R1 to a trust registered for the African Black employees. The external Professional Accountants, Azma & Zuane Inc., informed the board that the Companies Act 71 of 2008 no longer permits companies to have shares of par value and thus recommended that the shares must be converted to share of no par value. Mr. Rajah Singh, the Head of the Accounting Department, informed the shareholders that they must implement the recommendation of the Professional Accountants as it means that they will get their money back. The share capital must be reduced to zero based on the principle of no par value shares. The business is one of the major employers in the area and its employees account for approximately 40 percent of the work force in the Rustenburg area.
R1 to a trust registered for the African Black employees. The external Professional Accountants, Azma & Zuane Inc., informed the board that the Companies Act 71 of 2008 no longer permits companies to have shares of par value and thus recommended that the shares must be converted to share of no par value. Mr. Rajah Singh, the Head of the Accounting Department, informed the shareholders that they must implement the recommendation of the Professional Accountants as it means that they will get their money back. The share capital must be reduced to zero based on the principle of no par value shares.
The business is one of the major employers in the area and its employees account for approximately 40 percent of the work force in the Rustenburg area. The other inhabitants are employed in occupation serving the mining economy of the region and the informal sector such as road vendor and 'spaza shops'. Hash Ali who regards himself as a social entrepreneur expanded the business by concluding supply chain management agreements and outsourcing support services to start-up and SME businesses in the area as part of his transformation and growth strategy. Through this strategy he has developed a business community social networking system. As a result, all the employees know each other socially; they know each other's families and their children go to school together
The Head of the accounting department, Mr. Rajah Singh, is a self-made accountant with an only a grade 9 school leaving certificate and 30 years' experience as an accountant in the business. Mr Rajah Singh receives his technical support on business and financial reporting matters from his trusted high school teacher who has retired some 10 years ago. The senior staff in the accounting department is appointed based on sanguine (blood) linage and generation hierarchy of the family tree. Often the development of these appointments is under the tutelage and mentorship of Mr Rajah Singh. There has been continued resistance from Mr. Rajah Singh to implement a fully automated
(a) Discuss the potential financial reporting risks associated with the employment of staff and the structure of the accounting department.
(b) Discuss the factors that must be taken into consideration when determining whether the company requires a compilation, independent review, or audit to comply with the financial reporting requirements
(c) Discuss whether the Professional Accountants provide "assurance" when performing a compilation of financial statements as part of the Agreed upon Engagement with their clients
Step by step
Solved in 5 steps
