Governance and Auditing 1

Governance and Auditing

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Evaluate whether the Code should apply to all UK companies
The UK government understands that high quality corporate governance is the
key to long-term company performance. In the UK, the Corporate Governance Code (the
code) since it was started in the year 1992, has been instrumental in spreading the best
corporate governance practices through the listed sectors (Zhao, 2011). The code operates on
the norm of comply or explain which sets good practices when dealing with issues such as
risk management, the role of board committees, board effectiveness and composition, and
relations with the shareholders (Tricker, 2015). However, in UK the code is applied by
companies with premium listing of equity shares. Listed companies are expected to report on
how they apply the main principles outlined by the code and confirm if they have conformed
with the code or not. The code does not apply to all companies in UK such as AIM
companies. The code should apply to all companies in the UK since according to Varma, and
Patel (2014) it is a part of a framework of regulation, legislation, and best practice standards
that are aimed at delivering high quality corporate governance that has in-built flexibility.
Evaluate the rights and responsibilities of employees and directors with regard to
whistleblowing
The public denunciation by an employee of information or acts relating to his
employer is a problem that has been dealt with on several occasions by the courts.
Commonly called whistleblowing, public exposure is defined as the act of disclosing
information on illegal practices, organizational misconduct or abuse of the system by
exposing the public to raise concerns and make things happen (Calder, 2008). However, the
employee is not obliged to report his employer. On the contrary, the one who makes rash
statements in the media often has to suffer the consequences to be imposed very severe
disciplinary action. Therefore, the authors make this fundamental freedom is not without
limits, in that the employee must act in accordance with his obligation of loyalty and
respecting the rights also owned by the employer.
According to Fernando (2009), the employee is bound not to execute his work
with diligence and prudence, to act with loyalty and not to use the confidential information it
acquires in the performance or the Occasion of his work. These duties survive for a sensible
period after termination of the contract and survive at all times when the information refers to
the reputation and privacy of others. This duty to act loyally towards his employer derives
from the principle that good faith must govern any contractual relationship. The duty of
loyalty and the principle of good faith and forcing the employee to retain his remarks in order
to avoid attacking or harming the reputation of the employer (Macey, 2008). Consequently,
the exercise of the freedom of expression of the employee protected by the Charter is marked
by certain principles enabling the employer to correct problems internally before the whole is
publicly exposed with the irreversible consequences that could arise.
Assess the corporate governance arrangements in place currently at AZ Limited.
Advise the board on improvements that should be made.
The strengths of corporate governance stem from the independence of the
Chairman of the Board, which is itself composed of independent and knowledgeable
directors. This Council gives priority to strategic planning and ensures that standards are in
place to promote ethical compliance throughout the organization and the continuous
improvement of governance practices (Monks & Minow, 2011). These forces are

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consolidated throughout the group by a culture of active governance that has always
incorporated the most advanced standards in the sector. AZ Limited has initiated a process
aimed at harmonizing standards of corporate governance within the Company. In particular,
this effort concentrated on the harmonization, to the extent possible, of rules relating to
various governance issues such as the size and composition of management bodies, the role
of committees, criteria for the independence of directors, and the remuneration policy for
directors. These standards require that an audit committee and a remuneration committee be
set up, on the boards of directors of the Company's main subsidiaries (Martin, 2006). In order
to manage these risks, the Company has to put in place an overall internal control system
designed to enable managers to be kept informed in good time and on a regular basis of
significant risks.
This system should also enable managers to have the information and tools
necessary for the proper analysis and management of these risks, to ensure the accuracy and
relevance of the Company's financial statements and the information communicated to the
market fostering good governance which when anchored in daily practice establishes a
climate of trust in the company and guarantees a management oriented towards a sustainable
performance (Rezaee, 2008). Good corporate governance is a form of steering flexible,
effective, ethical, accountable and transparent manner in which the interacts harmoniously
with its surroundings. One of the obligations that Ms Noye has towards the stakeholders is to
ensure good governance. The implementation of governance in the company ensures
effective and sustainable process of value creation in agreement with all parties involved, and
compliance with ethical principles, internal rules, and legal regulations (Willekens, Sercu, &
Desender, 2005). Strong and effective corporate governance practices have been a priority of
the Board since the inception of the Corporation. The directors of the Company undertake to
maintain the highest standards of corporate governance to ensure the proper functioning of
the Company and effectively protect the interests of all its employees and shareholders.
Advise the FD on the steps she should take in response to the letter
In response to the letter, the financial director can carry out an audit of the company.
Basically, quality audit is a method of risk assessment for a particular product or activity, through
a detailed review of its implementation process. It emphases on the organization and working
methods and should lead to proposals to eliminate dysfunctions and proven risks. We say "known
risks" because the most common mistake that is to say the highlight of significant risks, which
leads to taking unnecessary precautions (Varma & Patel, 2014). To avoid this, it is necessary to
begin by clearly identifying the need for the activity and the essential risks to be avoided. There
are different types of quality audit but for the case of AZ limited, internal audit is the most
appropriate. The role of the internal auditor is to verify the accuracy of information,
organizational or financial, provided to company executives (Cascarino & Van, 2007). Through
the audit, they will be able to define new objectives or adopt new working methods. Thus, the
responsibility of the internal auditor is traditionally limited to the control and regulation. Yet in
recent years, this responsibility has evolved to meet new business needs. They expect the auditor
to add value to his mission by providing advice, anticipating risks and understanding the
strategic issues facing the auditor. Internal auditors have developed a good practice in the
performance of their work: participatory audit the auditors. Shall actively involve the persons
concerned at each stage of the audit engagement and obtain their validation on the intermediate

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and final results of the analysis. An audit engagement of AZ company can take place in four
phases:
1. Preparation phase
The objective of this phase is to apprehend the subject to be audited (entity, process, and
thematic) and to set precise audit objectives. The auditors take cognizance of the applicable
guidelines (working procedures, budget, regulations, good practices, and control environment)
relating to the theme of the mission.
2. Implementation phase
The auditors will test the audit objectives defined in the preparation phase. The tests can
be of various kinds: observations, analysis of databases, physical inventories, interviews, and
sending of questionnaires.
3. Conclusion of Phase
The auditors organize the results of their tests in a structured manner in a report. They
issue an opinion to the management concerning the degree of control of the audited operations
and draw up recommendations in order to optimize the processes.
4. Follow-up phase
The auditors monitor the implementation of actions developed on the basis of audit
recommendations.
To ensure the relevance of internal audits the FD requires good preparation,
implementation of good practices and the creation of a favorable climate for stakeholders. The
audit must be conducted in a climate of trust. To establish this relationship of trust the FD must
be both humble and open and implement a number of good practices. It is then that other
qualities must be developed: relevance and exhaustiveness of questioning.

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