Governance and Control 2A 2018

FIRST ASSESSMENT OPPORTUNITY - SCENARIO

12 MARCH 2018

FIRST EXAMINERS: MR R MOOSA

MS S VENTER

READING TIME: 15 MINUTES

WRITING TIME: 1.5 HOURS
INTERNAL MODERATOR: MRS R SMITH MARKS: 75 MARKS
INSTRUCTIONS:
1. This part of the paper consists of four pages. If your paper does not contain all the
pages, please put up your hand so that a replacement paper can be handed to
you.
2. You have 15 minutes reading time. During this time you are only allowed to read
and make notes on the question paper (scenario). You are not allowed to write
anything on the answering sheet. The required section will only be provided to
you once the reading time if finished.
3. Answer all the questions.
4. Answer each question on a separate folio.
5. Calculate the time that you should spend on each question by multiplying the
number of marks for each question by 1,2 to determine the time, in minutes,
available for each question. Adhere to these time constraints in order to finish the
paper in the given time.
6. Delete all (even single open lines) open spaces on your answer sheets with pen.
Pages on your answer sheets that contain open spaces will be marked as such
and those pages will not be eligible for a remark.
7. No tippex or pencil may be used on your answer sheets. Pages on your answer
sheets that contain pencil or tippex will be marked as such and will not be eligible
for a remark.
8. All the examination regulations of the UJ and the policy document for students of
the Department of Accountancy will apply during this assessment.
9. Hand this paper in, as it will be distributed with your marked answer sheet.
10. The neatness, disclosure and presentation of your answers will be taken into
account when marking your paper.
11. Read questions carefully, if you need to provide explanations you should always
use full sentences, refrain from simply naming facts.

Page 1 of 4
QUESTION 1 25 MARKS
(30 MINUTES)

Good morning Lungelo,

I don’t know if you remember me but we stayed in the same residence at the University of
Johannesburg. I got your email address from a friend. I hope you don’t mind.

Before I start, I just want to congratulate you. I see you are working at Resilient Capital now.
They have been rated the best business to work for two years in row now. Your family must
be so proud.

I remember our first year in varsity. Maybe the freedom was a little much for us. Even though
we felt like kings, we let our work slip. You were pretty down after those final results. Then
something changed. I remember how hard you started working. How many times you said
“no” when we all went out. The many hours in the library. Those were rough times but I see
now that you were busy with much bigger things. You weren’t only trying to pass-you were
sowing into your future career. Sowing takes a lot of patience and persistence. Now here
you are, registered with SAIPA. You are an inspiration to me.

This gets me to the purpose of my email. I need your help.

I am faced with a dilemma. I have always looked up to you and I would really appreciate
your inputs.

I am part of the accounting team at an events management company. I am very interested in

the industry and they are involving me in operations more and more. They were looking to
outsource the internal audit function and one of the board members noted that she has
already decided that they would use AuditMoi Assurance (hereafter AuditMoi) for all internal
assurance services. The problem is that I know her husband by chance and AuditMoi is
owned by him. I tried to skilfully suggest that we put this out for tender or just consider one or
two more organisations. After my suggestion, she called me into her office and made it clear
that she would make sure that I am never promoted if I disclosed that AuditMoi is owned by
her family. Her email signature indicates that she is a Professional Accountant (SA). This
means that she is registered with SAIPA, right?

I know that SAIPA has fundamental principles that they operate on. Kindly remind me what
they are again? Lungi, please explain each of them to me in simple terms. I really want to
get it. Also, which of these principles are applicable to this situation? Again, make it very
practical please. Explain why. I want to make sure I learn from you.

Also, what do you think would be the appropriate action on my side in this matter?

Hope to hear from you soon.

Regards,
Mcebo

Page 2 of 4
QUESTION 2 25 MARKS
(30 MINUTES)

PART 1

At a recent family dinner, your Uncle Tom enquired about your studies at the University of
Johannesburg. You informed him about all the cool stuff you have been learning, and in
particular, how much you enjoy the study of auditing. Uncle Tom, not knowing much about
auditing or the laws and regulations governing the auditing profession, enquired if it would be
possible for you to act as the auditor for a business where he is a director, since you have
the necessary knowledge.

PART 2

As a shareholder in CellKom LTD, you received the following notice in your post box
regarding the upcoming Annual General Meeting (AGM) of the company.

CellKom Annual General Meeting Notice

You are hereby invited to attend the Annual General Meeting of the company in accordance with the
requirements of the Companies Act.

Notice period: 10 business days

Venue: Indaba Hotel, Midrand, 150 Old Road

The agenda for the meeting is as follows:

1) To approve the board of director resolutions

2) Election of directors
3) Approve the minutes for the previous AGM held on the 17th of April 2016

B Ndlovo
Company Secretary
Midrand
10 February 2018
Connecting People

Page 3 of 4
QUESTION 3 25 MARKS
(30 MINUTES)

You have recently been appointed to the finance team of a medium sized digital media
marketing company, ScreenTime (Pty) Ltd. They are a full-service digital marketing agency
who believe that results come from being as creative as they can possibly be.

You have been called in by a senior financial controller and he shared with you that he is not
comfortable with the concept of independence in corporate governance.

He shared the following details with you with regards to the governing body of ScreenTime.

Other than the Chief Executive Officer (CEO), the Chief Operating Officer (COO) and the Chief
Financial Officer (CFO) the governing body of ScreenTime is as follows:

 Carter Kholedi is a web and graphic designer, working on a communications and

marketing team within higher education. He is employed by GoLive, which is an NGO
that focuses on improving basic education in South Africa through online education
strategies.

 Yvette Labuschagne is a senior digital marketing strategist with 7+ years of experience

in managing large teams, implementing successful digital strategies at large-scale
global companies, and analysing customer data to identify target markets, trends, and
customer sentiment. She is a freelance consultant and has provided many services on
a strategic level to ScreenTime in this capacity.

 Mpumelelo Dikgale currently owns and operates her own digital marketing consulting
business. Over the years she has helped numerous start-ups with go-to market
strategies, product design, web site development, online marketing campaigns,
ecommerce and what is now widely referred to as Social Media. The Dikgale family
trust owns a 25% stake in ScreenTime.

 Thomas Lathi leads teams in managing new media, online marketing, public relations,
web technology, customer service, drive engagement, developing communities,
establish measurements, educating employees and direct cutting edge social media
campaigns and strategies from start to finish for some of the best brands in the world.
Mr Lathi is employed at ScreenTime on a half time basis. The rest of his time is spent
on developing social media campaigns for various companies under the banner of his
own design company TREND.

Page 4 of 4