Principles

Fundamental principles: integrity, objectivity, professional competence & due care, confidentiality & personal
behaviour

Always: 1 – BD (Board of Directors or 2 – Govern the ethics of the

Approve the policy Governing Body) should lead organisation:
Implement it ethically and effectively: -ethical direction, code & policy,
Oversee the execution -integrity, competence, dissemination, management
Audit the process responsibility, accountability, involvement, oversight (whistle-
Disclose the findings (report) fairness blowers), disclosure
3 – Ensure the organisation is, &is 4 – BD should appreciate that the 5 – BD should ensure that reports
seen to be, a responsible corporate organisation’s core purpose is issued by the organisation enable
citizen: inseparable from the value stakeholder knowledge:
-direction, oversee, monitor, creation process: -set the direction, approving
disclose -iterate the direction, delegation & reporting frameworks, oversee that
approving reports are compliant, approve
bases for materiality
6 – BD should serve as the focal 7 – BD should comprise of an 8 – BD should ensure
point & custodian for corporate appropriate balance of knowledge, arrangements for delegation
governance: skills, diversity, independence and within its own structures:
-exercise its leadership role: experience to fulfil governance -sub-committee composition (audit,
approve protocol, gain professional responsibility, objectively and social, remuneration, etc)
advice, assist non-executives effectively:
-dependent/independent,
exec/non-exec
9 – BD should ensure that the 10 – GB should ensure that 11 – BD should govern risk in a way
evaluation of its own performance appointment & delegation to that supports the organisation:
support continued improvement: management clarify authority & -approve policies, evaluate & agree
-external evaluation every two responsibility: on risk types, risk responses
years -CEO appointment and role, still
responsible even if delegated
12 – BD should govern tech & IT in 13 – BD should govern compliance 14 – BD should ensure that the
a way that supports the with particular laws in a way that organisation remunerates fairly,
organisation: supports the organisation: responsibly & transparently:
-approve IT policy, appoint chief of -approve policy, delegate -social equity & remuneration
IT/Tech, IT audit implementation, oversee committee, approve policy
implementation, compliance audit (direction & approach; attract,
motivate & reward staff; compare
highest and lowest payments),
retention benefits, commission &
basic salary, signing-on bonus,
performance bonuses
15 – BD should ensure that 16- BD should adopt a stakeholder 17 – BD of institutional investors
assurance services & functions inclusive approach that balances in organisation should ensure
enable effective control the best interest of the responsible investment policies of
environment that support the organisation itself & invested companies
integrity of the organisation
 Board
Governing Audit Remuneration Nomination Risk Social &
Body/Board Committee Committee Committee Committee Ethics
of Directors Committee
Independent Independent Independent Independent Independent Chair of BD
Non-exec Non-exec Non-exec Non-exec Non-exec may be on
Chair

Not CEO (unless Chair of BD not Chair of BD may Chair of BD Chair of BD committee &
3 years passed on sub- be on committee may be on may be on cannot chair
since vacating committee & cannot chair it committee & committee & it
position) chair it chair it
Majority non- All independent All non-exec All non-exec Exec & Exec &
exec (majority non-exec (majority (majority (majority) (majority)
must be Min. 3 members independent) independent) non-exec non-exec
Membership

independent) Adequate Min. 3 members Min. 3 Min. 3 Min. 3

Min. of 2 exec finance members members members
directors (CEO & knowledge At least 3
finance) exec
Rotate one Overlap of
member every 3 risk & audit
years committee
members
Charter setting Oversee Assist BD in Nominate, Plan & Oversight &
out integrated setting & check & monitor the reporting of
responsibilities reporting administering appointment risk organisational
King IV Principles Oversee internal remuneration members of management ethics &
Functions

& compliance audit policies the BD process sustainable

Recommend & Succession through development
support external planning consideration
auditor Evaluation of of the risk
Combined performance policy
assurance of BD
applied
At least 4 times a At least twice a At least twice
Meetings

year year without a year

management
Internal &
external audit
once a year
 Internal Controls
Revenue & Acquisitions Inventory & Payroll & Finance &
Receipts & Payments Production Personnel Investment
Accounts Accounts payable Inventory Bank & Cash Share capital
Statement
Fin. Pos.

receivable Accounts payable Reserves

Cash & cash Long-term loans
equivalents PPE
Investments

Credit sales Credit purchases Cost of sales Wages Dividends paid

Comp. Inc.
Statement

Sales returns Cash purchases Salaries Profit or loss

Discount allowed Purchase returns PAYE Interest paid
Credit losses Discount received UIF Profit/loss on sale
Interest received Interest on late Medical aid of asset
Cash sales payments Profit/loss on
All receipts Expenses investment
Evaluate credit Identifying & using Warehousing Recruiting/ Frequency of
worthiness approved suppliers Production counselling/ transactions
Receiving Initiate purchase Comparing theory negotiating Size of
customer orders Accept items & to actual stock Record of transactions
Process the order acknowledge employees Legal & regulatory
Notify the receipt Appointments & requirements
customer (send Record purchases dismissals Non-routine
Functions

invoices) Allocate to correct Accurate controls

Create records account & supplier recording of time
Collecting Post to creditors & worked
payment & general ledger Amounts paid to
recording receipt Confirm amount to employees
Returns/credit be paid calculated
note/discount Initiate payment Paid via EFT/Cash
Amounts
recorded in
salaries & wages
correctly
Credit application Approved supplier Production Employment Planning – capex
form & price schedule/plan contracts budgets & budget
Price lists & Purchase Job cards Clock cards reconciliation
discounts requisition Physical access Batch control Segregation of
Customer order Purchase order controls sheets duties
Back order note Goods received Material Wage packets Authorisation at
Internal sales note requisition/issue made by two highest level
Controls

order Supplier delivery note employees Internal audit

Picking Slip note Transfer to Lock away monitoring
Despatch slip Supplier invoice finished goods payments till Implementation of
Delivery note Supplier statement note payday competent &
Invoicing Remittance advices Proper planning & Leave forms capable staff
Goods returned prep Wage/salary
voucher Count sheets reconciliation
Credit note Counting methods Monthly
Inventory scheduling of
adjustment forms payments
 5 components of internal control:
Control Risk Assessment Information Control Activities Monitoring of
Environment Systems Controls
Integrity & ethics Define objectives Valid, accurate & Actions & Assessment over
Competence Identify & assess complete procedures time
Management’s risks Procedures & supported by Assessment at all
philosophy & Respond to risk records for policies levels
operating style transactions Preventive, Independent
Organizational Related accounting corrective & assessments
structure records detective Remedial actions
Assigning Capturing events Type: isolation of
responsibility & other than responsibilities
authority transactions
HR policies

General Controls

• Control environment
• System development & implementation controls
• Access control
• Continuity of operations
• System software & operation controls
• Documentation

Application Controls

• Segregation of duties
• Isolation of responsibility
• Approval & authorisation
• Custody
• Access controls
• Comparison & reconciliation
• Performance reviews
 Business Cycle
The revenue
& receipt
cycle

The finance The

& acquisitions
investment & payments
cycle The cycle
accounting
system

The
The payroll
inventory &
& personnel
production
cycle
cycle

Assertions
Transactions & Events Account Balances Presentation & Disclosure
Occurrence – have actually occurred Existence – assets, liabilities and Occurrence, rights & obligations –
and pertain to the entity equities exist have occurred and pertain to entity
Completeness – anything that Completeness – all recorded Completeness – all has been
should have been recorded is included
recorded
Accuracy – recorded appropriately Rights & obligations – entity holds Classification & understandability –
& controls rights to assets is appropriately described and
disclosures are clearly expressed
Cut-off – correct accounting period Valuation & allocation – included at Accuracy & valuation – disclosed
appropriate amounts and valuation fairly & at appropriate amounts
or allocation adjustments are
recorded
Classification – recorded in the
correct accounts
 FAQs
Questions that have been repeatedly asked in MCQs between 2018-
2020
The key aspects of the King III Report revolve around …
Leadership, sustainability, and corporate citizenship.
Which companies are required by the Companies Act to have an audit committee?
State-owned, Public companies & Public companies that is a subsidiary of a holding company
Application of the King IV Report is based on …
Apply and explain.

Fees for non-executive directors for their services as directors must be submitted for approval by:
Special resolution by the shareholders within two years preceding the payment.

Which ONE of the following alternatives will not lead to the financial director being held liable in
terms of the Companies Act 71 of 2008?
Failing to inform the board of all environmental law changes

Which of the following parties are responsible for the internal control process of an entity?
Management, the board of directors and the employees.

Internal controls can be defined as the process designed, implemented, and maintained to provide
reasonable assurance about the achievement of an entity’s objectives with regard to …
The effectiveness and efficiency of the entity’s operations; its compliance with the applicable laws
and regulations; and the reliability of its financial reporting.

Which ONE of the following alternatives is not an input application control to ensure accuracy in a
computerised environment?
Access Control

In a governance context, stakeholders are considered to be …

Any group that could affect the company’s financial performance or be affected by the company’s
financial performance.

Which ONE of the following alternatives is not a factor the external auditor should consider when
assessing whether a risk is a significant risk?
Nature, timing and extent of audit procedures.

Which ONE of the following is not an example of physical IT controls?

Only the finance department’s top personnel have valid usernames and passwords to access the
bank account application.

Which ONE of the following is not a limitation of internal controls?

Tendency of directing internal controls at non-routine transactions rather than routine
transactions.

Which ONE of the following is not part of the risk assessment process, as one of the components
of internal control?
Identifying and assessing audit risks.

Which ONE of the following is not an example of the isolation of responsibilities?

If a mistake was made, the cashier will log the error, and the manager will authorise the
correction.

As part of systems development, which ONE of the following alternatives is not an advantage of
packaged software purchased?
Changes cannot be made by a purchaser of the software.

Which ONE of the following is not a component of internal controls?

Segregation of duties.

The financial manager ensures that all sales for the financial year are recorded in order to satisfy
himself/herself that …
The completeness assertion has been fulfilled and to ensure that revenue is not materially
misstated in the financial records of the company.

According to the King IV Report, the governing body should lead ethically and effectively (Principle
1). Which ONE of the following is not one of the characteristics of ethical leadership as described
by King IV?
Confidentiality