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King III Boards Responsibilities:
1. Provide effective leadership based
Thought Process: on an ethical foundation.
1. Dominated by a person/block 2. Boards is responsible for ensuring
2. Chairman independent non exec (if not, integrity permeates all aspects of
appropriate action) company and its operations
3. Chairman also Chairs committee 3. Company should be a responsible
(member of audit committee)
corporate citizen.
4. Majority of board non- exec
5. Majority of non-exec independent Remuneration:
6. Audit committee appropriately Should be fair and reasonable with a balance
constituted between fixed and variable
7. At least 4 other committees Boards and Directors:
8. Other committees appropriately 1. Board must always act in best
constituted interest of the company
Audit Committee: 2. Consider business rescue or other
1. Only independent non-executives turnaround strategy as soon as
2. At least three members company is in financial distress. (the
3. Chairman should not be a member act)
Board Committees:
4. Must have basic level of qualification 1. At least :
and experience. -risk
Chairman: -remuneration
1. Must be an independent non-executive -nomination
2. The CEO shall not serve as chairman -audit
3. If not independent non-executive, 2. Board committees other than the
appoint a lead independent non- risk committee should comprise only
executive director. of non-executives of which the
4. If the board does the above this must be majority should be independent
disclosed in the integrated report 3. Board committees should be chaired
5. Retired CEO should not become by an independent non-executive
Chairman until three complete years 4. External parties may be present by
have passed send end of executive term invitation but mat not vote
6. Board must consider the number of
Composition of Board:
outside chairmanships
1. Majority of non-executive directors
7. Chairman may not sit on the audit
2. Majority of non-executives should
committee
be independent
8. Chairman may not chair other
3. Size, diversity and demographic
committees but may be a member
4. No on individual or block of individuals should be able to dominate the board’s decision
making
5. Not independent if:
- holds >5% interest in company
-holds interest that is material to personal life
-employed by company or group in last three years
-Immediate family employed by group in last three years
-Professional advisor
-Has business or other significant relationship with the group
, Companies Act
Memorandum of Incorporation (S15-16):
S15: MOI must be consistent with the act and
is void to extent that it contravenes the act.
It may deal with additional issues and may
impose greater restrictions. Boards of Directors:
S66: Boards and prescribed officers
S16: Amendments to the MOI requires a Minimum of three directors
special resolution unless MOI provides S68: Election of Directors:
otherwise. Must be elected by those eligible to
vote
S69: Ineligibility:
Juristic person/un-emancipated
Disqualified:
- Court declares delinquent
- Un-rehabilitated insolvent
- Convicted of fraud
Conflicts of Interest:
S41 Shares for Related Parties:
Shares issued to directors, Company
secretary or related entity must be Reckless Trading S22:
approved by a special resolution of A company is trading recklessly if:
board if not go to S 77 - Gross Negligence
S44 Assistance for Shares: - Fraud
Only if: - Cannot pay debts as they become due
- Pursuant to employee share and in ordinary course of business.
scheme
- Pursuant to special resolution
- Solvency and liquidity test
- Fair and reasonable terms
- If not S 77
Loans for Directors:
The same principles as section 44
apply
S75 Directors interests:
List the procedure that must be taken Issuing Shares:
if there is an interest. If not refer to S36 Authorisation:
S76 2(a) then S77 then an RI - MOI must set out classes, rights and
max number of shares.
- This may be changed only by a special
resolution. (exception)
- Must give notice
S38 Issue:
- May only issue shares within bounds
of MOI
S40 Consideration:
- Consideration must be fair and
adequate
, Companies Act & the APA Reportable Irregularity:
APA:
Definition:
- Unlawful act or omission by
management which:
- Has caused/is likely to cause material
financial change
- Is fraudulent or amounts to theft
- Represents a material breach of any
fiduciary duty
- S45 contains duty and procedure to
Company Secretary: report
S86 Mandatory Appointment
Every company must have a company
secretary.
The secretary must have requisite knowledge
of laws.
S89 Resignation or removal:
Auditor and Audit Committees:
Resignation requires one month written notice
unless board requires less S90 Appointment of Auditor:
Removal may result in in secretary requiring Must be appointed at AGM
board to make disclosure in AFS as part of Must be registered and independent
director’s report
S92 Rotation:
Same individual may not serve as auditor for
more than 5 consecutive years, requires a 2
Other: year break.
S112 Disposal of Greater part of assets: S93 Rights of Auditors:
Requires a special resolution unless S115 Right of access at all time
applies.
S94 Audit Committee:
S159 Protection for Whistle Blowers:
Need at least 3 members
Additional Protection Must be independent non-executive
Audit Committees duty to nominate auditor
S213 Breach of Confidence: and determine fees
It is an offence to breach confidence
S214 False Statements, Reckless Conduct, and
Non-Compliance
Offence
, Pre- Engagement
Considerations and Procedures (CPC210; ISQC 1)
1. Client Investigation
A client investigation should be performed and the following aspects taken into
account:
- The firm’s independence as auditor’s (threats to independence)
- The clients business standing and risk, and the integrity of management (all
the bad stuff they are doing and what this bad stuff indicates they could be
doing)
- Whether there is any professional reason not to accept the engagement. CPC
enquires of previous
The following should also be considered:
- Whether there was a vacancy in the position of auditors i.e. whether the
existing auditors were legally dismissed in terms of the companies act.
- Whether the client is able to pay the audit fee on time.
- Whether the audits firm existing clients may have a conflict of interest.
2. Knowledge and Skills
The auditor should consider whether he and his team have the necessary
knowledge, skills, time and staff to conduct the audit and obtain reasonable
assurance.
3. Conditions of Engagement
If the engagement is accepted, the auditor should confirm the engagement and
conditions per the engagement letter.
- The letter should outline management and the auditors’ responsibilities for
the audit.
- The letter should specify any additional services that the auditor will be
required to carry out.
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