EcoDesign Innovations $($Pty$)$ Ltd$,$ a burgeoning company in the eco$-$friendly architectural design and building materials

sector, was on the brink of a significant expansion. Under the leadership of Amina Nkosi, the CEO and Chairperson of the

Board, the company eyed the integration of groundbreaking yet unverified sustainable materials from suppliers in regions

notorious for their relaxed environmental standards.

The Board of Directors, a close$-$knit group comprising Amina, her cousin as CFO Bongani Khumalo, her long$-$time business

partner Jabulani Ndlovu as Chief Operations Officer, and her close friend Thandiwe Mokoena as Chief Marketing Officer,

was enthusiastic about the proposal. The board was rounded off with a few non$-$executive directors, including Chipo

Gumbo, a supplier to EcoDesign Innovations, and two recent additions, Sipho Dube and Nia Diallo, who were new to

corporate governance.

Below is an extract from the minutes of the directors meeting:

EXTRACT OF MINUTES OF BOARD MEETING OF ECODESIGN INNOVATIONS $($PTY$)$ LTD HELD ON $20$ APRIL $2024$

Present Position Committee Membership

Amina Nkosi CEO & Chairperson Audit Committee Chair, Nominations Committee

Member

Bongani Khumalo CFO Risk Committee Chair, Nominations Committee

Member

Jabulani Ndlovu COO Risk Committee Member, Nominations Committee

Chair

Thandiwe Mokoena CMO Audit Committee Member, Nominations Committee

Member

Chipo Gumbo Non$-$Executive Director Risk Committee Member

Sipho Dube Non$-$Executive Director N$/$A

Nia Diallo Non$-$Executive Director Audit Committee Member

At a pivotal board meeting, the proposal was met with unanimous approval, albeit without a thorough assessment of the

environmental and ethical ramifications. The board, heavily influenced by Amina's persuasive presentation and the potential

financial benefits, overlooked the need for a more balanced and objective review.

As EcoDesign Innovations marched forward with its ambitious venture, the company's commitment to sustainable and

ethical business practices came under scrutiny. Stakeholder engagement was minimal, and the company's sustainability

reporting lacked depth, failing to address significant environmental, social, and governance issues.

Meanwhile, EcoDesign Innovations' long$-$standing external auditor, Tendai Mutombo $($CA$)$SA$,$ faced his own ethical

quandaries. With substantial audit fees pending for the past two years, Tendai found himself entangled in a precarious

proposal initiated by Bongani. In a confidential meeting, an arrangement was suggested where Tendai's audit fees would be

offset by EcoDesign Innovations undertaking renovations for his personal property development project. The value of these

renovations would exceed the outstanding audit fees. The offer was on the table as long as Tendai agreed not to disclose

the arrangement to SARS and wrote off the outstanding audit fees as bad debt.

Amidst these developments, Tendai Mutombo $($CA$)$SA had taken on an advisory role for EcoDesign Innovations, providing

strategic financial advice on several key transactions. This dual role was not uncommon in his practice, but it blurred the

lines between his consulting services and his responsibilities as an auditor.

Tendai's relationship with EcoDesign Innovations had evolved over a decade into a close personal friendship with Amina. At

a recent industry conference, Tendai Mutombo $($CA$)$SA took the stage to speak highly of EcoDesign Innovations' latest

venture into the use of cutting$-$edge, sustainable building materials.

During his presentation at the industry conference, Tendai Mutombo $($CA$)$SA enthusiastically endorsed EcoDesign

Innovations' pioneering venture into advanced sustainable building materials. He detailed the transformative potential of

these materials, drawing upon specific financial and strategic information that he had access to solely through his privileged

position as the company's auditor. This disclosure included sensitive data about the company's investment in research and

development, and projected financial returns, which were not yet public knowledge.

Behind the scenes, Tendai had been offered a consultancy fee by EcoDesign Innovations for his role in promoting the

venture, aligning his personal interests with the success of the project. This arrangement, however, was not common

knowledge among the conference attendees or the broader professional community.

In this narrative of ambition and oversight, the unfolding events at EcoDesign Innovations $($Pty$)$ Ltd present a complex

tableau of ethical, governance, and compliance challenges, weaving a story that calls for a discerning analysis of

adherence to the SAICA Code of Professional Conduct and the King Code IV on Corporate Governance for South Africa.

Answer ALL the questions in this section.

QUESTION $1(20$ Marks$)$

Discuss the concerns raised by ty the scenario with reference to the SAICA Code of Professional Conduct. Identify and explain

any threats to the fundamental principles and also suggest safeguards that could be i