Case Study:
Governance and Auditing
The coursework for this module will comprise of two components
Coursework One - Governance
Submission requirements:
Your submission should made in one word processed document, and respond to the following Requirements:
Requirement 1 (450 words).
With explicit reference to The UK Code:
a) Evaluate whether the Code should apply to all UK companies
b) Evaluate the rights and responsibilities of employees and directors with regard to whistleblowing
Requirement 2 (maximum 800 words).
AlphaZeta Limited
Ms Noye is the ambitious chairman and chief executive ofAlphaZeta (AZ), a rapidly growing privatesoftware development company. She is the heiress of a recently deceased South American mining tycoon.
The board of AZ has 6 other directors. Three directors are longstanding executives, two directors have been appointed within the last 2 years and one has joined recently, following publication of the company's annual financial results. The most recent results have shown remarkable and continued growth in AZ's turnover although profitability continues to be weighed down by significant investment in product development.
Directors are carefully selected based on their loyalty to the Noye family or connections through old school or university acquaintances.
The company has to date primarily financed its operations through the Noye estate and from its directors.
Ms Noye(like her father)believes that directors are motivated only where they have invested directly in the business.Every director has invested in the company through the purchase of shares(minimum investment £100, 000). As well as being a shareholder in the company each director hasexecutive responsibilities in the business. 22% of the company's shares are held outside of the board.
The group has two offices, in London and Paris, and employs 251 people. A core software development team of 80 is based in France whilst the sales and operational teams are based in London. MsNoyeis a serial entrepreneur and has a number of other business interests. She spends a minimum of 8 days per month focused on AZ. The Finance Director (FD), Chris Taylor, is the civil partner of Ms Noye.
Cash flow projections by the FD indicate that the group will require significant additional finance if it is to complete development of its latest offering of software and be able to takeit to market. Given its robust financial performance and strong track recordto date, the board is confident in the saleability of its latest products and is considering a listing on the London Stock Exchange (ideally within the next two years) in order to access capital for current and future needs.
The boardrecently met withexternal professionals, retained to adviseon the flotation. In that meeting, the board was informed of the need forquoted companies to comply additionalcorporate governance requirements. Chris Taylor took the opportunity toseek advice on the contents of an anonymous letter addressed to herself, most likely received from a disgruntled employee. It alleged that there were material discrepancies in the financial data published externally by the company.
From the perspective of an external professional advisor, submit a report to the directors setting out your response to the following aspects.
a) Assess the corporate governance arrangements in place currently at AZ Limited. Advise the board on improvements that should be made
b) Advise the FD on the stepsshe should take in response to the letter