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Chapter 1 UNIT 1 THE BUSINESS ENVIRONMENT (RELATIONSHIP BETWEEN THE…
Chapter 1
UNIT 1
THE BUSINESS
ENVIRONMENT
BOARD OF DIRECTORS
Members of the Board: Directors(Executive and non Executive). Governors, Trustees and Commissioners.
They are the entity's governing body, with the responsibility of creatively and strategically directing the the company's affairs and representing the interests of management and shareholders.
Differences between Executive and
Non Executive Directors.
Executive Directors :
are directors with the overall primary management and leadership in the entity, they are part of the day to day operations of the business, receive full salaries and are the companys full time employees.. like the CEO, MD, COO, CFO etc.
Non-Executive Directors:
are less or no hands on at all all in the entity and are strictly not involved in they daily operations of the business, they only attend board meetings and ensure adherence to good business practices in the business, they also serve as the whistle-blowers or over-viewers, there are regular and independent directors.
Independent Executive Directors
have no bond with the entity, don't own any shares, never provided the entity with a loan or took one from them and has no family member working in the entity, another business' retired manager or CEO is an example.
RELATIONSHIP BETWEEN THE BOARD OF DIRECTORS AND THE INTERNAL AUDITORS
Functional Reporting:
Reports to the audit committee regarding the responsibility of the Internal Auditor, approvals of the audit plan and budget and the staff's remuneration.
The Board's Reliance from the Consulting Services
: To provide ideas and advice based on the audit findings, add value and improve management"s processes.
The Board's Reliance on Internal Auditors from the Assurance Services Perspective
: To examine, analyse and assess the business' operations, to provide independent assurance that the entity's governance, risk management and internal control processes are effective.
Administrative Reporting
: Reports to the CEO about the daily operations of the Internal Audit Activity, preparations of performance evaluations and also the budget approvals.
Reporting Lines and Structure:
Why is there a need for auditors?
For Shareholders
: To check their management's reports and to give a fair representation of their reality and express an opinion on that.,
For Society
: they need confidence in financial information of businesses as they pay taxes and make investments, so they can be sure their information is true, fair and credible.
AUDITORS
Stereotypical Image of An Auditor
-Vague and Misconceptious, Conservative, Boring, Serious Faces and No sense of Humor.
Positive Realization of Auditors:
-They are investigators of certain matters, Reporters in Parliament, and verifies information,
Types of Auditors
Internal auditors
External Auditors
Forensic Auditors
Governmental Auditors
Special Purposes Auditors
Internal Auditors
People who give Independent and objective assurance and consulting services to add value and improve a business' operations.
They focus on the entity's \Risk Management, Governance and Internal Control Processes.
They are independent entity's employees.
External Auditors
-They deliver services to the public, are independent and not part of the entity they will be auditing, with SAICA as their Proffessional Body and IRBA the Statutory Body.
ACCOUNTABILITY
-Government:
accountable to the public for the way they spend the tax revenues
-Directors:
accountable to the shareholders for how they manage their investments and run the entity.
-Directors:
accountable to the public for the way they run the company and adhere to certain regulations
-Independent Auditors:
To evaluate and report on his findings on those who may be financially accountable on some things.
