Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ INDUSTRIAL TRAINING REPORT 1.

0 INTRODUCTION

Industrial Training is one of the programme that has been offered by Management and Economics Faculty, Universiti Malaysia

Terengganu (UMT). For Accounting student, Industrial Training is compulsory and should be done on semester 8. This programme represent six credit hours of the courses and will be counted in the Cumulative Grade Per Average (CGPA) and Grade Per Average (GPA). The encouragement of Faculty to put their student in audit firm for six month is the right decision because by undergoing Industrial Training, student will be placed in government or private sector where they will be given the opportunity to learn and adapt in the real working environment. In this audit firm, the student will familiar in various fields such as accounting, taxation, secretary and auditing. From there, the student definitely will achieve the objectives as follows: The experience and basic working skills that related to the theory learned. Able to apply theory learned to the real working environment. Able to understand the value of professional ethics. Able to improve communication, management and other skills as well.

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Able to provide high standard of professional practice.

2.0 2.1

ORGANIZATION BACKGROUND AND STRUCTURE

History of Organization

Jamal, Amin Partners firms is a Chartered Accountant and was founded in 1994 by Tuan Haji Jamaluddin Bin Shahidan and Tuan Haji Aminuddin Bin Haji Yahaya as partners of the firm. Jamal, Amin & Partners has established as a well known medium size audit firm with a client based from various industries including Government Link Companies (GLC), cooperative clients, offshore clients, private sectors, universities and others. JAP currently has seven (7) branch offices i.e. Kuala Lumpur, Alor Star, Penang (Northern Region), Johor Bharu (Southern Region), Kota Bharu (East Coast Region) and Labuan (East Malaysia Region) including branch in Kangar, Perlis Indera Kayangan. By opening this branch in Kangar in January 2005, its mean that JAP successfully cater in the whole country of Northern Region. In the future, JAP plan to open another new branch office in Kuantan, Kuala Terengganu to cater the East Coast Region, Ipoh, Melaka and Seremban (Central Region) and Kota Kinabalu and Kuching (East Malaysia Region). Thus, JAP will be

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ having branches in all states of Malaysia and be the only audit firm in the country that has branches in all states. Behind of the successful of the firm, Tuan Haji Jamaludin Bin Shaidan as managing partner was joined Maju Holding Group of Companies as an Accountant (Contract Basis) in 1985. In 1986, he

joined Bank Bumiputra Malaysian Berhad and was attached to Shah Alam branch as Head of Account Department. Tuan Haji Jamaluddin was joined one of the reputable Public Accountant Firm, as an Audit Assistant in 1990, to pursue his career in auditing and finance advisory. He has earned as an Audit Manager before he left the firm at his own accord. He is also a member of Malaysian Institute of Accountant. Tuan Haji Aminuddin Bin Haji Yahaya holds a professional qualification of Chartered Association of Certified Accountants (ACCA), United Kingdom in 1987. After his qualification, he joined Ernst & Young International in 1988 as an Audit Assistant and was later promoted to Audit Senior. He was later transferred, at his own request, to Tax Department. In February 1994, he joined Securities Commission as Finance Manager. Tuan Haji Aminuddin is a member of Malaysian Institute of Accountants and Malaysians Institute of Taxation. He is a fellowship of Chartered Association of Certified Accountants (UK).

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ JAP has successfully obtained an offshore license from Labuan Offshore Financial Services Authority (LOFSA) in order to enhance their service position. With this recognition, JAP has moved ahead in international market especially for offshore companies and thus, it will definitely boost the image of the firm. JAP also have international associates firm in Indonesia, Singapore, United Kingdom, Hong Kong and Saudi Arabia to enable in putting their name and standard to the same level with big firm in Malaysia with the like such as PricewaterhouseCoopers, Ernst & Young and KPMG.

2.2

Objective of Organization

The objectives of Jamal, Amin and Partners are: Able to be an established firm recognized locally and

internationally. Able to provide first class services to clients by setting up branches throughout Malaysia supported by competent

professional in various field. Able to produce competent and highly trained chartered accountants and provide opportunities (particularly to the locals) to be future practicing partners. Able to assists clients to expand their business network and opportunities locally and internationally.

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _

3.0

ORGANIZATION CHART 3.1 Jamal, Amin & Partners

Board of Partners Corporate Monitoring Committee

Managing Partner Executive Partner Business Development Division (BDD) General Manager I Finance & Administration Division (FAD) General Manager II

Operation Division (OD) General Manager III

General Manager I

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _

Planning & Development Department (PDD)

Implementation & Enforcement Department (IED)

Marketing & Public Relation Department (MPD)

General Manager II

Finance Department (FID)

Administration Department (ADD)

Finance Services Section (FSS)

Collection Recovery Section (CRS)

Branch Administration Section (BAS)

Office Administration Section (OAS)

Human Resource Section (HRS)

General Manager III Information Communicatio n Technology Department (ITD) Accounting Departmen t (ACD)

Audit Departmen t (AUD)

Training & Quality Control Departmen t (TQD)

Branch Operation Departmen t (BRD)

Taxation Departmen t (TXD)

Consultatio n Departmen

Kuala Lumpur

Johor Bharu

Penang

Kangar

Alor Setar

Labuan

Kota Bharu

Seremban

3.2

Jamal, Amin & Partners (Kangars Branch) 6

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _

Branch Manager Associates I Associates II Admin & Accounting Trainee

3.3

Audit Department

Partner Principal

Deputy President I Deputy President II Senior Vice President I Senior Vice President II

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Vice President I Vice President II Senior I

Senior II Senior III Associates Trainee

4.0 4.1

THE FUNCTION OF DEPARTMENT Audit Jamal, Amin & Partners audit approach is depend on the

requirement by clients but in most cases it covers both financial as well as non-financial aspects of the acquire company. Understanding that JAP work, to large extent, provide as a crucial input to acquirers decision, a detail work on the account balances is thus necessary. Physical inspection of assets or documents is conducted whenever possible, third party confirmation is requested and even liaise with the authority will be conducted. JAP expresses an opinion as to whether the Financial Statements for the financial period under review show a true and fair view. In this

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ regard, JAP is guided by professional standards which would act to meet with the requirements of generally accepted accounting practice and the Companies Act 1965. A feature of the firms value added approach to the audit functions is results obtained from the use of analytical software to identify areas where performance can be improved. This often leads to recommendations for enhancement of systems and procedures. JAP procedure are developed specific in relation to each client, and take into account factors of understanding clients operation, managements concern and internal control structure and procedures. In addition to statutory audits, they have also been involved in various engagements as follows:

Due diligence Share valuation Corporate advise on listing exercise Financial consultancy

Here are some of Jamal, Amin & Partners audit client: Perbadanan Kemajuan & Ekonomi Negeri Perlis (PKENPs) Majlis Perbandaran Kangar (MPK) Yayasan Islam Perlis (YIPs) Persatuan Nelayan Negeri Perlis (PELARIS) 9

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Persatuan Nelayan Kawan Kuala Perlis (PNK Kuala Perlis) Putra Palace Sdn. Bhd Majlis Amanah Rakyat (MARA) Koperasi Jabatan Kerja Raya Perlis Berhad (KORAYA)

4.2 Tax Department One of the major issues in most companies is taxation. Unless a proper tax planning being structured, a company may face huge tax liability. Jamal, Amin & Partners understand that clients expect to have the all tax planning and consulting expertise to reduce tax exposure and to minimize returns to the shareholders. In this regard, Jamal, Amin & Partners with expertise try to match with clients specific needs by concerning:

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ To maximize the Companys earnings by minimizing its exposure to taxation.

To minimize the impact of interest restriction. To maximize the use of tax exemption and relief in the Companys project and venture.

To set up appropriate structure for the purpose of tax efficient intercompany transaction.

Jamal, Amin & Partners tax consultancy services includes: Identifying tax inefficient in clients company and investment activities thus recommend solutions to overcome them. Recommending a structure which will minimize taxes and which will provide efficient distribution of income. Providing a broad framework of tax strategies in the Companys business and investment activities (including pitfalls to avoid). Recommending creative and helpful tax planning ideas and solutions through regular discussions with clients. Identifying major tax issues at an early stage and

communicating these issues to clients. Providing experienced tax executives who are able to resolve tax issues. 4.3 Corporate Secretary Department 11

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ The functions of corporate secretary department are to provide secretarial services to several clients. In Jamal, Amin & Partners, their secretarial services cover:

Incorporation registration.

or

formation

of

companies

and

business

Corporate advisory services. Company search services. Applications for work permit for expatriate personnel. Application for Foreign Investment Committee approval for foreign interest in companies incorporated in Malaysia.

Application for registration with Pusat Khidmat Kontraktor. Application for registration with Ministry of Finance.

In the area of secretarial, Jamal, Amin & Partners responsibility includes:

Assisting the company in complying with the Companies Act, 1965 and other legislation having relevance there to.

Attending

to

meetings

of

the

directors,

members

and

committees as and when so required to do so.

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Operating as a Registered Office which can be contacted by the public (Section 119 of the Companies Act, 1965). 4.4 Admin and Account Department

The functions of the departments are as follow: Send draft and final audit report to client Issues billing to the client Prepare client monthly statement Prepare staff claim and salary Prepare monthly report to Head Quarter (HQ) in Kuala Lumpur

5.0

INTER- DEPARTMENT RELATIONSHIP All the department in the Jamal, Amin & Partners has inter-

relationship between each other. Audit department will pass the draft audit report together with the working paper to the Branch Manager for review. After the draft complete with amendment, Admin and 13

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Account department will send draft and Letter of Representation (LOR) to client. If client agreed with the draft audit report, Admin and Account department will print out for final report to be signed by partner and client. During the initial audit process, audit department will obtain from tax department last year tax computation to be included in the working paper for references in computation of deferred tax. After the audit report has been signed, tax department will request from audit department the audited account together with the audit working paper. Tax department will rely on the draft audit report and audit working paper to get information for them to calculate tax for client. After that, the working paper will be passed back to the audit department to close the working paper for the year. Admin and Account Department normally will send the audit report to the client. For Corporate Secretary Department, the Audit Department needs the up-date information from Secretary Department to prepare statutory audit. Corporate Secretary Department will send the audit report to Registrar of Company (ROC) and Inland Revenue Board (IRB).

6.0

KNOWLEDGED AND SKILLED LEARNED

6.1

General Knowledge and Skilled

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ During my practical training for almost 6 month in Jamal, Amin & Partners, I have learned a lot of knowledge in the areas of auditing. Now, I understood that there are very different studying through books and doing a work in auditing field. While working in the audit field, I learn the actual situation that what is going on with the accounting entries, the real documents involved in daily transaction, facing with various clients, the procedure that need to follow as an auditor and become aware with the current issue around my place. I also learn to adapt myself to be independence and ability to solve the problems were the most important skills that I have got. Im able to carry out responsibilities assigned, always on time and keeps appointments as required by clients and higher management. Learning to become more responsibility, where every work done will be our responsibility until it become to the final stage. Sometime audit work can give so much of pressure. I need to motivate myself not to get so emotional and learn to take the pressure as a challenge to or to solve any kind of issue pertaining to work or environment. The critical part that I need to be able to control my emotional is during the review stage. There are others general skill that I learn in Jamal, Amin & Partners are leadership, willingness to learn, flexibility, ability to learn and adapt new knowledge.

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ 6.2 1. 2. Step in the Auditing Set up new file for auditing Calculate audit fee for client and sent to Branch Manager

for review 3. account 4. Ledger 5. 6. Vouching-to make sure the true of the document Prepare working paper for profit & loss and balance sheet For the working paper, there are some indexes in order to prepare the working paper of audit and the index involved are: A - A1 - Audit Administration A2 - Summary Review Management A3 - Other documents Letter of Representations (LOR) A4 - Management Letter (ML) A5 - Financial Statement A6 - Consolidation Checklist and Working Papers A7 - System Evaluation A8 - General Audit Procedure B B1 - Property, Plant & Equipment Agreed all the Trial Balance to the respective General Opening balance was taken from the last year audited

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ B2 - Intangible Assets and Deferred Expenditure B3 Research & Development Expenditure B4 - Investment B5 - Cash & Bank Balance and Borrowings C C1 - Trade Debtors C2 - Other Debtors, Deposits and Prepayments C3 - Amount Due From / To Related Companies / Directors D D1 - Inventories, Work In Progress / Progress Billings D2 - Amount Due To / From Customers D3 - Development Property E E1 Trade Creditors E2 Other Creditors and Accruals E3 Lease / Hire Purchase Creditors E4 Taxation Including Deferred Tax E5 Capital Commitments and Contingent Liabilities E6 Post Balance Sheet Events F Profit & Loss 7. 8. Acknowledgement and confirmation letter Bank confirmation send to bank to confirm the client balance Debtors and creditors confirmation letter Draft for report & financial statement except for

government

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ 9. Prepare Summary Review Management (SRM) 10. 11. 12. 13. Prepare Letter of Representation (LOR) Prepare Management Letter (ML) for government only Sent draft audit to Branch Manager for review Sent draft audit with LOR to Head Quarters of Jamal, Amin

& Partners in Kuala Lumpur 14. Partners will sent signing page and all the audit draft will

be casting check 15. Tax department in Kedah will calculate for client tax based

on the audit working paper and report and financial statement of client 16. Secretary Department in Kedah will prepare the statutory

audit for client 17. 18. Print out draft for discussion & meeting with client Print out final audit report

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _

Audit Department
Client Accou nt

Prepare Working Paper Do Audit Work

Ye s

Doc in Office

No Go to office client W/P Comple te

Ye s Prepare Draft Report & Financial Statement Prepare Summary Review of Memorandum (SRM) Send to Branch Manager for Review Prepare Management Letter (ML) *Government only No

No

Update W/P

Ye s

Any Amendments

Amend

Prepare draft to client

1st Draft Report & Financial Statement

Send to Admin Department

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _

Admin Department
1st Draft Financial Statement

Send to Client

No

Reply from Client

Ye s

Send Signing Pages to Director to Sign

Prepare Draft Financial Statement

Ye s

Any Amendments

No

Amend

Partner Sign

Finalise

Dorma nt Compa V ny 1 1 1 Audited Financial Statement 1 1 R o c T a x 1

Active Compa ny

1 T a x
R O C

J A P

Cli ent

C C M

Audited Financial Statement

20

J A P

Cli ent

C C M

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ V

Client Paid Audit Fee 6.3 Knowledge and Skill Learned In Performing Audit During the period of my practical training at Jamal, Amin & Partners, I had been assigned to do audit for several clients. Each client the audit team is head by a team leader which is a senior auditor. The team leader will allocate the section that should be done to each person in the team. Here are the sections that I have done during the period of Industrial Training and the skilled that I had learned in performing the audit.

6.3.1 Compliance Test Read and understanding the flowchart system for payment process. Discussing with management about the procedure. Choose one sample of payment voucher for 12 month by using fixed or random sampling for walkthrough test. Check payment voucher and request form whether has been authorized by the related person or not. Make sure that there are supporting document.

21

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Make sure that amount in payment voucher are same with the amount in invoice and request form. Check for the transaction in bank statement. Make sure that transaction has been transfer to ledger system and vote book. Make sure that the transaction has been classified in the correct account. I also have done compliance test for receipt, additional fixed asset, computer loan, vehicle loan, quotation price, salary and rental during my practical training.

6.3.2 Property, Plant & Equipment Obtain fixed assets register and fixed asset listing. Then, prepare the schedule of PPE. Doing physical sighting on assets listed in fixed asset listing to ensure the existence of that particular asset. Agreed total in the listing to the trial balance and general ledger. Identify new addition for the current year by test check to suppliers invoices. For instance: Motor vehicle Register card Land and building SAP agreement and Form 14A / Grant

22

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Check the ownership of the assets and ensure that is under the companys name, if not under companys name, need to disclose in Notes of Financial Statement. Depreciation methods should be reviewed annually. If

expectations are significantly different from previous estimates, the depreciation charge for the current and future period should be adjusted (FRS 116). Enquire and check whether any items has been scrapped or destroyed and ensure appropriate record have been kept, authorized and accounted properly. For land, need to verify that the basis of valuation is acceptable and reasonable. Determine which items should be expensed or capitalized based on the capitalization policy of the company. Check the insurance coverage for PPE and ensure it is sufficient and check the insurance expenses account whether all motor vehicles, building, plant & machinery are taken up in Profit and Loss. Consider whether there are any impairment of PPE as per FRS 136.

6.3.3 Cash and Bank Balances

23

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Obtain the cash book from client and agreed balance to trial balance. Obtain bank reconciliation from client and agree the figure to the cash book and bank statement as at year end. Note all long overdue cheques that still unclear for more than 6 months. Normally cheque will expire 6 month after it had been issued. Check subsequent clearance for unpresented cheque and deposit in transit to subsequent bank statement. Send bank confirmation to ensure that the balance agreed with the bank statement and all liabilities have been taken up. If the account is on overdraf, ensure that it does not exceed its limit. For petty cash, perform the cash count on the petty cash at the day of audit been done and reconcile it to the year ended. Review cash book and ensure the cheques are in sequential order.

6.3.4 Trade Debtors Obtain the trade debtor listing and agreed balance to the trial balance. Agreed the individual balance to individual ledgers. Test check debtors balance to the invoices and debtors statement.

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Check subsequent payment. For provision of doubtful debts, check whether client has any policy with regards to provision for doubtful debts. Review the aging listing and note long overdue debts for more than 12 month. Test check for the subsequent payment and consider any debts which need to be written-off. Discuss with management on the companys credit policy and ensure that it has been complied with.

6.3.5 Deposits and other debtors Obtain breakdown of deposits and other debtors and agreed to the general ledger. For the deposits, check to the original receipt. Test check to other debtors documents. Check subsequent clearances. Sent confirmation to the debtors for the large balance. Ensure that there is no trade debtor balances included in the other debtors listing. balances to the supporting

25

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ For old balances, discuss with management for possible provisioning.

6.3.6 Trade Creditors Obtain trade creditors listing and agreed to the general ledger. Agreed individual creditors balance to the creditors ledger. Agreed large individual balances to the creditors statement (if applicable). Enquire for large variances. Send creditors confirmation wherever possible. Search for unrecorded liability, check to suppliers statement and agreed to the ledger balances. Explain for any variances. Review for any unpaid invoices as at year end and check to creditors ledger to ensure that it has been taken-up.

6.3.7 Sales / Turnover Obtain detailed schedule Profit & Loss account and agreed balance to trial balance. Perform cut-off test by obtaining last 5 sales invoices for the period and first 5 sales invoices in subsequent year to ensure that sales are taken up in the correct period. When vouched to invoice or delivery order, ensure the

calculation, approval, acknowledgement pricing are in order.

26

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Compare current year results against last year results (perform analytical review). Then, comments on major differences. Compute the gross profit margin and compare with last year result and comments on major differences. Identify goods in transit.

6.3.8 Purchase Obtain schedule of expenses and agree total balance in the schedules to the trial balance. Compare current years expenses with last years expenses and note for the major differences. Vouch selected sample to the payment voucher, journal voucher, debit note and other supporting documents to ensure amount stated are at the correct amount. For salary include details of directors salary. The other items likes EPF & SOCSO as included under staff cost, which should be disclose under FRS 101. For salary, need to state numbers of staff while for EPF need to do reasonable test for employer contribution by calculating the percentage of EPF to salary and bonus. Directors remuneration includes fee, salary allowance,

and bonus. For instance fee should be disclose separately and state name and nature of payment.

27

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ For rental such as rental of premises or land obtain rental agreement and agreed the rental stated in the agreement. In the working paper, need to state recipient or landlord name and address, premise address and monthly payment. For audit fee, calculation based on MIA schedule. For the dormant company, the standard audit fee is RM 500. Review repair & maintenance expenses to ensure no capital expenditure was included.

6.3.9 List of Companies List of companies that I have been assigned to perform audit in Jamal, Amin & Partners are: 1. Government Perbadanan Kemajuan & Ekonomi Negeri Perlis (PKENPs) Yayasan Islam Perlis (YIPs)

2. Association Persatuan Nelayan Negeri Perlis (PELARIS)

3. Subsidiaries Company of Perbadanan Kemajuan & Ekonomi Negeri Kedah (PKNK) Agro Botanical Garden Sdn Bhd Kedah Overseas Trading Network Sdn Bhd Kedah Credit & Leasing Sdn Bhd

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Langkawi Seafood Sdn Bhd Tebus Samudera Sdn Bhd

4. Subsidiaries of Majlis Amanah Rakyat (MARA) Novel Caterers (M) Sdn Bhd Yayasan Matri Perlis Absolute Base Sdn. Bhd

6.4

Communication Skills Communication skills are the vital in the working environment.

The

key

skills

that

learn

during

practical and

training team

are

verbal The

communication,

written

communication

work.

experience working in audit firm bring me more confident in dealing with different level of people. I have improves the ability to communicate where there is a huge differences as a student I only communicate to my fellows friends and lecturer. It helps me to develop my communication skills. During my practical training, I need to call and ask client regarding the queries. From here Im try to become more confident in dealing with clients.

7.0

ISSUES HIGHLIGHTED

In performing the audit for client, a have face several issues relating to the client accounts:

29

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ 7.1 Company A A is a State Government Agencies (GLC). In performing audit for company A, we facing major issues that related to their account and the type of audit report for the said agencies is Disclaimer Report. The issues that interesting to highlight are:

7.1.1 Issue 1: PPE Register A failure to prepare a complete of PPE Register. We are unable to verify the amount of net book value for Plan, Property & Equipment (PPE) which amounting to RM 6,820,859. We cannot perform the physical sighting during performing the audit to ensure the existence of PPE. We are unable to ensure whether A has ownership to the PPE, to ensure that the PPE are properly revalued accordance to as specified in FRS 116 and Company Act Schedule 9 thus our objective to ensure that all PPE transactions are completely recorded are failure. During auditing, we found that not all land and vehicle grants are in their keeping. Then, we cannot verify the ownership of the assets,

where this related to FRS 120 Accounting for Government Grants and Disclosure of Government Assistance. In the working paper, we conclude that we cannot give true and fair view of opinion for amount of PPE.

30

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ The recommendation for solution is discuss and advise management to prepare the complete PPE Register by include information about date of purchase, description about assets, cost, rate of depreciation, current depreciation, accumulated depreciation and net book value of assets then make necessary adjustment to their accounts. We also advise A about PPE Register in management letter. The complete tagging also recommend such as for furniture and fitting. Then, this can bring more easily for physical sighting process.

7.1.2 Issue 2: Accrual Basis We have found that A have used cash basis in recording rental income for the year such as Sewa Tanah, Kolam Udang, dan Tapak Bangunan (RM 168,323.00) and Sewa Tapak Kilang Ais (RM 74,00.00). These bring effect to rental income 2006 was included into rental income for the current year. For 2007, we found that rental income that not accrued by A amounting to RM 15,216.67. Based on the record, we can conclude that A not complies with FRS 101 Presentation of Financial Statement. For solution, we recommend that A to record the rental income by using the accrual basis as specified by approved accounting standard in Malaysia, so that rental income not over or under stated during the year. After discussion with client, they agree to take up the

31

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ accrued interest portion in 2006 in their account. At the same time, auditor also advises in management letter to ensure that client record does not have the same mistake.

7.2

Company XY XY is one of the State Government Link (GLC), where we have

audited their financial statement for year ended 2007 and 2008.Their nature of work are as a main contractor in construction of building, rent and sales their project likes building or house. Here are several of the major issues that can we highlight to be discussed:

7.2.1 Issue 3: Consolidation of Financial Statement XY have 11 subsidiaries and the report for 5 of their associates are not consolidate in financial statement of XY in the appropriate form and content as specified in FRS 127, Consolidated Financial

Statements and Investment in Subsidiaries and FRS 128, Investment in Associates due to the appropriated audited financial statement are not given by subsidiaries to console. For solution, we advise that if XY not prepare consolidated financial statements, XY need to disclose that the financial statements are separate financial statements and its exempted from preparing consolidated financial statements and state list of significant

32

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ investment in subsidiaries and associates and a depreciation of method used to account for these investment. In the same time, we also advise in management letter.

7.2.2 Issue 4: Standard Operating Procedure (SOP) Based on our observation, XY still did not have complete and detail of Standard Operating Procedure (SOP), where can be use by their staff. This is important to make sure the uniformity, the effectiveness and efficiency in XY operations. Furthermore, concerning on understanding of the standard is very important. The standard operating procedure includes for recording and controlling any product or services provide that are not met the specification that needed by XY. We recommend that XY to take note about the matters that related with internal control, so that there is no mistake done against by XY, which can give effect to their management control. The details of SOP is important to make sure that the XYs operation are in the track and all the procedure that need to follow by all staff of XY will be followed then can bring guideline for them.

7.2.3 Issue 5: Segregation of Duties

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Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ Based on our observation, we found that XY still have problem of segregation of duties because we can see that several staff need to the multiple work in once time. For example, the same person should not authorize the payment of a bill and also sign the cheques in payment of the bill. Naturally, the extent of separation of duties depends heavily on the size of the organization, in many small companies, it is not practical to segregate the duties, but in this case, the segregation of duties is needed because of XY have a complexity size of organization structure. For the solution, we recommend that segregation of duties needs to be implemented to compensate for these potential overlaps of duties and to avoid from fraud risk. The distinction between authorization and approval is important. Authorization is a policy decision for either a general class of transactions or specific transactions while approval is the implementation of managements general authorization decisions. Segregation of duties is one of the control objectives that relate to policies and procedures. We also advise XY in management letter.

7.2.4 Issue 6: Internal Audit There is no internal audit in XY. The internal audits are expected to provide value to the organization through improved operational

34

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ effectiveness, in addition to traditional responsibilities such as reviewing the reliability and integrity of information, ensuring

compliance with policies and regulations, and safeguarding assets. Without internal audit can contribute XY with risk likes inefficiency management, fraud and unlawful. We suggest to XY to set-up the internal audit division in helping them to strength the position of XY, by employ their own staffs to perform internal auditing. Based on ISA 610 Considering the work of Internal Auditing also permits the external auditor to use the internal auditor for direct assistance on the audit. Relying on the internal audit staff performance of some of the audit testing may allow the audit to be completed in the less time and for a lower fee.

7.2.5 Issue 7: Investment Property During auditing, we found that one of the building held by XY initially held for sale but are being rental by Z and others tenants. Based on IAS 25, Accounting for Investment where, the assets are held for rental or increment in value can be classified as investment property. FRS 140 states a property interest that is held by a lessee under an operating lease may be classified and accounted for as investment property provided that the rest of definition of investment property are

35

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ met, the operating lease is accounted in accordance to FRS 117 Leases and the lessee uses the fair value model for the asset recognition. We recommend that the assets should be classified as

investment property for assets that held for rental and not record as inventory as recorded by client. Properties held for investment are those held to earn rental or to be benefit from appreciation in value or both. The adjustments due to wrongly classification of asset are needed to do.

8.

CONCLUSION For conclusion, industrial training can give a lot of benefits to the

students, a lot of useful experience and knowledge in the auditing and accounting field. This training is like a self preparation for student to go through the real working experience in the future. During six months industrial training, I can feel how the real working environment is. Besides that, a long this training period, I have learned how to discipline myself with the planning done before starting the audit work and by following on schedule given by manager to complete the task given. This experience is not only focus on audit work, but also in communication skill, where, during the perform audit filed work I need

36

Jamal, Amin & Partners AF 1067 _______________________________________________________________________ _ to arrange appointment with client when there is needed for deep explanation and more exposure that I got during dealing with various level of clients. These experiences are very valuable to me for future career.

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