Q2.

You are an audit senior at BDO and partners an audit firm based in Dubai. You have just been asked by one of your existing clients, Alain company, for help in compliance with corporate governance guidelines because they are about to obtain a stock exchange listing.

They have sent you the following information;

At present Mr. Ali al Harthy is thew CEO (Chief Executive Officer) of Alain Company and he solely decide and appoints all other board members. There are currently 8 directors, only 2 of which has a non-executive role. All the board members salaries are set by Mr Ali and are based upon his own assessment of performance of the directors.

Recently Mr. Ali has appointed to his brother Mr.Nasser al Harthy as head of finance and asked him to monitor and report about internal control systems in Alain company. The two non-executive directors are proposed to set up an audit committee and remuneration committee, however Mr.Ali al Harthy has completely denied their proposal, and argued in the board meeting that there is no need for audit committee and remuneration committee.

In respect of the corporate governance of Alain Company,

(i) Identify and explain any four corporate governance weaknesses in Alain Company.

(ii) You are required to provide a recommendation to address each weakness you have identified in Alain Company.

(iii) Do you think the two-proposal given by the non-executive directors regarding setting up an audit committee and remuneration committee is an important corporate governance requirement? Yes/No justify your answer.