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Let`s call a spade a spade here. This is the University ever with the most frustrating administration. I stopped two of my brothers from studying with them after the experience I had. Certificates are always delayed and when students send emails, noone replies.I wanted to study my MBA with them. Got an offer, but with this kind of poor administration, I cancelled it. There is nothing better about two bad things. After what happened to students in period 37, they should have adjusted to expedite certificates dispatching.
I hear what you are saying. Let me rephrase it. In my opinion, the mentor is not expected to teach a student what is corporate governance and the understanding of the concepts overarching a research topic is what the student must have before they choose the topic. What you are saying about guidance towards further reading is all true and I just wanted to put this point across so it can be understood within context.
I am very cautious when I apply certain models or theories and the reason why I picked OPPORTUNITY as a driver of fraud from the fraud triangle is because the research topic is about weaknesses of CG. One of the duties of the board of directors is to design an effective system of internal controls to reduce risks like fraud to an acceptable level. We all agree that the system does not always work due to factors like conspiracy etc, but now when it comes to opportunities , these are a product of weak or dysfucntional governance practices.
When we talk about corporate governance, these are the powers given to the incumbent to make certain decisions in a way that adds value to the company within prescribed frameworks.I have worked in risk advisory and when you want to objectively identify the weaknesses of corporate governance, you have to dig deep. I will give you some few real examples I have come across in my career(in generic form)
1. The CEO invested $12million in buying a farm with the intent to convert it into a residential area as the city was expanding. In the jurisdiction concerned, land is highly regulated with even a more tricky, yet complex legal framework. My observation was that the agreements of sale were signed exactly on the same day the board sat to approve this investment(according to the board minutes, this might have been anywhere 4 hours after the board meeting). So what went wrong? Only one legal procedure missed stalled a multimillion investment for several years of course later on leading to the dismissal of the CEO. What was the root cause? Too much powers in the hands of the CEO and executive management. Any predecessor could have come in and made exactly the same mistake. Even though there was a board investment committe specifically formed to deal with issues of investment, there were no prior minutes to indicate that the committee was ever involved in the investment decison which later on became a highlly costly one.The firm had an independent legal counsel which could have been consulted for legal perspective regarding all intricacies relating to the Land Act, but this was never done. The Real Estate industry has no shortage of qualified experts who could have provided valuable advice regarding the questionable value of the property(market related), but none was consulted. Guess what?The Board sat for three hours and still approved this investment. Rings the bells? There is a very famous case in South Africa which dates back to 1994. It`s called the Pharmaceuticals Case, would lay down the principle that, when an incumbent is charged with a duty of fiduciary responsibility, there is a duty on that incumbent to exercise such authority in a fair and judicious manner, taking into consideration all complexities which come with making such decisions. The ignorance to the complex legal framework, too much powers at operations, disyfunctional investment committee made up of board members,no proper due diligence procedures actually make the case why this company is in dire straits.
2. A server failed due to wear and tear regardless of several reports written by the systems administrator stating that this issue had to be a priority. IT was never at all represented in the board and executive meetings. Partly represented in executive meetings by a Finance Manager whose capability maturity levels were questionable. All what the board did was to move IT risk from amber to red. No way! What failed here is lack of governance of enterprise IT. That is the root cause. Digging deep, there wasn`t even any IT portifolio management system and therefore any asset could still age and fail.
3.The once lucrative investment property made head lines for wrong reasons 3 years later. 63% of the land was deemed a wetland and the judge who heard the case ruled in favour of lobbying groups and the regulator. Only 37% of the $6m worth of a property could be developed for the benefit of the client`s business model. The risk matrix even after this did not include regulatory risk as a significant risk.
The mentor will never teach you the underlying technicalities of any topic. That’s what you should know yourself. You must have a detailed understanding at finger tips on what is the authority, responsbility and powers of the board and executive management and all applicable frameworks e.g ERM which are designed to assist the board in achieving its objectives. Weaknesses could easily emanate from disyfunctional frameworks, abuse of powers, too much powers on one individual e.g Carlos Ghosn of Nissan. Ghosn held the position of CEO and Chairman in the same group and his unfettered powers would lead to opportunities( one of Donald Crisy’s cause of fraud in the fraud triangle) for fraud. I could go further to question the logic behind one person being the CEO and Chairperson as these executive and non executive board members respectively. Infact one can also mention that this is still aproblem today at corporate.
it is very unfortunate that students have to go through this. From my observation many dissertations which are defferred are later on passed or exonerated from academic misconduct. Personally, this is why I have always chosen primary source researches.
-obtain an aged receivables list.Perform receivable circularisation to ascertain that none of the material balances recognised in current assets as receivables are infact bad debts.
-scrutinise the board minutes for any discussions encapsulating material bad debts.In order to ensure that adequate disclosures , provisions and write offs have been made.
-Recalculate the list of balances in the receivables control account and ensure that it matches the balance in the general ledger.For accuracy
-Review the credit department`s correspondence with clients/customers for any evidence of bad debts or queries relating to specific balances in the receivables control account
-calculate the receivables days (trade receivables/sales *365) in order to ascertain the health of company`s future cashflows.Note that in some cases this may support the going concern assessment problem.Remember , audits are by far becoming risk based in terms of approach.Therefore you should be able to come up with your own audit procedures by just understanding a specific account and sources of risk of material mistatement.Either by error or fraud.Hope this helps
60% first attempt.affliate and done.I have never failed a paper at professional level.
that was the only information which was available.anything else becomes hypothetical.ys the relative performance was based on their revenues against the whole market
i think the NPV was $492,000.we did that at F9 anyway.We needed net cash flows of which year 1 realised a loss of $220,000 beyond which postive cashflows were made.Discount year 0 by 1 (250k) and the others by thegiven discount factors.deduct the intial investment from the net discounted cashflows overall will give a positive NPV.the payback period was 4 years. even though a negative cash inflow would be made in year 1, superior posotive cash inflow in year 3 (300k) will payback the initial investment leaving a balance of 280k.Both the selected investment apparaisal techniques suggested that the project was financially feasible besides their inherent limitations. 5 marks only and must nit worry anybody
Trust me I read the question time and time again and have seen quesitions like those.It was not a must to apply BCG matrix.However in conclusion BCG matrix would have made your life easier in identifying the relative contribution of each company to the portifolio and whether they will be significant in the company`s future strategy.
The company`s future growth strategy was that venture on a project that would introduce E-commerce.As the society was gradually becoming paperless and paper industry growth contracting, it ca be doubted that PP would be significant in the future strategy.After all they controlled only 4% of the market share yet market growth slowing down.It was a dog which would be prone to divestment in future.
However diagram was the cashcow by no doubt.Controlling about 36% market share in the market thathas stagnated.It`s revenues grew more than the industry.It has managed to secure a unique niche which might be depending on their bespoke engineering and technical books.The future e bussiness model should be modelled to accommodate Diagrama as it is clear it isvery important as a financier in this portifolio.
What
s this has been enjoying a persistent increase in revenues and the industry is surging.The industry grew by 86% overall while Whats this recorded a 288% growth in sales since 2011 in general.This should remind us the extent to which the paperless society has rose to prominence in that country.Controlling about 27% in the growing market it is a star.It is the perfect foundation which is consistent with the ongoing project to introduce an E BUSINESS model.Therefore it is very relevant to the future strategy.The question wanted you to assess: performance to date,contribution to the portifolio, and significance of each business to the future strategy.You shouldnthave been restricted to any model but it would have made your life easier.
-relative performance to date
-contribution to the portifolio
-significance in future strategyall per company would give you 6 marks per company.There was more than enough information in my opinion
very fair paper.So long you studied the whole syllabus.I had a feeling that they would bring project managent.PDI document missed a lot of crucial things.Project drivers were there but not risk assessment,project gateways,dissemination plan,assigning teams-benefit owners and change owners.
observable,measurable,quantifiable and finacial benefits need to be distinguised
part (a) was straight foward.the sizes of revenue determined their contribution.BCG matrix can identify that PP had relatively low market share in its market.The industry was on decline but it would appear that PP revenues declined by 50% more than the industry.Probaly due to overreliance on internal sales (80%).May it is the structure of transfer pricing system.But the fact that the society is gradually becoming paperless and MLK has ventured on an E Business project, PP might be less relevant in the future.
same as derecognition of non current assets with a loss or profit on disposal recognised in profit or loss.Landing rights appear under intangle NCA and are armotised over their life.Any accumulated armotised should be removed from the books.
I am also trying to get a grasp of how you guys used borrowing costs under IAS 23.I didnt see any evidence that the previously purchased 5 planes did not get landing rights.I thought maybe your assumption was that since they will take long before use then IAS 23 is relevant.5% $300 fixed and secured on assets right?Because IAS 23 is very popular on self constructed assets which are capitalised over a long time which wasnt the case.Unless if the assumption is that the landing rights will delay the use of the aircrafts thus for the mean time they have to be capitalised under IAS 23 then I cannot argue.The fair value of the derivative was recorded at $40 m in current assets.I wasnt so sure here.
i agree with most of what you said.Probably enough to secure a pass.I left the last part of the audit report – marks due to time .I thought service organisations applied to outsourced payroll service thus the Thornhill would require both report 1 and report 2 directly from the auditor and management of the service organisation.Also a direct confirmation from the auditor at service organisation about any significant matters which may suggest that the controls over payroll are not working effectively.With the permission of the client, deploying part the team to perform test of controls or substantive procedures on the payroll.Enquiries of management at client on the processes and procedures of hiring and authorisation of cash payments for casuals.
I wrote international version and i thought it was fair.
1.Group audit
A.Required an evaluation of business risks facing an Madness airline group
-new government regulation on landing times
-landing rights are very difficult to secure
Etc
B.Four significant risks of material mistatement
-Five new aircrafts purchased
-recognition of landing rights
-non cash transaction where the landing rights were exchanged with a competitor
-derivative which is recognised in current assets @$40m
-Fixed loan
-GoodwillC.further information which can be provided to the audit team about group wider controls
D.ethical issues involvedThis was 35 marks worth.
2.a.assets held for sale and discontinued operation
b.capital expenditure
c.payroll expenses
The question required to evaluate appropriateness and sufficiency of audit evidence,recommendation of further audit procedures and information to be communicated to those charged with governance about deficiencies in internal control.
3.Cashflow.did not attempt
4.several issues between the component auditor and group parter .The subsidiary was no longer a going concern.Yet a letter of support was not provided except for a verbal confirmation.The parent was facing legal woes.With a litigation pending .The partner refused to provide copies of legal representations.The management declined meetings and explanations.The partner was pushing the component auditor to issue an unmodified report regardless of lack of evidence which could trigger a potential disclaimer.
5.KAM
b.Audit report..I left 4 good marks here and was dissapointed..This was probably the easiest question in this examHello,
I dont know whether I am allowed to help you guys.
This is the difference.When we say test of controls ,we mean a procedure taken by the auditor to determine whether controls are working effectively.why is this important?If the client ‘s control systems are weak,it means there is a huge risk of material mistatement.when i say risk in relation to internal controls ,i refer to inherent and control risk.Because they are not influenced by the auditor.
For example, is it possible for a purchasing officer to purchase without authorisation?If yes ,then there is a risk that fraud might occur.This control must be meant to prevent fraud ,but it isn’t.Therefore there is a risk that if by chance this has ever occured,financial statements might materialy misstated.Substantive procedures are meant to detect the actual misstatement.For example attending inventory count enables the auditor to identify so many things.E.g damaged inventory.If there is,then is it written off.Otherwise if is appears in the closing inventory ,the cost of sales are understand thus overstating the profits.Also think about test of details.Tracing the figure from a source document to the ledger for completeness,accuracy etc.E.g inspecting invoices for recently purchased non cuurent asset and tracing it to the asset register to ascertain that it has been recorded(completeness).
Not really Mike.The contrast I gave among the three matters above was to try and see if I am not confusing these issues.My question remains that , when there are material inconsistencies in other reports the auditor has the resposnsibility to report them under Other Information paragraph if management or those charged with governance do not resolve the matter.The standard says , the auditor reprots these material inconsistencies below the Basis of Opinion paragraph.Does this mean that this paragraph is positioned before KAM?Also since the auditor does not express an opinion on other information, does this mean that material inconsistencies therein do not warranty any modification?
Thanks Mike.
yes Mike I clearly understand that. Especially KAM which are those matters usually communicated to those charged with governance due to their significance and gravity of risk- for listed companies of course.
Other Matters
-the matters in the auditor judgement are very significant and must be communicated accordingly to the users.They are not presented anywhere in the f/s.For example the auditor has failed to withdraw from the engagement because of law and regulations.
*if the discosures are appropriate but the significance of the matter need the auditor to draw users` attention, an emphasis of matter paragraph( or matters relating to going concern) is used below the basis of opinion e.g a pending litigation which has potential material impact on the going concern asumption and is appropriately disclosed.
Other information
-the auditor does not not express an opinion on this information but has responsibility to test its consistency with f/s.For example the chairmans report, annual report,employee report etc.If there are material inconsistencies in these documnets ,and after discussing with mgnt and those charged with governance with no resolution crystallising the auditor need to report the material misstatements under other information paragraph below the basis of opinion
