Module code and title: BM637: Corporate Governance and Ethics
Assignment No. and type: Coursework – CW
Assessment weighting : 100%
Assignment task :-
A few months ago Shoprite Super market a major national retailer uncovered a serious issue with in its financial accounts. In accordance with local stock exchange market regulation Shoprite Super market issued a profits warning statement detailing that its pre-tax profits (pbt) for the last six months in 2020 had been overstated by £250,000. As a result of this error profits for the first half of the financial year 2021 were around 25% lower than fore cast and already well below initial expectations.When stock market trading opened Shoprite Super market’s share price immediately fell by 12% and it has not yet recovered.
BM637 Corporate Governance And Ethics Assignment – UK.
The audit committee of Shoprite Supermarket decided to engage a firm of Chartered Accountants to investigate the reason for this massive discrepancy and in doing so delayed the publication of its interim results by a month. Their preliminary findings stated that the Shoprite Super market profit over statement was due to the accelerated recognition of commercial income and the delayed accrual of costs. Further detailed investigations indicated internal financial reporting systems and associated internal controls were wholly inadequate, allowing significant errors to go unchecked.
Before Shoprite Supermarket announced the results of investigations, they were leaked to the media. The alleged serious errors and the need for further external assurance were widely reported due to the scale of the irregularity and the importance of Shoprite Supermarket to the national economy.
The Board (BOD) of Shoprite Supermarket as a whole was heavily criticised and at an extraordinary general meeting convened at the express wish of its major Shareholders the Chairman the Chief executive officer CEO and the Finance director were all asked to tender their resignations and the new Board to establish a risk committee to ensure such problems would never arise in the future.
Task 1 – 1000 words
Define Corporate Governance and explain in detail its functions in the effective management and
control of Shoprite Supermarket business.
Task 2 – 1000 words
Critically identify and describe the objectives of internal control systems and explain how meeting these could help prevent further misreporting or error at Shop rite Super market in the context of corporate governance and ethics.
Task 3 – 1000 words
Explain in detail the responsibilities of the Board of Shop rite Super market for ensuring effective financial reporting and internal control systems, and explain how the work of a risk committee can help the board fulfil its responsibilities in the context of corporate governance and ethics.