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Hi Ken.
1stly, Can NEDs hold the shares in the company? Or is it against corporate governance code for them to hold shares in the company?
2ndly, what is a general procedure in which members are elected to sit on the board? Is it that share holders vote on who is to sit on the board? And is the election process quite similar to exec board as well as non ex board?
NEDs can hold shares in the company.
New directors are suggested by the nomination committee and these have to be voted on at the AGM.
Thank you Ken!
As always, you make my understanding so much clear. I am really grateful to you.I will appreciate if you address a couple more questions of mine in relation to general audit:
Suppose the SOFP has an item which has a balance which is material for e.g. PPE, then the auditor will want to audit it to see if it has any error, isn’t it?
What if there is an error of immaterial amount in PPE (which by itsef has a material balance in SOFP), will that be highlighted as material error or will it be ignored?
And what if there is an error of material amount but it is sum of many immaterial errors?
If a balance is material, thenauditors will certainly want to audit it. Even if a balance is not material, some work might have to be done to ensure that it has not been understated (think of understated liabilities).
If there is an immaterial error in a balance that is itself material, then the error is unlikely to be material (but remember that the nature of the error as well as its quantity determines materiality).
If a number of small misstatements aggregate to a material misstatement (this is the point of the concept of performance materiality) then the errors should be corrected or the audit opinion modified.
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