Tag (SQ): Ethical Business Practices

The following statements were made by the chief executive officers of four companies about the corporate social responsibility stance of their respective companies, in Harmonyville, at a ball to honor companies that were socially responsible in the just ended year.

(i) “Bright Future Ltd has invested heavily in digital communities in villages of Harmonyville to create new market opportunities and promote community economic development. On the business side of the deal, Bright Future has partnered with local business leaders, community groups, and NGOs to create web-based services for education, healthcare, and agriculture needs of the people. Bright Future Ltd has created an executive level corporate citizenship committee and several tiers of multi-functional committees to support citizenship in the company’s lines of business.”

(ii) “Core Profit Ltd primary social responsibility is to assure our shareholders of the short-term financial success of the company. Expecting us to exercise social duties beyond this can undermine the authority of government. As a company we have met all government regulations concerning society and nothing more is expected of us.”

(iii) “GreenPath Ltd is increasingly moving from simply complying with environmental laws to taking more practical actions to winning the public’s trust through interactions and dialogue with other stakeholders. The company recognizes the fact that engaging and addressing concerns of other stakeholders will result in long-term financial benefit to the shareholders. We are aware that company’s operations sometimes affect society negatively and we take steps to promptly address issues stakeholders bring to our attention. This is currently enhancing our reputation.”

(iv) “Unity Corp Ltd has come to accept the legitimacy of the expectations of stakeholders other than shareholders and we have built their expectations into our organization’s stated vision, mission and strategic direction. We recognize that without appropriate relationships with groups such as suppliers, customers, employees, government and society at large, Unity Corp Ltd will not be able to function. As a company, our long-term survival depends on protecting our environment and promoting social equity as well as economic or financial performance.”

Required:
Identify and discuss the corporate social responsibility stance each company is as stated by their respective CEOs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      (b)

Establishment of internal audit function plays a crucial role in effective corporate governance system. Internal audit function exists to perform a number of activities including review of the accounting and internal control systems, identification of significant business and financial risks, performance of value-for-money audits and safeguarding company’s assets. External auditors may from time to time rely on the work of internal audit function in forming audit opinion. However, in doing so external auditors would have to assess the work of internal audit they want to place reliance on.

Required:
Discuss FOUR criteria that will determine the extent of reliance to be placed on the work of internal audit work by external auditors.