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Presentation on Environmental Audit

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Fraud Findings Outline

Fictitious Revenue/Sales

Improper Asset Valuation

Legal Requirements

Should Audit Report be Written?

What to Look for in an Environmental

Management Audit?

Benefits of Regular Audit

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Fictitious Sales/RevenueSales Increase

Receivables decrease

No Provision and Bad debts

Cash DecreaseCash Flows From Operating Activities

Negative

GMI Higher than nonmanipulator index butslightly lower from manipulator index

Days on inventory almost 5 months which

showing slow in selling activities

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Improper Asset ValuationCash Flows From Operating Activities

Negative

Inventory Turnover Increase Not provide

write offLengthy on Days in Receivables 227 days

on 2011 and 249 on 2010

Intangible assets may derived fromestimate figure due to suddenly appear in

2011

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Concealed Liabilities And ExpensesUnderstating liabilities and expenses is one of

the ways financial statements can be

manipulated.

When liabilities are concealed, equity, assets,

and/or net earnings are inflated.

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Concealed Liabilities And Expenses

Red Flags 1

Recurring negative cash flows from operations or an

inability to generate cash flows from operationswhile reporting earnings and earnings growth.

Can you find this at HoyongHayang Financial

Statement???

Cash Flows From Operating Activities Negative forTwo consecutive years 2010-2011

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Concealed Liabilities And Expenses

Red Flags 1

Why the Cash Flows From OperatingActivities Negative for Two consecutive years

2010-2011 while your sales revenue having a

good growth and surprisingly the cash andbank balance decreased by 27.54%????

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Concealed Liabilities And Expenses

Red Flags 1

HoyongHayang is suspected made a fictitioussales revenue which is to proof that our first

finding is correct

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Concealed Liabilities And Expenses

Red Flags 2

Assets, liabilities, revenues, or expenses based onsignificant estimates that involve subjective

Judgments or uncertainties that are difficult tocorroborate.

So what about with this???

Figure from Intangible asset amounted RM7,279,000may derived base on estimation figure due tosuddenly appear in 2011 even worse it suppose to berecorded under expenses (Suspected CapitalizingThe Expenses)

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Concealed Liabilities And Expenses

Red Flags 2

So what if this transaction recorded under theexpenses???

HoyongHayang will suffer another majorlosses as per 2008 and even worse after

made fictitious sales revenue they still

couldnt make a profit

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Recurring negative cash flows from

operations or an inability to generate cashflows from operations while reporting

earnings and earnings growth.

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Improper Disclosure On Unusual Activities

Advances to log supplier suppose to be

recorded on current asset instead of non

current asset

Reason may be to avoid current ratio resultgoes to extremely high. CR 2011 is 3.33

and it may go to 4.24

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Timing Differences

Early recognition on sales/revenue on year

2010

Slightly increase in trade receivable for year

2009 to 2010

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