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4.1 The Johannesburg Securities Exchange (JSE) Refer to paragraph 1 - NSC Accounting - Question 4 - 2022 - Paper 1
Question 4
4.1 The Johannesburg Securities Exchange (JSE) Refer to paragraph 1. - Explain why companies might want to be listed on the JSE. - Explain why the JSE would not t... show full transcript
Worked Solution & Example Answer:4.1 The Johannesburg Securities Exchange (JSE) Refer to paragraph 1 - NSC Accounting - Question 4 - 2022 - Paper 1
Step 1
Explain why companies might want to be listed on the JSE.
Answer
Companies often seek to be listed on the Johannesburg Securities Exchange (JSE) for several reasons. First, being listed provides greater access to potential investors and capital, enhancing their ability to raise funds for expansion and operations. It also increases the company’s visibility, allowing them to tap into the global investment environment and reach a wider audience through firm credibility and publicity.
Moreover, listing on the JSE ensures compliance with the Companies Act and other regulatory requirements, which can improve operational standards and promote transparency. This adherence can enhance the company's prestige and reputation, making it more appealing to investors and stakeholders.
Step 2
Explain why the JSE would not tolerate 'incorrect, false and misleading financial results' from companies that are listed.
Answer
The Johannesburg Securities Exchange (JSE) takes the integrity of its listed companies very seriously. Listing companies are expected to provide accurate and truthful financial reporting to maintain investor trust and a stable market environment. Incorrect, false, or misleading financial results can lead to severe repercussions for the market, including loss of public confidence and potential financial losses for investors.
Additionally, the JSE aims to uphold its reputation as a robust securities exchange, ensuring companies comply with legal standards regarding financial disclosures. This commitment helps to avoid legal action against the JSE for failing to oversee listed entities properly, as well as protects investors by ensuring that they can make informed decisions based on reliable information.
Step 3
Explain the difference between a qualified audit report and a disclaimer of opinion audit report.
Answer
A qualified audit report highlights specific issues that concern auditors pertaining to certain aspects of a company's financial statements but still allows for the conclusion that the financial statements present a true view overall. It suggests that while there are some reservations, the majority of the report is satisfactory.
Conversely, a disclaimer of opinion audit report indicates that the auditors were unable to obtain sufficient evidence to form an opinion on the financial statements. This situation often arises due to significant limitations in the scope of the audit or inadequate records, making it impossible for auditors to express confidence in the overall financial status.
Step 4
As a concerned shareholder, what questions would you raise at the AGM? Provide THREE different questions.
Answer
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Why do the disqualified directors seem to have no skills and/or experience in governance issues?
- Understanding the qualifications of directors is crucial as their skills directly affect the company's governance and strategic direction.
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Why did the board not take immediate action over the qualified and disclaimer audit reports?
- This question addresses the board's responsiveness to serious audit findings, as timely action is vital to restore stakeholder confidence.
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How has the financial stability or profitability of the company been affected by recent events?
- It's important to discern how external and internal factors have impacted the company's financial health to make more informed investment decisions.