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2021 AUI4862 ass 4 - dfbvdf

Advanced Internal Audit practice (University of South Africa)

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AUI4862/103/0/2021

Tutorial Letter 103/0/2021

The Internal Auditor’s Responsibility in
Governance, Risk Management and Control

AUI4862

Year course

Department of Auditing
This tutorial letter contains important
information about assignment 04.

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AUI4862_TL103_0_2021

1 ASSIGNMENT 04

This tutorial letter contains information regarding the submission of assignment 03 as well as
the assignment questions.

Assignment 04 is a written assignment and should be submitted via myUnisa upload

function. No hardcopy of emailed assignments will be accepted. If you submit the incorrect /
incomplete / picture / Word document or a <Read only=/ corrupted file you will receive 0%.

Assignment 04 will be electronically uploaded via myUnisa (in PDF). The due date for
this assignment is 16 August 2021.

To submit assignment using myUnisa:

 Go to http://my.unisa.ac.za
 Enter your student number and password.
 Select the module.
 Click on assignments in the left-hand menu.
 Click on the assignment number you want to submit.
 Follow the instructions on the screen.

Special instructions for answering this assignment

(1) This assignment covers the whole syllabus.

(2) All questions must be answered.
(3) You are reminded that your assignment must be your own work.

This declaration holds you accountable for completing your assignment on your own.

PLAGIARISM DECLARATION:

By submitting AUI4862 assignment number 04, I declare that:

 I have read the Unisa Students’ Disciplinary Code;
 I know what plagiarism is, that plagiarism is wrong and that disciplinary steps can be taken
against me if I am found guilty of plagiarism;
 This assignment, submitted by myself, is my own work and that I have referenced all the
sources that I have used;
 I have not allowed any other student to copy my work;
 I know that if I am found to be in violation of this declaration, I will receive 0% for the
assignment involved.
Please note: You do not have to submit the declaration. By submitting any assignment for
AUI4862, you automatically declare that you adhere to all the above with regard to the specific
assignment.

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AUI4862_TL103_0_2021

ASSIGNMENT 04 – Due Date 16 August 2021

QUESTION 1 20 marks

King IV defines the governing body as the structure that has primary accountability for the
governance and performance of the organisation. Members of the governing body (directors)
are those who are duly appointed to serve on the governing body (board). Taking this into
account, discuss the following questions.

REQUIRED MARKS

1.1 Discuss why it is important, from a governance perspective to have (5)

independent outside directors on the board of directors.

1.2 Given that directors typically do not interfere directly with stakeholders. How (9)
might a board of directors obtain an understanding of key stakeholders’
expectations? Also, explain ow might that process vary among the various
stakeholder groups identified in King IV?

1.3 King IV includes assurance given by the International Standards for the (6)
Professional Practice of Internal Auditing as part of the assurance given to the
board of directors and senior management. In light of this, discuss the pros
and cons of the chief audit executive reporting to the board of directors (or
one of its committees) versus the chief financial officer. Relate your answer to
the concepts as described in Standard 1100: Independence and objectivity.

QUESTION 2 45 marks

Part A

Chemco Limited is a large chemical manufacturer. One of its bestselling products is an anti-
bacterial all-purpose sanitiser. A major competitor of Chemco Limited has recently sustained
enormous reputational damage owing to its unethical behaviour and culture. Management at
Chemco Limited would like to maximise the opportunity whilst this competitor is still suffering
reputational risk and want to ensure that Chemco Limited would not suffer the same fate. As
a result, management has embarked on an aggressive approach to defend and manage
ethics across the company.

The following information relates to ethical practices at Chemco Limited:

a) Although there is an aggressive approach to implementing ethics at Chemco Limited, the

organisation has a couple of reported unethical behaviour cases that have never been
investigated. As a result, employees no longer report unethical behaviour.

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b) The chief ethics officer (CRO) has developed a code of ethics for all staff. Management
has implemented the code of ethics by forcing every employee to sign the policy as
acknowledgement that they share in the value of the policy. No education was provided to
employees to assist them in understanding the code of ethics, policies and procedures.

c) The code of ethics does not include external parties.

d) During the 2020 review, the external auditors were concerned about the lack of ethics
discussions at board meetings. The chief executive officer (CEO) and chairperson of the
board indicated that the company employed ethical individuals and therefore there was no
need to discuss ethics matters at board meetings.

e) The risk assessment reports provided by the chief risk officer (CRO) do not include any
ethics-related risks.

f) Internal auditors have never undertaken an organisational ethics review at

Chemco Limited since the chief financial officer (CFO) does not deem it necessary.

REQUIRED MARKS
2.1 Discuss the ethics strategy implemented by Chemco Limited. (4)

2.2 Based on the case study above, indicate and explain 6 (six) violations of
the Ethics Management Framework. Motivate your answer by referring
to the violated components of the Ethics Management Framework and (21)
the non-compliance to requirements of King IV, Principle 2.

Provide your answer in the following format:

No Violated components of Ethics Non- Compliance to King IV (12)

Management Framework (9)

Part B

Six months after senior management has taken an aggressive approach to ethics, the
internal audit activity is requested to perform an audit on the ethics management process.
Senior management intends to determine the adequacy of the ethics management process
with the results of this audit performed by the internal audit activity.

Provide your answer in the following format:

No Ethics Management process (4) Audit procedure (6)

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Part C

With the recent worldwide outbreak of Covid-19, Chemco Limited contacted the Ministry of
Health and offered to supply antibacterial all-purpose sanitiser to the Department of Health
as part of a project to help curb the outbreak of the virus in South Africa. The agreement was
that Chemco Limited would supply antibacterial all-purpose sanitiser at less than cost price.

Various international organisations incorporated in the United States of America offered to

help with the project and provide funding to cover the remaining cost of the sanitiser supplied
by Chemco Limited. The investor organisations all trade on international markets. The project
has now been in operation for six months and the investors seek reassurances about risk
management and/or controls before they will provide further funding.

The internal auditing department of the Department of Health has been asked to audit the
compliance of the current project to applicable laws and regulations. Their specific task is to
evaluate the adherence of the programme to appropriate legislation, with specific reference
to a risk management and/or control framework.

You are an internal auditor at Chemco Limited and you have agreed to help where needed.

2.4 Identify and discuss the applicable legislation(s), regulations or any international (10)
Acts and their relevant sections that are applicable to the South African
Department of Health.

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UNISA 2021

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