1.  Introduction of the company and the poultry
industry.
 Issues, assumptions and recommendations:
◦ Financial perspective
◦ Management style
◦ Internal control
 Conclusion

2.  Excel Poultry & Meat Sdn Bhd (EPM) was
established in 1998 as a small and medium
enterprise (SME).
 20 200
 Actively involved in chicken farming and supplying
of whole chickens.

4.  High demand in chicken meat.
 E.g. Fast-food restaurants and Malaysian
delicacies.
 Cheapest source of meat protein in Malaysia.

5. s u e 1 ::
IIs s u e 1
s
• Late 2008, operating cash was
systematically running low
problems in cash liquidity

6. RATIO 2006 2007 2008
Profit margin
5.484% 1.654% 1.081%
Inventory
turnover ratio 16.677 36.067 28.459
Account
receivables 4.307 3.396 2.881
turnover ratio

7. The percentage of increase/decrease in the account balances:
Particular/Year 2007 2008
Revenue 0.567% 36.157%
Cost of sales 4.642% 36.950%
Operating profit/(loss) (69.670%) (10.989%)
Expenses 37.500% 45.455%
Net profit/(loss) (108.636%) (315.789%)
Trade receivables 27.559% 60.494%
Stock (51.613%) 73.333%
Trade creditor 62.162% 50.000%

8. Recommendations:
1. Increase the chicken production types
 Organic eggs
 Meat
 Fertilizers
- Chicken poop
- Sell to farmers
 Feathers
- Sell to handicraft makers
 Livestock
- Sell the chicks (breed more)
- Sell to other customers (hobby)

9. 2. Increase revenue by expanding market
share
• Sell to neighboring countries.
3. Offer discounts and send reminder to
debtors

10. u e 2 ::
IIs s u e 2
ss
Increase in cost of sales and expenses.
Recommendations:
1. Reduce the feed cost : Mix the chicken feed with
different types of ingredients.
2. reducing transportation cost and labor cost.

11. (B) Management Style
s s u e 3 ::
II s s u e 3
Autocratic
Laissez-faire

12. Benefits Drawbacks
Incredibly efficient Increase staff turnover
and absenteeism
completely control over One way communication
the operation between leader and
subordinates
Group members focus
on specific tasks

13. Benefits Drawbacks
Group member is Possible damages to
given autonomy the company
High satisfaction and Few guidelines from
productivity the leaders

14. Benefits Drawbacks
Group members are Time taken to make decision
encouraged to share ideas is long
and opinion
Increase the job satisfaction
and productivity
Develop a high sense of
personal growth for
employees

15. (C) Internal Control
s s u e 4 ::
II s s u e 4
Encik Selamat ~ Conflict of interest
Unethical
actions

16. Assumptions :
1.En. Selamat used the company’s funds illegally.
2.He instructed Pn. Azura to prepare the accounts in
a way to conceal his acts.
Recommendations:
- Clear set of policies and procedures.
- PCK Holding needs to monitor its
subsidiary.
- Whistle blowing policy.

17. s u e 5 ::
IIs s u e 5
s
BOD was reluctant to take action against Encik
Selamat.
Recommendations:
~ Ms Choy : To persuade BOD to take action.
- Conduct investigation. (3rd party)
- Fiasco in EPM can lead to worse
company’s performance.
~ To report to PCK Holding.

18. s u e 6 ::
IIs s u e 6
s

19.  En. Munir had committed fraud (cash skimming)
based on a few indicators:
 “former staff” – already resigned.
 Encik Selamat was also involved in the case of En.
Munir. (mentioned by the director)

20. Action Explanations and example
Proper essential to ensure adequate accounting
documentation records and source documents is maintained.
To ensure effective documentation, the
receipts should be:
 Pre-numbered consecutively .
 Prepared at the time of the transaction.
 Create a user-friendly format.
Internal audit Responsibility – testing, monitoring company’s
outsourcing policy and internal control.
Eg: focus on Account receivable auditing
-Purpose: to detect a variety of audit risks
related to acc. receivables and to detect the
possibilities of fraud.

21. s u e 7 ::
IIs s u e 7
s
 En. Selamat crossed his boundaries as a General
Manager.
 He instructed the marketing department to supply
products to Cold Gold Sdn. Bhd. although it had
exceeded the credit limit.

22. Recommendations
1. Segregation of Duties
- Purpose: To help minimize risks and fraud,
maximize inventory and supply protection.

23. 2 . Security Controls
- To deter or prevent unauthorized access to sensitive
materials.

24. 3. Authorization procedures
Customer
Credit Sales Cycle
Take Approve Check
Check
Customer
Customer Take Approve
Order Credit Inventory
Inventory
Order Credit
Availability
Availability
orders
Approve orders
Rejected
Orders
Acknowledgement

25. 1. Financial Perspective
 Increase revenue – chicken products
Increase revenue – expand market share
2. Management Style
• Democratic Leadership
3. Internal Control
• Clear set of policies and procedures, whistle blowing
policy.
•Persuade the BOD to investigate.
•Report to PCK Holding.
•Segregation of duties.
•Proper documentation.
•Internal audit outsourcing.
•Authorization procedures.

26.  The main issue in this case study is EPM’s weak
internal control.
 Implications of the issue: Opportunities to commit
fraud, business performance affected.
 Based on the recommendations that we had made
to improve the internal control, in our opinion,
there are 3 main things that should be carried out:
- segregation of duties
- proper documentation
- hiring of internal auditors