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P. 1
P1 - Interim

P1 - Interim

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Published by: shaggy2k9 on Jun 03, 2009
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Interim AssessmentKAPLAN PUBLISHING Page 1 of 6
 ACCA INTERIM ASSESSMENT
Professional Accountant
JUNE 2009QUESTION PAPERDo not open this paper until instructed by the supervisor This question paper must not be removed from the examinationhall
Time allowed Reading time:
15 minutes
Writing time:
3 hoursThis paper is divided into two sectionsSection A
This ONE question is compulsory and MUST beattempted
Section B
BOTH questions to be attempted
Kaplan Publishing/Kaplan Financial
 
ACCA P1 Professional Accountant © Kaplan Financial Limited, 2008All rights reserved. No part of this examination may be reproduced or transmitted in any formor by any means, electronic or mechanical, including photocopying, recording, or by anyinformation storage and retrieval system, without prior permission from Kaplan Publishing.Page 2 of 6 KAPLAN PUBLISHING
 
Interim Assessment
SECTION AThis ONE question is compulsory and MUST be attempted
QUESTION 1
The QAZ Company is based in a country where there is a code of corporate governance.Listed companies should follow the code, or explain why not in their annual report, while othercompanies can follow the code if they choose to do so. QAZ is not listed as many of theshareholders are members of the same family and application for listing has not been one oftheir aims.However, QAZ is larger than many listed companies and the board is attempting to followpatterns of good corporate governance. The board consists of six executive and six non-executive directors (NEDs), with the roles of CEO and chairman being carried out by twodifferent people. NEDs are appointed for a maximum of six years. There are audit, nominationand remuneration committees which comprise non-executive directors apart from thechairman, who sits on the remuneration committee. A senior independent director has beenappointed (SID) who maintains close contact with the chairman to obtain a betterunderstanding of the business. A recent innovation has been a weekly squash match toimprove their business relationship. Control systems are implemented by department headsas required.On the audit committee, all the NEDs have business experience; the directors' specialities aremarketing, human relations and production. The nomination committee produces jobdescriptions for each director and provides suggestions for new directors as existing directorsleave QAZ, and not before. However, one NED believes that this is inadequate and has hadlengthy, and at times argumentative, discussions with two of the executive directors on thispoint. The issue has yet to be resolved.All directors are required to hold shares in QAZ, although the timing for share sales andpurchases is limited to a few months in the year and board approval is needed for largepurchase. The CEO is also directly responsible for the implementation of board policy at anoperational level, with performance appraisal being linked partly to this area.Remuneration of the executive directors is a mixture of basic salary, bonus and performancerelated pay (PRP). Basic salary continues to be determined by reference to the averagesalaries paid in QAZ’s country of operation. The bonus payments are linked partly toguaranteed elements, taking into account the risky nature of QAZ’s business and the amountof net profit made. The performance element of remuneration is linked to change in QAZ’sshare price; the total amount of PRP consists of 25% of remuneration to again recognise therisky nature of QAZ’s business. Directors are also provided with share options, normallyexercisable after five years.KAPLAN PUBLISHING Page 3 of 6

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