Study guide_AUI4862_2018_Final.pdf - Part B Corporate...

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1 Part B: Corporate Governance Topic 1: Corporate Governance and Ethics in different Organisational Environments Learning unit 1.1: Corporate Governance and Ethics and the Implications thereof on the Management of an Organisation INTRODUCTION AND PURPOSE OF THE TOPIC Corporate governance, is an issue of global importance. There have been significant corporate governance and regulatory developments, locally and internationally, since King III was issued in 2009, such as the enactment of the Companies Act 71 of 2008. Non-profit organisations, private companies and entities in the public sector have experienced challenges in interpreting and adapting King III to their particular circumstances. To this end, King IV is more accessible to all types of entities across sectors. King IV contains more succinct and fewer principles for easier interpretation and implementation. Sector supplements are also published alongside King IV to aid in its interpretation by organisations in different sectors. Knell (2006) states that c orporate governance is the regulating influence applied to the affairs of a company to maintain good order and apply predetermined standards . The origin of corporate governance goes back as far as 500BC. Moral government, led by virtue and uniformity with rules of propriety, was advocated by The Confucian Analects in China in 31BC. Roman citizens invested in business enterprises as shareholders. Modern corporate governance really started during the 17th century when the East India Company introduce d a “Co urt of Directo rs” sep arating ownership and control. Corporate governance can therefore be described as the practices and processes by which organisations are directed and controlled. Good corporate governance normally include the following: An ongoing monitoring system of checks and balances to ensure that there is a balance of power within a company; A system of internal control to ensure compliance to all legal and regulatory obligations; A proper risk management system and processes to ensure the sustainability of a company; The development and implementation of practices to keep the company accountable to all stakeholders, specifically the broader society in which it operates. In the South African context the most important and comprehensive guidelines regarding corporate governance is contained in the King IV Report on Governance for South Africa 2016 (King IV) as well as specific legislation, i.e. the Public Finance Management Act (PFMA); the Municipal Finance Management Act (MFMA) the Companies Act and the JSE listing requirements . For you as a postgraduate student in internal auditing it is necessary to understand the principles underlying corporate governance and all the elements constituting good governance within organisations. Based on this knowledge you should be able to assess and evaluate the corporate governance processes of an organisation and advise management on the best practices regarding corporate governance for a specific organisational environment. This topic will focus specifically on the interpretation and analysis of corporate governance models in
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