REPORT :

CHICKEN RUN
(EXCEL POULTARY & MEAT SDN BHD)

PREPARED BY:
MOHD HAIRI BIN AB RAHMAN GA 01786
NURRIN AISYAH BINTI DERAMAN GA 02038
NURUL AMALINA BINTI AHMAD GA 01801
SHAHRUL ALAIE BIN SHAMSUL BAHRIN GA 01811
SITI FATIMAH BAGAWATY BT ABDULLAH GA 01941
 Table of Contents
1.0 Introduction .......................................................................................................................... 1

2.0 Main issue .......................................................................... Error! Bookmark not defined.

3.0 Analysis and Discussion .................................................... Error! Bookmark not defined.

3.1 Short-term borrowing ....................................................................................................... 9

3.2 Ethical Analysis................................................................................................................ 8

3.3 Lack of internal control .................................................................................................... 9

4.0 Recommendation ............................................................... Error! Bookmark not defined.

4.1 Develop different types of chicken products.................. Error! Bookmark not defined.

4.2 Change or mixed chicken feed ....................................... Error! Bookmark not defined.

4.3 Proper documentation and segregation of duties ........... Error! Bookmark not defined.

4.4 Establish new policies by management .......................................................................... 14

5.0 Conclusion ........................................................................................................................ 15

6.0 References .......................................................................................................................... 15

1
1. INTRODUCTION
Excel Pountry & Meat Sdn Bhd (EPM) which is small & medium sized enterprise (SME) was a
subsidiary of PCK Holding and located in Kluang, Johor. EPM was established in 1998 with
initial capital of RM 3.6 million and main business is to carry on chicken farming and supply of
whole chickens to various outlets in Malaysia. Starting with 20 employees, EPM now had more
than 200 employees and become amongst top 5 chicken suppliers in the mid-tier producers in the
country as the company also one of the members of Livestock Farmers Associations of Malaysia
(FLFAM). The chart below shows the organizational chart and the person responsibility to each
department.

PCK HOLDING

Parent Company

EXCEL POULTARY & MEAT SDN BHD

Subsidiary

Board Of Director

B.O.D

General Manager
Mr. Selamat

Finance Manager & Marketing Planner

Mr. kassim

Finance Executive Credit Controller

Account Executive Miss Choy

Figure 1 : Organization Chart

The company was able to maintain its operation and make profit to in the poultry and meat
industry since strong chicken consumption in domestic market as Malaysia recording one of the
world highest per capita consumption rates in the world for chicken.

2
 The domestic market was further intensified by popular home-grown fast food chains and the
surge of quick-service-restaurants and also traditional Malaysian delicacies such as Satay Ayam
and Rendang Ayam have causes business in these local chains reported to be doing well. En
Selamat, a Certified Public Accountant had been the General Manager since 2005 and he has
established good promotional strategies closely managed function units. As a result, the company
maintains to make profits as the demands from the superstores continues and was spread to a
different market segment such as hospitals and hotels. However, in the year 2008, the company
having loss in operation which indicated that the company facing problems in term of lack on the
important considerations for proper running of business operations in term of management,
accounting record procedure, internal control, conflict of interest and human resource that
potentially harm the image and financial performance.

2. ISSUES AND PROBLEMS

There are many problems that can be detected in Excel Poultry & Meat Sdn Bhd (EPM).
2.1 Management and Leadership Skills
Is a good manager automatically a good leader? What is the difference between
leadership and management? The main difference between leaders and managers is that
leaders have people follow them while managers have people who work for them. A
successful business owner needs to be both a strong leader and manager to get their
team on board to follow them towards their vision of success. Leadership is about
getting people to understand and believe in your vision and to work with you to achieve
your goals while managing is more about administering and making sure the day-to-
day things are happening as they should. In EPM, Mr. Selamat was have capabilities
as a leader but he less focused on the operation of the company when he left the duties
to Mr. Kassim (Financial Manager & marketing Planer) because he want actively
involved in social and community work.
2.2 Financial Problem
Encik Selamat did not disclose this matter to the Board. Besides that, the issue is the
increasing of production cost. Since 2008, the company has been facing the problem of
increased chicken feed cost which has risen from RM54. 50 to RM88, the increase is
more than 50%. The increase in feeding cost has ultimately increased the company’s

3
 production cost to about 56. 5% the increase of feeding cost has affected the whole
industry. Thus, Federation of Livestock Farmers’ Associations of Malaysia (FLFAM)
has called for higher chicken prices in order to protect producer’s earnings in the face
of feed cost hike. However, members of the FLFAM had seen a drop in demand of the
chicken. On top of that, the event of the feed cost hike discovered that the company has
systematically low operating cash. In the situation, the company resorted to borrow
short-term loans from the bank in order to meet operating obligations. This in turn
increased its financial obligations in terms of interest payments plus principal. Then,
there is also issue on the shortage of chicken supply in market. Since the feed cost hike,
the company has cut down the production of chicken in market. While at the same time,
the demand of chicken from hypermarket, flea market and individual become high. The
ceiling price that control by government also contributed to this problem. Another
problem discovered is that in EPM’s books, a retailer, Mr. Siva’s account had
outstanding balance. This was contrast with the books of Mr. Siva, where he claimed
to have paid all outstanding balance and the cash payments had been made to Mr.
Munir.
2.2 Ethical
There is no segregation of duties among EPM staff. This situation can be seen when
Mr. Munir, the former staff at the finance department, collects the payment from client
but he does not disclosed the payment receipt to the account department.
2.3 Conflict of Interest
Like other types of illegal or unethical activities, conflict of interest activities carry the
risk of consequences. In certain circumstances, conflict of interest can result in
prosecution. For example, public officials, like state legislators, are specifically
prohibited from activities that would result in a personal gain because of conflict of
interest. In most cases, though, conflict of interest matters are handled in court by a
civil lawsuit. For example, if a company has proof that a board member profited from
her role on the board, the board member has violated her duty of loyalty and can be
taken to court. Conflicts of Interest in the Workplace an employee may work for one
company but he or she may have a side business that competes with the employer. In
this case, the employee would likely be asked to resign or be fired. A common

4
 workplace conflict of interest involves a manager and his or her employee who are
married and have a relationship. Next, the issue is conflict of interest. The situation can
be seen on the company’s General Manager, Encik Selamat has close relationship with
one of the executive directors of Cold Gold Sdn. Bhd. , Mr. Azman. This relationship
has enabled Cold Gold to extend its credit limit with authorization from Mr Selamat
and not the Credit Controller (Ms. Choy). Mr. Selamat also has personal interest in the
deal with Cold Gold Sdn. Bhd. The deal was if Mr. Selamat extended the credit limit
of Cold Gold Sdn. Bhd. , he will personally benefit from the deal.
2.4 Fraudulent
This is a conflict because the manager has the power to give raises or promotions to the
employee. Discussions about the company between the two people may also breach
confidentiality restrictions. Munir (finance department) collects the payment from
client and does not disclosure the receipt to accounting department. When these
functions not be divided, a detailed supervisory review of related activities is required
as a compensating control activity. Segregation of duties is a deterrent to fraud because
it requires collusion with another person to perpetrate a fraudulent. So the company
must have segregation of duties to reduce the critical problem of internal control. Such
as, the approval function, the accounting or conciliating function, and the asset custody
function should be separated among employees.
2.5 Lack of internal control.
There is no segregation of duties among EPM staff. This situation can be seen when
Mr. Munir, the former staff at the finance department, collects the payment from client
but he does not disclosed the payment receipt to the account department and also on
debt collection.

5
3. ANALYSIS AND DISCUSSION

Particular/ Year 2006 2007 2008

(RM million) (RM million) (RM million)

Revenue 54.70 55.01 74.90

Cost of Sales 51.70 54.10 74.09

Operating Profit/ (Loss) 3.00 0.91 0.81

Expenses 0.80 1.10 1.60

Net Profit/ (Loss) 2.20 (0.19) (0.79)

Trade Receivables 12.70 16.20 26.00

Stock 3.10 1.50 2.60

Trade Creditor 18.50 30.00 45.00

Table 1 Performance analysis of EPM for the past 3 years from 2006 to 2008

Particular/ Year 2007 2008

Revenue 0.57% 36.16%
Cost of Sales 4.64% 36.95%
Operating Profit/ (Loss) (69.67%) (10.99%)
Expenses 37.5% 45.45%
Net Profit/ (Loss) (108.64%) (315.79%)
Trade Receivables 27.56% 60.49%
Stock (51.61%) 73.33%
Trade Creditor 62.16% 50%

Table 2 Percentage of increase/decrease in the account balances

6
 Particular/ Year 2006 2008 Increment
Price of Feed RM 54.50 RM 88.00 RM 33.50
(per bag)
Production cost RM 3.22 RM 5.04 RM 1.82
(per kilo)

Table 3 Increase of price of feed and production cost

In late 2008, the operating cash was running low because of the problems in cash liquidity. From
the abstract of account above, we found that the cost of sales was increasing from 2006 to 2008
and it is too close to the revenue amount. However, in 2007, the cost of sales increased while the
revenue did not increase much and operating loss was recorded in 2008 as the retail price of
chicken was increased from RM 3.22 to RM 5.04 per kilo from 2006 to 2008. Thus, the increment
of revenue in 2008 by 36.16% was almost same with the increment in cost, 36.95% in that year.

On the other hand, in 2008, the cost of feeding was increased by RM 33.50 from RM 54.50 to RM
88.00 per bag which is an increased of almost 61.5%. Hence, the production cost was also increase
from RM 3.22 to RM 5.04 per kilo from 2006 to 2008 by RM 1.82 which is 56.5%. In short, the
exorbitant cost of chicken feed resulting the operating loss faced by the company.
Particular/Year 2006 2007 2008
Profit Margin 5.48% 1.65% 1.08%

Inventory Turnover Ratio 16.68 36.07 28.50

Account Receivable 4.31 3.40 2.88

Turnover Ratio

Days to Collect Account 84days 107days 126days

Receivable

Table 4 Financial ratio analysis of EPM

7
Profit margin is very useful to assess the current financial position and financial performance.
The higher the profit margin indicates more profitable company that has better control over the
costs compared the years. In this case, EPM have the highest profit margin which is 5.48% in
2006 and decreases gradually in the following years to 1.08% in 2008. This is because the
increment of cost of sales, EPM is profiting only 1.08% for every dollar of product sold in 2008.

Besides that, the inventory turnover ratio is used to measure the inventory management efficiency
of a business. It is an activity efficiency ratio and it measures how many times per period, a
business sells and replaces its inventory again. In general, a higher value indicates better
performance and lower value means inefficiency in controlling inventory levels. For the year 2007
we can see that the value of inventory turnover is higher compare with 2008 may be an indication
of overstocking which may pose risk of obsolescence and increased inventory holding costs. EPM
was turning over its inventory on average, 3 times per month in 2007 while it reduces to twice per
month in 2008.

The reason of the low running operating cash was also due to significant increase in the trade
receivables, also cash collection. The credit controller, Ms Choy was discovered from the aging
analysis of customers that one of the major customers, Cold Gold Sdn Bhd, was exceed the credit
limit and the marketing department of EPM still continued to supply products to that particular
company. Encik Selamat has personal benefit from the deal with Cold Gold Sdn Bhd. Therefore
although Cold Gold Sdn Bhd did not pay within the credit limit, Encik Selamat did not stop the
marketing department to continued supply products to the company. EPM has weakeness in their
cash collection because of customer selection and depends on the relationship rather than business
matter. There is a supported evidence which between General Manager, Encik Selamat and one of
the executive directors of Cold Gold Sdn Bhd, Encik Azman, who was the best friend during
college days. Besides that, there is two possibilities that the statement of customer account is not
tie up with the client records.

Firstly, the account receivable is not being maintained properly. There is an assumption that Encik
Selamat might use the company’s fund illegally and he instructed the Account Executive, Puan

8
Azura to prepare the accounts in a ways to conceal his acts. It is an illegal transferring of a
particular debtor’s balances to another debtor. Secondly, there is theft on cash collections. This
might be one of the former staff in finance department; Encik Munir did not record properly and
committed fraud on cash skimming. Cash skimming is an illegal practice of taking the money for
personal used. And the person skimming is not reporting the cash as the payment of Mr Siva, one
of the retail customers with small account. By calculating the financial ratio analysis, account
receivable turnover ratio is indicates how quickly a company is having difficulties collecting sales
made on credit. It is an important indicator of a company’s financial and operational performance
also. However, the receivables turnover ratio is convert it into days to collect account receivable.
The days to collect account receivables is also called Average collection period is the number of
days , on average, that it takes a company to collect its account receivables. In 2006 we can see
that the company collects its trade receivables in 84 days (around 3 months) compare with the year
2007 and 2008 when their collect the money in 107days and 126 days (around 4 months), where
there is the differences about 1 month. It means that a higher value of average collection period is
unfavorable whereas a lower value is favorable. So, it is means that EPM takes around 3 months
to collect its debt in 2006, while it takes more than 4 months in 2008.

3.1 Short-term borrowing

The another reason of the low running operating cash was also due to the company had to resort
to significant increase in the short-term borrowing in order to meets its operating obligations. This
may in turn increase its financial obligations in terms of interest payments. By increasing short-
term borrowing, the company may incur short-term debt; the debt is usually made up of short-term
bank loans taken out by the company. The value of the debt is important when determining the
company’s financial health. If the debt is larger than the company’s cash and cash equivalents, the
company may results in poor financial health and does not have enough cash to pay off its debts.
EPM will facing loss if the debts incur could not be clear and the interest payments will keep on
increasing. On the other hand, short-term borrowing may in turn increase its financial obligations
in terms of interest payments. The interest payments on the short-term bank loans can quickly add
up to a major expenses for EPM.

9
 Short-term borrowing Long-term borrowing

-The borrowing time usually not more than -EPM can take longer period of time to start
one year. paying of their loans.
-Unsecured. -Lent over a longer lending term.
-High interest rate with additional fees. -Long-term borrowing is good for
-Short-term borrowing is good non-regular equipment and other depreciable assets.
expenses that come up.

3.2 Ethical Analysis

Encik Selamat and Encik Azman were best friends during college days. They involve in the issues
of conflict of interest during the trading business between both companies. Both of them have
personal deal within the company’s interest. Cold Gold Sdn Bhd was one of the major customers
in EPM, the relationship between Encik Selamat and Encik Azman may affect the judgment of
Encik Selamat as a General Manager of EPM. Fraud was founded in EPM especially the
irregularities in the debtor’s account. This is lead to the figures of the debtor’s account does not tie
up to the balances in the company’s account, this happened caused by one of the former staff at
the finance department Encik Munir who did not record the payment paid from customer in
company’s account. One of the retail customers Mr. Siva, with the small account in EPM came to
the office and complaining about the figures on the statement of accounts that sent to him were
incorrect. He stated that he had no outstanding balance in his account as payments had been made
to Encik Munir. This happened was totally unusual in the company’s account, there is some where
goes wrong when preparing the account.
Moreover, there is another ethical part which is when Ms. Choy realizes this issues was happened,
she approached one of the company directors and highlighted the fiasco, only to discover about
the “deal” between Encik Selamat with one of the Cold Gold Sdn Bhd’s directors. The director
was reluctant to take any action against Encik Selamat, since he was very “well-connected” and
had good reputation at the previous company. Encik Selamat’s connections with parent company
will results that he can secure his position in EPM and settled the problem that he created without
facing any penalize. Encik Selamat will continue make this fraud because he know that nobody

10
 will caught him or get any penalize just because of his relationship and “well-connected” with all
the related person, he know that they will cover up his fraud.

3.3 Lack of internal control

Internal control plays an important role in how management meet its stewardship or agency
responsibilities. Management has the responsibility to maintain controls that provide reasonable
assurance that adequate control exists over the entity’s assets and records. Proper internal control
not only ensures that assets and records are safeguarded, but also creates an environment in which
efficiency and effectiveness are encouraged and monitored. Encik Selamat had been the General
Manager of EPM, a subsidiary of PCK Holding. He was transferred from another subsidiary of the
same group, which dealt in the business of transportation. He was initially reluctant to accept the
current position due to his lack of expertise in poultry and meat industry. PCK Holding Company
was still transferred him to become General Manager of EPM, PCK was founded lack of internal
control that did not consider Encik Selamat was lack of expertise in poultry and meat industry.
After Encik Selamat was accepted the offer, the career track had been smooth until the closing of
the year 2008 when the company he presently helmed faced operational crises. The “chicken run”
saga pictured a case that was familiar in respect of management of small-and-medium sized-
industry, at the infant stage when there was a lack of focus on the important considerations for
proper running of business operations. Encik Selamat also fully used his power as General
Manager by hiring Encik Kassin to manage the financial of company. Due to Encik Selamat was
lack of expertise and don’t have experience in this industry, he was unable to handle when things
become more and more serious.

3.4 Management and Leadership Skills

The four quadrants represent the level of strength of the two behaviors:
Authoritarian — strong on tasks, weak on people skills
Country Club — strong on people skills, weak on tasks
Impoverished — weak on tasks, weak on people skills
Team Leader — strong on tasks, strong on people skills
The goal to good leadership is to score at least a 6 on both task and people, which places the leader
in the Team Leader grid. The four leadership behaviors are discussed in more detail below.

11
Team Leader (high task, high relationship) - These leaders lead by positive example and endeavor
to foster a team environment so that all team members can reach their highest potential, both as
individual team members and as a group of people who use cooperation and collaboration. They
encourage the team to reach goals as effectively as possible, while also working tirelessly to
strengthen the bonds among the various members. They normally lead some of the most productive
teams. Authoritarian Leader (high task, low relationship) - Leaders who get this rating are very
much task oriented and are hard on their workers (autocratic). There is little or no allowance for
cooperation or collaboration. Authoritarian leaders mostly display these characteristics: they are
very strong on schedules; they expect people to do what they are told without question or debate;
when something goes wrong they tend to focus on who is to blame rather than concentrate on
exactly what went wrong and how to prevent it; they are intolerant of what they see as dissent (it
may just be someone's creativity), thus it is difficult for their subordinates to contribute or develop.
Country Club Leader (low task, high relationship) - These leaders predominantly use reward power
to maintain discipline and to encourage the team to accomplish its goals. Conversely, they are
almost incapable of employing the more punitive coercive and legitimate powers. This inability
results from fear that using such powers could jeopardize relationships with the other team
members. Impoverished Leader (low task, low relationship) - These leaders use a “delegate and
disappear” management style. Since they are not committed to either task accomplishment or
maintenance, they essentially allow their team to do whatever they wish and prefer to detach
themselves from the team process by allowing the team to suffer from a series of power struggles
within the group. The Sweet Spot on the Grid Lead Primarily as Team Leader, but be Situational
for the Other Three — The most desirable place for a leader to be along the two axes at most times
would be a 9 on task and a 9 on people — the Team Leader. However, do not entirely dismiss the
other three. Certain situations might call for one of the other three to be used at times. For example,
by playing the Impoverished Leader, you allow your team to gain self-reliance. Be an
Authoritarian Leader to instill a sense of discipline in an unmotivated worker. Be an Impoverished
Leader to allow others to teach others to lead. By carefully studying the situation and the forces
affecting it, you will know at what points along the axes you need to be in order to achieve the
desired result.

12
4. SOLUTION AND RECOMMENDATION
4.1 Develop different types of chicken products

In order to resolve the main issue of the low liquidity of cash, we recommend that EPM can expand
or develop more chicken products to sale. Since the main activity of EPM is supplying the whole
chicken to customers, it is advisable to develop more products to increase the sales as below.

Types Purpose
Eggs EPM can raise the chicken eggs either for
consumption or to breed more chicken to sell.
Feathers The chicken feathers also can be use to sell to the
handicraft makers.
Livestock EPM can sell the chickens not only for consumption
but also to customers who would like to buy chicken
as pet.
Compost fertilizer EPM can sell as organic purpose for the green
environment advantages.

Table 5 Types of chicken production

Another problem that causes the low liquidity of cash flow is the increase in the cost of chicken
feed. It is recommended that EPM mix the chicken feed with other cheap ingredients to reduce the
chicken feed cost.

4.2 Change or mixed chicken feed

The following are the list of other feed that can be use to replace the current chicken feed:
 Milled corn – suitable for small chickens because it is easily digested and certainly has a lot
of carbohydrate content that can make chickens full faster, in choosing milled corn it is better
to choose a good corn and not kutuan because many of us who sometimes choose milled corn
origin - as long as this is important for the development of chickens later.

13
 Dedak (bran) – Bran is the skin of rice that is often thrown away at the time of grinding rice,
but it turns out bran can also be used as chicken food, giving way enough to give to the chicken
with mixed with corn and given a little water, bran contains fiber suitable for chicken growth.
 Canned yam – Chopped morsels (cut into small pieces) can also be given as the main feed of
the chicken but sometimes the chicken is reluctant to eat it therefore to outsmart enough blend
yam with bran will make the texture of the yams changed so that the chicken will be more
interested to eat later, sweet potatoes that are used as chicken feed is good yam with the quality
of the mediocre but it is recommended that the sweet potato is still fresh.
 Pellets - an alternative feed for chicken farmers, especially chicken, but the price of pellets
that every day soared up makes some people make processed feed of their own chicken
(homemade feed) with pellet base material, by mixing sweet potato or jangung with pellet and
then dried in this way making chicken feed produced will be better and not wasteful in the use
of pellets.
 Wheat waste (pollard) – Wheat waste or pollard can also be a chicken feed but if we live in
urban areas it will be difficult to get it, polls contain many fibers but it is good in feeding
chicken with this ingredient should be mixed with other foods such as corn, yam or bran
because in some the case is often the chicken will experience diarrhea caused by fiber content
in pollard.
Well that's a suitable chicken food is given as a main food from chicken, in addition to the above
foods in fact there are many types of foods that are suitable given to chickens but from all that we
can only choose 5 only, in addition to cheap and certainly easy to obtain.

4.3 Proper documentation and segregation of duties

Based on the analysis, we recommend that EPM to manage their cash flow system. EPM allows
their customers to purchase their products by credit. Thus, before approving the customers, EPM
should conduct a background check on their customer’s credit account and related relationship
pertaining to creditors. This is to avoid any personal interest in the company’s management team.
EPM should prepare a specific contract that includes the credit term (e.g. 90 days, 120 days or 180
days) in collecting the debt. EPM can send reminders to customers with outstanding balances in

14
respect of their accounts. Therefore, the customer will not have long outstanding and can avoid
paying higher debts and pay at time given.

In order for EPM to avoid having risk with customers purchase in credits, EPM can find their
customers that afford to pay in term of cash. They can be the small-medium sized company or
small groceries stores. This will increase directly the income of the company thus higher operating
cash flow. Somehow, they can also export their products to other countries.

Besides that, EPM can apply for banking facilities and financial assistance in order to meet their
financial obligations. For example, Skim Pembiayaan Perniagaan MARA or TEKUN. With the
money they received, EPM can use them for improving the cash flow of the company. They also
can purchase additional raw materials in order to supply their products to their customers.

In term of maintaining their resources, EPM can find other supplier for their product. They can
implement the backward integration as one of the way to control their supplier. From the supplier,
they can ask to buy in bulk so that EPM can get discount for every purchase. This will reduce their
cost and increase the sales.

Other than that, since marketing department continued to supply their product even the credit limit
of Cold Gold Sdn Bhd had gone into its limit, EPM should take alert on their revenue cycle
especially sales order entry.

15
 Figure 1 Process of Sales Order Entry
1. Taking customer order
 Receive order in many way
 Sales order contains information about item number, quantities and prices
2. Approve credit
 Credit sales should be approved before they are processed
 Checking and verify the account
 Order exceeds the customers credit limit, it require specific authorization by credit manager

3. Check inventory
 Determine if there is sufficient inventory available to fill the order
 If sufficient, the sales order is completed
 If not sufficient, the department of the production will be informed about the shortage

In order to solve the problem on cash collection, EPM should maintain their account receivables.
Errors in maintaining customer accounts can lead to loss of future sales and may indicate possible
theft of cash. EPM can implement the closed-loop verification to ensure that proper account is
being credited. A field check onto the numeric values must be done frequently for the payment

16
amounts. It is also important to reconcile the subsidiary account receivables in general which
should be done by another person.

Figure 2 Process of Cash Collection

4.4 Establish new policies by management

In order to resolve this issue, it is recommended to bring the matter internally to the board of
directors with sufficient evidences and justifications together with any solutions to boards of
directors. For example, EPM should establish policies for clear ethical conducts, job scopes and
management of EPM to solve the ethical problems. Other than that, EPM should develop whistle
blowing policy to ensure and encourage the members of EPM to disclose any conflict of interest
issues or irregularities. In the end, a good communication across levels of management to
implement these policies and absorb them into EPM’s corporate culture to be shared within the
organization.

17
5. CONCLUSION

As a conclusion, the company financial become worst as there are increase of chicken production,
there are many ways to improve the performance and overcome the problems facing by EPM. The
alternative such as find the source or others food that cheaper to feed the chicken and use other
part of chicken to make as side income. Although the main reason of increasing cost of production
which led the company incurred losses for the 2 consecutive years, the EPM also need to improve
the management and internal control of the company. The company ignored the importance of debt
collection system that the resulted in high outstanding balance. Based on the recommendation that
we had made to improve the internal control, in our opinion, there are three main things that should
be carried out which is segregation of duties, proper documentation and hiring internal control.
The cases of conflict of interest of En Selamat should be avoid as well as weak of internal control
that lead to accounting problem and fraud. The EPM management should ensure that the issues
which lead to financial loss need to take more attention and more focus on how to deal it and
overcome those problems With the identifiable issues and suggestion of recommendation, I think
it would help the company back on track and having the clean management system in the
organization in order to achieve its vision and mission of the company.

18