Melati Bhd has been operating for 10 years providing finance consultation and recently listed as public...

  

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Melati Bhd has been operating for 10 years providing finance consultation and recently listed as public listed company. According to the MACC, the company should have an audit department. Melati decided to form one internal audit department. After one year, the management feel that the internal audit department plays an important component to the organization and decided to increase the size of the department. However, one of the directors, Zack suggests outsourcing the whole internal audit to their external auditors, Chong & Co. In order to maintain the public listed status, it is necessary to comply with corporate governance principles in order to maintain its listed status. Since the other directors have urgent issues need to be managed, thus the finance director has undertaken an assessment of the compliance of the corporate governance requirements. In addition, he decides on the amount of remuneration each director is paid. Currently all remuneration is in the form of an annual bonus based on profits. At the end of the assessment, he found out that the company yet to have the audit committee. Two directors were appointed last year and yet to take any board trainings. The chairman of Melati, Bakar was the chief director for the company until December last year. He is uncertain if the company required more directors since the number of non executives is lesser than the number of executives. He is planning to appoint one of his relatives, who just resigned from food and beverage industry as a non-executive director. The directors viewed the cost of setting up the annual general meeting for the shareholders and realised the cost is high and irrelevant. The director decided to opt for electronic form. The electronic form suits the current environment. No physical meeting and the shareholders can view the financial statements via electronic form and can vote on the resolutions through email. Do you agree with the outsourcing of the internal audit? Provide your opinion with relevant arguments. Melati Bhd has been operating for 10 years providing finance consultation and recently listed as public listed company. According to the MACC, the company should have an audit department. Melati decided to form one internal audit department. After one year, the management feel that the internal audit department plays an important component to the organization and decided to increase the size of the department. However, one of the directors, Zack suggests outsourcing the whole internal audit to their external auditors, Chong & Co. In order to maintain the public listed status, it is necessary to comply with corporate governance principles in order to maintain its listed status. Since the other directors have urgent issues need to be managed, thus the finance director has undertaken an assessment of the compliance of the corporate governance requirements. In addition, he decides on the amount of remuneration each director is paid. Currently all remuneration is in the form of an annual bonus based on profits. At the end of the assessment, he found out that the company yet to have the audit committee. Two directors were appointed last year and yet to take any board trainings. The chairman of Melati, Bakar was the chief director for the company until December last year. He is uncertain if the company required more directors since the number of non executives is lesser than the number of executives. He is planning to appoint one of his relatives, who just resigned from food and beverage industry as a non-executive director. The directors viewed the cost of setting up the annual general meeting for the shareholders and realised the cost is high and irrelevant. The director decided to opt for electronic form. The electronic form suits the current environment. No physical meeting and the shareholders can view the financial statements via electronic form and can vote on the resolutions through email. Do you agree with the outsourcing of the internal audit? Provide your opinion with relevant arguments.

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Step 11 Nonexecutive directorships are common in listed companies but not in private companies Nonex... View the full answer