Question 1

PREAMBLE:

After series of corporate governance failures and the abuse of trust placed in the

management of public companies in the late 1990s and the early parts of the 2000s,

regulators sought to change the rules surrounding the governance of companies.

In US the Sarbanes Oxley Act (2002) (SOX) introduced a set of rigorous corporate

governance laws, while, in the UK, the Combined Code (Currently the UK corporate

governance Code) introduced a set of best practice corporate governance initiatives,

reflecting major changes in Corporate Governance. The aim is to ensure that companies

are run well in the interests of their shareholders and other stakeholders. The focal point of

this era of corporate governance rests on the following:

- Responsibilities of directors

- Appropriate composition of the board

- Necessity for good internal control

- Necessity for an audit committee

- Relationships with the external auditors

Effectively, this brings to bear the Six Principles of OECD Framework, which are:

Ensuring the basis for an effective corporate governance

The rights of shareholders and key ownership functions

The equitable treatment of shareholders

The role of stakeholder in corporate governance

Disclosure and transparency & accountability

The responsibilities of the Board

Principally, these dynamics in corporate governance sets the pace for global acceptance of

such principles for effective management of companies with particular focus on:

Segregation of Chairman's role from that of the CEO

Fair inclusion of non-executive directors on management boards

Audit committee

Risk management committee

Remuneration committee

Internal Audit among others.

Reflecting on the preamble above, you are required to:

Critically reflect on "Fairchild, R. Gwilliam D. and Marnet, O. (2019). Audit Within the

Corporate Governance Paradigm: A Cornerstone Built on Shifting Sand? British Journal

of Management, Vol. 30, 90-105", (See paper attached) and attempt the questions below.

a) Based on the paper identify Four (4) corporate governance weaknesses from each of the

following firms.

i) WorldCom

ii) Xerox

iii) Hollinger

iv) Tyco

b) Adduce respective recommendations to address each weakness identified, to ensure

compliance with corporate governance principles.

8 marks

c) Based on the paper and the corporate governance principles set out in the preamble

above, identify and explain the following:

i. Four (4) actions that the board chairmen of each of the four firms should have taken in

order to meet corporate governance requirements for their firms.

4 marks

ii. Four (4) actions that the chief executive officers of each of the four firms should have

taken in order to meet corporate governance requirements for their firms.

4 marks

iii. Four (4) actions that the non-executive directors on the management boards of each of

the four firms should have taken in order to meet corporate governance requirements for

the firms.

4 marks

iv. Six (6) actions that the audit committee boards of each of the four firms should have

taken in order to meet corporate governance requirements for the firms.

6 marks

v. Three (3) actions that the risk management committee of each of the four firms should

have taken in order to meet corporate governance requirements for the firms.

3 marks

vi. Two (2) actions that the remuneration committee of each of the four firms should have

taken in order to meet corporate governance requirements for the firms.

vii. Four (4) actions that the internal auditors of each of the four firms should have taken

in order to meet corporate governance requirements for the firms.

4 marks

d) Reflecting on Fairchild, Gwilliam and Marnet (2019), and applying all your research

principles in auditing, particularly corporate governance, answer the following:

i. Identify the research problem of the paper and state it as clearly and concisely as possible.

Note: As much as possible support your answer with in-text citations and references

5 marks

ii. Identify 3 main findings of the paper and briefly comment on each.

6 marks

iii. Identify 3 main contributions of the paper and briefly comment on each.