IIE BAcc AUDI7312 Previous assessment questions

Question 2
You are a third-year trainee at Auditpreneur Incorporated (Auditpreneur), a firm of registered
auditors. You have been assigned to the audit of Emergicare Limited (Emergicare) for its financial
year ended 30 September 2021. Emergicare is a pre-hospital risk management and emergency
medical assistance provider in South Africa. Emergicare is listed on the Johannesburg Stock
Exchange (JSE).

Emergicare’s services include:

 Fully integrated, world-class emergency medical assistance
 Patient evacuation by road or air
 Telephonic medical advisory services
 Remote site clinics
 Medical services to mining and industrial clients

Since inception in 1999, Emergicare has made significant, ongoing investment in operational
resources and capabilities. Their investment in a state-of-the-art emergency operations centre, a
fleet of road and air ambulances and skilled staff resources combine to provide service quality,
optimum response performance and resource availability.

Due to the impact of COVID-19, Emergicare is experiencing a significant default on payments from
debtors and this has caused cash flow pressure. This has also resulted in a breach of covenants on
a significant loan to the value of R18,000,000 which Emergicare obtained from B Bank Limited
which may now be fully payable.

The following working papers/documents are available to you for the 30 September 2021 audit:

Title of document Reference number

Committee compositions D-100
Extracts of the minutes of the board meeting held on 25 March 2021 E-100
IIE BAcc AUDI7312 Previous assessment questions

Client: Emergicare Limited Year end: 30 September 2021 D-100

Prepared by: Trainee A Date: 15 October 2021
Reviewed by: Date:
1/2
Subject: Committee compositions

1. Board of directors

Mr Allen Meiring – CEO and Chairperson

Mrs Christa Witfield – Financial director
Mr Samuel Mguni – Operations director
Mr Muhammed Carrim – Managing director
Miss Thuto Masheko – Human resources director
Mr Sherwin Moodley – Marketing Director
Mrs Minette Olivier – Non-executive director*
Miss Zanele Ndumisani – Non-executive director**

*Minette Olivier is a lawyer and is the chief legal advisor of Emergicare.

** Zanele Ndumisani works for government in the department of health and her remuneration is
based on the profits of Emergicare.

The audit committee is responsible for the evaluation of the board and the chairperson’s
performance, and this is conducted every 3 years. These performance evaluations form part of
the determination of the board’s development and of the training needs of directors.

2. Internal audit

 Internal audit reviews the implementation of the risk management plan on an annual
basis
 Sherwin Moodley heads the Internal Audit Department and reports to Chrsita
Witfield annually
 Internal audit is responsible for the preparation of financial statements
IIE BAcc AUDI7312 Previous assessment questions

Client: Royale Hotels & Resorts Ltd Year end: 30 September 2021 D-100
Prepared by: Trainee A Date: 3 September 2021
Reviewed by: Date:
2/2
Subject: Committee compositions

3. Committees

Audit committee

-Mrs Christa Witfield

-Mr Samuel Mguni
-Miss Zanele Ndumisani

During the meeting of the audit committee held on 15 July 2021, it was decided that Emergicare
will acquire shares in Ambulance Assist PLC, a company listed on the London Stock Exchange. A
detailed analysis of the London emergency medical services sector supported this decision.

Risk committee
- Thuto Masheko
- Zanele Ndumisani

The risk committee was dismissed during the year by the board.

During the current financial year, the company had only the above-mentioned board committees
in place.
IIE BAcc AUDI7312 Previous assessment questions

Client: Emergicare Limited Year end: 30 September 2021 E-100

Prepared by: Trainee A Date: 10 October 2021
Reviewed by: Date:
1/1
Subject: Extracts of the minutes of the board meeting held on 25 March 2021

Members absent
None

Other persons present

Mr Henry Muton (Company secretary)

Summary of matters discussed

Matter 1 – Issue of shares

The board resolved to issue 500,000 shares in order to fund the company’s growth strategy and to
fund the investments in new remote site clinics. The authorised share capital was 1,000,000.

Christa Witfield’s daughter, Jenna Witfield, is unsure as to what career path she wishes to take.
She does however want to try trading in shares. Therefore, it was decided to issue 50,000 of these
shares to Jenna. Jenna does not have sufficient capital to purchase the shares, it was requested
that Emergicare provides financial assistance to Jenna to purchase these shares. The board
approved this.

Matter 2 – Purchase of Ambulance vehicles

10 new ambulance vehicles are required to be purchased to replace part of the fleet operated by
Emergicare. Allen Meiring suggested that these be purchased from Custom Drive (Pty) Ltd
(Custom Drive), a company that specialises in custom vehicle set ups. His motivation was that he
can negotiate a good deal for both parties to the contract. Muhammed Carrim requested clarity
on how Allen would be able to negotiate a good deal and Allen disclosed that his father is the CFO
of Custom Drive. All the directors deliberated on this and approved that the vehicles will be
purchased from Custom Drive. The board agreed that since Allen will negotiate the terms of the
contract with Custom Drive, he should execute all the documentation regarding this purchase.
IIE BAcc AUDI7312 Previous assessment questions

Required:

Q.2.1 With reference to working paper D-100 Committee compositions, discuss your
concerns in terms of the requirements of King IV Report on Corporate
Governance.
Presentation and communication (1)

Q.2.2 With reference to working paper E-100 Extracts of the minutes of the board
meeting held on 25 March 2021,
Q.2.2.1 Draft a memorandum to the board of directors in which you discuss your
concerns with compliance with the Companies Act 71 of 2008.
Presentation and communication (1)
Q.2.2.2 Formulate the substantive procedures that should be performed to
obtain sufficient and appropriate audit evidence about the addition of
the 10 ambulance vehicles discussed in matter 2. You can assume that
the ambulance vehicles were purchased and received during the
financial year under audit.