Flat Cargo Essay

1029 Words Oct 28th, 2013 5 Pages
Flat Cargo Berhad (FCB)
FCB obtained listing in Bursa Malaysia on the 15 September 2001. The main core business was to provide air freight transportation within the Asian region. As a fast growing company, FCB secured agreements from well-establish company within the transportation industry such as Worldwide Express, United Parcel Services (UPS), Nationwide Express, City link and others.
Issue on FCB 1) The auditors were unable to verify the aircrafts claimed have been purchased by FCB in 2005. The audit team found a non-functional rundown aircraft barely worth 231 million in a hangar.
Aircrafts that was claimed have been purchased are categorize as an asset for FCB. It’s because the business nature in providing
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2) The audit report found that there was a large sum of sales transactions was found with no supporting documents. Most of these transactions involved small clients.
We noticed that the revenue in 2005 was approximately 5 times higher comparing to 2001 until 2004. Changes amount in revenue will affecting the net income as well.
The major issue is failing to comply with the basic recognition of revenue according to FASB standard and obey both the conservatism concept and realization concept. Other issue was the FCB management feel that record transaction involving small clients were insignificant to show true and fair view in the financial statement because it is not materialize compare to others event.
According to conservatism concept, we should recognize revenue only when they are reasonably certain. In this case, without the supporting document on sale there are possibilities the auditor couldn’t verify when the revenue should be recognize. When dealing with measurement uncertainties, the management should disclose numbers that have valid documents that represents true and fair view in the financial statement. In this case, certainly the amount on revenue against the realization concept because there are no sales without proper documentation provided. So the amounts of sales not reasonably realize.
According to FASB, revenue should be recognized in the earliest period in which the entity has substantially performed what is required in order to earn

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