Step 2 Perform the guardian role of a company director proactively through: Assessing the risk level involved in any strategy devised; Putting brakes on poor strategies or decisions, demanding management's explanations and rectifications; and Reporting to the board and the relevant authority any unethical concerns, conflicts of interest, malpractices or illegal acts unveiled. Assessing the risk level brought about by Derek’s illegal acts: Derek’s secret pledge of the IPO funds to secure loans for his wife would increase the financial risks of the company and cause grave consequences to different stakeholders as mentioned above. As an INED and Chairman of the audit committee, I should inquire with Derek diligently and demand for an explanation once I observe the irregularities in the financial figures. I should seek professional advisors, the company secretary, financial controller or the internal auditor, for assistance in looking into the matter. Monitoring the management to mitigate the risks: Weak management controls create opportunities for persons under financial, social or other pressure to exploit circumstances and rationalise their fraudulent actions. I should ensure the management implements different control measures to limit opportunities for manipulation of company funds by any individual. Examples include requiring board approval for use of IPO funds or loans over a certain amount; monitoring the due checking of company funds by internal and external auditors; setting policy to govern non-audit services taken up by the serving audit firm; and enhancing the awareness of directors and in fact all levels of staff on related law and guidelines governing illegal acts, conflicts of interest or unethical behaviours.
Step 2 Perform the guardian role of a company director proactively through: Assessing the risk level involved in any strategy devised; Putting brakes on poor strategies or decisions, demanding management's explanations and rectifications; and Reporting to the board and the relevant authority any unethical concerns, conflicts of interest, malpractices or illegal acts unveiled. Assessing the risk level brought about by Derek’s illegal acts: Derek’s secret pledge of the IPO funds to secure loans for his wife would increase the financial risks of the company and cause grave consequences to different stakeholders as mentioned above. As an INED and Chairman of the audit committee, I should inquire with Derek diligently and demand for an explanation once I observe the irregularities in the financial figures. I should seek professional advisors, the company secretary, financial controller or the internal auditor, for assistance in looking into the matter. Monitoring the management to mitigate the risks: Weak management controls create opportunities for persons under financial, social or other pressure to exploit circumstances and rationalise their fraudulent actions. I should ensure the management implements different control measures to limit opportunities for manipulation of company funds by any individual. Examples include requiring board approval for use of IPO funds or loans over a certain amount; monitoring the due checking of company funds by internal and external auditors; setting policy to govern non-audit services taken up by the serving audit firm; and enhancing the awareness of directors and in fact all levels of staff on related law and guidelines governing illegal acts, conflicts of interest or unethical behaviours.