CODeL ASSIGNMENT COVER

2020 ACADEMIC YEAR

Student Name Matias Ndeshipanda Nghiludile
Student number 201711768
Email Address [email protected]
Cell/Tel no 0816238388
CODeL Centre Windhoek Centre

Course/Module Name Course/Module

Code
Financial Reporting and Accounting Ethics AFR3872

Assignment no
(e.g. 1, 2 or 3, etc.).
2
Question 1

According to Velasquez (2014) an example of store of value is currency. If the value of currency
becomes unpredictable, such as in times of hyperinflation, investors and consumers will shift to
alternative store of value such gold, silver, precious stones and real estate. According to the
scenario CK investment (pty) uses the following inputs; water from a nearby lake, alcohol and
fragrance to make the final output which is sanitiser and exchange it with money (N$) to the final
user (customer). Value creation process can be achieved through a management process of
defining, creating, delivering and sustaining value and it is defined by customers, investors and
other stakeholders created through the organisations purpose, strategy and business model taking
into account all resources (ingredients that were used by CK), capitals (start-up fund N$200 000)
and relationships in an integrated way.

Question 2

Rossouw (2012) identified three (3) types of ethical issues

 Systemic- ethical questions about the social, political, legal, or economic systems within
which companies operate.
 Corporate- ethical questions about a particular corporation and its policies, culture,
climate, impact, or actions
 Individual- ethical questions about a particular individual’s decisions, behaviour or
character.

According to the scenario the ethical issues is based on individuals in terms of decision making
like what to produce, when and in what quantities, who to hire to carry out the production process
(CK employs 500 men to produce, package and sell the sanitiser) and the character of how the
sanitiser should be, as it was stated that CK is known to make sanitisers that leave ones skin clean,
smelling good and moisturised.
 Question 3

They are morally responsible for what they do and ethical qualities apply in a primary sense to
them, corporations have ethical qualities only in a derivative sense and it will ensure maximum
social benefit so business ethics is not needed.

However, we will look at 3 views;

1. Corporations, like people, act intentionally and have moral rights and obligations and are
morally responsible.
2. It makes no sense to attribute ethical qualities to corporations since they are not like people
but more like machines; only humans can have ethical qualities.
3. Humans carry out the corporation’s actions so they are morally responsible for what they
do and ethical qualities apply in a primary sense to them; corporations have ethical
qualities only in a derivative sense.

Therefore, ethical qualities attribute to corporations because corporate acts originates from choices
of individuals which are seen as primary bearers of moral duty and responsibility. CK investment
allocated responsibilities to each individuals who are running and managing the company and CK
was held responsible ineffective sanitiser that was not strong enough to clean or sanitise skin.

Question 4

Since shareholders are always part and parcel of stakeholders in a corporation but stakeholders are
not always shareholders. A shareholder owns part of a public company through shares of stock,
while a stakeholder has an interest in the performance of a company for reasons other than stock
performance or appreciation. Therefore CK investment adopted a shareholder approach since Mr
Charles holds 100% shareholding.
 Question 5

There are three ethical evaluations namely:

1. Independent- management must not impose restrictions on the scope, content,

comments and recommendations of evaluation reports. Evaluations must be free of
conflict of interest
2. Transparent- meaningful consultant with stakeholders is essential for the credibility
and utility of the evaluation
3. Impartial- removing bias and maximising objectivity are critical for the credibility of
the evaluation and its contribution to knowledge.

Ethical evaluation should not reflect personal or sectoral interest. Evaluations must have
professional integrity, respect the rights of institutions and individuals to provide information.
Therefore CK investment use impartial ethical evaluation because the CEO is output driven and is
known to fire salesperson who do not sell more than N$10 000 worth of sanitiser per month. They
use this method also because the CEO and all executives receive annual bonuses based on the
profit before tax of the company.

Question 6

CK investment operates in a market economy.

This is an economic system whereby the societies or governments organise and distribute the
available resources (water, alcohol and fragrance) , services and goods across a geographic region
or country. In the scenario it was stated that the government distribute the sanitiser to schools and
hospitals. Market economy regulates factors of production, including capital, labour, physical
resources and entrepreneurs.
 Question 7

CK investment operates in a monopolistic competition.

Demand curve

Question 8

Jackson (2012) states that operating sustainably is a method of evaluating whether a business can
maintain existing practices without placing future resources at risk. It also refers to a company’s
ability to use natural resources at its current pace without depleting the resources it relies upon.
Therefore, CK investment has no sustainability or future for companies that ravage their
environments or exploit their constituency since CK had been selling the government ineffective
sanitizer that was not strong enough to cleanse or sanitize skin. As a result, the virus was able to
easily spread as people would go about day to day activities under the assumption that they had
effectively sanitised their hands.
 Question 9

A code of ethics and professional conduct outlines the ethical principles that govern decisions and
behavior at a company or organization. They give general outlines of how employees should
behave, as well as specific guidance for handling issues like harassment, safety and conflicts of
interests.

The fundamental code of ethics

Integrity- it is being straightforward, honesty, truthful, fair in business and professional

relationships

Objectivity- it is being free of bias, free of conflict of interest, free of undue influence in
professional judgement.

Professional competence and due care- having the professional knowledge or skill. This is
obtained and maintained by obtaining the appropriate education, where knowledge is obtained and
practical experience where the skill is sharpened. To act carefully and thoroughly, providing
training and supervision to trainees/staff to ensure errors are prevented.

Confidentiality- should not disclose confidential client information, unless specific authority was
obtained from the client or employer and when we have legal or professional obligation to do so.

Professional behavior- the duty to comply with laws and regulations, not to bring the profession
into disrepute and marketing or promotion must be done in an honest and truthful manner.

As a future accountancy professionals, you will not only act in the interest of your employer and
clients, but also be required to act in the best interest of the public. Therefore CF investment need
to obtain a thorough knowledge of the professional ethical standards expected from them.
 Question 10

Corporate governance refers to the system whereby companies are controlled or directed towards
being good corporate citizens. This means the broad umbrella of corporate governance will thus
include, amongst others the corporate governance principles as recommended by king III and all
laws and regulations of the country in which a specific business operates or do business for
example a financial institution listed on the stock exchange.

Good corporate governance is in essence about effective leadership, characterized by sound ethical
values of responsibility, accountability, fairness and transparency. It also involves the balancing
of interests of many stakeholders.

The governing body (board or directors) is expected to lead effectively and ethically which is not
the case die to the following: The board of directors of CK investments are not ethical as their
integrity is questionable. For them to resolve to make low quality sanitizers means they have poor
integrity.

The board bribed a government official with a family trip fully catered for by CK Investments in
order to be awarded the tender of the supplying government with sanitizers. The government
official’s trip expenses were deducted in terms of S11a of the income tax act. This is wrong as
such expenses are personal and they are not in the production of income as required by the income
tax act.

The composition of the board of directors is not in compliance with King 4 code of corporate
governance in terms of King 4, the board should comprise of non-executive directors most of
which should be independent, this is not the case as the board comprises of Lazareth Shilongo,
Sydney Haufiku and Wilhelm Gariseb who are all not independent as they work for CK
Investments.

The board should promote diversity in its membership with regards to gender, age, field of
knowledge etc. This principle is not complied to as all the members of the board are men, there is
no female to promote gender diversity.The governing body should elect an independent non-
executive member as chair of the board. The chairperson of the board in this case in Mr Lazareth
Shilongo (company CEO), this is not allowed since he is not an independent non-executive
director.

The board should appoint an independent non-executive member as lead chair to lead in the
absence of the chair. CK Investments board does not have a lead chair. The board is expected to
comprise of a sufficient number of members that qualify to serve the committees of the governing
body. The board comprising only of three members appears to be an inadequate number to serve
on different committees

The board should ensure that its arrangement for delegation within its structures promotes effective
discharge of its duties. As such various committees should be formed. CK Investment board only
has one committee (audit committee), there is no remuneration, risk, nominations social and ethics
committees established. The Audit committee should be chaired by an independent non-executive
director. The chairperson of the Audit committee is Sydney Haufiku who is a sales executive of
CK, hence this principle is not adhered to as Sydney is not an independent non-executive director
as required.

The governing body is required to appoint a Chief Audit Executive (CAE) to oversee the internal
audit function. CK investment does not have a CAE. The audit committee should meet annually
with the internal audit function and the external auditors without the presence of management.
This principle was not adhered to as the audit committee did not have any meeting during the year.