2 The chairperson of the Board should not be a member of the audit committee (P7RP36):

(0.5)
• Mr Hulk is the chairperson of the Board and therefore, should not be a member of
the audit committee.(1)
3 The CEO should not be a member of the audit committee (P8RP79): (0.5)
• Mr Thor is the CEO of Avengers and therefore, should not be a member of the
audit committee. (1)
4 All members of the audit committee should be independent, non-executive members of the
Board (P7RP56): (0.5)
• Mr Hulk is not independent (for the reasons noted previously) and therefore,
should not be a member of the audit committee. (1)
• The audit committee has only two members (1)
• Since Mr Thor is the CEO of Avengers, he is not a non-executive member of the
Board and therefore, should not be a member of the audit committee. (1)
• Currently with only one independent non-executive director (Mr Spiderman), and
with the audit committee recommended to have a minimum of three members
(P8RP46), it would not be possible for the audit committee to consist only of
independent, non-executive directors. (1)
(Max 7.5 marks of available 9)

d) Nominations committees
1 The nominations committees should consist only of non-executive directors of whom
the majority should be independent (P8RP61 & P8RP66): (0.5)
It is recommended that each committee have a minimum of three members (P8RP46)
(0.5)
• Currently with only one independent non-executive director (Mr Spiderman), the
majority of the members of the nominations committees will not be
independent non-executive directors.(1)
2 Given that a nominations committee has been established, its duties should include the
process for nominating, electing and appointing members of the board, and succession
planning of members of the board (P8RP60): (0.5)
• In light of the concerns explained regarding the composition of the governing body,
and the long terms of board members’ appointment, the effectiveness of the
nominations committee in discharging its responsibilities must be questioned. (1)

(Max 1.5 marks of available 3.5)

e Company secretary
1 The company secretary should not be a member of the Board (P10RP96): (0.5)
• Mr Black Panther is the CFO and a member of the Board and therefore, should
not be the company secretary. (1)
(Max 1.5 marks of available 1.5)

(1 marks for presenting answer under the correct headings)

Max of 25.5 marks for section from 31.5 available marks + 1 presentation marks

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1.2 Duties of the audit committee concerning the auditor 4 marks

Reference: Adams, Diale and Richard (2019: 3/53-3/54)

• nominate for appointment as auditor of the company, a registered auditor who, in the
opinion of the audit committee, is independent of the company. (1)
• determine the fees to be paid to the auditor and the auditor’s terms of engagement. (1)
• ensure that the appointment of the auditor complies with the provisions of this Act, and
any other legislation relating to the appointment of auditors. (1)
• determine the nature and extent of any non-audit services that the auditor may provide to
the company, or that the auditor must not provide to the company, or a related company.
(1)
• pre-approve any proposed agreement with the auditor for the provision of non-audit
services to the company. (1)

(Maximum of 4 marks for this question)

(Available 5 marks)

1.3 Standards of director’s conduct – section 76 3 marks

Reference: Companies Act. No 71 of 2008: section 76

• Mr. Black Panther communicated to the board, the possible contract as soon as he could
(1½)
• He did not use his position as a director to gain an advantage for himself by assisting the
company to win the contract (1½) OR to knowingly cause harm to the company by getting
involved with a company being involved in litigation regarding pollution (1½)
• He exercised his powers and function as a director in the best interest of the company by
not accepting the contract (1½)
(Maximum of 3 marks for this question)
(Available 4½ marks)

1.4 Remuneration committee 3 marks

Reference: King IV Report
Adams, Diale and Richard (2019: 4/31)

• The chairperson should be an independent non-executive director (1½)

• Mr Captain America is not regarded as a non-executive director as he is the CEO of one
of Avengers’s significant suppliers (1½)
• The only other member of the Board who is an independent non-executive director is Mr
Spiderman (1½)
(Maximum of 3 marks for this question)
(Available 4½ marks)

1.5 Accurate and complete internal sales order generated for all orders 12 Marks
Reference: Adams, Diale and Richard (2019: 10/10)

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 1. All orders (faxed, emailed or posted) received should be entered in an orders received
register daily. (1½) The responsibility should be allocated to a specific individual who
should sign the register. (1½)

2. Each customer order should be numerically sequenced (1½) (by stamp) before being
entered into the register in the numerical sequence. (1½)
3. Attach customer order to internal sales order and have second staff member cross check
detail. (1½)
4. On a frequent and regular basis (possibly daily) an employee in the cycle should enter
the relevant ISO number into the orders received register against the customer orders
listed and confirm that (1½)
4.1 the sequence stamped on the customer orders is complete and (1½)
4.2 that there is a unique internal sales order number allocated to all customer orders.
(1½)
4.3 and matched to delivery notes to identify any orders that have not been acted upon.
(1½)

5. All queries from customers in respect of orders placed but not received should be
followed up promptly to determine whether the order was initiated by the creation of an
ISO. (1½)

Max of 12 marks for section from 15 available marks

1.6 Weakness in cash sales 13 Marks

Reference: Adams, Diale and Richard (2019: 10/40-10/41)

SALES TO STREET VENDORS

Weakness 1

Identify: There is a lack of division of duties in operating the shop; in effect Ted Baker “authorises,
executes and records” the sale transactions and has custody of the assets involved, i.e.
inventory and cash from the sale. (1½)

Explanation 1

1. Because nobody else is involved in the shop, Ted Baker is able to defraud the company by not
recording sales made to street vendors, and stealing the cash. (1½)
2. There is no independent person to ensure that a cash receipt is issued for every sale, e.g. gate
security checking street vendors’ purchases against a receipt. (1½)

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Weakness 2

Identify: Sales are not rung up on a cash till, and vendors are only given a cash receipt if they
request it. (There also appears to be no signage which urges them to obtain a cash
receipt). (1½)

Explanation 2

There is no means of reconciling the amount of cash which Ted Baker actually receives:
1. With the actual sales made e.g. sales made for which a receipt is not given could be stolen by
Ted Baker. (1½)
2. With items which left the vendor shop e.g. Ted Baker could be giving friends etc two items and
charging and providing a receipt for only one item. (1½)
3. As there is no independent total for anyone to reconcile to, Cookie Oats could also be stealing from
the cash sales. (1½)

Weakness 3

Identify: Custody over the cash from vendor shop sales (asset) is poor. (1½)
Explanation 3

The risk of theft of the cash box appears to be high as it is inadequately protected. It remains
in the factory in Ted Baker’s office for the entire week and is then left unattended on Cookie
Oats desk, where it could easily be stolen. (1½)
Weakness 4

Identify: There is inadequate isolation of responsibility with regard to the cash when it is
transferred between Ted Baker and Cookie Oats. (1½)
Explanation 4

When Cookie Oats takes over responsibility for the cash, neither she nor Ted Baker
acknowledges the transfer of responsibility (counting and signing for the cash), therefore any
shortage in cash, should it be discovered, cannot be pinpointed i.e. each of the parties could
blame the other. (1½)

(1 marks for presenting answer under the correct headings)

Max of 12 marks for section from 16.5 available marks
1.7 Responsible corporate citizen (6 marks)

Reference: Adams, Diale and Richard (2019: 10/40-10/41)

• This fundamental concept proposes that by virtue of being an integral part of society, a
company is a corporate citizen. (1) Thus like any other citizen, the company has rights but
also obligations and responsibilities to society and the natural environment on which society
depends. (1)