1) The important of separation of right and duty between shareholder and management.

Delima Enterprise Sdn. Bhd. was a large company due to these reasons; the company had been awarded with several engineering projects and its cumulative revenue for 2004 and 2005 were nearly RM 1 million and RM 1.7 million respectively. By referring that reasons, we can say that it was a large company. As a large company, the shareholders are separated from Board of Director and management.
However, in this case, there is no separation or segregations of rights and duties between shareholder and management. Segregation of right and duties means assign two or more competent and qualified individuals in a way that provides reasonable assurance comply with the standards. It means, at any time , no one person should be in position of doing the primary functions of authorizing, recording and taking care the custody of assets. Besides, shareholders and director have two completely different roles in company. Shareholders are owner of the company while director manage the company.
From what we can see in this case, Encik Zayed is the shareholder of Delima Enterprise Sdn. Bhd., in the same time he act as Managing Director. Meanwhile Puan Hashimah is the shareholder of Delima Enterprise, in the same time she act as Chief Operating Officer. Before the company hire Cik Amy as Finance Executive, Puan Hashimah was responsible for all finance related matters. There is clearly stated that they do not have segregation of rights and duties between shareholder and management.
Besides that, there is no segregation of duties when the employees itself prepared their timesheet when they arrived at work and recorded the time they leave the office, manually. The possibility of employees will cheat their time in and time out would increase because the record is not checked by another colleague. It supposed different individuals be assigned to record their timesheet or the company could apply punch card system to avoid fraud.
The company again does not apply the segregation of duties when at the end of every week, the employee timesheets were sent to Puan Hshimah who is also the shareholder of company and Chief Operating Officer for approval and payment of salaries. It means that Puan Hashimah has four responsibilities in Delima Enterprise. Company must assign other officer who is responsible to manage approval and payment of salaries to avoid any error, confusion, misplace, misstatement and fraud.
Hence, from the several situations that we have gone through, there are many important of separation of right and duties between shareholder and management. Firstly, management of large company has to depend on formal internal control for reliability of records and other information. Therefore, no one person should sees the transaction through from the beginning to the end on their own. This is to avoid error and fraud. Besides that, due to size of business, management could not personally ensure the accuracy, completeness, and validity on most action carried out by them if there is no segregation of duties.
As a conclusion, separation of rights and duties between shareholders and management are very important to maintain the company’s internal control in term of accuracy and validity also to avoid error and fraud. 2) The needs for proper recording and authorization of business transaction.

3) Implementation of internal control is necessary for company to operate and execute business transaction

Internal control is the whole system of controls, financial or otherwise, established by management in order to carry on the business of the enterprise in and orderly and efficient manner, ensure adherence to management policies, safeguards the assets and secure as far as possible the completeness and accuracy of the records.

4) Ethical and governance issues that is critical in the business environment.
Ethics refer to a system or code of conduct based on moral duties and obligations that indicates how an individual should behave.

5) Auditors’ responsibility to detect material misstatements due to fraud 6) Compliance to Companies Act 1967, FRS and other requirements.