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Legal Aspects in Accountancy(AUE1601 Exam pack 2023)
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AUE1601 EXAMPACK 2023
QUESTIONS AND
ANSWERS
For assistance contact
Email:gabrielmusyoka940@gmail.com
,Question 1
1.1The difference between the following types of companies
Public limited companies Private limited companies
Unrestricted transferability of shares Transferability of shares is restricted
Offers of shares to the public are permissible Offers of shares to the public restricted
Minimum of 3 directors is required Minimum of one director
Extensive disclosure and transparency is Less disclosure and transparency is required
required
The financial statements must be audited Financial statements can be audited or
independently reviewed depending on the
requirements of the MOI and the pi score
The company name shld end with Ltd Name should end with PVTY LTD
Must appoint a company secretary May appoint a company secretary depending
on the requirements of MOI
1.2 pre-incorporation contracts
A person may enter into a written agreement in the name of or on behalf of the entity that is
contemplated to be incorporated, but does not yet exist at the time
A person who does anything as explained above is jointly and severally liable with any other
such a person for liabilities created as provided for in the pre-incorporation contract while so
acting
-the contemplated entity is not subsequently or
-after being incorporated, the company rejects any part of such agreement
If after incorporation, a company enters into agreement on the same terms as or in substitution
for an agreement contemplated above, the liability of the person in respect of the substituted
agreement is discharged
Within three months after the date on which a company was incorporated the board of that company
may completely, partially or conditionally ratify or reject any pre-incorporation contract or other action
purported to have been mode or done in its name or on its behalf
If after three months the company has not ratified or rejected the contract the company will be
regarded as ratifying the contract and the original person is discharged of liability
, If the company rejects the contract the person who bears liability for the agreement may claim against
the company for any benefit it has received or is entitled to receive in terms of the agreement
Regulation 35:
o A person may give notice to a company of a pre-incorporation contract by filing and delivering
to the company form Notice of Pre-Incorporation Contract
If the company rejects or ratifies the contract it must file a notice of its decision with form Notice of Action
Concerning Pre-Incorporation Contract within five business days and deliver a copy of that notice to each
person who is party to or affected by the contract
1.3 instances when directors considered ineligible or disqualified
Ineligibility
A juristic person
Unemancipated minor
A person not meeting the requirements of THE MOI
Disqualified
Prohibited by the court
Declared delinquent by the court
Unrehabilitated insolvent
Prohibited in terms of the public regulation
Removed from office due to misconduct that involves dishonesty
Convicted and imprisoned without the option of a fine for theft, fraud, forgery, perjury, or other
offences.
1.4
candidate eligibility reason
Sipho gumede eligible Nothing in the information
disqualifies him from being
appointed
Sibusiso gumede eligible Nothing in the information
disqualifies him from being
appointed
Robert mostoeneng Eligible Nothing disqualifies him from
being appointed
Pik van Riebeek ineligible Convicted of fraud which
amounts to crime involves
dishonest as stated in the act
Nthando gumede ineligible A minor below the age of 18
, Siyamthanda gumede Ineligible A minor below the age of 18
Mzikayise khumalo ineligible Unrehabilitated insolvent
1.5calculation of public interest score
1million turnover ------- 1point
1million third party liability------1point
One shareholder---------------------1point
One employee-------------------1point
Number of employees 71
Third party liability 21
turnover 11
Beneficial interest 4
The public interest score lies between 100-350 and the financial statements were externally
compiled; therefore an independent review can be done.
Question 2 Auditor of the company
Appointment of an auditor
Must be registered auditor
Can be a juristic person
Must be independent
Must not be an officer of the company
Must not be a company secretary
2.2 Bookworms Accountants appointment concerns
Bookworm accountants are not registered auditors
A shareholder of the auditing company is related to the CEO, a director therefore there is no
independence.
Bookworms were engaged in preparation of the currents year’s financial statements which
affects objectivity due to presents of self-interest threats
Bookworms also were disqualified to be appointed as auditors in terms of the companies act.
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