NAME MUPANDASEKWA RUFARO CORDILIA

REG NUMBER R204359D

COURSE CODE ARMGT303
PROGRAM HARMGT
FACULTY BUSINESS MANAGEMENT SCIENCES AND ECONOMICS
Question 1

Discuss the six pillars of Corporate Governance and relate these to Compliance of an
organization or company you are familiar with.

Cadbury Report (UK) of 1991 explained the Corporate Governance as the rules and practices by
which a company is governed which involves taking simultaneous care of interests of all the
stakeholders, be it Shareholders, management, government, suppliers, employees and all those
who are associated with the corporation and improving investor confidence by appointing non-
executive directors, appointing audit committee, employment committee and many more. The
pillars of successful governance are accountability, fairness, transparency, assurance, leadership
and stakeholder management. Shareholders’ goal is to achieve great profits and managers’ aim at
small term goals to improve the current finances to get bonuses and good salaries. To achieve the
ultimate objective of profit, legally and ethically which benefits all the stakeholders, Good
Corporate Governance is of utmost importance. The above given pillars help in keeping the
structure of organization strong and profitable for all the entities and keep the economy in a good
shape. In most cases companies which uphold the pillars of corporate governance usually are
compliant with the rules, laws and regulations that bound them.

Fairness refers to equal treatment to all and in this case, it means shareholders. They have the
right to regular and unadulterated financial information as well as treatment with equality. All
shareholders must equally be able to redress their grievances. In transactions involving
amalgamation, merger, acquisition, rightful information must be provided to stakeholders
especially shareholders. It means treating all stakeholders including minorities reasonably,
equitably and provide effective solutions and remedies to violations. It also entails including an
effective and efficient communication to ensure that just and timely protection of resources and
as well as correcting wrongs. Thus making each part well informed and happy, which is good
business. As a student on attachment it has caught my attention that in our organization not all
stakeholders are treated fairly. Shareholders with money can bribe the management in order for
their interests to be prioritized and their grievances and concerns tend to be acted upon quickly.
But however efforts have been put in place like policies to ensure all stakeholders are treated
fairly but truth be said it has not yet been very fruitful in promoting fairness as those charged
with governance tend to override.

Transparency suggests full disclosure of corporation activities, including financial statements,

risks and means to be adopted to reduce the same and performance of company to the
shareholders. If the financial position of a corporation is not made accessible, it becomes difficult
for the investors to trust the corporation and the trust of existing shareholders is broken.
Transparency ensures free flow of information in an organization Most of the scams have
occurred due to lack of transparency in the transactions of an organization. It means having
nothing to hide and fully informing every stakeholder about every decision and how it will affect
them individually. Over the past years they have been an increase in fraud and scams due to lack
of transparency. Many organizations operate on the pretense of being transparent but in reality
they withhold some crucial information to stakeholders. Usually what they normal withheld for
public consumption has some negative impacts. This has led to those charged with governance
cooking the financial statements and paying auditors to give them a favorable opinion. This has
led to companies winning tenders they are not able to fulfill, some organizations liquidating etc.
And after the Enron scandal in 2001, transparency is no longer just an option, but a legal
requirement that a company has to comply with.

Accountability refers to giving reasons and justification of one’s actions and being answerable.
The allocation of shareholders’ capital is in the hands of the board, so they must be made
answerable to the shareholders as to where this resource has been allocated. It includes
presentation of an unbiased and accurate account of an organization. Accountability and
transparency are two sides of the same coin. Board must identify and disclose risks and how they
are managing that risk. It means ownership of strategy and task required to attain organizational
goals. Every decision should be backed up by a reasonable and convincing reason as to what
basis they took that approach and strategy.

Social corporate responsibility, Social responsibility at the corporate level is increasingly a topic
of concern. Consumers expect companies to be good community members, for example, by
initiating recycling efforts and reducing waste and pollution. Good corporate governance
identifies ways to improve company practices and also promotes social good by reinvesting in
the local community. Companies do not operate in a vacuum they operate in a space with people
thus they should conduct their activities in a way to protect the environment and submit to
environmental regulations.

Leadership, is the willingness and ability to take ownership in a part of an organization and to
continually do what is best for the organization. Effective corporate leaders stand on a
foundation of solid governance principles. They have a clear mission and vision for the future
and align their decisions with them. Leaders in governance follow a specific strategy and help to
create a corporate culture that's conducive to success. Employees who embrace these concepts
will naturally develop leadership skills.

Leaders tend to have certain essential attributes. They practice excellent two-way
communication. Also, they have strong emotional intelligence and team-building skills. They
understand the competitive landscape well and are forthcoming with suggestions and solutions.
Strong leaders also have empathy for others and know how to express it appropriately.

Recently at Halsted Brothers Pvt Ltd has developed and restructured its policies were by they
have that they have cultivated and trained those charged with governance the pillars of corporate
governance in their organization. It has set a culture and the tone, this has helped them in being
compliant with the rules and regulations that bond them. This has saved them money by curbing
avoidable costs like fines and has helped them greatly. The company is now mindful on treating
its employees and shareholders fairly avoiding clashes with labor unions. It no longer filters
information it passes down to employees, customers and shareholders etc. Conclusively, the
pillars of corporate governance to a greater extend when fully incorporated and religiously
followed within and organization can result in a company being compliant. However,
management can override it requires joint effort and willingness of every stakeholder thus
making it difficult to fully implement. Proving the point that, It takes more than transparency to
build integrity as a company. It also takes accountability, which can also mean answerability or liability

Question 2
A professional Accountant is required to be guided by five fundamental principles in his or her
day to day professional work. Identify these principles and make a meaningful discussion around
them including practical examples of these Principles.

The nature of accountancy and the complexity of the work that accountants do, means that this
work needs to be trusted, and demonstrate the highest standards of professional conduct. The
Code of Ethics and its obligations are therefore a key part of the accounting profession’s
commitment to these standards. The five fundamental principles are integrity, objectivity,
professional behavior, professional competence and due care and confidentiality.

The principles on which the Code is based are those of openness, integrity and accountability.
They go together. Openness on the part of companies, within the limits set by their competitive
position, is the basis for the confidence which needs to exist between business and all those who
have a stake in its success. An open approach to the disclosure of information contributes to the
efficient working of the market economy, prompts boards to take effective action and allows
shareholders and others to scrutinize companies more thoroughly.

Integrity means both straightforward dealing and completeness. What is required of financial
reporting is that it should be honest and that it should present a balanced picture of the state of
the company’s affairs. The integrity of reports depends on the integrity of those who prepare and
present them. A professional accountant shall comply with the principle of integrity which
requires straightforwardness, honesty, fair dealing, and truthfulness in professional and business
relationships. Professional accountants should not be associated with information they believe,
contains a materially false or misleading statement, contains statements or information provided
recklessly or omits or obscures information where such omission or obscurity would be
misleading. If a professional accountant becomes aware that he has been associated with such
information, he must take steps to disassociate him/herself therefrom.

Objectivity stipulates that professional accountants should not allow bias, conflict of interest, or
undue influence of others to override or compromise professional or business judgements.

Professional competence and due care requires professional accountants to attain and maintain
professional knowledge and skill at a level which ensures that clients or employers in the case of
professional accountants in business receive competent professional service. This emphasizes the
importance of continuing professional development, and act diligently in accordance with
applicable technical and professional standards when providing professional services. Rendering
“competent professional service” assumes the exercising of sound judgement in applying
professional knowledge and skill. To maintain professional competence a professional
accountant must remain abreast of relevant technical, professional and business developments.

Professional accountants shall comply with the principle of confidentiality which requires a
professional accountant to respect the confidentiality of information acquired as a result of
professional and business relationships. A professional accountant shall be alert to the possibility
of inadvertent disclosure, including in a social environment, and particularly to a close business
associate or an immediate or a close family member, maintain confidentiality of information
within the firm or employing organization. Auditors also shall not disclose confidential
information acquired because of professional and business relationships outside the firm or
employing organization without proper and specific authority unless there is a legal or
professional duty or right to disclose. Confidentiality also entails professional auditors not to use
confidential information acquired because of professional and business relationships for the
personal advantage of the professional accountant or for the advantage of a third party. However,
disclosure is permitted by law and is authorized by the client or employer. For example,
providing documents and other provision of evidence in the course of legal proceedings,
disclosure to appropriate public authorities, to comply with the quality review of the regulatory
board or the professional body where the professional accountant’s practice is being reviewed.

Accountants should maintain appropriate professional behavior by applying professional

skepticism, professional judgment and due care throughout the audit. The auditor’s attitude
should be characterized by professional skepticism and professional judgement, which are to
be applied when forming decisions about the appropriate course of action. Auditors should
exercise due care to ensure that their professional behavior I is appropriate. Professional
skepticism means maintaining professional distance and an alert and questioning attitude when
assessing the sufficiency and appropriateness of evidence obtained throughout the audit. It also
entails remaining open minded and receptive to all views and arguments.
However due to pressure professional Accountants sometimes their compliance with the
principle fundamental of ethics is threated due to different situations and circumstances. Thus, a
Professional Accountant should be concise of this threats and if possible put safeguards in place
to mitigate them. Due to the nature and structure of their work they are fortunate enough to have
access to companies third part information which they should not divulge to anyone or use them
for their personal gain. For example, an Accountant may be aware of that the share price might
shoot up in the future, and if he decides to buy shares on the basis of this information. he or she
will have violated the confidentiality principle.

Ignorance is not justified at all thus the nature of the accounting field requires the Accountant to
acquire and maintain necessary skills to enable him or her to carry out their duties and
responsibility to standard and not offer a substandard outcome. We leaving in an involving world
were technology is advancing aggressively, the accounting field is not spared and efforts should
be made by an accountant to be familiar and acquitted with new developments within the field.
Many times Accountants are pressured to throw the ethics out of the window in pursuit of
profits, loans and in a bid to win tenders. They end up cooking the financial statements and
manipulating the figures misleading the stakeholders. A culture within the organization should
be implemented to promote adherence to the fundamental code of ethics as this promote good
corporate governance and contribute to compliance. The fundamental ethical principles establish
the standard of behavior expected of a professional accountant. If you’re ‘up against the wall’,
you might feel pressured into breaking one of these fundamental principles. That’s why it’s so
important that you recognize any threats to our fundamental principles early on.

Question 3
The Cadbury Report has been adopted by many Countries as a compliance mechanism.
Discuss the tenets of this report.
The Cadbury Report was developed by Adrian Cadbury at the instigation of London Stock
Exchange. It was indeed the first attempt to formalize corporate governance best practices in a
written document which was aimed at raising the standard of Financial Reporting and Auditing.
Cadbury was generally a result and a product of high profile company collapses.

To address the financial dilemmas of corporate governance, the Financial Reporting Council, the
London Stock Exchange, and the accounting profession established the Committee in May 1991.
The composition and mandate of the Committee are outlined in. The perceived lack of
confidence in financial reporting and in the ability of auditors to provide the safeguards that
readers of corporate reports needed and expected worried the organization's sponsors. The
underlying causes were viewed as being the laxness of accounting standards, the lack of a clear
framework to ensure that directors kept their company's controls under review, and competitive
pressures placed on both businesses and auditors, making it challenging for auditors to contend
with demanding boards.

Corporate governance is the framework for managing and directing businesses. The governance
of companies is the responsibility of the boards of directors. The shareholders' responsibility in
corporate governance is to select the directors and auditors, as well as to ensure that a suitable
governance framework is in place. Setting the company's strategic goals, giving the leadership to
carry them out, overseeing the management of the company, and reporting to shareholders on
their stewardship are all duties of the board. The board's decisions are governed by laws, rules,

and general meetings of shareholders. "It is for boards to develop internal control rules and to
ensure that they are operating as they should," says Sir Adrian. Regarding the function of boards,
the 1992 Cadbury report states: "They must have the freedom to move their firms forward, but
they must do so within a framework of effective accountability. Any system of strong corporate
governance must include this. Organizations transition from compliance to performance through
corporate governance. The way that boards establish financial policy and oversee its application,
including the use of financial controls, as well as the procedure by which they report on the
operations and development of the company to the shareholders, are the specific financial aspects
of corporate governance within that broader framework. The auditors' job is to give shareholders
an unbiased, external review of the financial statements prepared by the directors, which serve as
the foundation for that reporting system. The reports of the directors are intended for the
shareholders, but they are also important to a wider audience, including the employees whose
interests the boards are required by law to consider.

A Cadbury Committee was established in May 1991 by the Financial Reporting Council, the
London Stock Exchange and the Accountancy profession. The Cadbury Report was once
referred to as the Financial Aspects of Corporate Governance. It was published in 1992. Its
principles provided an arrangement of company systems to mitigate corporate risk and failures.
The paramount tenets brought about by the Cadbury were the roles duties and composition of
board of directors. The role of non-executive directors and dealing with their remuneration. Also
addressing questions of financial reporting. The rights and equitable treatment of shareholders
and key ownership functions. The role of stakeholder in corporate governance. The board of
directors should meet regularly and its composition should be made up and include non-
executive directors of sufficient caliber chosen through a formal process. All directors should
have equal access to the advice and services of the company. Non-executive directors should
bring an independent judgement selected through a formal process. Also yet another tenet is that
a single person should not be given too much decision making power. The board should establish
an Audit Committee. The term of board of directors cannot be extended beyond three years of
approval.

Congress created the PCAOB in the wake of Enron, WorldCom, Tyco, and a series of other
financial reporting scandals that rocked the securities markets and shook investor confidence.
The birth of the Board signaled the end of voluntary self-regulation of the auditing profession
and the beginning of compulsory, independent oversight. The Board has four primary
responsibilities, registering accounting firms, inspecting registered firms, establishing auditing
standards, and conducting investigations and disciplinary proceedings. Coordination and
supervision, the challenge function, advocacy, and advice and support are among other functions
of oversight boards.

In order for the board to be effective, it must be balanced, effectively recruited, and capable of
evaluating its own performance while carrying out its tasks and obligations. Board members
must be able to collaborate successfully so that the collective knowledge, experience, and skills
are higher than those of any one board member. This facilitates navigating the agendas created
for each board meeting to manage risk, challenge the executive, and be stewards of the vision

The Cadbury Report brought forth positive results and lead to good corporate governance, but
we can no ignore the fact that it is too costly to implement and is reactionary and not organic.

Question 4
Discuss the functions of oversight boards as a means of regulating companies and organization's.

Oversight refers to the actions taken to review and monitor public sector organizations and their
policies, plans, programs, and projects, to ensure that they are achieving expected results,
represent good value for money; and are in compliance with applicable policies, laws,
regulations, and ethical standards. Oversight is a critical governance function performed by
boards of directors, committees, councils, and external bodies. Oversight is composed of “over,”
meaning above, and “sight,” meaning looking, but not touching. Indeed, those in charge of
oversight functions are asked to look at a process, program, or project from above, but not to get
involved in its day-to-day management. Therefore, the Board's primary goal is to encourage
corporate accountability and transparency through the installation of extensive procedures that
would enable people to monitor irregularities and take remedial action to enhance service
delivery.

In other words, oversight (or watchful care) is a safety net to ensure the following, due diligence
takes place before key decisions are made, policies and strategies are being implemented as
intended, key risks are identified, monitored, and mitigated, business processes and systems are
working well, expected results are being achieved, value for money is obtained, activities comply
with policies, laws, regulations, and ethical standards, developing areas of concern are being
dealt with, assets are being safeguarded and continuous improvement is taking place.

Oversight bodies have been key pieces in the process of regulatory reform, working as ‘engines
of reform’, maintaining a whole strategic point of view, coordinating inside the administration.
Oversight bodies’ general role, besides supervision, control and coordination, consists in forcing
regulators to demonstrate and justify the relevance of their regulation (potential and existing),
using accountability and assessment mechanisms, as well as offering them technical advice and
promoting regulatory reform throughout government whilst guaranteeing regulatory quality.

A key role of oversight bodies is to coordinate and supervise, making sure that regulatory reform
meets quality standards, complies with a general economic strategy and that Regulatory. In that
sense, channels of communication between regulators and bodies must be properly settled.
Furthermore, the level of government from which the body coordinates is important, as well as
the used tools. Oversight bodies can be very useful in the promotion of regulatory reform and
quality. Overlapping and duplication of functions can be avoided through information activities
inside and outside government. Oversight bodies can help to raise public awareness of reform
outcomes and benefits.

Provide advice and support helps to create and maintain a cultural change in regulators. This
generally under-prioritized task could be achieved through extensive guidelines, continuous
training and providing specific expertise even with external consultants if necessary.

Oversight bodies are an essential regulatory institution, which enhances quality in regulatory
processes and their reforms. Their mission is to supervise, co-ordinate, challenge and advice
regulators while promoting reform, regulatory quality and its benefits. These institutions should
have the capacity to co-ordinate, maintain a whole-of-government perspective and a broad
concept of reform, holding sufficient authority and preferably benefit from a permanent mandate.
23. The path to building a well-functioning oversight body is not a single straight line. The first
task to build this institution is to assess the regulatory situation, its advantages and its challenges,
and draw clear policy objectives. Oversight bodies should have an incremental approach in tasks,
and should be constantly developing capacities and skills of human resources. As for their
internal organization there are several possibilities: a body structured in working groups for each
function, some of them of permanent nature; but also enough flexibility to form ad hoc groups
which could respond to a changing environment. In order to inform this process, a research unit
might be created, evaluating and supporting the oversight body and other institutions involved in
the regulatory system.

The oversight board in order for it to be beneficial it must be given full powers and resources to
carry out their task and must report findings and give recommendations thus improving
compliance within an organization as it acts as a guardian angel.

Question 5
Identify three (3) International Standards on Auditing (ISAs) and discuss
their requirements in terms of compliance.
The International Auditing and Assurance Standards Board (IAASB) sets high-quality
international standards for auditing, assurance, and quality management that strengthen public
confidence in the global profession.

Auditing standard means level of auditingquality or excellence established by the TaxInstitute as

a norm to be accepted and followed by auditors of published financial statements.

Auditing standard requires the auditor to obtain an understanding of the company’s accounting

and internal control systems, sufficient to plan the audit and develop an effective audit
approach.International Auditing Standards provide minimum guidance for the auditor that helps
determine the extent of audit steps and procedures that should be applied to fulfill the audit
objective. They are the criteria or yardsticks against which the quality of the audit results are
evaluated.

The IAASB is committed to the goal of developing a set of International Standards and other
pronouncements which are generally accepted worldwide. IAASB members act in the common
interest of the public at large and the worldwide accountancy profession. This could result in
their taking a position on a matter that is not in accordance with current practice in their country
or firm or not in accordance with the position taken by those who put them forward for
membership of the IAASB.

The IAASB’s pronouncements govern audit, review, other assurance, and related services
engagements that are conducted in accordance with International Standards. They do not
override the local laws or regulations that govern the audit of historical financial statements or
assurance engagements on other information in a particular country required to be followed in
accordance with that country’s national standards. In the event that local laws or regulations
differ from, or conflict with, the IAASB’s Standards on a particular subject, an engagement
conducted in accordance with local laws or regulations will not automatically comply with the
IAASB’s Standards. A professional accountant should not represent compliance with the
IAASB’s Standards unless the professional accountant has complied fully with all standards
relevant to the engagement.

The goal of an audit is to increase intended users' level of trust in the financial statements. This is
accomplished by the auditor expressing an opinion on whether the financial statements were
prepared in compliance with the applicable financial reporting framework in all material
respects. In the majority of general purpose framework cases, this opinion pertains to whether the
financial statements give a true and fair view in accordance with the framework or are presented
fairly, in all material respects. The auditor can come to that conclusion after conducting an audit
in accordance with ISAs and any applicable ethical standards. All ISAs pertinent to the audit
must be followed by the auditor. To comprehend an ISA's goals and correctly implement its
requirements, the auditor must comprehend the entirety of the document, including its
application and other supporting documentation.

ISA 200 deals with the independent auditor’s overall responsibilities when conducting an audit
of financial statements in accordance with ISAs. It explains he scope, authority and structure of
the ISAs.To obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, thereby enabling the auditor to
express an opinion on whether the financial statements are prepared, in all material respects, in
accordance with an applicable financial reporting framework; and to report on the financial
statements, and communicate as required bythe ISAs, in accordance with the auditor’s
findings.Compliance with ethical requirement relating to audit of financial statement.

Auditor shall exercise professional judgement in planning and performing audit of financial
statement.Auditor shall obtain sufficient appropriate audit evidence to reduce audit risk to an
acceptably low level for expression of opinion. Auditor shall comply with all ISAs relevant to
the audit. Auditor shall comply with each requirement of an ISA unless, entire ISA is irrelevant
or requirement is conditional and condition doesn’t exist.In case of departure from ISA auditor
shall perform alternative audit procedures to achieve the aim of that requirement. If objective of
ISA cannot be achieved auditor shall evaluate whether this prevents the auditor from achieving
the overall objectives of the auditor and thereby requires the auditor, in accordance with the
ISAs, to modify the auditor’s opinion or withdraw from the engagement. Document the same in
accordance with ISA 230.

ISA 500 explains what constitutes audit evidence in an audit of financial statements, and deals
with the auditor’s responsibility to design and perform audit procedures to obtain sufficient
appropriate audit evidence to be able to draw reasonable conclusions on which to base the
auditor’s opinion
The objective of the auditor is to design and perform audit procedures in such a way as to enable
the auditor to obtain sufficient appropriate audit evidence to be able to draw reasonable
conclusions on which to base the auditor’s opinion.The measure of the quantity of audit The
quantity of the audit evidence needed is affected by the auditor’s assessment of the risks of
material misstatement and also by the quality of such audit evidence.

Audit evidence being Information used by the auditor in arriving at the conclusions on which the
auditor’s opinion is Audit evidence includes both information contained in the accounting
records underlying the financial statements and other information.I

SA 500 require auditor to Design and perform audit procedures that are appropriate in the
circumstances.When designing audit evidence consider the relevance and reliability of the
information.ISA 500 require auditor for using information produced by the entity, obtaining
audit evidence about the accuracy and completeness of the information; and Evaluating whether
the information is sufficiently precise and detailed for the auditor’s purposes.

ISA 300 deals with the auditor’s responsibility to plan an audit of financial. ISA 300 is written in
the context of recurring audits. Additional considerations in an initial audit engagement are
separately identified.The objective of the auditor is to plan the audit so that it will be performed
in an effective manner.ISA 300 requires to get engagement partner and other key members of the
engagement team to get involve in  planning and discussion.ISA 300 requires under take the
following activities at the beginning of the current audit engagement; Perform requirements of
ISA 220 and Establishing and understanding terms of engagement in accordance with ISA 210 .
ISA 300 Require to establish overall audit strategy in order to identify the characteristics of the
engagement that define its scope and ascertain he reporting objectives of the engagement to plan
the timing

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