MAF680 JUNE 2014

SUGGESTED SOLUTION
MAF 680 JUNE 2014
QUESTION 1 (GLAMOUROUS BOUTIQUE)
a. Identify five (5) issues/challenges faced by Glamorous Boutique since its
incorporation and provide appropriate recommendations to improve those issues.
Five issues/challenges faced by GB
Challenges
1 No clarification of job descriptions for each staff to do. Besides that on choosing staff he
did not screen them properly or chose the appropriate staff for job he needs for his
business. (choose the right staff for the right job)
2 Poor record keeping on his fashion collections made, sold, reserved or display in his
premise. All records were done in an old log book that made references difficult
especially when he or the customers wished to look for or refer to previous design done
at this boutique.
3 He urgently needed a design and product database but none of his staff he hired knew
how to develop the database. As a result, Salihin has to outsource the building of the
database and thus will incur extra cost on developing of database and maintaining it.
4 Customers details were manually kept. Though it was a simple procedure, Salihin is not
well-versed with the process.
5 Details of students attendance, progress, assessments, and payment, all were kept in
his personal planner. In addition, fees received were kept in his pocket and none of the
staff keeps record on fee received from fashion designing night classes.
6 Fabric and other related material to fashion was purchased from one supplier. The
transaction was done via phone and no documentation was attached to those orders.
7 Improper and poor maintenance on inventory system on fabric movement and its unused
portion. The movement of fabric material used and its balance were not recorded. Salihin
has no knowledge on the inventory of those fabrics and he relies totally on his staff to
inform him on the availability of the fabric.
8 Fabric price changes regularly. Nicefabric Enterprise failed to inform Salihin of the price
changed and on Salihin part the boutique failed to record or compare prices due to poor
record keeping by them.
9 Nicefabric Enterprise charges stock delivery on a fixed rate. No discount was given and
no allowance of delivery charge was given even when they deliver an out of stock item to
the customer.

Any 5 x 1 = 5 marks
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b. FIVE suggestions/recommendations for GB to control weaknesses

Suggestions/recommendations
1 Design job description for each staff for job effectiveness. By having job description the
staff will not be relying on Salihins instructions each day. However, daily briefing is
needed to update staff with the latest development and report on work-in-progress.
2 The company need to introduce a proper inventory system suitable for the business to
record the movement of the of the entire gallery inventory. Information need to be
properly filed. Relying on a log book may be a good idea, once missing there is no other
way to trace those records.
3 Hiring a System Analyst to develop the database needed by Salihin may be very costly to
the cost of doing business, however, Salihin may outsource the project or purchase a
database available in market which is cheaper but needed some adjustment to suit his
business needs.
4 Record kept at the business was manually done. Salihin needs to computerize the
system to minimize errors, upgrade inventory, for effective record keeping and fast
retrieval of customers information.
5 Both staff are to be send for training to upgrade their computer skill, record keeping skill,
boutique management, and other business skills to ensure that they have advance
knowledge of the business.
6 The movement in/out of the materials must be recorded and filed immediately. GB must
keep proper purchasing system which begins with the material requisition note and
quotation sent to supplier. Inventory stock take and reconciliation must be made every
month.
7 Together with the materials ordered, there should be a record of material price, quantity,
date and discount offered. This will assist GB to update the price charged for the fabric
and for GB future reference. Also, any orders made need to be accompanied by proper
purchase order following an order done by phone for confirmation.
8

Any other appropriate answers are accepted. Marks are to be allocated appropriately if
students give reasons to all their recommendations. If students merely state the reasons
without further explanation, the examiners need to reduce their marks.
Any 5 x 2 marks =10 marks

(15 marks)

MAF680 JUNE 2014

b. Referring to the case above, discuss the importance of segregation of duties and
suggest five (5) different types of segregation of duty that GB should address for
effective internal control.
i.

Discuss the importance of segregation of duties.

Define what is segregation of duty (2 marks)
Discuss/explain the importance of segregation of duty (3 marks)
(5 marks)

ii.

Suggest five (5) type of segregation of duties that could be effective for GB
internal control.

1. The person who requests the purchase of goods or services should not be the person
who approves the purchase.
2. The person who approves the purchase of goods or services should not be the person
who reconciles the monthly financial reports
3. The person who approves the purchase of goods or services should not be able to
obtain custody of checks.
4. The person who maintains and reconciles the accounting records should not be able
to obtain custody of checks
5. The person who prepares check payments should not be the person who approves
the purchase of goods or services.
6. Other responses are acceptable.
(10 marks)
(Total: 15 marks)
c.

Identify five (5) selection criteria that this business should consider before
appointing suppliers to the business and discuss the importance of each criteria
selected to ensure flawless business supply chain.

Supplier selection criteria:

1. Company must examine previous experience and past performance of any potential
supplier product/service before they can be appointed.
2. Ensure suppliers quality system level is satisfactory, including meeting regulatory
requirements or mandated quality system registration (for example, ISO 9001).
3. Company must check the ability of the potential supplier to meet current and future
capacity requirements, and do so on the desired delivery schedule.
4. Check the financial stability of the potential supplier as this is important to ensure that the
supplier continuously have financial backup and able to provide the necessary ordered
good/services.
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5. The technical support availability and willingness to participate as a partner in developing

and optimizing design and a long-term relationship is also important.
6. Total cost of dealing with the supplier including material cost, communications methods,
inventory requirements and incoming verification required.
(15 marks)
d. Based on your discussion above, give your own opinion should Salihin find
another supplier or maintain the current status quo with Nicefabric Enterprises.
Yes / No. Students answer need to be accompanied with suitable at least 2 reasons.
(5 marks)
(Total: 50 marks)

Question 2
a. Briefly explain 5 issues in the case
Tellcel Issues
1. Tellcell Berhad faced challenges on product diversification and expansion that
require Sherine, the CEO to formulate another production strategy
2. In order to maintain high market share, Telcell Berhad has to reduce investment in
the low market share product which is the battery pack
3. Telcell Berhad is overwhelmed by returned goods from customers and by customer
complaints on their battery production
4. Nathan appears to have been pushed reluctantly into his role, helping to perpetrate
a fraud within the company due to the pressure placed upon him by Sherine.
5. Sherine has abused her power as Telcell Berhad Chief Executive Officer by
pressuring Nathan to adjust the sales volumes and create fictitious sales
transactions.
(Any 5 acceptable answers x 2 =10 marks)
b. In promoting business expansion, ethics are sometimes been marginalized. Identify and
discuss five (5) principles of business ethics in conducting a healthy business.
(15 marks)

MAF680 JUNE 2014

b)

Business Ethics

1. Trustful: customers want to do business with a company they can trust. Trust can be
assured based on business character, ability, strength, and business integrity.
2. Keep An Open Mind: For continuous improvement of a company, the leader of any
company must be open to new ideas. Opinions and feedback from customers and staffs will
help the company to.
3. Have Clear Documents: Ensure all business related materials including advertising,
brochures, and other business documents are clear, precise and professional. Make sure
these documents do not misrepresent the company.
4. Get involved with community: Iinvolved in community-related issues and activities. This
will help to show to public that the business is a responsible to public community.
5. Maintain Accounting Control: Ensure a reliable approach to accounting and record
keeping to gain stakeholders trust.
(Any 5 acceptable answers x 3 =15 marks)
c. Suggest four (4) actions that Telcell Bhd Board of Directors should take in order to avoid
any abuse of authority power.
(10 marks)
c) FOUR actions that the Board of Directors of Telcell Berhad should take to avoid
any abuse of authority power
1. The BOD delegates the executive responsibility to the executive management, but
should expect the CEO to be accountable to the board for the internal control and
risk management.
2. There should be a system of internal control which, amongst other things, will ensure,
fraud is prevented and detected when occurs
3. BOD should establish internal audit department and review their function in ensuring
internal control quality is properly emphasized
4. BOD should establish strict legal requirement over financial reporting and the review
of internal controls.
5. BOD should impose penalties and warning system based on accepted ethical
conducts
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6. Send top management for frequent governance training and integrity camp.
(Any 4 acceptable answers with explanations x 2.5 =10)
d. Explain five (5) auditors responsibilities in detecting fraud and error.
d)

Auditors responsibilities in detecting fraud and error

The financial statements are the responsibilities of the management however

auditors are to confirm the financial reports prepared comply to the statutory
obligation and requirement and free from error.

The auditors responsibilities are to plan and perform the audit procedures to
obtain reasonable assurance about whether the financial statements are free
of material misstatements.

An auditor is not trained as an expert in laws and regulation, but he may be

able to recognize a possible non compliance and express their opinion.

The auditor should exercise due professional care and professional

skepticism in detecting any financial reporting problem.

Auditors are also required to objectively evaluate the audit evidence and this
means that the auditor should also maintain a critical and questioning mind.
(15 marks)
(Total: 50 marks)