You are an Audit Manager at ABC Auditors and have already been working at ABC Auditors for 5 years. In 2023, your first audit client for the year was the audit of Global Industries (Pty) Ltd (“Global”). Global has a February year-end.

You know the audit client and staff well as you were on Global’s 2022 financial year audit.

Global is a transport company that owns buses, trucks, and cars. The entity provides transport services across South Africa, with depots in the major cities.

The following is Global’s Board of Directors structure: 

Jason Sevan Executive Director – Chief Executive Officer and Chairperson of the Board.

He was appointed as Chairperson in 2019.

Chairman of the Social and Ethics Committee.

Member of Audit Committee.

Member of the Nomination Committee.

Craig Ceasar Executive Director – Chief Financial Officer.

Head of Internal Audit.

Chief Audit Executive.

Viola Jekwa Executive Director – Operations Director
James Classen Non-Executive Director and a Professor

at the Business School in Cape Town.

Ryan Curran Executive Director – Human Resources


Paul Swarts Executive Director – Marketing Director.
Wade Fisher Executive Director – Chief Information



Greg Johannes Non–Executive       Director       and       a government official (only attends Board


You inspected the minutes of the Board meeting held on the 30th of November 2022. You made the following notes from the minutes:
• Part of Jason Sevan’s duties includes procurement. He is the Chairman of the Social and Ethics Committee and a member of both the Audit Committee and Nomination Committee.
• Jason Sevan welcomed the newly appointed Board member, James Classen, who is the lead independent Director in line with King IV requirements. He was appointed on 30 June 2021. He is an experienced businessman with extensive experience and thus there was no need for an induction.
• Jason Sevan appointed James Classen as both an Independent, Non- Executive Director and the Company Secretary.
• The Audit Committee is responsible for the evaluation of the Board’s performance. The performance evaluations form part of determining the Board’s development needs and the training needs of Directors.
• The Board of Directors had discussed the content of the remuneration to be disclosed in a separate table on the Financial Statements as some of the Directors complained that only the remuneration of all directors in total should be disclosed, and not the remuneration of each member.
• The performance of the CEO and Chairman of the Board is evaluated by the Internal Audit Department.
• The Annual Financial Statements are compiled by the Accountant and reviewed by Craig Ceasar. A copy of these financials and integrated reports are available only at the Head Office in Bellville. This is done so that stakeholders can view it. The annual report is issued every second financial year.
• Craig Ceasar is the Head of Internal Audit and is also the Chief Audit Executive(“CAE”). The Internal Audit Department reviews the implementation of the risk management plan on an annual basis.
• Craig Ceasar approved the internal audit charter.
• The Risk Committee approves the risk policy, and the risk appetite is also approved by the Risk Committee.

Discuss any contradictions and concerns you have regarding the information presented, in terms of the requirements of King Code IV. A reminder to first state the applicable King Code IV requirement, whereafter you apply the information in the scenario to the requirement. Structure your answer by using the following headings:
• Board of Directors (14 marks)
• Chairman of the Board (11 marks)
• Annual Financial Statements and Integrated Report (2.5 marks)
• Risk management (2.5 marks)
• Internal audit (10 marks)


You are the Audit Senior in charge of the audit of Pixel Clothing (Pty) Ltd (“Pixel”). Pixel has a February yearend and you are currently busy with the 2023 financial yearend.

Pixel manufactures clothing. The clothes that the entity manufactures are mainly purchased by teenagers. Pixel sells directly to retail stores. The entity also has an online platform. Retail stores can order clothes online, in bulk, from Pixel. Customers can also order online via the internet.

Pixel has three inventory warehouses which are located in Durban, Cape Town, and East London. The Head Office is located in Blackheath, Cape Town.

Payments to creditors
When suppliers have any changes in payment terms or any other details, Masterfile amendment forms are completed for new or existing suppliers. The Masterfile amendment form is completed by the Purchase Manager, and the details contained on the form are recorded on Zero (an accounting software program). Zero allocates an account number to the supplier and the number is recorded on the Masterfile amendment form. The Masterfile amendment form contains, amongst others, the following information:
• Payment terms;
• Supplier name and key contact person’s name and surname;
• Business address and delivery address;
• Contact information; and
• Banking details.

Orders are placed by the Purchase Manager and entered into Zero. When the goods have been delivered by the suppliers, inspected for damages, and inspected against the supplier’s delivery note, the details of the goods received are then entered into Zero, which automatically matches the information with the details of the order in Zero.

The suppliers’ invoices and monthly statements are scanned into Zero by the Creditors Clerk, by taking a photo of the invoices and monthly statements. An artificial intelligence system reads the invoices and monthly statements and then converts them to machine-readable text. The Creditors Clerk compares the invoices and monthly statements with the captured data before he accepts the transaction to be processed.

Creditors’ reconciliations are performed on a monthly basis by the Accountant. In order to ensure proper security and control around payments, payments are made by means of cheques.

Pixel intends to use the electronic fund transfer (“EFT”) method of the system instead of the manual payment process that is currently in use. The EFT method will place reliance on intelligent technology which will decide when payments are made. The information in the system will be integrated with the bank’s electronic fund transfer software in order to allow the bank’s system to be updated via an internet connection. If the company decides to proceed with this option, a proper feasibility study will be performed before the implementation can take place. Specialist Consultants from the bank will be contracted to write the software program which will integrate the system with the bank’s software according to the company’s specific needs. The Specialist Consultants will also be responsible for the testing of the EFT module. These Specialist Consultants are the only specialists with the necessary knowledge to perform the conversion.

The management of Pixel realised that there would be business risks related to the fact that the company would be connected to the bank and the internet. They are willing to carry the risk but are unsure of whether there are any other risks that they should consider.

South Africa experienced severe disruptions in power due to the loadshedding implemented by Eskom during the 2023 financial year. Management expressed their concern regarding information lost due to damage that occurred to the information technology (“IT”) system as a result of frequent power cuts. Live data as well as backed-up data were lost.

During one of these power outages, it was suspected that an employee hacked into the IT system and gained unauthorised access to some company information. He made unauthorised changes to the employee and supplier Masterfile such as changes to salary rates and adding his own banking details to certain supplier profiles.

The Chief Information Officer (“CIO”) immediately investigated the security breach. His proposal to appoint an external IT company to administer Pixel’s IT system was accepted and implemented by the Board.

Programme changes
Every department in Pixel has their own module that is used for that specific department, inside the software application that Pixel uses. When a user has a need to change the module in his department in order to adapt to current transactions, a meeting is held with the Information System Manager. During the meeting, they discuss the request and agree on when the change should be implemented. The Information System Manager prepares a report which is then sent to Pixel’s programmers. Program changes are made in accordance with the report by the programmers.

During the development of the proposed changes, the changes are tested by using similar data that is currently used in the programs. The results are presented to the Information System Manager after the testing. He reviews, authorise the change and it is then immediately implemented.

The Information System Manager makes backup copies before and after the changes are implemented. The programmers of Pixel implement the changes on Sundays when there are no users at the office. Users are informed via e-mail when the changes to their module have been implemented.


Refer to the information under the heading programme changes and identify the weaknesses in the internal controls of program changes in the information department of Pixel Clothing (Pty) Ltd.
(25 marks)

Explain what you understand under the term computer-assisted audit techniques (“CAATS”) and describe how computer-assisted audit techniques (“CAATS”) could be used to identify possible irregular payments made to creditors.
(15 marks)

Refer to the information under the heading payments to creditors and loadshedding, describe the general and application controls that Pixel Clothing (Pty) Ltd does not have, but should implement over the employee and supplier Masterfile to prevent incidents such as the one mentioned in the scenario.
(20 marks)

Answers to Above Questions on Corporate Governance

Answer 1: An analysis of the given case study indicates the contradiction and concerns that are evident in respect to the breaches of the Kind Code IV. According to the king code IV, it is important to follow the principles of ethical leadership, good governance and transparency. However the major concern in the given case study considering the principles of King Code IV is in relation to the appointment of James Classen as both an independent non executive director and the company secretary. This dual role might raise suspicion with respect to the working of James in an independent way.


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