P a p e r P 1
Section A –This ONE question is compulsory and MUST be attempted
1When the 1,000 km Hiaka pipeline in Wyland was built ten years ago, the route took it, overground, the full length of Hiakaisland, one of Wyland’s largest offshore islands. Owned and operated by Hiaka Energy Company (HEC), its construction was significantly over budget and suffered lengthy delays, but the pipeline has since become a vital source of economic growth on Hiakaisland and beyond. Its purpo is to connect the oil platforms off the north coast of the island with the deepwater port of Hiakatown in the south. A land pipeline to the south is needed becau a ice in the north prevents shipping access during the winter months. The oil carried by the pipeline is loaded onto veral ships each day at Hiakatown port. Most of the oil from Hiakaisland is nt to the neighbouring country of Exland, with oil from Hiakaisland reprenting 90% of Exland’s total oil consumption. Becau the contract with HEC is so important to the government of Exland, the terms of supply are subject to legal enforcement with regard to prices charged, delivery terms and the quality of the oil delivered. Becau most of its output goes to export, HEC is a major source of foreign currency for Wyland.
Hiakaisland is a globally important natural habitat with a dramatic and rugged terrain. It is monitored by veral international scientific agencies, some of which were very critical of the decision to build t
he pipeline in the first place.
It is one of very few locations in which some wildlife species threatened elwhere are still in abundance. There are healthy populations, for example, of bears, elk and otters. One well-respected international wildlife organisation (called Save Our Wilderness or ‘SOW’) produced a report saying that the Hiaka pipeline was not environmentally sustainable and that, over time, it would deteriorate and create an unacceptable environmental risk to Hiakaisland. It said that both the company (HEC) and the government of Wyland needed to adopt longer-term time perspectives and consider the potential environmental conquences of the pipeline. The government of Exland, elected every four years, disputed this, saying that SOW’s definition of sustainability was too narrow and that it should also consider the economic sustainability of Exland. The position of the board of HEC is that its operations should be ‘as sustainable as is economically possible’.
Wyland is a developing country with few labour regulations and very little legislation on employee pay and conditions.
This has enabled HEC to u a large proportion of poorly-paid immigrant labour to build and maintain the pipeline, thereby reducing its construction and operating costs. Becau of the multinati
工作状态
onal nature of much of the mi-skilled workforce, there are often language difficulties, especially when conveying messages to staff working on the pipeline and on the oil platforms. HEC has a requirement that all staff should speak the language of Wyland, but this has proven to be impossible to enforce.
As the main employer on Hiakaisland, HEC employs 5,000 people including some on offshore oil platforms, others in the main southern town of Hiakatown, and others still at a number of remote locations the length of the island at strategic points situated along the pipeline. Becau of the remoteness of much of the work on Hiakaisland, conditions are harsh for many of the workers. HEC employees often work in freezing temperatures and live in encampments with intermittent logistical support. Motivation and morale are often low among the maintenance employees.
There have been poor industrial relations becau of this lack of support. Workers rent the company’s management in Hiakatown for their harsh conditions. The poor relationships have also made it difficult for management to try to enforce the Wyland language requirement upon the immigrant labour. The remote locations and poor conditions have also meant that the company has found it difficult to recruit the skilled technical people it needs to inspect and maintain the pipeline. There is a shortage of qualified engineers and technical staff in Wyland, with many preferring to work
鸽子怎么交配in the cities rather than in the more difficult conditions on Hiakaisland.
HEC is one of Wyland’s biggest business and is listed on the Wyland stock exchange. Becau of the nature of the energy market, shareholders have come to expect a good annual return on investment in terms of dividends. One market analyst recently commented that a focus on short-term returns has not been good for the company’s long-term strategy and that shareholders should be prepared to expect lower dividend yields as a result.
母的笔顺
In order to address the many challenges which the company faced, HEC appointed a new chief executive and risk manager last year. Gavin Hoo was appointed chief executive and Gerry Jupp joined as risk manager. Born and educated in a highly developed country, Mr Hoo had a strong track record in the energy industry and took over at HEC on what was considered a good reward package for his home country. On Hiakaisland, however, the level of reward was very large by local standards, making him the highest paid person not just in the company, but in the entire regional economy of Hiakaisland. When the reward figure was later published in the annual report, the local press and some trade unions were angry, believing that his reward was ‘outrageous’ and that he lived in luxury whilst unskilled immigrant workers ‘froze’ in the maintenance parties working along the length of the pipeline. Some critics pointed to the fact that it was significantly cheaper to live on Hiak
aisland than in the major cities on the Wyland mainland and that this was not reflected in Mr Hoo’s rewards at all.
2
Meanwhile, risk manager Gerry Jupp t about examining the company’s many risks. One of his first tasks was to asss some of the risks which may affect the operation of the pipeline, and he took technical advice on the to arrive at probabilities of the risks arising over the next ten years. It was recognid that there was some subjectivity involved in the measurements.
手串金刚菩提Risk 1.Risk of terrorist attack on any part of the pipeline causing vere spillage and complete supply disruption: 10%.
Risk 2. Risk of geological movement and/or earthquake capable of vering the pipeline in more than one place causing vere long-term supply disruption: 5%.
Risk 3.Risk of technical failure of a joint in the pipeline causing a temporary supply disruption of a few hours but no leakage of oil: 10%.
Risk 4.Risk of animal or natural damage to pipeline (e.g. by bears, elk or adver weather) causing s
uperficial damage to pipeline but no disruption to supply: 60%.
Unfortunately, Risk 4 was realid shortly after Gerry Jupp produced his calculations. At the point where it crosd the Gojo river in northern Haikaisland, the pipeline had a long and unsupported ction. During a winter storm, a connection was slightly displaced resulting in a minor oil leak. Although not rious in itlf and quickly repaired, the ‘Gojo incident’ did rai concerns and showed that the pipeline was vulnerable. Seeking to protect both the pipeline and the environment on Hiakaisland, the Wyland government’s industry minister wrote to CEO Gavin Hoo asking him to respond to rumours about poor internal controls in HEC and to introduce measures to reduce the chances of a repetition of the Gojo incident.
In respon to the industry minister’s letter, the HEC board reviewed internal controls and two resolutions were agreed. The first was that the company should establish a formal internal audit function and cond, that a full review of any barriers to sound internal controls in the company should be carried out. Although a formal internal audit function was not required by statute law or any stock exchange listing rule in Wyland, the board agreed that it would be good practice, especially if the curity and maintenance of the long Hiaka pipeline could be included in the scope (terms of reference) of the internal audit function to be established. It was decided that in responding
to the minister, Mr Hoo should convey both the board’s resolve on internal audit and also an honest review of the problems for achieving sound internal controls in the unique situation the company was in on Hiakaisland.
Required:
(a)The term ‘sustainability’ can be understood in different ways.
(i)Explain the concept of ‘sustainable’ as ud by ‘Save our Wilderness’ (SOW) and contrast this with the
concept of economic sustainability as discusd by the government of Exland.(4 marks) (ii)Using information from the ca, discuss the tensions which exist between the two concepts.
(8 marks)
(b)Asss the four risks described by Gerry Jupp and propo a suitable risk management strategy for each.
Briefly explain why subjective judgement may limit the accuracy of his risk asssments.(10 marks)
垄断的形成是(c)Briefly explain the meaning of ‘labour market conditions’ in the context of executive pay and critically
evaluate the decision to award Mr Hoo such a high level of reward in comparison with local rates of pay on Hiakaisland.(10 marks)
祛斑祛皱
(d)Prepare the letter from Gavin Hoo, the chief executive of Hiaka Energy Company (HEC), to the Wyland
industry minister. The letter should:
(i)Explain the reasons why the implementation of sound internal controls has been difficult at HEC.
(8 marks)
(ii)Basing your answer on the main roles of internal audit, discuss the ways in which an internal audit function might provide assurances in order to make an effective contribution to HEC.(6 marks) Professional marks will be awarded in part (d) for the format, tone, logical flow and persuasiveness of the letter.(4 marks)
(50 marks)
3[P.T.O.
Section B – TWO questions ONLY to be attempted
2The Sarbanes-Oxley legislation in the United States was introduced in 2002, partly in respon to the earlier failure of the American energy company, Enron. It was decided by United States legislators that compliance should be enforceable under law rather than under listing rules. At the time it was being debated, some said that the legal enforceability of Sarbanes-Oxley would be unfair to smaller companies without the infrastructure needed to generate internal control data and to report on it. One example of this was the debate over s.404 of Sarbanes-Oxley, which mandated external reporting on the adequacy of internal controls. Before a size criterion was later introduced, this applied equally to all companies but now smaller companies are partly exempted from this requirement.
In its advice on this requirement, the United States Securities and Exchange Commission (SEC) published the following comments:
The rules we adopted in June 2003 to implement s.404 of the Sarbanes-Oxley Act of 2002 (‘Sarbanes-Oxley’) require management to annually evaluate whether internal control over financial r
日本海军大将
eporting (ICFR) is effective at providing reasonable assurance and to disclo its asssment to investors. Management is responsible for maintaining evidential matter, including documentation, to provide reasonable support for its asssment. This evidence will also allow a third party, such as the company’s external auditor, to consider the work performed by management.
Required:
(a)Distinguish between rules and principles-bad approaches to the regulation of corporate governance, and
explain the disadvantages of a rules-bad system such as Sarbanes-Oxley in the United States.(7 marks)
(b)Define ‘agency’ in the context of corporate governance and discuss the benefits to shareholders of
‘maintaining a system of internal control over financial reporting’ in a rules-bad jurisdiction.(10 marks)
(c)Construct the ca to exempt smaller companies from the full reporting requirements of s.404 of t
he
Sarbanes-Oxley Act 2002.(8 marks)
(25 marks)
4
3‘Help-with-life’ (HWL) is a charitable organisation established ten years ago. Its stated purpo is, ‘to help individuals and families with social problems and related issues.’ Its work, in a large city with people from many countries and backgrounds, involves advising, counlling, giving practical support to rvice urs (the people who come for help).
Over the years it has been operating, HWL has realid that the best outcomes are achieved when the staff member understands and sympathis with the rvice urs’ social norms, ethical and cultural beliefs.
40% of HWL’s funding comes from local government. This means that HWL has to account for its u of that portion of its funding and comply with veral rules impod by local government. One of the rules concerns demonstrating appropriate diversity amongst the managers of rvices such as
tho delivered by HWL. It requires the charity management team to involve the widest feasible range of people and to reflect the demographic make-up of the community.
HWL has recently had to replace a number of executive and non-executive members of its board. The external auditor suggested that tting up a nominations committee would help in the board appointments. The CEO, Marian Ngogo, has always stresd that all directors should share the ethical values of HWL and agree to take reduced rewards becau, ‘every dollar we pay a director is a dollar less we are spending on rvice delivery.’ She stresd that the culture in a charity was very different from a commercial (‘for profit’) business and that staff and directors must share the ethical stance of HWL and had to accept a different approach to social responsibility if they joined.
Required:
(a)Explain the roles of a nominations committee and describe how the Help-with-life (HWL) nominations
committee might approach the task of nominating and appointing new directors.(8 marks)
(b)Explain the advantages of diversity on the board of HWL.(8 marks)
(c)Explain ‘corporate social responsibility’ (CSR) and discuss the ways in which CSR and the ethical stance
草上飞打一字
might differ between HWL and a commercial ‘for profit’ business.(9 marks)
(25 marks)
5[P.T.O.
