Background
Flat Cargo Berhad (FCB) is an air cargo company, which was listed in Bursa Malaysia on 15th September 2001. It was known to be one of the largest airfreight companies in Malaysia. The company was registered as an investment holding company with several subsidiaries, for which their principal activities ranging from air freight services to ground handling services. FCB was the only dedicated Intra-Asian overnight express cargo operator based in Malaysia and had exclusive excess to an international cargo complex at Sultan Abdul Aziz Shah Airport in Subang. Furthermore, as it has successfully secured the landing rights in Asia Pacific regions, FCB was in ideal niche position to serve the international integrators, freight forwarders, and major airlines within Asian region. However, as highlighted in this case, the auditors had identified several suspicious findings in a financial audit engagement.
In 2006, Mr. Chuah, an auditor from Kencana & Associate s had noticed some irregularities of accounting records in FCB, which may possibly be another fraud case after Media Com and Blue Vital. These irregularities could be created intentionally or merely just an accounting error. Hence, auditors from Kencana & Associates had the responsibilities to identity the issues through relevant analysis to curb with potential fraud discovery, with the firm’s reputation at stake.
Issues
The auditors were unable to verify the aircrafts claimed to have been purchased by FCB in 2005. The audit team found a non-functional rundown aircraft barely worth RM231 million in hangar.
Several debtors’ confirmation letter was returned because the addressees had changed their mailing addresses.
A large sum of sales transactions was found with no supporting documents. Most of these transactions involved small clients.
Loan received from a Hong Kong based company was found to be incorrectly recorded in the debtors’ account.
Several abnormal...