MCCARTHY
You are the audit manager of Wolves & Co, a medium sized firm of accountants. Your firm has just been asked for assistance from McCarthy & Co, a firm of accountants in an adjacent country. This country has just implemented the internationally recognised codes on corporate governance and McCarthy & Co has a number of clients where the codes are not being followed. One example of this, from ADAR, a listed company, is shown below. As your country already has appropriate corporate governance codes in place, McCarthy & Co have asked for your advice regarding the changes necessary in ADAR to achieve appropriate compliance with corporate governance codes.
Extract from financial statements regarding corporate governance
Mr Williams is the Chief Executive Officer and board chairman of ADAR. He appoints and maintains a board of five executive and two non-executive directors. While the board sets performance targets for the senior managers in the company, no formal targets or review of board policies is carried out. Board salaries are therefore set and paid by Mr Williams based on his assessment of all the board members, including himself, and not their actual performance.
Internal controls in the company are monitored by the senior accountant, although detailed review is assumed to be carried out by the external auditors; ADAR does not have an internal audit department.
Annual financial statements are produced, providing detailed information on past performance.