 |
FOE601Y-FUNDAMENTAL OF ETHICS AND ASSURANCE-2ND OPP-DEC 2025 |
|
|
1 Page 1 |
▲back to top |
nAm I Bl A un IVERSITY
OF SCIEnCE Ano TECHndLOGY
FACULTY OF COMMERCE, HUMAN SCIENCES AND EDUCATION
DEPARTMENT OF ECONOMICS, ACCOUNTING AND FINANCE
QUALIFICATION: BACHELOR OF ACCOUNTING (CHARTERED ACCOUNTANCY)
QUALIFICATION CODE: 07 BACC
COURSE CODE: FOE601 Y
DATE: DECEMBER 2025
LEVEL: 6
COURSE NAME: FUNDAMENTALS OF ETHICS AND
ASSURANCE
PAPER: THEORY AND PRACTICAL
TOTAL DURATION:
MARKS: 100
150 MINUTES (2 HOURS, 30 MINUTES)
SECOND FINAL OPPORTUNITY EXAMINATION QUESTION PAPER
EXAMINER
MS. G. KAFULA
MODERATOR: MS. M. Cloete
INSTRUCTIONS
1. Answer ALL questions in blue or black ink only.
2. This paper consists of 1 question.
3. Write clearly and neatly.
4. Start each required on a new page and number the answers clearly.
5. No programmable calculators are allowed. You may make use of an unprogrammable
calculator during the assessment.
6. Questions relating to the paper may be raised in the initial 30 minutes after the start
of the paper. Thereafter, candidates must use their initiative to deal with any perceived
error or ambiguities & any assumption made by the candidate should be clearly stated.
7. Any resemblance to any people, places, organisations, or anything are purely
coincidental.
THIS QUESTION PAPER CONSISTS OF 9 PAGES (Including this front page)
1
|
|
2 Page 2 |
▲back to top |
QUESTION 1
l00MARKS
You are an audit manager at Hamilton & Myers Auditors Inc. ["HMA"], a firm of registered
auditors in South Africa.
In February 2024, Ms Lerato Dlamini, the audit partner at HMA, was approached by a
prospective new client, UrbanSpaces Ltd ["UrbanSpaces"], and requested to conduct the
companies external audit for the financial year ended 30 April 2024. This includes all
companies in the group, with UrbanSpaces as the holding company as well as other
subsidiaries in the group (see more information in working paper A-3 below). Ms Lerato
Dlamini immediately accepted the audit engagement as this is a large client to add to her
portfolio.
In mid-April 2024, as part of the planning procedures performed to understand UrbanSpaces
and its business environment, the following information and working papers were prepared
and are available for your review:
Document
Reference
Understanding the entity and its environment
Details of an audit planning meeting between Ms Lerato Dia mini and
UrbanSpaces's Chief Financial Officer (CFO), MrThabo Khumalo
Email sent from Mr Thabo Khumalo to Ms Lerato Dlamini-Corporate
Governance Matters
A-3
B-4
C-5
Attachment 1
2
|
|
3 Page 3 |
▲back to top |
Client: UrbanSpaces Ltd
Prepared by: Audit trainee
Reviewed by:
Year-end: 30/04/2024
Date: 15/04/2024
A-3
Date:
Subject: Understanding the entity and its environment
Nature and background of the company:
UrbanSpaces purchases properties throughout South Africa and rents them to tenants. The
properties include retail properties (shopping malls), office blocks and industrial buildings
(factories). These properties are managed by UrbanSpaces's 210 property managers and
financial professionals who it permanently employs.
UrbanSpaces has a head office in Sandton, Gauteng, and smaller offices in other cities around
South Africa. UrbanSpaces is listed on the Johannesburg Stock Exchange (JSE) and is one of the
largest listed property companies on the JSE.
UrbanSpaces uses an automated and integrated IT software called SYSPRO throughout its
business.
Updates relating to UrbanSpaces's 2024 financial year:
Sale of Greenbuild shares:
UrbanSpaces sold 49% of its (previous) 100% shareholding in Greenbuild (Pty) Ltd. The
effective date of this sale was 31 October 2023.
HarborView
UrbanSpaces's only other equity holding is a 35% shareholding in HarborView(Pty) Ltd.
HarborView(Pty) Ltd is incorporated in Mauritius and owns property that it rents to various
holiday resorts operators.
Directors' performance incentive bonuses:
The UrbanSpaces board of directors agreed at the beginning of its 2024 financial year to
approve and implement a new performance incentive scheme for all senior managers and
directors. The decision was taken to encourage UrbanSpaces's senior management to increase
revenue and tenant occupancy and retention rates (i.e. fill up its properties and keep
customers for as long as possible).
3
|
|
4 Page 4 |
▲back to top |
Details of an audit planning meeting between Ms Lerato Dlamini and
UrbanSpaces's Chief
B4
Financial Officer (CFO), Mr Thabo Khumalo
Details of an audit planning meeting held on 16 March 2024:
After introducing himself, Mr Thabo Khumalo CA(SA) thanked Ms Lerato Dlamini for
congratulating him on his recent employment as CFO. Mr Thabo Khumalo said he is pleased
to have been chosen to be on the board of such a prestigious company.
Mr Thabo Khumalo requested that HMA finalise the audit by 30 June 2024. It is the first time
that HMA is auditing UrbanSpaces and Ms Lerato Dlamini is concerned that the deadline is
quite tight, especially given the complexity of the SYSPRO systems, but said that the audit team
would try their best.
When Mr Thabo Khumalo was asked to describe the governance structures of UrbanSpaces,
he responded as follows:
I am going to send you a document which sets out the governance structures of UrbanSpaces(see
document CS below). I want to request that you review this document and send me a report
concluding on whether we are complying with the recommendations of King IV.
I know your audit staff are already under pressure to meet the audit deadline but I thought that
their knowledge of our business could be well used for this and it would be more efficient than
contracting another companyfor this.
Ms Lerato Dlamini thanked Mr Thabo Khumalo for the opportunity and mentioned that
although she hasn'tcompleted a report on governance structures before, she accepted it as this
would give her an opportunity to gain experience on the recommendations of King IV.
Mr Thabo Khumalo then informed Ms Lerato Dlamini about the retirement of Mr Adams,
UrbanSpaces's previous CFO:
Mr Adams had a car accident in November 2023 and, as a result ofinjuriesfrom the accident, was
forced to retire. As the accident happened while he was travelling to a UrbanSpaces meeting,
UrbanSpaces agreed to assist with preparation and submission of Mr Adams's personal tax
returns after the accident as a way compensate him for his injuries.
Ms Lerato Dlamini offered for HMA to assist with the preparation and submission of Mr Adams'
personal tax return for no additional fee.
4
|
|
5 Page 5 |
▲back to top |
Email sent from Mr Thabo Khumalo to Ms Lerato Dia mini -
cs
Corporate Governance Matters
TO: Ms Lerato Dlamini <Lerato Dlamini@HMA.co.za>
FROM: Thabo Khumalo <Thabo Khumalo@ UrbanSpaces.co.za> (CFO
of UrbanSpaces)Date: 16 March 2024
Subject: Governance Structures
Dear Ms Lerato, Dia mini
As a follow-up to our planning meeting, please find UrbanSpaces's governance structure
attached [see attachment 1 below].
Included in the attachment is the following:
• Part A- Board of Directors
• Part B- Governance Policies and Practices
Looking forward to getting your report on this.
Kind regards
Thabo Khumalo
5
|
|
6 Page 6 |
▲back to top |
CS - Attachment 1:
URBANSPACES LIMITED PART A-
BOARD OF DIRECTORS
12
3
4
5
6
7
8
9
1. MrTKhumalo CA(SA)
2. Prof A Anderson
3. MrWWilliams
4. Mr G Gellar
5. Mr D Dwayne
6. Mrs H Harper
7. MrWWatts
8. Mr SSeamor
9. MrsAGreenfields
10. Mr A Adams
11. Mr B Bullock
Chief Financial Officer (appointed 1
March 2024)
Independent non-executive director
Independent non- executive director
Independent non-executive director
Chairman and Independent non-
executive director
Non-executive director
Chief Operating Officer
Company Secretary
Chief Executive Officer (appointed 1
February 2024)
Chief Financial Officer (resigned 31
December 2023)
Chief Executive Officer (removed 10
October 2023)
6
|
|
7 Page 7 |
▲back to top |
PART B- GOVERNANCE POLICIES AND PRACTICES
UrbanSpaces's governance policies and practicesCEO (Chief
Executive Officer)
The position of CEO was vacant for 3 months in the 2024 financial year after the directors
unanimously decided to remove the previous CEO in a board of directors meeting on
10 October 2023. The directors were unable to find a suitable replacement from within
UrbanSpaces. Consequently, they delegated the identification of a suitable person to an
external recruitment firm called HR Collect. HR Collect head-hunted Mrs. A Greenfields
who was found to be a suitable candidate for the position. At a director meeting on 5
January 2024, the board of directors voted in favour of her appointment.
Mrs A Greenfields accepted her appointment, subject to the following employment
conditions:
• An annual bonus of Rl 000 000 (increasing at 10% per annum), payable at the end
of each financial year that she is employed, starting on 30 June 2024.
• If UrbanSpaces terminates her employment contract, she would receive a
payment of R2 500 000.
UrbanSpaces's remuneration committee approved these conditions in a meeting
held on
15 February 2024.
CFO (Chief Financial Officer)
Mr Watts appointed Mr T Thabo Khumalo as the new CFO on 1 March 2024. This
appointment followed Mr Adams's retirement in December 2023.
COO (Chief Operating Officer)
Mr W Watts was UrbanSpaces's COO for the last 6 years.
Company Secretary
Mr S Seamor has been an executive director of UrbanSpaces for the last 3 years.
On 1 January 2024, UrbanSpaces's audit committee appointed Mr S Seamor as
UrbanSpaces's company secretary.
7
|
|
8 Page 8 |
▲back to top |
Chairman of the board
Mr D Dwayne has continued as the Chairman of UrbanSpaces's board of directors in its 2024 financial year. It is
UrbanSpaces's policy to rotate the position of Chairman every 3 years and his 3-year term will end on 30 April 2021
As a result, the shareholders are required to appoint a new chairman at UrbanSpaces's Annual General Meeting 01
30 June 2024.
Committee Compositions
Audit committee
•
Prof A Anderson (Chairman)
•
MrWWilliams
•
Mr D Dwayne
Remuneration committee
•
Mrs H Harper (Chairman)
•
MrD Dwayne
•
Prof A Anderson
Risk committee
•
MrWWatts (Chairman)
•
Mrs A Greenfields
UrbanSpaces 's board of directors has always delegated strategic decision making, implementation
and monitoring to its risk committee as they believe this committee is best suited to such
responsibilities given their awareness of the risks and opportunitiesthat UrbanSpaces face.
Performance assessments
The most recent formal performance assessment on all board of directors occurred in May 2021.
Independence review
During the 2024 financial year, all UrbanSpaces independent non-executive directors were
individually reviewed by the new CEO for their degree of independence. The new CEO reported that,
although all of them had served on the board of directors for between 2 and 3 years, they remain
independent.
Other Matters
UrbanSpaces Ltd is facing increasing pressure from its investors, regulators, tenants, and the
broader society to conduct its business responsibly and to provide transparent reporting.
8
|
|
9 Page 9 |
▲back to top |
Recent debates in the media have questioned whether large property companies, such as
UrbanSpaces, are fulfilling their social and environmental obligations, especially regarding
urban development, sustainability, and tenant affordability.
YOU ARE REQUIRED TO:
QUESTION 1
MARKS
(a)
Describe the audit risks at the overall financial statement level for the (15)
UrbanSpaces consolidated financial statements for the 30 April 2024
financial year.
(b)
Based on the request to review and report on UrbanSpaces's (15)
compliance with King IV in B4, discuss the considerations that Ms
Lerato Dlamini should have considered and the conditions that she
should have specified before accepting the request. Provide the
appropriate safeguards where necessary.
(c)
In terms of SAICA's Code of Professional Conduct, discuss and (8)
conclude on whether Ms Lerato Dlamini's offer to assist
UrbanSpaces with Mr Adams's personal tax (see B4) was
appropriate. Provide the appropriate safeguards where necessary.
(d)
With reference to the information in Parts A and B of CS - (30)
Attachment 1, identify and discuss the areas of UrbanSpaces's non-
compliance with the recommendations of King IV.
(e)
Explain how the utilitarianism and the deontology classical ethical (10)
theories could be applied to evaluate UrbanSpaces' decision to
implement the directors' performance incentive scheme that
prioritises revenue growth and tenant occupancy.
(f)
Using an appropriate ethical decision-making model, set out the (10)
steps that Ms Lerato Dlamini should follow in resolving the ethical
dilemma she faces in accepting the additional request to report on
King IV compliance while under time pressure.
(g)
Discuss UrbanSpaces' corporate moral obligations towards its (10)
stakeholders (investors, tenants, employees, and society at large)
considering the concerns raised in the media.
Overall presentation and effective communication
TOTAL MARKS: SECOND FINAL OPPORTUNITY EXAMINATION
(2)
(100)
END OF INFORMATION AND REQUIRED
9