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AUE2602 Assignment 2 Semester 1 2022 Questions and Solutions
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Corporate Governance in AccountancyAUE2602
Department of Auditing
Assignment 02 for Semester 01 (compulsory)
QUESTION 1 107 MARKS
Corporate governance
You are an audit trainee at ZHS Auditors and have been allocated to assist with the client
Book Marked Limited (Book Marked). Book Marked is a large wholesaler of books and
stationery in South Africa. The governance structure of Book Marked consists of the
Board of Directors, assisted by four committees, namely the Audit, Remuneration, Risk
governance and Nominations committees. Book Marked’s board of directors as at 28
February 2022 consisted of the following individuals:
Notes
1. Mr Adofo owns 7% of the equity interest in Book Marked which can be regarded as a
material amount regarding his personal wealth and had been appointed as the
chairperson of the board by all the members of the board at the meeting held on 1
October 2011. Mr Adofo served as CEO of Book Marked until 31 October 2008. He is
also the chairperson of the Audit Committee.
2. Mr McCoy has been an advisor to Book Marked for several years before being
appointed to the board. Book Marked has a people-centred ubuntu philosophy and
members of the board were urged to identify social projects where the company could
make a difference in communities. The board approved the social initiative presented
by Mr McCoy whereby Book Marked would build a school in Tshituni town, his
hometown and provide all the required textbooks for school-going children.
3. Mr Scott had been appointed to the position of CEO of Book Marked on 1 September
2008. Mr Scott is the chairperson of the Nominations Committee.
, 4. Messrs Scott, Summers and Stryker are the only members serving on the
Nominations Committee. Mr Stryker does not have a material interest or relationship
with Book Marked.
5. Ms Grey has announced her retirement from her position as CFO and has
recommended that Mr Rhodes, the financial manager should take over her position
on the board, which the board accepted.
6. Ms Adam plays a significant role in the day-to-day management of Book Marked as
COO.
7. Messrs Stryker, Kandasamy and McCoy are also members of the Audit Committee.
Mr Kandasamy’s purchases for his bookstore amount to 15% of Book Marked’s
revenue.
Company Secretary
Mrs Thandiwe, the company secretary for Book Marked since its incorporation retired on
31 December 2021. The board has appointed Mr Booysen, a lawyer, who was removed
from office in April 2015 due to dishonesty. He was appointed at the board meeting held
on 4 March 2022.
Online sales
As a result of the continuing curfew and capacity restrictions in place due to the Covid-19
pandemic, Book Marked has had to adapt and created an online platform where the
general public can purchase directly from them.
Mr Scott provided you with the following information relating to how Book Marked
transacts through the internet:
1. The online system for transacting by the public is linked to Book Marked ‘s current
application software.
2. The customer is required to create an account; however, they do not need to
authenticate personal details to transact on the online system.
3. Once the customer has selected the items on the system and added them to the
shopping cart, the system automatically moves to the payment screen.
4. Book Marked is looking into possibly having the website verified since it is not
currently verified.
5. The website is manned only during working hours and sales can only take place
during these hours.
6. The website pricing was updated to the same pricing as retailers selling Book Marked
books.
Inventory counts
Mr Rhodes feels that inventory counts should be conducted more often since inventory is
being sold over the internet as well. He requests your assistance on the procedures to be
followed to conduct cycle inventory counts.
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