THE ANSWER SHOULD BE GIVEN BASED ON THE MARK NEEDED.

Background Brian and Farid were two friends who grew up together in a small town near Kuala Lumpur. Both went overseas to pursue their degrees accounting and architecture respectively. They had successfully completed their degrees and returned to Malaysia and had been working in Malaysia for the past ten years. Brian was a senior manager in the finance department of a public listed company, RX Bhd. Brian, who had vast knowledge in programming, was entrusted with the configuration of an in-house system. This system had saved the company a great sum of money. For his contribution, Brian received the excellence award and best employee of the year award for contribution, Brian three consecutive years in a row. Farid was a junior partner at a local architecture firm. He joined the firm ten years ago as a management trainee, and had since built his career to become a partner. He was hard working and often attended trainings to enhance his knowledge and expertise. Both Brian and Farid often hung out together after work and sometimes went on vacations together too. Unlike Brian, Farid was a very thrifty person, owing to his difficult childhood. Coming from a broken home, Farid was raised by his mother. As a single parent, Farid's mother struggled doing odd jobs to make ends meet. With her meagre income she still managed to give Farid a good education. Farid was very grateful to his mother and was now caring for her. Farid was still unmarried and lived with her in a double-storey link house which Farid bought a few years ago. He managed his finances well. Every month he set aside a fixed sum of money for savings, and to date, he had a healthy bank balance. As for Brian, he recently got married to his childhood friend Sandra, who came from a well-to-do family. Sandra had a book store, operating in one of the prestigious shopping malls in the city. Both Brian and his wife were high earners. Their financial commitments had increased since their marriage due to their lifestyle. Their expenses included a high mortgage repayment for an exclusive high-rise condominium unit they bought in the heart of Kuala Lumpur and also hire purchase repayments for luxury cars for both of them. They also enjoyed dining with friends and family in expensive cafes and hotels, going on holidays, shopping, and had frequent family gatherings. Financial position Most of the time Brian and his wife used credit cards to pay for their expenses, including utilities. Because they were still young and with good monthly incomes, they were able to easily obtain financial facilities, including high amounts of personal loans and high credit cardlimits. Each month all of Brian's salary was used to live in style, pay credit card bills and also to cope with the lifestyle of his wife and in-laws. Hence, Brian had no savings. Brian and Snadra's assets and liabilities as at 31 December 2018 were as follows (in RM): ASSETS RM Condominium 1,600,000 Four expensive cars 2,000,000 Bungalow 4,300,000 Orchard land 1,800,000 Saving 200,000 LIABILITIES Credit cards 200,000 Personal loans 400,000 Brian and Sandra's income and expenses could be summarized as follows: Brian's monthly income was RM25,000. Sandra's take home proceeds were RM20,000 per month. Their monthly expenses usually exceeded RM60,000, including credit card payments and loan repayments. Act of desperation Sandra often asked Brian for cash to pay for her book store supplies. One day, however, Brian came to a point where he could not spare the usual amount he normally gave to Sandra. They got into an argument and did not resolve the issue. Brian felt bad and went out for a drive. He stopped at a quiet junction and kept thinking. He came home very late, and his relationship with his wife soured. With the mounting financial pressure, Brian's performance at work declined. His thoughts were on other things such as having to accommodate for family engagements and outings as well as finding cash to settle his dues. He was desperate, but he thought he would still be able to put things right. One day, after office hours, Brian made several attempts to enter the company's data security system. This system was supposed tobe highly confidential, with multiple security passwords. After several attempts, he managed to penetrate the first layer of access. However, the system required authorization from three high-ranking officers. Brian wondered how he could he break into the system. In despair, he returned home. The next day at work, Brian was miserable. His senior clerk Ali approached him and they started talking. Brian confided in him of his troubles and Ali tried to console Brian but Brian broke down. Ali then suggested that he might be able to help. One Monday morning, both Ali and Brian arrived very early at work and managed to gain access to the back-up system, where money could be transferred without leaving any trace and where the transactions were not documented. Brian was at first taken aback. How could his staff, whom he had trusted all this while, had been committing illegal transfers? Suddenly, Brian thought, "What if this is a chance to solve all my problems?' Despite the thought, he was initially reluctant to commit any wrongdoing, but after a while, he said to himself, Why not? Maybe this is my only chance.' That evening, Brian came home with a big smile. His wife was in the kitchen, sipping coffee and staring out the window as if it was the end of the world. Brian said, 'Sandra, what are you doing?' Sandra refused to face him, and slamming her cup on the table said, 'Drinking coffee, can't you see?' Brian passed Sandra an envelope. She looked at the contents in surprise and asked, Where did you get this money from? I checked our bank accounts, our credit cards, they're all zero!' Brian answered, 'Honey, I forgot I had an investment, a long- term one with an old friend. He called to give me the dividends, and here it is, for you.' That night, they went out for dinner to make up for the argument they had earlier. Upon returning home, Brian sat at his desk rubbing his forehead, feeling tired, while Sandra prepared to bed. Brian kept thinking of the wrongdoing he had committed in the early hours of the day. He knew it was wrong and he knew he would be in trouble if it was discovered. The incident kept flashing through his mind. He thought about Ali and realized that Ali was indeed very smart. A 56-year-old man, with at least 30 years of experience in the same finance department, he was very crafty and careful with his steps and moves. He got away all this while, unnoticed. He was also a simple man who did not spend lavishly, and lived like the senior clerk that he was. He also donated frequently and seemed to be generous in his community. If Ali could get away with it, why couldn't he? Meeting his old friend One evening, Farid bumped into Brian at a shopping mall. Surprised to see his old friend, Farid asked Brian to have coffee with him. At first, Brian declined but later agreed when Farid said that he was leaving for Australia for a good five years at least. Brian learned that Farid was leaving to head his firm's overseas branch. They exchanged updates and developments abouteach other. Somehow, Farid could sense that something was not right with Brian. They were close once upon a time, and they knew each other well. When Brian arrived home, he told his wife Sandra about his meeting with Farid. Brian kept reminiscing about his closeness to Farid and the good old days, sharing every detail with Sandra. Sandra found Brian's behaviour rather peculiar. When she asked him what was wrong, Brian opened up and told Sandra how he got the money that he gave to earlier in the week. At first, Sandra was very angry and started to scream at Brian but he managed to convince her that nobody will know of the act. Convinced, Sandra too began to accept the illegal earnings. Soon, both husband and wife were back to their extravagant lifestyle. Only this time they were using money obtained through illegal means. Thanks to Ali and he confidential code Ali had shared, Brian was comfortably transferring cash into his accounts. For several months, Brian and Sandra were buying and selling properties. They made their gains thinking that their deals were all profitable. Most importantly, they were so caught up with what they were doing that they were oblivious to the fact that their integrity was at stake. Where were their values as law-abiding citizens? Were they no longer abiding by religion-guided principles or a code of professional ethics? Meanwhile, Ali, who was a simple person, was happy with his actions. He was feeling good as he could now involve his boss. Keeping Brian happy meant that no one suspected anything about him at all. He maintained getting a cut every time Brian committed a transfer. After several years, Brian, who was now 45 years old, was appointed as the deputy managing director, the youngest senior manager of RX Bhd. He seemed to be performing and doing well. He was also a favourite among the board of directors. Farid meeting Brian's kids Brian had three teenage kids, all of whom he had sent for tertiary studies in Sydney. Australia. Sandra was now a lady of leisure and travelled to and fro to visit their children. One day, Brian's children were at a Malaysian restaurant in a mall in Sydney. They bumped into Farid. As fellow Malaysians, they chatted with each other, and Farid began asking more about their background. Farid realized that they were his friend Brian's kids. He further learned that they were staying in an uptown apartment close to Farid's, located in the city. Farid also noticed the shopping bags they had, and was surprised at the luxury brands these teenagers could afford. Farid thought to himself, 'Wow, those must be so expensive.' After all these years, Brian must be very successful. But Farid had no idea about Brian's wealth or current occupation. So, returning to his apartment, Farid did some homework and searched the internet about Brian. Puzzled by the family's luxurious lifestyle, he made further checks. He could not find anything suspicious. In fact, he respected Brian for doing so much charity work. He thought, 'So the saying that shared wealth will be returned tenfold holds true for Brian.'Brian's international wealth Back home, Brian and Sandra had moved into a comfortable country home, a resort-like premise with a nice sizable bungalow, amidst an orchard with a range of fruit trees. Almost every weekend, there was a gathering of family and friends. They were very generous, inviting residents of charity homes to come enjoy the harvest during the fruit seasons. The lake and small stream passing through the back of the compound made an astonishing and peaceful sight, a real dream home. To their names, currently Brian and Sandra had a collection of land and apartments in the vicinity and good locations, as well as a nice luxurious apartment in Sydney, Australia. They also had properties in London and New York. It seemed like the family would live happily ever after since everything was running as smoothly as they thought it would, clearing all their doubts and uncertainties of their plans and actions. After all, they did good deeds and shared the benefits of their wealth with others as well. Ali remained their closest friend even after he retired. Now Brian and Sandra lived the lives of the rich and famous, with their latest hobbies being golfing, entertaining guests and shopping. Were they happy? Were their consciences clear? Brian's retirement plan One evening, Brian sat back in the backyard overlooking the lake, and he thought to himself, 'What else do I want in life?' Sandra brought him a cup of coffee and they talked about life, their family and moving forward, they agreed that it was time for them to be more religious and offer more support to the community as well. Brian's routine at work and his performance was well-recognized. In his late 50s, he opted for early retirement to pursue religious activities, he claimed. New management Just two years later, RX Bhd tendered for an upgrade of the ten-year- old computer and data system. The tightest and strictest procedures for Tender acquisition were in place, a robust mechanism that Brian himself introduced while in service. The normal examinations and evaluations were carried out without any big issues being uncovered. For some reason, the new board members queried again about the robustness of the system and level of access, so as to identify if there were any current weaknesses. This was thought to be necessary in helping to make the decision whether to upgrade or to change the whole system. The internal audit department stepped in again, this time to re-assess the Current System and its assessment was counter-checked by an independent third party offered by the regulators. Will they discover the illegal transfers that were carefully crafted and disguised over the long-standing and so called efficient system? Will Brian be convicted?Required: a) Evaluate the adequacy of the general and application controls in place within RX Bhd, with respect to its information technology and information systems. Suggest any improvements you consider to be necessary. (7 Marks) b) Discuss the extent to which the main objectives of an internal control system were not achieved at RX Bhd, and criticize how the behaviour of Brian and Ali resulted in a clear breach in their duties to shareholders. (8 Marks) 6