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(a)Contrasttheroleofinternalandexternalauditors.(8marks)(b)ConoyCo

2020-11-11 01:40:33 问答库 阅读

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(a)Contrasttheroleofinternalandexternalauditors.(8marks)
(b)ConoyCodesignsandmanufacturesluxurymotorvehicles.Thecompanyemploys2,500staffandconsistentlymakesanetprofitofbetween10%and15%ofsales.ConoyCoisnotlisted;itssharesareheldby15individuals,mostofthemfromthesamefamily.Themaximumshareholdingis15%ofthesharecapital.
Theexecutivedirectorsaredrawnmainlyfromtheshareholders.Therearenonon-executivedirectorsbecausethecompanylegislationinConoyCo’sjurisdictiondoesnotrequireany.TheexecutivedirectorsareverysuccessfulinrunningConoyCo,partlyfromtheirtraininginproductionandmanagementtechniques,andpartlyfromtheir‘hands-on’approachprovidingmotivationtoemployees.
Theboardareconsideringasignificantexpansionofthecompany.However,thecompany’sbankersare
concernedwiththestandardoffinancialreportingasthefinancialdirector(FD)hasrecentlyleftConoyCo.TheboardaredelayingprovisionofadditionalfinancialinformationuntilanewFDisappointed.
ConoyCodoeshaveaninternalauditdepartment,althoughthechiefinternalauditorfrequentlycommentsthattheboardofConoyCodonotunderstandhisreportsorprovidesufficientsupportforhisdepartmentortheinternalcontrolsystemswithinConoyCo.TheboardofConoyCoconcurwiththisview.Anders&Co,theexternalauditorshavealsoexpressedconcerninthisareaandthefactthattheinternalauditdepartmentfocusesworkoncontrolsystems,notfinancialreporting.Anders&CoareappointedbyandreporttotheboardofConoyCo.
TheboardofConoyCoareconsideringaproposalfromthechiefinternalauditortoestablishanauditcommittee.
Thecommitteewouldconsistofoneexecutivedirector,thechiefinternalauditoraswellasthreenewappointees.
Oneappointeewouldhaveanon-executiveseatontheboardofdirectors.
Required:
DiscussthebenefitstoConoyCoofforminganauditcommittee.(12marks)


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