Tag (SQ): Corporate Governance

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SCS – L3 – Q41- Corporate Governance

Compare and contrast unitary and dual board structures in corporate governance.

(a)

Ghanara’s model of corporate governance is based on the UK model, which is a single, or unitary board. The unitary board is made up of a mix of executive and non-executive directors. All directors have the right to participate in board decision making. Other countries operate dual board model (for example, Germany, which has a management board and a supervisory board) or even a three-board model, which operates in Japan. All participants in the single board have legal responsibility for management of the company and strategic performance.

Required:

Compare and contrast unitary board structure and dual board structure.                                                                                                                                                                                                                                                                                                                                                          (b)

The intensity of competition among rival firms within an industry will affect the profitability of the industry as a whole. Within the past decade, the Ghanaian telecommunication industry has witnessed intense competition, taking several forms. You are a strategic management consultant and have been invited as guest lecturer in one private university to discuss the intensity of competition among rival firms in the telecommunication industry.

Required:

Discuss FOUR factors that could be responsible for the intensity of competition among rival firms within the telecommunication industry in Ghana.

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SCS – L3 – Q32 – Strategy implementation

Explain five common weaknesses of Boards of Directors at Zamu Enterprises.

(a) Boards of Directors are expected to manage companies effectively. However, corporate boards sometimes fail to do so. Recent corporate scandals have highlighted key weaknesses of Board of Directors.

Required:

Explain FIVE common weaknesses of Board of Directors.

(b) Zamu Enterprises began as a small company which operated in the financial services sector of Zamora’s economy. Within the last ten years, the Board, which is chaired by the founder, Ms. Amina Zuri, has incrementally expanded into three more sectors of the economy, namely: telecommunications, logistics and real estate. Currently a conglomerate, Zamu Enterprises has four different companies in its portfolio and has its corporate head office located within the capital city, Zambara.
Required:
Explain the different levels of corporate strategy as it relates to Zamu Enterprises.

(c) Technology is one of the most powerful forces within the external business environment that has changed significantly how business is conducted especially within the 21st Century. For instance, information technology (IT), well exploited, can have significant impact on all the five forces of competition.

Required:

Identify FOUR effects of technological change on organization.

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FR – L2 – Q55 – Financial Instruments

Calculate capital, reserves, and liabilities for Jordana PLC after share issues and preference share transactions in Year 1.

On 1 January Year 1 Jordana PLC has the following capital and reserves.

Equity GH₵
Share capital (1 million ordinary shares) 1,200,000
Retained earnings 5,670,300
6,870,300

During Year 1 the following transactions took place.

  • 1 January: An issue of GH₵100,000 8% GH₵1 redeemable preference shares at a premium of 60%. Issue costs are GH₵2,237. Redemption is at 100% premium on 31 December Year 5. The effective rate of interest is 9.5%.
  • 31 March: An issue of 300,000 ordinary shares at a price of GH₵1.30 per share. Issue costs, net of tax benefit, were GH₵20,000.
  • 30 June: A 1 for 4 bonus issue of ordinary shares.
    Profit for the year, before accounting for the above, was GH₵508,500. The dividends on the redeemable preference shares have been charged to retained earnings.

Required
Set out capital and reserves and liabilities resulting from the above on 31 December Year 1.

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SCS – L3 – Q23 – Conflicts of interest and ethical conflict resolution

Discuss three justifications for separating the roles of board chairman and CEO at Kabwe Pharmaceuticals Ltd.

Susan Kabwe completed a first degree in pharmacy programme abroad and returned to her native country Gambia with the hope of starting a pharmaceutical company. Gambia has been experiencing high graduate unemployment and Susan was very determined not to join the teaming unemployed youth in the country. Susan put together an excellent business plan and approached four other childhood friends who have also completed university to start Kabwe Pharmaceuticals Ltd for manufacturing of basic and essential drugs locally. After many months of hard work, the company finally commenced operations two years ago.

Susan Kabwe plays a dual role of the chief executive officer (CEO) and chairman of the Board of Directors, and the four other friends are all executive directors of the company. The board of the company is currently composed of five executive directors and two non-executive directors. The two non-executive directors are close friends of the executive directors without relevant work experience since they remained unemployed 3 years after completing university. There have been several board meetings held without the non-executive directors. This situation is largely due to a belief by the executive directors that non-executive directors are really not needed since they do not play any important role on the board. Susan and other executive directors participated in a seminar on corporate governance where the facilitator made the following statements on best practices of corporate governance:

“The roles of board chairman and chief executive officer should be held by two different individuals”

“The board chairman performs critical functions to ensure that the board functions effectively”

“The board should be composed of at least one-third of non-executive directors”

After the seminar the executive directors disagreed with some of the facilitator’s assertions. They claimed the statements are idealistic and not pragmatic. Susan Kabwe has approached you as a corporate governance expert to help provide clarity to the statements by the facilitator.

Required:

Discuss THREE justifications why the roles of the board chairman and chief executive officer should not be held by Susan Kabwe.

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SCS – L3 – Q19 – Strategy, stakeholders and mission

Identify stakeholders of a research organization and explain their interests; explain corporate governance to the majority shareholder.

(a) BrightFuture Institute is a research organization with branches in five African countries. The majority shareholder, Mr. James, though not officially part of the management structure, is actively involved in management decisions. He gives directives and makes decisions that sometimes influence the management policies. Customers, employees, and management are often affected by these decisions of Mr. James.

Preparations are underway to get the company listed on the Accra Capital Market and a consultant is needed to advise on the improvement of its weak corporate governance structure.

Required:

(i) Identify FOUR stakeholders of the company and explain the nature of their interests in the company.

(ii) Explain to Mr. James what is meant by good corporate governance, including the problems it is intended to address.

(b) Mr. Kweku Amoako is the founder and managing director of StarBloom Foods Ltd. StarBloom is a private limited liability company, which was established six years ago. Its line of business include growing different kinds of fruits, processing, and distributing them to supermarkets across the country. Mr. Amoako, together with the company’s board, has intimated on the need for the company to expand beyond its current operations in Ghana. You have been consulted by a consultant by the company’s management to advise on its quest to participate in the global market.

Required:
Discuss FOUR factors that must be considered by the board of Star Bloom Foods and Processing Ltd. before choosing a suitable mode of entry into international markets.

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SCS – L3 – Q17 – Professional practice and codes of ethics

Identify three situations at NTM conflicting with IFAC's Code of Ethics.

At its recent Annual General Meeting, management of NTM was highly criticized for two major scandals that occurred in the organization during the year. In one case, newspapers reported that the management of the company connived with officials at the port to undervalue imports in order to pay lower taxes. In the other case, it was reported that the accountant leaked information to his friend who was bidding for a contract in the company. The Board Chairman, who is also the Chief Executive Officer of the company apologized for these incidents but did not disclose that the company had been sued in respect of the first case. He went on to promise the shareholders that the fortunes of the company would change dramatically by the end of the new year as the company was going to start exporting its products to Europe within the next few weeks.

Required:
(a) Identify and explain THREE situations that are in conflict with the International Federation of Accountants (IFAC)’s Code of Ethics.

(b) Explain FOUR disadvantages of the CEO acting also as the Chairman of the Board.

(c) Identify FOUR principal duties of a Board of Directors.

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SCS – L3 – Q3- Corporate Governance

Explain the composition and functions of an Audit Committee in corporate governance.

a) The role of Audit Committee in corporate governance cannot be overemphasized.

(i) What should be the composition of an Audit Committee, and who might be invited by the committee to attend their meetings?

(ii) Explain FOUR (4) functions of an Audit Committee.

(b) Corporate governance is now a very popular and important area in strategic management. However, corporate governance is poor in a number of organizations.

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FM – L2 – Q7 – Dividend policy

Discuss if share option schemes for directors/employees benefit shareholders of Sunlit Enterprises.

Discuss whether share option schemes for either directors or employees generally, can benefit the interests of the shareholders in Sunlit Enterprises.

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AAA – L3 – Q68 – Non-audit Services

Discuss how non-audit services by audit firms may compromise audit integrity and its impact on management, considering client size and listed status.

The current practice of many audit firms offering substantial non-audit services to their audit clients compromises the integrity of the auditing profession and is not in the interests of management.

Required

Discuss the above, indicating whether factors such as client size and listed status would make any difference to your opinion.

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AAA – L3 – Q65 – Reporting

Prepare a management report on payroll internal control deficiencies at Bibini Co. Ltd., including implications and recommendations.

Kofi & Co. have audited the annual financial statements of Akoma Co. Ltd., a public limited liability company, for the year ended 31st December 2014. The accounting system of the company is partially computerised.
During the audit, it was detected that just two members of staff, out of one hundred and fifty workers, were entirely and equally responsible for the maintenance of personnel records and preparation of the payroll. The chief accountant only confirms that the amount of the wages and salaries cheque agrees with the total of the net wages column in the payroll, then he signs without any reasonableness check of the amount of the total wages cheque. This situation is a serious deficiency in the system of internal control which can have serious implications. As audit senior, you are considering communicating this situation to the management, showing the deficiency, implications, and recommendations.

Required:
Prepare an appropriate report to management on the deficiency noted in the system of internal control for payroll.

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