Rempson, Inc. is a private company that manufactures heavy machinery. The company has an active audit committee and board of directors. The audit committee consists of two outside directors and Mason Perry, the company chief financial officer. The audit committee meets quarterly to provide oversight of financial reporting, including reviewing new accounting policies and unusual transactions. Mr. Perry personally reviews and approves any related party transactions. Internal audits of operating units are performed by the internal auditor, who reports directly to Laura Holmes, the chief operating officer.

The company has a written code of conduct, and employees agree to adhere to the code when they are hired. The company also has a hotline for confidential reporting of unethical behavior that is staffed by the corporate controller. The audit committee reviews summaries of all incidents and investigations performed.

Required: Identify the weaknesses in Rempson's system of corporate governance and provide suggestions for improvement in the system. Organize your answers as follows:

Weaknesses Recommended Improvement