Grade 12 · CAPS

Grade 12 Corporate Governance and Auditing

Accounting practice questions and a worked example

Grade 12 corporate governance and auditing covers audit reports, the people who run and check a company, and ethics. The questions here ask you to explain the roles of the independent external auditor, the internal auditor and the directors, to identify and explain a qualified or unqualified audit report, and to give advice on issues such as whistle-blowing, conflict of interest and the repurchase of shares. They come from the NSC Paper 1 for November 2023, 2024 and 2025, each with the answer from the marking guideline.

Worked example

QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION GUARDIAN LTD AND NAVARRA LTD The information relates to TWO companies. 3.6 Directorship: (a) 'The CFO (chief financial officer) has a significant influence on the success of a company.' Explain why you would agree with this statement.

Answer & explanation

• He must be an expert in Accounting and financial management tasked to safeguard the investment by stakeholders. • As head of finance, he is responsible for good financial management / expected to advise the Board / lead by example / display good corporate governance (ethics & professionalism). • Should be aware of the performance / financial position / available financial resources and create structure for sound checks and balances (controls) • He should not place the business at risk / focus on the growth and sustainability of the company / he must report regularly / transparent.
1. The CFO is responsible for managing the company's financial resources effectively. This involves safeguarding stakeholder investments and ensuring financial stability. 2. As the head of finance, the CFO provides crucial advice to the Board of Directors. This guidance helps in making informed decisions that align with the company's financial goals. 3. The CFO must demonstrate good corporate governance by adhering to ethical and professional standards. This includes transparency and regular reporting. 4. By being aware of the company's financial performance and resources, the CFO can implement checks and balances to prevent risks and promote sustainable growth. 5. Overall, the CFO's expertise and leadership in financial management significantly influence the company's success.

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Corporate Governance and Auditing

Question 1 of 3

QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION GUARDIAN LTD AND NAVARRA LTD The information relates to TWO companies. 3.1 Choose an explanation from COLUMN B that matches the individual or term in COLUMN A. Write only the letter (A–D) next to the question numbers (3.1.1 to 3.1.3) in the ANSWER BOOK. 3.1.1 Director
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More practice questions

Explore additional Grade 12 Corporate Governance and Auditing questions.

  • 2
    QUESTION 3: INTERPRETATION OF FINANCIAL INFORMATION GUARDIAN LTD AND NAVARRA LTD The information relates to TWO companies. 3.6 Directorship: (c) The CEO (chief executive officer) of Guardian Ltd intends to offer the vacant position of CFO to Nathan Crewe in March 2023. Explain ONE point of advice to the CEO.
  • 3
    QUESTION 4: CORPORATE GOVERNANCE You are provided with an article relating to an internal auditor who lost her job. Use the information presented and your knowledge on companies to answer the questions. 4.1 Auditing: (a) Explain ONE duty of an internal auditor.
  • 4
    QUESTION 4: CORPORATE GOVERNANCE You are provided with an article relating to an internal auditor who lost her job. Use the information presented and your knowledge on companies to answer the questions. 4.1 Auditing: (b) Give ONE reason why the accounting records of a listed company must be audited by an external auditor.
  • 5
    QUESTION 4: CORPORATE GOVERNANCE You are provided with an article relating to an internal auditor who lost her job. Use the information presented and your knowledge on companies to answer the questions. 4.2 Whistle-blowers (Informants): What would you say to Sally regarding her statement in the first paragraph about whistle-blowers not being willing to take a stand against corruption? Explain ONE point. INFORMATION: MONACO LTD: A WHISTLE-BLOWER'S STORY Eight months ago, the internal auditor of Monaco Ltd, Sally Bolden, was shocked to learn that she had been fired from her well-paid position in the company. She had exposed her bosses, new board chairperson, Glen Turner, and chief financial officer (CFO), Rachel Donovan, for irregular payments of R3 500 million to companies linked to them. Sally remains unemployed and is battling to support her family. She and other whistle-blowers now regret taking a stand against corruption. Sally's introduction of new internal control measures and her role in replacing non-performing suppliers and service providers with competent ones had greatly benefitted the company. A loss of R500 million in 2021 had been converted into a profit of R280 million in 2022. However, Sally's problems started when a new board of directors, chaired by Turner, was appointed. When asked to comment, Turner said that Sally Bolden's employment had been terminated for bringing the company into disrepute. He added that the board would conduct an investigation into identifying the other whistle-blowers. In recent developments the external auditors of Monaco Ltd found that a further amount of R200 million had been paid to other individuals linked to Turner and Donovan through irregular procurement deals and that they (Turner and Donovan) had allegedly manipulated company policies to appoint their friends to the new board.

Common mistakes

  • Mixing up the audit reports. An unqualified report means the financial statements are fairly presented; a qualified report means they are fairly presented except for the matters mentioned; a disclaimer means no opinion could be expressed.
  • Confusing the two auditors. The internal auditor is employed by the company and looks after internal control; the independent external auditor gives an opinion on the financial statements to the shareholders.
  • Giving the same point twice in different words. When a question asks for TWO points, each point must be a different idea.

More Grade 12 Accounting topics

Aligned to CAPS Grade 12 Accounting — Corporate Governance and Auditing. Curriculum source: CAPS for the FET Phase, Department of Basic Education.

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