AUE1601 Assignment 2 (Comprehensive Answers) Semester 2 2024

QUESTION 1 50 marks PART 1 20 marks Snazzy-Sewing Ltd is a textile company that operates all over South Africa. The company secretary of Snazzy-Sewing Ltd has recently resigned, and the following candidates are being considered for appointment: • Nylon (Pty) Ltd, a company specialising in providing company secretarial services. The company has two directors, Mr Denim and Mr Jeans. They are also the only two employees of Nylon (Pty) Ltd. Both Mr Denim and Mr Jeans have the requisite knowledge and experience to perform the duties of company secretary, and both are South African citizens. • Mr Suede, a resident of eSwatini, who has several years’ experience performing company secretarial services. He permanently resides in eSwatini, but he often undertakes business trips to South Africa. • Mrs Silk, a South African resident who holds the requisite knowledge and experience to perform the duties of company secretary. She has recently been declared delinquent to be appointed as a director of a company. • Miss Corduroy, the auditor in charge of the audit of SnazzySewing Ltd. The directors of Snazzy-Sewing Ltd are however questioning the need for a company secretary and the position's purpose. Page 2 of 5 YOU ARE REQUIRED TO: (a) Briefly explain the Companies Act requirements relating to the notice period for the resignation of a company secretary. (2) (b) In terms of the Companies Act, discuss the eligibility of each of the listed candi dates for appointment as company secretary. (7) (c) In terms of the Companies Act, respond to the directors as to whether they may choose not to appoint a company secretary and list the company secretary’s duties to explain to them the purpose of the position. (11) PART 2 13 marks • Print-It (Pty) Ltd is a manufacturer and retailer of printers with an average workforce of 150 factory workers, 20 administrative employees (including 5 individuals in its accounting department), and 10 cleaners. In the 2023 financial year, the company's turnover decreased to R180 million from R220 million in the previous year. The company has a debtors' book value of R52 million and third party liabilities of R12 million. The only known beneficial interest holders of the company are its 7 shareholders. • Ink-R-Us (Pty) is a subsidiary of Print-It (Pty) Ltd and shares the same 7 shareholders. The company is owner-managed and has a staff of 8 employees. In the 2023 financial year, Ink-R-Us (Pty) Ltd had a turnover of R7.2 million. The company does not have any third-party liabilities, but it has assets held in a fiduciary capacity valued at R7.4 million. The financial statements of both companies are independently compiled. YOU ARE REQUIRED TO: (a) Calculate the public interest score for each company (show workings). (8) (b) State, giving brief reasons, whether each of the companies will have to be audited or reviewed, or will require no external intervention. (4) (c) What does it mean that Ink-R-Us (Pty) Ltd is owner-managed? (1) PART 3 10 marks Dazzle (Pty) Ltd has a public interest score of 154 and currently compiles its annual financial statements internally. This, in turn, means that the annual financial statements (AFS) must be audited. However, the company has determined that it would be less expensive and less disruptive to have an independent accounting professional compile the AFS and then have it independently reviewed. The financial director of Dazzle (Pty) Ltd is seeking advice on whom to appoint as the independent accounting professional to compile the AFS and has approached you for guidance. The following individuals/firms are being considered: Page 3 of 5 1. Diamond Inc The firm has been the auditors of Dazzle (Pty) Ltd for a number of years. 2. Ruby (Pty) Ltd A company that offers bookkeeping and financial services. The directors are all CA(SA)s and neither they nor the company itself have any involvement with Dazzle (Pty) Ltd in an