Scribd
Upload
32 views

Tutorial Test 2 - AUD300 - Question

The document provides governance information for Kaplan Ltd, including its board composition and various committees. It also describes some issues: 1) The CEO and CFO positions experienced turnover without proper procedures. 2) The new CEO was appointed based on unusual contract terms, without policy prohibiting this. 3) Performance evaluations were conducted solely by the CEO without oversight. 4) The audit firm was requested to evaluate governance for the integrated report, compromising independence.

Uploaded by

molemotheka
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
32 views

Tutorial Test 2 - AUD300 - Question

The document provides governance information for Kaplan Ltd, including its board composition and various committees. It also describes some issues: 1) The CEO and CFO positions experienced turnover without proper procedures. 2) The new CEO was appointed based on unusual contract terms, without policy prohibiting this. 3) Performance evaluations were conducted solely by the CEO without oversight. 4) The audit firm was requested to evaluate governance for the integrated report, compromising independence.

Uploaded by

molemotheka
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 5

NKUHLU DEPARTMENT OFACCOUNTING

GOVERNANCE & AUDITING 3


AUD300E

TUTORIAL TEST 2
6 JUNE 2022

ASSESSOR: Mrs Felicia Mintoor

MODERATOR: Mr Wayne Molefe (Internal)

TIME: 1 hours (plus 15 minutes reading time)

MARKS: 40

PAGES: 5 pages (including front page and required)

INSTRUCTIONS:
1. Answer all the questions.
2. Start each question on a new page.
3. Show all workings clearly – marks are allocated to workings.
4. Only answers in ink will be marked (including workings). Pages where pencil
or tippex were used will not qualify for remarking.
5. Only silent, non-programmable calculators are allowed.
6. Calculate the time that you should spend on each question by multiplying the
number of marks for each question by 1.5 to determine the time, in minutes,
available for each question. Adhere to these time constraints in order to finish the
paper in the given time.

7. Delete all open spaces on your answer sheets with pen. Pages on your
answer sheets that contain open spaces will not be eligible for a remark.
8. Students that contravene the rules in the General Prospectus of the
University of Fort Hare will be disciplined in accordance with said rules.

Question Topics covered Marks Minutes


1 Corporate Governance 40 60
Total 40 60
QUESTION ONE (40 MARKS: 60 MINUTES)

Background

You are an audit partner at Core Audit Inc. (“Core”), a firm of professional accountants. You
have been requested by the Chief Financial Officer (CFO) of Kaplan Ltd (“Kaplan”) to take on
the company as an audit client for the 31 March 2022 financial year-end. You accepted the
appointment as the new engagement partner after agreeing fees and terms of engagement
with the CFO and subsequently started the audit with your audit team.

As part of your planning procedures, you contacted the previous auditor and they were very
surprised to hear about your appointment as they were still engaged with Kaplan as their
auditors.

You obtained the following Appendix from the CFO, Mr Zeke Mandela, as part of the
documents required to obtain an understanding of the business:

Appendix: Governance Overview

Board of Directors

1. Mr Zeke Mandela Chief Financial Officer

2. Prof Stephen Nash Independent non-executive director

3. Mr Terry Post Independent non-executive director

4. Mr Tim Stoter Independent non-executive director

5. Mr David Moore Independent non-executive director (Chairman)

6. Mrs Dori Gotta Non-executive director

7. Mr Johan Engelbrecht Chief Operating Officer

8. Mr Simon Smith Compliance Director / Company Secretary

9. Mrs Amanda Homer Chief Executive Officer

Governance Structures

Overview of governance structures within the company:

1. CEO (Chief Executive Officer):


The position of CEO was vacant for 3 months in the current financial year after the
directors unanimously decided to remove the previous CEO. The directors did not
have a suitable qualified person who wanted to “step up” as the new CEO and
consequently the board delegated the identification of a suitable person to a human
resource sourcing firm. They identified only Mrs Amanda Homer as a suitable
candidate for the position.
The nomination committee voted in favour of her appointment. Mrs Amanda Homer
was not actually “in the market” for a new position, but decided to join the company
subject to the following:
 An annual fixed bonus payment of R1 000 000 in the first year, with an annual
increase of 10% per annum from the second year onwards.
 On termination of services a payment of R2 500 000 is payable to her, for loss
of office.

The nomination committee accepted the conditions because no policy within the
company forbids such payments.

2. CFO (Chief Financial Officer):


Mr Zeke Mandela joined the board of directors as the new CFO effective 1 November
2021 after the board voted in favour of Mr Mandela. The previous CFO was removed
by the board with immediate effect from 1 August 2021.

3. Compliance Director/Company Secretary:


Mr Simon Smith is the Compliance Director of the company. As from the current
financial year he has also been appointed as the replacement Company Secretary of
the company by the Audit Committee.

4. Chairman of the board:


Mr David Moore was the Chairman of the board, in the current financial year under
review. His term of 3 years will end this year and the shareholders must appoint the
next chairman at the following Annual General Meeting.

5. Audit committee
 Prof Stephen Nash (Chairman);
 Mr Terry Post; and
 Mr David Moore

6. Nomination committee
 Mr Tim Stoter (Chairman);
 Prof Stephen Nash; and
 Mr Terry Post

7. Remuneration committee:
 Mr David Moore;
 Prof Stephen Nash; and
 Mrs Dori Gotta (Chairman).

The remuneration committee approves all remuneration relating to directors and no


other approvals are obtained.

8. Risk committee:
The company has a Risk Committee consisting of senior management of the
company only. The board of directors has delegated the strategy decisions of the
company to the committee as they are better situated in the company to ensure that
all strategic matters are implemented and monitored throughout the year.
9. Social and Ethics committee:
As required by section 72 (4) of the Companies Act of 2008, the company has a
Social and Ethics Committee. The composition of the committee is as follows:
 Mrs Chico Mbali (The Chief Audit Executive - CAE) – Chairperson;
 Prof Stepen Nash; and
 Mr Tim Stoter.

10. Performance assessments:


In the current year the CEO performed all the performance evaluations of all the
directors of the board. Based on the results of these evaluations, directors will be
remunerated in terms of the remuneration policy approved by the shareholders. The
CEO determined that the remuneration of executive directors is in accordance with
the remuneration policy put to the shareholders’ vote at the Annual General Meeting.

11. Independence review:


All independent non-executive directors underwent an independence review in order
to assess whether they are still independent. The findings of the review indicated that
all directors are independent.

During the planning phase of the audit, the CFO contacted you with the following request as
part of an email:

“Please review the governance structures and send me a review report on whether
or not we are complying with the practises of the King IV Report. I need to have a
review report on the governance part of the Integrated Report. I know your staff is
already under pressure to meet the audit deadline and you do not have additional
staff available, but because they are already performing the audit, this would make
the performance of the review procedures, and obtaining audit evidence more
effective. The Integrated Report must be issued with the Annual Financial
Statements.”
Marks
QUESTION 1 – REQUIRED Sub- Total
total
With reference to the information provided, discuss any
(a)
non-compliance with the practices of the King IV Report on
Governance and the Companies Act 2008 which is clearly
evident from the information provided.

Set your answer out as shown below:


Requirement Discussion

Mark allocation:
 King IV 24
 Companies Act 14

Communication skills – logical argument 2 40


TOTAL 40

* End of assessment *

You might also like