Were there any abuses of power by the management and breach of fiduciary on the part

of the directors?
Yes, there is an abuse of power by the management. Abuse of power is the act of using
ones position of power in an abusive way. This shows that a director has misuse his or her
power to act as a director in the company by doing something wrongly by the law. For example,
in this case the Auditors express their intention to qualify the Financial Statement of Delima
Enterprise Sdn Bhd. Due to several unresolved issues regarding the financials of the company.
However, Encik Zayed and Puan Hashimah tried to negotiate with the auditor not to qualify the
Financial Statement. If the auditor refuses to do so, Encik Zayed planned to terminate the
auditors appointment and appoint a new friendly party. Here as we can see, there is an
intimidation threat to the auditor. From this we know that Encik Zayed has abuse his power as a
director to terminate the auditors appointment if the auditor refuse to do so. This situation
happened because Encik Zayed was not familiar with the Accounting Standards and The
provision of the Companies Act 1965 lead to the abuses of power by the management.

According to the Section 132(1) of the Companies Act 1965, directors must at all time
act honestly in the exercise and discharge of the duties of their office. Directors must exercise
their power in good faith and in the interest in the company as a whole. The fiduciary duties of
directors can be defined as to act in a good faith, with reasonable care, and in the best interest
of the company as a whole. The types of fiduciary duties are duty to act honestly and in a good
faith, duty of care, obedience and loyalty, duty to avoid conflicts of interest and lastly, duty to
exercise their powers for their proper purpose. There will be a breach of fiduciary duty under
Section 132(3). They can be penalizing imprisonment for up to five years or pay a fine up to RM
30,000.
The first type of fiduciary duties is to act honestly and in a good faith. The directors
occupy a fiduciary position and must therefore exercise their power in good faith and in interest
of the company as a whole. In this case study, Encik Zayed can be considering breach his
fiduciary duties when he tried to negotiate with the auditors to qualify the Financial Statement
and if the auditors refuse to do so, he will terminate the auditors appointment and appoint the
new friendly party auditor. As we can see here, Encik Zayed try to not act honestly and in good

faith because he tried to cheat to get the funds from Malayan Banking Berhad and CIMB Bank
Berhad.
Second type of fiduciary duties is to avoid conflicts of interest. The directors should not
enter into engagement in which there is a possibility that the directors personal interest could
conflict with those of the company which they were bound to protect. It is to prevent directors
improperly making a profit from their office. The directors may not involve any act or personal
interest to avoid they breach their fiduciary duties. In this case, Puan Hashimah act as a director
and at the same time she also responsible for all finance related matter before Cik Amy was
appoint as Finance Executive. This will lead to conflict of interest where Puan Hashimah might
use the company money for their personals expenses in as she doing with the personal vehicle
expenses charge in the company instead of their personal accounts. The director cannot use
money or asset of the company to make profit for himself. All the money or assets must be used
to make profit for the company.
The third type of fiduciary duties is duty to exercise their powers for their proper purpose.
The director must not engage into the improper act or purpose that will guide them to breach
their fiduciary duties. For example, in this case the Auditors express their intention to qualify the
Financial Statement of Delima Enterprise Sdn Bhd. It is because there are several unresolved
issues regarding the financials of the company. However, Encik Zayed and Puan Hashimah
tried to negotiate with the auditor not to qualify the Financial Statement. If the auditor refuses to
do so, Encik Zayed planned to terminate the auditors appointment and appoint a new friendly
party. This shows that, Encik Zayed has misuse his power for improper purpose to get the
funds from the bank. He wants to show to the bank that their company Financial Statement was
clean from any problems such as financial problems. Thus, Encik Zayed has breach his
fiduciary duty as a directors.
Last type of fiduciary duties is duty of care, obedience and loyalty. A director owes duty
of care to the company. The standard is that of a reasonable care. It is clear beyond doubt that
the necessary proximity of relationship to create such a duty exits between a director and the
company. Next, duty of obedience requires a director to act in accordance to business
organizational goals and mission and prohibit directors to act outside the scope of business
organizational power. Meanwhile, duty of loyalty is director must act in a good faith, be faithful to
the organization and pursue the organization best interest. As related to this case, the directors
have breach the fiduciary duties as they failed to discharge their duties with that degree of

diligence, care, and skill. For example, Encik Zayed and Puan Hashimah were not familiar with
the accounting standards and provision of the Companies Act 1965 including their roles and
duties as company directors. This will cause the omission of assets purchased records and
cash and bank balance reconciliation. Furthermore, the directors breach their duties of loyalty
because there is a personal vehicle expenses totalling RM 50,150 were charge to the company
instead of the director.
As a conclusion, the directors have breach their fiduciary duties on the parts of directors
as according under Section 132(3) of Companies Act 1965.

Who should be held responsible and accountable?

The person should be held responsible and accountable was the directors. Directors are
a person appointed to manage the company efficiently. Their powers were restricted by the
company articles that they can in the most cases can do that the company that do. There are
several statutory duties of the directors, which is the directors should carry out duty diligently
and honestly, not to make improper use of information obtained by virtue of office to gain
advantage personally or to cause detriment to company, disclose interest in any contract made
by the company and they must make sure registers and statutory books are kept updated.
In this case, we can see that both directors was not familiar in accounting standard
which is to carry out the duty diligent and honestly where they want to terminate the
appointment of the auditor and make a deal with a new friendly party with the other auditor.
They should know what are their statutory duties so that it will be easy for them to carry out their
duty
In addition, not only statutory duties, the directors also have their own responsibility that
they have to follow. Some of the responsibilities that they have to follow are keeping the proper
accounting records, for every annual general meeting of the company, the directors requested
to present before the company once in every calendar year an audited accounts made for the
period since the proceeding account made up to a date not more than 6 months before the date
of the meeting, registration of others, appoint the auditor and company secretary in the case of
voluntary winding up by member when required declaration of solvency and also maintaining
registered office.
Other than that, the directors should do their responsibility in order to achieve the
mission and vision of the company. Moreover, directors who the only person will make the
operations of the company works efficiently and the financial of the company will in the proper
accounting. In this case we can see that the directors have not keep the proper accounting
records such as there in no proper documentation, several unrecorded cash withdrawals and
cash and bank balance were not reconciled. If this happen, it will give bad reputation of the
company. In order to make the company is more effective and efficient, the directors should do
keeping proper accounting records and registration of others and maintaining registered office.

The next person responsible and accountable are officers which Encik Salam and Puan
Balqis. They should together with the directors in setting objectives and decision making of the
company. The main responsibility is the effective operation of the company and they also
responsible for the management and day-to-day operations of the corporation.
Moreover, person in charge of finance, Puan Hashimah (prior to Cik Amys appointment)
also be responsible. She need to ensure proper documentation of any information and data
related to transactions. She also need to maintain proper records on assets of the company and
always supervise in accounting process regularly.
So, what we can conclude here, not only Encik Zayed and Puan Hashimah as the
directors, but all the top management, employees, and the Company Secretary of the company
should be responsible and accountable as well. Although Encik Zayed and Puan Hashimah are
the directors of the company, the officers should also support and give opinion in every
decisions taken by directors. Employees below the officer level will have job titles and
descriptions designed to meet the corporate goals as set by the directors. Company Secretary
at all times should to assist the company towards proper objectives.

Could the audit be completed soon without any qualification?

The audit cannot be completed soon without any qualification, however theres some
ways that the director should do to help the auditor to prepare the audit in order to make the
audit can be completed soon without any qualification. The director should objectively answer
the question from the auditor. They must answer to make the process of audit quicker, they also
must provide all the documents sources, evidence and details for all transaction such as
invoices and bank statement. Moreover, the full set of accounts is important and if the accounts
are wrongly recorded, they must reconcile it and also the bank statement is to reconstruct the
accounts. The director must not depend on the auditors because it will make the process of
audit slow. In this case, Cik Amy as a new Finance Executive should assist the Puan Hashimah
to reconcile all the accounting records and reconstruct the bank and cash balances. Cik Amy
cannot hold the accounts as she is new in the accounting field and has no experience to
prepare the accounts in the short time. Even though the audit will complete soon but it will issue
qualified report due to the several unresolved issues.