Best Cereals Ltd $($BC$)$ manufactures and sells cereals to retailers across South

Africa. The manufacturing plant is situated in Johannesburg, and the cereals are

distributed from there. BC has a distribution warehouse next to the manufacturing

plant.

BC uses Logistics Trucks $($Pty$)$ Ltd to transport the cereals to various provinces across

South Africa. Logistics Trucks $($Pty$)$ Ltd provides long$-$distance deliveries to deliver

bulk cereals to the main retailers$$ distribution centres; these retailers will further

distribute the cereal to their relevant stores. Logistics Trucks $($Pty$)$ Ltd mainly drives

long distances to Cape Town, KwaZulu$-$Natal, Pretoria and Mpumalanga.

During the financial year ended $30$ September $2024,$ the Board of Directors decided

and voted on the following matters:

$$ They were unhappy with the transport services provided by Logistics Trucks

$($Pty$)$ Ltd due to late transportation to the retailers$$ distribution centres. All the

directors voted on using Transports $4$ U $($Pty$)$ Ltd as the new transport service.

$$ There was a batch of cereal that was about to expire that was returned from

retailers. All the directors voted, by way of a resolution, to change the expiration

date on these cereals to show a later expiration date, resulting in food poisoning

for customers.

The Board of Directors is made up of the following directors:

Name Position Other directorships

Professor Natalie Ben Independent non$-$

executive chair

Non$-$executive director of

Mines Ltd

Mr$.$ Rodney Hen Chief Executive Officer

$($CEO$)$

Non$-$executive director of

Happy $($Pty$)$ Ltd

Mr$.$ Finn Manley CA$($SA$)$ Chief Financial Officer

$($CFO$)$

None

Mrs$.$ Bailey King Chief Operating Officer

$($COO$)$

None

Mr$.$ Ben Cane Independent non$-$

executive director

CEO of Transports $4$ U

$($Pty$)$ Ltd

Mr$.$ Jim Shoo Non$-$executive director None

REQUIRED:

$1\mathrm{.}1$ Discuss any ethical considerations you may have in terms of SAICA$$s Code of

Professional Conduct based on the decision made by the Board of Directors.

$(10$ marks$)$

$1\mathrm{.}2$ Identify and discuss any corporate governance concerns you may have

regarding King IV and the Companies Act of South Africa.

Structure your answer using the below headings:

$$ Corporate governance concerns in terms of King IV $(20$ marks$)$

$$ Corporate governance concerns in terms of the Companies Act of South

Africa $2008$

$1\mathrm{.}3$ Assume you are auditing Best Cereals Ltd $($BC$)$; discuss the matter of the

expiration date of the cereal by explaining how this will have an impact in

accordance with the Auditing Profession Act.

Assume that the customers sued BC for a material amount of R$6000000$ and

that the final materiality is R$5000000.$

Limit your responses to the following:

$$ Discuss whether this constitutes a reportable irregularity $($RI$).$

$$ Discuss the actions the auditor will take when communicating the RI$.$

$(25$ marks$)$