Management and control Issue to be highlighted DIRECTORS DUTIES Directors, Encik Zayed and Puan Hashimah do not understand

nd about the Companies Act 1965 and his responsibilities Relevant references Section 132 of Companies Act 1965 : director of a company shall at all times exercise his powers for a proper purpose and act bona fide (in good faith in the best interest of the company) Shall exercise reasonable care, skill and diligence with the knowledge and experience Duty to disclose all material information and various interest in the business conduct Power to delegate Recommendations Encik Zayed and Puan Hashimah must know what are their duties and responsibilities All types of incorporated companies The need to comply with the applicable standards and regulations Enhance corporate governance Matters regarding powers of the: registrar of the company management and administration of the company Officers of the company Accounting and auditing of the company

NO STANDARD OPERATING PROCEDURE (SOP) IMPLEMENTED

Standard operating procedures (SOP) are a detailed explanation of how a policy is to be implemented.

Delima should implement standard operating procedure (SOP) : Increase efficiency and consistence in performing task Indicate compliance in the entity requirements and can be used to train others

Withdrawal of companys money made without proper documentation.

Serve as framework for organizational policy provide direction and structure

Written documentation of best practice

Decision and authorization made by the directors on its own without proper documentation

Tells what, how, when, why, and who Provide foundation for: job descriptions, employee training corrective action and discipline, and Performance review.

It will increase the risk of fraud and inconsistency in performing task

Give the auditor hard time to keep track of

the transaction and movement of asset. IMPROPER ORGANIZATION CHART The organisational chart was improperly drawn and too few positions had been added to the chart. The chart does not include distinct departments to show the organisation by departmental functions. It should be properly drawn with distinct functional departments to show distinct job description for each department and several important positions should be added to ensure effective and efficient control.

INTERNAL CONTROL Segregation of duties Section 132 (1F): directors Segregation of duties is

Encik Zayed does not exercise his duties properly as to segregate management duties equally among the employees of the company that he may thinks fits to perform such duties.

may delegate any power of the board of directors o any committee to the board of directors, director, officer, employee, expert or any other

important in a companys management as to avoid any task redundancy, fraud, negligence, power abuse, inefficiency and work delay. Moreover, it is to ensure the management works efficiently and effectively. Cik Amy is has been assigned to numerous workloads and some of the works are not within her job description as a Finance Executive. Encik Zayed should segregate Cik Amys workloads to other personnel according to the relevant job descriptions. For example, Account Payables and Receivables should be assigned to different personnel.

No supervision

Supervision must be done on a regular and continuous basis to ensure that all business

activities are done in line with the companys vision and mission APPOINTMENT OF AUDITOR Directors simply appoint auditor without any proper procedure Appointment by company Resolution to appoint auditor at each AGM (Section 172 (1)) The auditor appointed holds office until the conclusion of the next AGM Appointment by Directors To appoint the first auditor for the company (Section 171 (1)) To fill any casual vacancy in the office of an auditor Appointment by Registrar Where an auditor of a company has been removed from office and the company has not Encik Zayed cannot simply appoint another auditor without complying with the requirement by the Act on the procedure to appoint the Auditor. In this case, a new auditor can be appointed by the new company provided that the previous auditor has acknowledge the matter (there is communication between the previous and the to-beappointed auditor)

appointed another auditor (Section 172 (8)) To act on a written application of a member where the directors of the company fail to appoint an auditor (Section 172 (10)) REMOVAL OF AUDITOR Removal of Auditor before the expiration of his terms of office Under Section 172 (4),(5),(6) CA 1965, only the shareholders can remove the auditor before the expiration of his terms Required the passing of ordinary resolution at general meeting with special notice of 28 days given to the auditor

AUDITORS DUTIES AND

Sec 174(2) Express opinion in

RESPONSIBILITIES Encik Zayed tried to negotiate auditor to make unqualified report

report (duty to report defects, irregularities in account) Sec 174(3) Report particulars of deficiency, failure and shortcoming