<< Prev Question Next Question >>

Question 15/21

SIMULATION
A month later, you receive the following email:

Reference Material:
From: Hesham El-Sayed. Independent Non-executive
Director
To: Romuald Marek. Chief Finance Officer
Subject: Collapse of fuel supplier
Hi Romuald
I am writing to give you some advance notice of an internal audit investigation that has been commissioned by the Audit Committee Just over a year ago. Planejoos, a newly formed company, approached the management team at Airfield's Capital City International (CCI) airport and offered to take over refueling operations at Starport Planejoos offered a higher percentage of revenue than the existing supplier was paying CCI's management team agreed and appointed Planejoos rather than renew the existing supplier's contract.
CCI was unable to conduct the usual background and credit checks on Planejoos for two reasons. Firstly, Planejoos was a new company and so did not have an extensive credit history that could be checked Secondly CCI was under time pressure to reach a decision on whether to renew the existing supplier's contract or allow it to expire CCI's management team claimed that it had acted quickly in order to benefit from the additional revenue that could be earned from dealing with Planejoos The management team was acting on the basis that it had an ethical duty to maximise the wealth of Airfield's shareholders and that maximising revenues from fuel sales through this agreement with Planejoos was consistent with that ethical duty.
Unfortunately, as a new company. Planejoos struggled to obtain trade credit and the high demand for fuel put the company's cash flows under extreme pressure Receipts from sales lagged behind payments for inventory Planejoos has now collapsed, leaving a large trade receivable that CCI will have to write off as uncollectable CCI had permitted this receivable to accumulate rather than pressing for payment and so putting Planejoos under further pressure.
Fortunately, the previous fuel supplier was prepared to return to CCI.
Kind regards

LEAVE A REPLY

Your email address will not be published. Required fields are marked *

Question List (21q)
Question 1: The following email has just arrived: From: William Seaton, ...
Question 2: A further eight weeks have passed since the discussion conce...
Question 3: Newsweb Wodd and Darrell announce plans for restructuring Tr...
Question 4: Reference Material: (Exhibit) You have received the followin...
Question 5: The Director of Finance, William Seaton, has stopped you in ...
Question 6: Twelve hours have passed since you received the telephone ca...
Question 7: From: Martin Wills, Head Geologist To: William Seaton, Direc...
Question 8: A month has passed since you submitted the report requested ...
Question 9: Peter Sorchi, Wodd's Chief Executive has stopped you in the ...
Question 10: Newsweb Protesters block bulldozers Attempts by Wodd to harv...
Question 11: Reference Material: (Exhibit) Wodd's Chief Executive, Peter ...
Question 12: Daily Gazette Draft story for comment The singer, the forest...
Question 13: Daily Gazette Celebrities flock to release tax returns Comed...
Question 14: The Director of Finance, William Seaton, has invited you int...
Question 15: SIMULATION A month later, you receive the following email: (...
Question 16: From: Abdhulla Al- Waihabi, Regional Manager - Middle East -...
Question 17: Memorandum of Understanding between Fouce Oil and Slide It i...
Question 18: Six months have passed since you briefed William Seaton, Dir...
Question 19: Three months has passed since the discussion concerning Fouc...
Question 20: You have received the following email from Peter Sorchi, CEO...
Question 21: The formal merger with Darrell has been negotiated and the l...