RwM & Co Certified Public Accountant

GOVERNANCE TIPS
What is meant by reasonable assurance from a governance perspective?
When auditor give reasonable assurance on the preparation of financial statement (FS) is because they do audits on a sample basis.
Their assurance on these FS is not absolute, and even if they did a full audit (100%), you cannot rule out management conspiracy to perpetrate and conceal fraud or even human errors. Because auditor rely on information that has been provided by their audit client. However their test can sight gaps and variation that are inconsistent from a high level analytical review which is done at the inception of an assurance engagement for purposes of placing reliance on FS preparation.
The FS preparation and operational environment is what they audit.
From an environment perspective its the internal controls (IC) in place to minimise fraud and errors, and the design of IC is a management responsibility. The auditor will review those control to give reasonable assurance that there are minimal leakages and gaps, and where there are gaps, the auditors will raise then in a Management Letter. or "Letter of Internal Management Weaknesses" as they refer to it in some jurisdictions.
The control environment also includes the system processes within which these FS are prepared and therefore need to be reviewed to check whether there are minimal errors, misstatement, misrepresentation, leakages or no overrides.
Assurance is therefore needed on the Information Technology General Controls (ITGC) environment,.which is carried out with a specialised team of Certified Information System Auditors (CISA) . However this ts also not an absolute assurance, because in a flash of a second hackers and fraudsters can go around controls on firewalls and Operating Systems to perpetrate fraud and can cause great financial losses, harm and damage to databases.Therefore vigilance on the computing environment needs to be enhanced and always on lookout for any possible attacks.

Strategies and Operational management tips
Do entities move to other markets for only financial benefits?
Not at all times do entities go into markets for financial gains, at times they spread in regions that makes them appear to be commendable market foot print.
When companies grow in size they also like being seen as giants on a given continent(s). There are some that are measured in numbers of subscriber or turnover, while others its the geographical spread.
Whereas AT&T, Verizon, Nippon, Deutsche, T-Mobile, or Vodaphone could be considered the biggest telecoms companies globally, Airtel may be considered widely spread on the globe in terms of geographical and subscribers as well.
Indeed it makes more sense in as far as spreading the risk. Let's take China Mobile as an example which has similar number of subscribers, had Covid_19 taken a serious impact on the population and the economy of China. It would certainly have impacted the company's overall performance as well. But as I had earlier said Airtel would not suffer as much even if Covid, impacts India, because it operates in more than one continent. Why I compare Airtel and China Mobile is their huge subscriber numbers.
Its important to spread(footprint) in more than a single market to avoid risks like that of Covid;19.
Therefore companies do not only choose to enter markets for purposes of financial gains, but also by spreading their operational risks (avoiding putting eggs in the same basket).

STRATEGIC & OPERATIONAL MANAGEMENT TIPS.
Why do group formation move to diverse market and acquire other entities?
There are group formations that have difficulties in entering a given market, there are many strategies, however Mergers & Acquisition commonly referred as (M&A) could be one of them. There are entities out there that struggle to keep their heads above water. These are heavily targeted by these groups that have resources and synergies and acquire the weaker companies.
The targeted companies commonly referred to as "prey" are taken over by these financial giants. The "prey" could be having resources, copy or patents rights or rare technology or knowhow which these group acquirer may wish to benefit from this acquisition.
Most of the times the acquired entity looses control to the incoming merger. And most of the times their management tries to resist the takeover. for fear of loss of their jobs.
Most mergers come with their own challenges especially conflicting corporate culture. Its very difficult for the incoming entities management style to fit well with the acquired company.
There is a brand phaseout of the acquired company and gradually their name gets dropped.
The acquiring entity maintains their strategic interest in the company while the rest is discarded.

STRATEGIC & OPERATIONAL MANAGEMENT TIPS
How do group formation devise means of increasing their shareholders' return on Investment?
Groups operate from different jurisdictions with diverse tax regimes. while there are a number of reasons why they would expand in a given market, tax avoidance schemes are one of them. They often take advantage and purposely move to a different market for purposes of tax avoidance. This can only be easily achieved where there are bilateral tax agreements. Commonly referred to as double tax agreements (TDA). These are tax agreement between intending countries to ease and also give tax incentives to investors in order to repatriate back profits to the groups' country of origin or residence.
They overprice when they sell to their subsidiaries in these tax heavens to maximise on the tax benefit derived from the existing DTA.
For example they sell to subsidiaries raw material at prices higher than would have been in normal course of business, thereby transferring costs to this regime in view of the tax benefits. Commonly referred to as transfer pricing, and most of the times leaves the subsidiary as a loss making unit, for purposes of tax avoidance scheme. Upon consolidation of results at group level, the group's tax liability is reduced as a result.

STRATEGIC & OPERATIONAL MANAGEMENT
How can entities in group formation improve their performance?
In most group formations, entities mature under their maturity path model, and as they grow profitability reduces.
This is mostly due to maturity of their products along their product cycles, due to reduced innovation, excessive advertising costs, and other stakeholders making competitive and complementing goods.
What needs to be done other than extending in other new markets, is cutting costs at the operational level of the group through outsourcing services that were previously provided in-house.
Most groups outsource services like Networks in telecommunication companies, payroll services, finance, HR, Marketing e.t.c for example through franchises.
In so doing they remain concentrated on their core businesses.
However those in-house provided services that are very strategic like; Corporate & Secretarial services and Research & Development may be retained for matters of strategic interests and being very confidential nature.
In outsourcing in-house provided services costs such as human resources are reduced tremendously .
Confidential strategic information should be well protected by for example not being on shared mail servers,away from intending hackers.

STRATEGIC & OPERATIONAL MANAGEMENT TIPS.
Other than strategic tax planning initiatives, an investor may chose to move to a new market, to increase his turnover where the domestic market is getting saturated or appears matured. As products life cycles get to their upper quartile, their profitability reduces and sales drop, due to a saturated market.
The symptoms of a saturated market are high advertising costs, and cut throat completion where complementing goods are gaining ground. Hence a redused profitability on products margins..
In an effort to benefit from from fast mover advantage, entities look else where in a virgin market, where they can make a higher profit to compensate for the low profit margins in the domestic markets. It can also be a carbon foot print in global market coverage. And its also a yard stick in measuring how extensive is their market coverage.
As fast mover the risk is high. Hence the risk and rewards that comes with taking risks.
Feasibility studies need to be well studied, take for example an Indian pharmaceutical producing generic products, the company needs to be careful when launching in a genuine product market. While the East African market does very well with generic drugs, as opposed to a French or Portuguese markets that are more sophisticated

STRATEGIC & OPERATIONS MANAGEMENT TIPS.
Indeed proximity to the market and final consumers can be one of crucial factors that an investor may consider when locating his industry.
Some industries move closer to their final consumers(FC), especially where the FC has a variety of choices available and after sales service is needed to sustain a product in the market.
The investor gets the required consumption pattens on the product demand and may choose to bring closer his products to the FC. For example the automobile manufacture can set up an assembly plant, or spare part factory to service a given market depending on demand. South Africa is a good example for BMW, Mercedes Benz, and Toyota.
This is a market driven strategy meaning the market dictates your investment decisions.
However other considerations have to come into play, as technical manpower, the relative cheapness of energy, cost of production, proximity to the sea, level of infrastructure development such as rail network., relative stability of the currency(inflation), stringent foreign exchange rules, overall security, repatriation of profits and tax incentives e.t.c. Angola is a mineral rich country but with very strict foreign exchange rules, which makes investors way their choices.

STRATEGIC & OPERATIONAL MANAGEMENT TIPS
Like I had earlier mentioned factors that an investor may consider before he chooses a market to operate from is like the resource base.
Most industries in the extraction industry prefer to locate near where this resource may be located. For example a cement manufacturing, gold, copper, cobalt extraction venturers are situated at the source of their main raw input.
For reasons that it would be costly to move the raw material to a processing plant if it were not near the source itself. These recourses are heavy and their waste product is pollutant, bulky and disposing it would be costly as well, hence the preference to leave them at their source. Mining these resources can have adverse environmental repercations. However most countries try to put measures to restore sights to their original nature, which at times this is supposed to happen after along time of their existence and followups can be difficult to implement.
Its easier to transport semi-finished goods for better refinement to their final consumable destination.
Decommissioning such activities has been a major challenge to most governments especially on the African Continent, yet evaluating their environment impact is mostly left unresolved.

STRATEGIC & OPERATIONAL TIP
Many a times investors choose where to operate from is determined by the nature of their business, could be capital or Human capital, labour intensive, resource based industry, or market led business.
Let me start with the former, when the business is capital intensive, meaning it requires heavy machinery to operate it may relocate where such machinery can be got and serviced easily. Most industries decide to locate in Silicon valley in the USA, and Bangalore in India because of the the vast technology in this region. However it combines technology and human capital in a way because of the uniqueness of today's industries. The labour in these localities is more of human resource capital, therefore industries that need a lot of such investment relocate to these regions. Companies such as VISA, Chevron, Facebook, Apple, are located in Silicon valley. To be able to access new innovations in IT capital.
Bangalore in India is another place with vast area with IT potential where young innovative talents can be found. Bangalore being cheap in these IT resources, big tech companies like: Accenture, Dell, Intel, Amazon, Oracle, IBM e.t.c. have established themselves in this region to tap on the cheap form of IT capital.

Dear my Clients and followers, let me take this opportunity to thank you for your support. Let Almighty bless you in the coming year. I agree that 2020 was indeed challenging to so many of us, but the fact that we are still alive is that God has given us another chance to realise our dreams. Let's not loose hope, but be hopeful, and remain focused.
Happy new 2021.
God bless you

GOVERNANCE TIPS
There are other pertinent issues that investors also consider when viewing a given market is the availability of factors of production; i.e. land, technical/skilled labour, cheap access to finance, energy, access to the sea and the size of the market and ofcourse tax incentives.
With land they may need to know how big it is if needed for agriculture or assembly plants for example, it's cost of acquisition. Is it leasable, can it be brought upfront and so on and so forth.
Technical/ skill labour will be another important factor for consideration, if the relative number of technical/skilled labour is quite sizeable, it can be significant to overall payroll costs, it would be even worse if the bigger proportion are expertriat staff.
The market should have capital that can be acquired at a cheaper cost and flexible. High interest make the entity become highly geared due to the proportion of debt to equity finance.
If the markets are far and away from the point of production, easy access to sea routes would be paramount in the circumstance.
Cheap energy is also crucial for low cost of production.
Domestic market make it easier to get to the final consumer, however foreign market provide hard currencies.
Tax incentives woe investors and easy repatriation of profits.

https://www.linkedin.com/posts/ronald-walter-mutarindwa-58189020_riskmanagement-auditandassuarance-investments-activity-6741985798737932288-cg9l

Ronald Walter Mutarindwa on LinkedIn: #riskmanagement #auditandassuarance #investments GOVERNANCE TIPS How are risks like political, regulatory and macroeconomic important to an investor's decision? There is a lot of uncertainty in our day...

GOVERNANCE TIPS
Who are stakeholder to a company and how important are they?
There are quite an number of stakeholder both internal and external, and may include; shareholders, management, employees, customers and suppliers, investors the revenue authorities, government, the environment at large.
The first five in that order can be considered internal while the rest external, but all have varying influences.
To begin with Internal stakeholders(ISH) are the one who constitute or a make the company what it should be.
While the later are important because they can be viewed more from a regulatory perspective.
If a company is liquidated for example, the ISH normally get a share of the split, where it is sufficient. Actually the shareholders get last if there is anything remaining to distribute to them.
The ISH make the company's day to day existence for their participative contribution
Shareholders, will have to raise the capital, management will run the company, the employees will runs tasks at operational level, customers will contribute by buying the products or services, the suppliers will equally avail to the company what they require for smooth operations of the company.
All are import in varying degrees, but there has to be a balance of power from each one of them.

https://www.linkedin.com/posts/ronald-walter-mutarindwa-58189020_governance-tips-what-else-do-investors-look-activity-6738496788849823744-bvMJ

Ronald Walter Mutarindwa on LinkedIn: GOVERNANCE TIPS What else do investors look for externally before GOVERNANCE TIPS What else do investors look for externally before they decide to invest in an entity? If an investor decides to look else where than in...

Governance Tips
What are the most important internal factors that investors may be keen on before they invest in an entity?
As we had earlier broadly mentioned about internal and external factors that may be pertinent on investor's decision to invest.
Profitably is a crucial element, where there is no profitability, it implies that the entity, has no strategic direction or the entity has matured products, or there are serious litigations and fines in the foreseeable future that may erode the profits, or the products may be rendered obsolete due to technological advancement. An example can be antibiotics that cured infections, but as the body immune system varied the drugs have been rendered ineffective.
Entities need to fund research & development to improve products and increase their range to remain sustainable.
Other factors that they may consider is the leadership & management style. An entity needs to have a sound board of directors with requisite experience and a good CEO and senior management who have what it takes to run the entity.
Good reputation is one key factor, since this drives the share price and hence the value, e.g.getting involved in unethical business practices like; child labour, tax evasion, poor remuneration, bad working conditions, & insider dealing.

Dear valuable followers here is yet another article on governance, feel free to comment, share and like as well.

Governance Tips
What are the most important internal factors that investors may be keen on before they invest in an entity?
As we had earlier broadly mentioned about internal and external factors that may be pertinent on investor's decision to invest.
Profitably is a crucial element, where there is no profitability, it implies that the entity, has no strategic direction or the entity has matured products, or there are serious litigations and fines in the foreseeable future that may erode the profits, or the products may be rendered obsolete due to technological advancement. An example can be antibiotics that cured infections, but as the body immune system varied the drugs have been rendered ineffective.
Entities need to fund research & development to improve products and increase their range to remain sustainable.
Other factors that they may consider is the leadership & management style. An entity needs to have a sound board of directors with requisite experience and a good CEO and senior management who have what it takes to run the entity.
Good reputation is one key factor, since this drives the share price and hence the value, e.g.getting involved in unethical business practices like; child labour, tax evasion, poor remuneration, bad working conditions, & insider dealing.

Governance tips;
Why is it important to have a strategic plan(SP)?
Strategic planning is an organisational process of making strategies, direction, mobilising, and allocation of resources in order for an entity to meet its desired goals in the foreseeable future in pursuit of its strategy.
While the environment in which entities operate in is very unpredictable, its equally important that entities endeavour as much to predict the future, considering past trends and the trajectory going forward.
Organised entities with shorter product life cycle( PLC) like those in the technology sector will have a shorter SP, like three years, likewise those with a longer PLC, will have a longer period of at least five years or even longer, the reason being that those with a shorter PLC a lot evolves in a short time, and reverse is true for those with longer PLC.
From a SP entities can narrow down to a business plan of one year and a budget. A budget will quantify the activities in greater details which are measurable.
As years evolve towards the lapse of the SP, adjustments are like to be made to be more realistic with the prevailing circumstances.
In preparation of SP, analytical tools will be utilised, like SWOT, or Porter's five forces, PEST/EL e.t.c. SP is a top-down, bottom-up process.

Governance tips
What is business continuity planning(BCP), and how important is it in today's business world?
BCP is the documented approach on how an entity may resume business process where there is an interruption, the interruption could be as a result of crushing of a critical application, like a server, a platform or switch (like in telecoms) or as a result of a disaster or breaking up of a war from a supply chain source.
Entities that run processes on platforms or applications on realtime need to develop plans like having a parallel processing facility, in case of failure of the main processing unit the entity can be able to switch to the alternative processing unit without hindering business processes. In ny previous experience in a telecommunication company, these were some of the audit areas that I had recommended and audited to see how effective they were and there was minimal disruption of business processes. I ensured that this process switched within micro seconds without any one noticing of the switching.
Its important that this alternative processing facility be in a different location (geographically), which we otherwise refer to as an off site location to safeguard from the main facility's disaster effects that could have affected the primary processing unit.

Governance tips.
What is Disaster Recovery Planning(DRP) and how is it important in modern world of business?
DRP is the ability of an entity to perform a structured approach to restoring its business processes where an unplanned disruption has occurred.
As corporates become more embraced with technology in their business processes, and as they grow, the capacity for servers to handle the ever increasing transaction volumes becomes overwhelming. Not withstanding the requirement by regulators for financial institutions and other large business to retain information up to ten years. This leaves entities with the responsibility to keep huge amounts of data, which also poses a risk of hacker who may disrupt or corrupt the data, and other disaster that may come long.
This would require protection of information from attacks by hacker by having firewalls and antivirus on servers that can cope with ever changing circumstances in the way attacks my be launched.
Its important to keep information on an off site location, and where the realtime physical location is attacked or disrupted, the information from this off site storage can be used for business resumption, hence assurance on business recovery.
In today's financial statement audits, ITGC audit should cover this important area.

Governance tips
Why is it important to have audited financial statement(FS) before being published?
As a matter of compliance listed or large companies have to file audited FS. Audited in a sense that these have been independently verified by a competent Qualified Accountant(QA).or registered auditor like it may be referred to in some jurisdictions.
It should noted not all QA can be eligible to give an audit opinion. Its takes years of supervision or mentoring before one does, hence that's why it requires a separate registration as a "registered auditor" like in South Africa.
While we should not dought the FS prepared by competent QA, but we should also not ignore human nature like errors, and other motives that can compel one to paint a good picture of the performance of a given entity common referred to as "Creative Accounting"
While it goes without emphasising that QA are governed by professional ethics not to do such undeserving behavior, the regulators like Security/Stock Exchanges and government agencies compel companies to have their FS independently reviewed by a competent QA or group of QA, to give their opinion on whether the FS comply with IFRS or local GAAP.
It should be noted that the auditor's opinion binds others as well, in as far it can be placed reliance on.

Governance tips
Should business strategy remain static?
Every situation brings along its own advantages.That having been said, I have watched entities and business change their models, owing to the current Covid-19 pandemic. Case in point is the Amazon CEO who has taken the bull by its horns and made a fortune worth $200 billion dollars. Businesses should always strategise whenever the landscape changes. Apparently most businesses have resorted to home working and at the end of the day will discover that having staff who are not critical is a wastage of resources and not worth keeping.
In order for businesses to survive they will have to develop e-cormmerce such as electronic supply chain, and online shopping going forward.
Businesses like telecoms or online shopping companies e.g. Amazon have exhibited better performance unlike others that have seen themselves in a nose dive direction due to their modis operanda.
For example MTN group posted interim results in their second quarter 2020 an EBITDA increase of 21% from previous year's quarter. This shows how entities that have embraced technology in their operations made considerable profits.
Certainly many entities will experience loses because of the business models due to the effects impacted by Covid-19.

Dear my well intentioned followers here is yet another article on governance, feel free to read, comment, share and remember to like.
Governance tips
The conflicting circumstances at Bank of Uganda(BOU), not line with good principles of governance.
As I had earlier stated in some of my previous articles, Dr Emmanuel Tumusiime MUTEBILE, has performed an exemplary role as governor BOU. To that effect he was voted 3 consecutive times as the best Central Bank Governor in Africa. The stability of the Ugandan currency UGX is relatively stable relative to other international currencies. However as the saying ggoesoes that even those who dance well have to leave the stage at one point in time. But am certain the bank will experience a big vacuum upon his departure.
Back to the issue of governance , as I have always advocated for separation of roles of the board and executive management. Dr ETM could have exercised his discretion as the chairman of the board to do what he did (pondering), and failed to separate the role of Chairman from that of Chief Executive(CEO). Some central banks in the region wanted to do the same structure as that of BOU where by the chairman also serves as the CEO(Governor) and i strongly urged against copying and pasting, even when there is something fundamentally wrong. Structures act as means of self regulation & accountability. Good governance should leave these roles segregated.

What is investor confidence and how important is it to increase their confidence?
Publicly listed companies at the end of their financial year are supposed to present their results i e. audited financial statements coupled with the CEO/Chairman's reports , for past performance and way going forward respectively.
The former will address the AGM on how the company's performance has been in comparison to the previous year's performance, while the chairman will present to the AGM on the company's plans going forward, e.g. expansion in product range or line, or market expansion.
These coupled with a sound internal control environment as expressed by the audit findings in the management letter to the executive, which report the external auditor will present in summary at the AGM, and also serves as means of seeking his reappointment.
Where the company is listed and wants to attract more investment in its traded shares, the investors would look out for prospective shares that seem to have gained value after the companies have published their results.
Investors like "institutional investors" with excess liquidity, (which is not good financial management principle to hold excess liquidity) look out for prospective companies to buy shares as a way of increasing their shareholders wealth.

Governance tips;
How important is the chairman's role in controlling the board meetings?
Boards have a mix of members, those that are reserved(watching things behind curtains) and the vocal who take the centre stage and at time can exert pressure on others and have considerable influence. This can be at times very uncontrollable where the chairman does not leave to the task of directing meetings.
Its important to have balanced views of all members even for those whose voice could have been suppressed by the vocal ones.
It should be remembered that all board members have an equal say and voting rights.
It's therefore important that the chairman takes charge and everyone is given an equal opportunity to air their views.
The chairman needs to control the tone and mood in the board room by accepting through a show of hand and when the chance to speak is done, no interjection should be accepted from the rest of the members. Its only the chairman that allow the next contributor to the subject matter.
At the end there should be board resolutions after members have deliberated. The company secretary(Sec. to the board) should take note of all deliberation and minutes should be sent to all board participants to acknowledge what was agreed upon on their resolution and should be filed.
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Happy new year to all my friends and followers. May God bless you in the new year.

Today World Congress of Accountants are meeting in Sydney Australia, its an important event to discuss challenges faced with the profession integrity being an important issue to be considered, and the challenges technology comes with the profession.

The decision to scrap the Uganda government departments, will lead to a great loss of money that no one can ever imagine. This also creates a lot of insecurity amongst previous employees, because it threaten their jobs, and the anticipated disorganized manner in which the handover process will be carried out is likely to leaves a lot of loopholes to perpetrate fraud, leave alone the process not going smoothly. This will also paralyse government operations and for suppliers that were yet to be paid I feel sorry for them. Overall this will affect the country's development, it will certainly go in the negative. This requires huge resources to manage the change, it's going to seriously impact the population. As a result many people will be left unemployed. The crime rate will raise as a result too.