Flat Cargo Berhad (FCB) was one of the largest air freight companies in Malaysia, FCB wasa listed company operating primarily as an air carrier. Its core business was to provide airfreight transportation, which included aircraft charter and leasing. Kencana & Associatesserved as its auditors. In 2006, during a routine financial audit, the auditors identified several
suspicious findings that resulted in a delay in finalizing the auditor’s report.
These are the issues found
from FCB’s working paper for 2005; the auditors were unable to
verify the aircrafts claimed to have been purchased by FCB in 2005. The audit team found anon-functional rundown aircraft barely worth RM231 million in a hangar. Next issue was,
several debtors’ confirmation letters were returned because the addressees had changed
their mailing addresses, besides that a large sum of sales transactions was found with nosupporting documents. Most of these transactions involved small clients. Next issue foundwas a loan received from a Hong Kong based company was found to be incorrectly recorded
in the debtors’ account. Ot
her issues were found are several abnormal transactions involving
the purchase of aircrafts by FCB and offsetting the debtor’s accounts were found in FCB’s
Based on the audit working paper of FCB in 2005, auditor found some disagreements withmanagement account which may lead to fraud. They were unable to verify the aircraftswhich was claimed to have been bought by FCB in 2005. The audit team found aroundRM231 million of non-functional rundown aircraft in hangar. This situation leads to potentialfraud because these old aircrafts had high price tag. As a result it will increase the holdingcost or storage cost of the assets. In this situation, auditor should have checked with thecompany secretary for any documents related to the purcha
se of those aircrafts. A director’s
resolution for purchase of assets has to be passed to all directors which require...