Implication of Singapore Tiger Airway's Q3 results.

Tiger Airways Singapore posted a net loss of S$17.4mil in Q3 FY 2011, as compared to a net profit of S$22.5mil in same period last year.

The net loss for the Group was largely attributable to: losses generated from Tiger Airways Australia as a result of the CASA suspension, under-utilisation of aircraft fleets (due to 38.8% increase in the average size of the operating aircraft fleet and significant increase in fuel costs. Fuel costs (net of gain/losses on fuel hedging) has increased from S$54.5mil in Q3 FY 2010 to S$75.7mil in Q3 FY 2011.
Tiger Airways made the following comments in the outlook statement of its announcement:

“The Group expects to report a significant net loss for the financial year largely as a result of the CASA suspension in Australia, the under-utilisation of the Group’s aircraft fleet and exposure to high and volatile jet fuel prices.”
Implication of Tiger Airways’ results.

Tiger Airways’ results are alarming to audit clients involved in airlines, shipping, transportation, and logistics industries. This is because:

- global economy is experiencing slow down of business activities, which may likely to result in under-utilisation of capacities (e.g. under utilisation of vessels, fleets, trucks). Your audit clients may experience significant over capacities in current period of review;
- fuel costs have increased significantly during the period of review. Your audit client may record substantial fuel costs in current period.

The above factors, individually or in combined, may result in the audit clients record substantial operating losses. In addition, the above factors may trigger potential impairment on property, plant & equipments, going concern issue, capabilities of repaying creditors / borrowings.

Classification of male pig and female pig

In English:

A male pig is called a boar.
A female pig is called a sow.

In Accounting:

A male pig is classified as fixed asset.
A female pig is classified as inventory.

Disclaimer: just a joke, no bias against any gender.

Importance of Suppliers' Evaluation Process

One of the key emphasis of internal audit is to evaluate whether your audit client has appropriate process in place to evaluate the suppliers.

Unfavorable event in any part of the supply chain will causes disruption to the distriubtion of products to end-customers successfully. It is important to evaluate the suppliers to ensure that they have the capability and stability to conduct sustainable business with your audit client on a long term basis.

On an ideal basis, management/ procurement of your audit client should have a formal policy on the entire process of evaluating suppliers. The evaluation has to be developed and documented in a proper format.

For instance, a background check on the suppliers is required (e.g. is the supplier a subsidiary of any congolmerates, is the supplier financially sounds). Another key document is the financial statement of the supplier. This is to ensure that supplier is financially stable to operate on a going concern basis.

Please let us know if you would like a detailed format of Suppliers' Evaluation Form. This is available in our Accounting & Auditing blog. Please drop us an email at myauditing@gmail.com.