Case study on Knight Transportation Inc.

Knight Transportation, Inc. (KTI), recognised by Forbes for its low operating ratios in the United States trucking industry, is setting standards in corporate governance. To comply with the listing standards in New York Stock Exchange (NYSE), the company has put in place written charters for selection of independent directors, voting requirements for their election, and limiting executive compensation packages. The case talks about what role the Board of Directors can play in ensuring corporate governance standards during the growth of the company. The case examines in detail the corporate governance practices undertaken by the Board Committees and the strict adherence to the Generally Accepted Accounting Principles while preparing financial statements. Mandatory personal assurances by the top executives on the fairness of financial statements are also complied with. With stricter corporate governance standards, KTI is expecting to realise higher returns for its stakeholders. Extract from IBS - Case Development Centre http://www.ibscdc.org/Case_Studies/Corporate%20Governance/GOV0024B.htm - 20.08.2018 3

Questions:

1. The setting of standards in Corporate Governance by Knight Transportation Inc might prevent potential conflict of interests. Using examples, discuss the benefits firms get by adopting practices of good governance. (30 Marks)

2. In Knight Transportation Inc, the need for strict adherence to the Generally Accepted Accounting Principles while preparing financial statements has been highlighted. The Financial Reporting Act 2004 provides for the establishment of a Code of Conduct for all Professional Accountants which is consistent with the principles contained in International Federation of Accountants (IFAC) Code of Ethics. Professional Accountants are required to adhere to the fundamental principles enshrined in the Code of Ethics. Discuss the application of the fundamental principles of a Code of Ethics. (20 Marks)