1. Executive summary: The summary of the case study analysis which may include all the important points discussed in the analysis. The executive summarymay not exceed 150 words.

In this case study, we have analysed some of the problems faced by Water Works Bhd. The study outlines the warehouse management issues within Water Works Bhd. This warehouse management issue was highlighted in the inventory audit. In the inventory audit, it was found that some water filters may have been falsely discharged by the warehouse manager and sold on the black market. To address these issues, this case study includes solutions such as the company could form an internal audit investigation team, hire an external investigator, report to the police or do nothing at all. At the end of the case study, we also provide the company with a recommendation based on these four solutions to improve their internal management. The recommendation from this case study is(which option?)

1. Background: It may include the background information and relevant facts of the case.

CASE BACKGROUND

Water Works Bhd is a well-established Malaysian company that produces water filters. The company exports its product to many Asian countries for 15 years of operation. James, the CAE noticed a disparity in the inventory of commercial water filters. He received asurat layangin the mail that accused John, the warehouse manager, of being the mastermind in the sale of 500 commercial water filters that were sold at a 20% discount on the black market and eventually written off as a bad debt.

FACTS OF THE CASE

• Two months ago, there was a fire caused by a cigarette butt thrown into a waste bin at the warehouse office. According to John, some inventory records were destroyed, and some water filters were damaged.
• The financial manager performs data analytics on the inventory levels and discovered that obsolete inventory worth RM10,000 had been included in the closing inventory after a physical stock take.
• According to the human resource manager, John was a model employee and probably the healthiest employee. However, he did observe that John has been upgrading to new imported luxury cars and an RM1,000,000 new house which does not seem commensurate with his salary.
• A warehouse clerk previously worked in the finance department before transferring to the warehouse to assist John. He was well versed with accounting for inventory and aware of the various internal controls over inventory.
• He met with a motorcycle accident one week after the fire and hospitalised for a fortnight. He later resigned with a claim that he was tired of being bullied by other warehouse staff.
• Rumors circulated shortly after his resignation that this employee was the one who ignited the warehouse fire.
• James suspects that John is connected to the theft of the water filters.

1. Key issues/problems: Identify the maximum ofTWO (2)key problems or issues in the case.

i) Weak Internal control

• Discrepancy between the physical count and the inventory records
• Discovery of theft activities of water filters

ii) Ethical issue

• Cigarette butt that caused fire
• Bullied issued between staff

Explanation (for presentation):

The first issues in this case study are weak internal control. By having a weak internal control, James noticed that there are discrepancies between the physical count and the inventory records for the main inventory item which is commercial water filters. Besides, due to weak internal control, it gives an opportunity for the staff to steal the inventory. For example, James discovered the theft activities of water filters that might have been committed by John.

The second issue is related to ethical issues. The cigarette butt that was thrown into a waste bin by one of the staff has caused a fire in the warehouse office, causing minimal damage to the company. Moreover, there was also a bullying issue between warehouse staffcausing the loss of a good worker.

1. Possible solutions: You may outline the maximum ofTWO (2)possible solutions and analyse each of them in terms of the advantages and constraints of each solution.

Solution 1: Report the theft of the commercial water filters to the police

Advantages:

If we report the theft to the police directly, then the police will be responsible to judge according to the relevant laws and regulations. Therefore, it will be fair for all parties who are involved in this case. Police's investigation has the potential warning for other employees in Water Works Bhd to obey the rules and regulations, it will help to avoid such cases taking place again.

Constraints:

However, the criminal action will be released in the public and consequently the public including the existing investors and contractors will have the negative impression on Water Works Bhd. What's worse, it will indicate that Water Works Bhd doesn't have adequate internal control and compliance, and the significant risk may also exist in the financial information provided.

Additionally, James was unsure to name John as a suspect because he doesn't have sufficient evidence. If the investigation by police fails, John will possibly sue Water Work Bhd for defamation. The malicious attack on John will result in impairment of fame.

Solution 2: Initiating an internal inquiry and internal audit gather evidence

Advantages:

Internal audit team is more professional in investigation because this team is more familiar with the Water Work Bhd's operation and risky area, they can collect the evidence in time so that the management can make decisions based on the results very quickly. What's more, the scope of this investigation will be limited inside the company thus no matter what truth is revealed, it won't impact the company's reputation.

Constraints:

The theft may not be completed by only one individual- John. If there is any conflict of interest in this investigation, in other words, this case may involve other employees who assisted John and hide his behavior, this investigation could not be conducted smoothly. Therefore, the truth may remain under cover.

1. Recommendation: In this section, you may need to provideONE (1)specific and realistic solution and justify why this solution was chosen. You may also need to discuss specific strategies for accomplishing the proposed solution.

plz help me the recommendations by looking at the summary or the answers solved above from the case study