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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 tole... 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 may desire to be listed on the Johannesburg Securities Exchange (JSE) for several reasons. Firstly, being listed can enhance a company’s visibility and prestige, attracting potential investors and facilitating access to capital markets. This includes tapping into the global investment environment, which can lead to increased public trust and potential financial backing.
Secondly, listing on the JSE ensures compliance with pertinent regulations such as the Companies Act and enhances corporate governance standards. This compliance not only fortifies the company’s reputation but also helps in building credibility among stakeholders and the public.
Step 2
Explain why the JSE would not tolerate 'incorrect, false and misleading financial results' from companies that are listed.
Answer
The JSE would not tolerate incorrect, false, and misleading financial results for several critical reasons. Primarily, the JSE's role is to maintain market integrity and investor confidence; thus, any discrepancies in financial reporting can undermine the trust that investors have in the entire market.
Additionally, such misleading results can result in legal ramifications for the companies involved, including penalties or delisting. The JSE aims to protect the investing public by ensuring that companies provide accurate financial data, adhering to compliance and regulatory frameworks designed to promote transparency.
Step 3
Explain the difference between a qualified audit report and a disclaimer of opinion audit report.
Answer
A qualified audit report indicates that the auditors have identified specific areas of concern regarding the company's financial statements but are still able to provide assurance with certain reservations. This means that while there are issues, they do not preclude the auditors from expressing an opinion on the overall financial statements.
In contrast, a disclaimer of opinion audit report is issued when the auditors are unable to obtain sufficient evidence to form an opinion on the financial statements. This may occur due to limitations in the scope of the audit or uncertainty regarding critical information, preventing the auditors from providing any assurance.
Step 4
As a concerned shareholder, what questions would you raise at the AGM? Provide THREE different questions.
Answer
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What measures is the board implementing to ensure compliance with JSE listing requirements moving forward?
- This question seeks clarity on the proactive steps taken to avoid future compliance issues that could harm shareholder interests.
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How does the board plan to address any identified governance lapses and improve accountability?
- This inquiry targets the board's commitment to enhancing corporate governance and ensuring responsible management of shareholder assets.
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Can shareholders expect regular updates on the financial health of the company going forward?
- This question emphasizes the need for transparency and consistent communication regarding the company's performance and strategic decisions affecting shareholder value.