QUESTION TWO [20] You recently were appointed as auditor to Green Solutions (Pty) Ltd. a company involved in environmental friendly products and which manufactures and sells anything from solar water heaters to enviro friendly packaging and is also involved in recycling. Abel Green the CEO of the company appointed your firm as he had heard that your firm was also concerned about environmental issues. The company has a 31 July year end. Before you commenced with the audit, Xolani Mkhize the financial director pointed out that the company has spent a lot of money during the year, setting up the internal audit department and had recruited Phinda Begha an internal auditor with 15 years' experience to lead it. The internal audit team has attended some training workshops and Phinda Begha had done some on-the-job training. During the year the internal auditors produced several reports on their assessment of business risk for the company, tested the systems and monitored the implementation of group policies at all the branches. While busy with the audit, Abel Green the CEO of the company informed you that they were considering listing on the Johannesburg Stock Exchange but first needed to prepare the company for such a big step. Abel Green believes that the scope for environmental products is potentially massive and wants to prepare for the growth which will be financed most efficiently by the issue of shares to the public. One of the areas of concern is that the board realizes that the company needs to implement the provisions of King IV. Abel Green has asked you to assist him with this as he is not familiar with King IV. By using a questionnaire and making inquiries of appropriate staff, you have ascertained the following: The board of directors is made up of seven directors. Six are executive and one is non-executive. The members of the board are appointed by Abel Green as he feels he needs to work closely with the other directors and does not want anybody he cannot get on with and who does not pull his/her weight. The philosophy of the board is that the directors need to be "hands-on" and have a sufficient knowledge of the ins and outs of the business. The non-executive director is an ex director of Green Solutions (Pty) Ltd who retired two years ago. She was the financial director before she retired. Abel Green - CEO and Chairman (MBA) Xolani Mkhize - Financial director CA (SA) Primrose Suni - Marketing director Simon Makabele - Corporate director Sisha Naidoo - HR director Jim Brown - production director Getrude Groen - Non-executive director CA (SA) The company does not have an audit committee or any other board committees as they do not have sufficient independent non-executive directors and believe that the efficient internal audit department performs basically the same function that an audit committee would. The head of internal audit reports directly to the CEO Abel Green who points out what work they should do. If the company decides that a committee is necessary for whatever purpose, then the CEO appoints the committee and chairs it. Abel Green also determines the amounts directors should be paid and just recently awarded all directors an above inflation increase of 7% as well as a performance bonus of R150 000 each for achieving record income and net profits. The company presently prepares annual financial statements in terms of IFRS for the audit. The financial statements are only presented to directors and shareholders who attend the annual general meeting of the company and a copy is given to the Revenue Authorities when the tax return is submitted. A review of the financial statements for the prior year revealed that they contained a director's report, a statement of financial position, a statement of profit or loss and comprehensive income, a statement of changes in equity, a statement of cash flows and notes. The directors believe the company is a good corporate citizen as it is employing over 600 employees, makes good profits for its shareholders and pays substantial amounts of income tax. You are required to: Draft a report to Mr. Abel Green discussing Green Solutions (Pty) Ltd.'s non-compliance with the recommendations of King IV based on the information supplied. Briefly include in your report, the committees which King IV recommends and the composition of those committees