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UK Corporate Governance Code Audit

Expansive Industries plc's board structure and decision-making process does not fully comply with the UK Corporate Governance Code in several ways: 1) The executive directors hold frequent informal meetings without non-executives where decisions are made and then rubber-stamped at formal monthly meetings. 2) There is no in-house internal audit function. 3) While the Financial Director claims these issues are just "technical infringements" and improve decision-making, not ensuring proper involvement and discussion goes against the principles of the Code.

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Leslie Jean Cueme
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247 views2 pages

UK Corporate Governance Code Audit

Expansive Industries plc's board structure and decision-making process does not fully comply with the UK Corporate Governance Code in several ways: 1) The executive directors hold frequent informal meetings without non-executives where decisions are made and then rubber-stamped at formal monthly meetings. 2) There is no in-house internal audit function. 3) While the Financial Director claims these issues are just "technical infringements" and improve decision-making, not ensuring proper involvement and discussion goes against the principles of the Code.

Uploaded by

Leslie Jean Cueme
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
  • Case Study Questions and Analysis: Presents detailed questions regarding the corporate governance and decision-making issues within the company, requiring analytical answers based on the presented case study.
  • Overview of the Case Study: Introduces the case study, providing background information about the company and the roles of key individuals involved.

Case study 

You are an audit manager for a firm of accountants and you have been put in
charge of the audit of Expansive Industries plc. You have been given the background
briefing note so are aware of broadly what the company does, its directors and board
structure and a summary of its financial performance. You are just beginning to
understand and document audit matters and as part of your review you have been
speaking to Financial Director Georgia Tickett and Head of Legal Mike Wong. Mike
Wong is worried about compliance with the UK Corporate Governance Code and the
possible effect of any non-compliance on the auditors’ report and possibly the share
price. Georgia Tickett is of the view that whilst there may be some what she calls
‘technical infringements’ of the Code, these are easily explained as being for
commercial reasons. She says she feels that a streamlined board makes it more
responsive and ‘hands on’ and less of a discussion forum. She explained that they
often have informal meetings between the four executive directors without inviting the
non-executives. They make decisions at those meetings, which are then rubber-
stamped at the monthly formal board meetings. She is also not worried about not
having an in-house internal audit function. She says the accountants are perfectly
adequate and are brought in when needed to investigate any particular issues the
board or her department require. 
Discuss:
1. What is the UK Corporate Governance Code, where did it come from and why
should companies comply with it? 
 The UK Corporate Governance Code (“the Code”) sets out the Principles the
board of directors should apply in order to promote the purpose, values and
future success of the company. The Code sets out expected standards of good
practice in relation to issues such as board leadership and company purpose,
division of responsibilities, composition, succession and evaluation, audit, risk
and internal control, and remuneration.  Companies  should comply it to make
certain that the company's mission, values, and strategy are in line with the
corporate culture as well as employee policies and practices. It should set up a
system of cautious and effective controls, as well as ensuring good
communication with shareholders and stakeholders.
2. In what ways does Expansive not comply with it? 
 As stated in the case, the board of executive directors hold frequent informal
meetings without inviting non-executives where they make decisions that are
then approved automatically without proper consideration at the monthly
formal board meetings and there are fewer discussion forums where the board
of directors are responsible for making proper business decisions, but in this
case they make decisions that are rubber-stamped. Georgia Tickett also claimed
that there may be certain technical infractions of the code, but they are
unconcerned about the lack of an internal sudit function. These activities, as well
as the lack of an in-house internal audit function, are in violation of the UK
Corporate Governance Code.
3. Does it matter-is Georgia Tickett right about it improving decision-making?
 No, because all members of the board of directors, whether executives or non-
executives, as well as shareholders, must be involved in making company
decisions. They must not abuse the power and authority that has been granted
to them. Because if they do not invite the individuals mentioned above, it
demonstrates that they are only interested in their own interests and are
abusing their power.

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