SYNOPSIS Encik Selamat, a Certified Public Accountant (CPA), had been the General Manager of Excel Poultry &

Meat Sdn. Bhd. (EPM) since 2005. EPM was established in 1998 to carry on chicken farming and supplying of whole chickens to various outlets in Malaysia. With an initial capital of RM 3.6 million, now EPM had more than 200 employees within the organization and started positioning itself amongst the top 5 chicken supplier, in the mid-tier producers in country. The company was able to maintain its operations and started to make profits in the poultry and meat industry since the demand for chicken buoyant. However, the company had facing problem in 2008. The issues arose include the management of trade receivable, in dealing with superiors, subordinates and customers as well as in handling credit control. The case become worse with a situation faced by general manager of the company who took opportunities capitalized on his past connections while assuming office. The issues also highlighted the leadership style, lack of adequate internal control system on sales and collection processes, flaws in internal reporting as well as issues on professional ethics and conduct of an accountant.

PROTAGONIST Encik Selamat was the protagonist in this case. As a General Manager he has the responsibility to make decision.

PROBLEMS 1. General Manager was not competence enough in poultry and meat industry. -En. Selamat (GM) was transferred from another subsidiary of the same group that dealt with transportation business. Even though he had good reputation at the previous company but the experience is not related to this industry. 2. The operating cash was systematically running low. -Low operating cash due to the feed cost hike. This problem has leads to the increment in short-term borrowing and financial obligations in terms of interest payments. 3. Fail in controlling the credit limit of the customers. -The major customer (Cold Gold Sdn Bhd) had exceeds the credit limits but marketing department continued to supply products to the company. 4. En. Selamat (GM) has personal interest in the deal with Cold Gold SB. The close relationship between one of the executive directors of Cold Gold SB (En. Azman) and

General Manager enable the CGSB to extend its credit limit and En. Selamat personally benefited from the deal. 5. Finance department had not disclosed the receipt of payments from customers. -En. Munir, staff in the finance department has not prepared proper documentation for the payment receipt from the customers. 6. There are misstatements in the company accounts. Balance in the company account did not tie up with the confirmation letters sent to their debtors. 7. The event of feed cost hike resulted in higher selling price but the demand for chickens has drop.

MAJOR ISSUES a) Lack of internal control Marketing department continued to supply the product even the credit limit of Cold Gold Sdn Bhd exceed the limit because of Cold Gold Sdn Bhd is a major customers and also have close relationship with the En.Selamat. Weakness in cash collection whereby the statement of customers not tied up with the balances in the account. It occurred because the account receivables not being maintain properly by Encik Selamat and can lead to the loss of potential sales and point toward possible theft of cash. Conflict of interest because the closed relationship between Encik Selamat and Encik Azman that can influence in terms of to make reasonable decision making.

b) Lack of leadership skill Encik Selamat does not have enough skills and lack of expertise in the poultry and meat industry. Encik Selamat also have no value to be as a leader because of the shallow in experienced to managed the business and he also accept the offer without taking into consideration the implication towards the company later. En.Selamat did not properly monitor the operation of the company and unable to detect the fraud commit by the Encik Munir (one of the former staff at finance department). Encik Selamat use delegation style by highly trust Encik Kasim to manage the finances of the company and also part of EPMs marketing think tank.

OPTIONS i. Manage cash flow system As the company offers the customers to purchase their products by credit, so the company should screening the customer credit before approve them to engage with the company. The company should prepare a contract that includes the credit term period (eg: 90 days, 120 days or 180 days) in collecting the debt. This will ensure that the customer will not have long outstanding debt which could effect on the company cash flow. In order for the company to avoid risk of customers purchase with credits, the company probably can look for potential customers that purchase their products by cash which is small-medium sized company or small groceries stores. So that, the income of the company can be increased and operating cash flow will be higher.

ii.

Leader must have value and ethics Supposedly, Encik Selamat as the General Manager must have value and ethic as a leader. As a leader, he should act with profound sense of integrity and fairness. Encik Selamat must uphold this value in his daily decisions and actions. He should maintain professionalism in the office. Moreover, he should not treat customer as a buddy which later create personal interest such as in the deal with Cold Gold Sdn. Bhd. Besides, Encik Selamat can use authoritarian and participative as leadership style in running the EPM rather than using delegation style. In authoritarian style, Encik Selamat can tell their employees what to be done and how he wants it to be accomplished. In participative, Encik Selamat include together the employees in the decision making process and maintains the final decision making authority.

iii.

Interference of Board of Directors The interference would be appropriate before situation gets much worse. At least to have Encik Selamat being transferred to other subsidiary. The general manager however needs to be an experienced person in poultry industry to turn EPM around. In a bigger picture, the subordinates of Encik Selamat will view of the action (transferring Encik Selamat to other subsidiary) to be a serious measure shown by the Board of Directors to not tolerate with greediness and putting self-interest beyond the interest of the company.