I need the a Financial Review on the reporting and fraud analysis for Lininmar Corporation based on the Annual report provided to the public and link is below.
The items to be covered are:
Contractual
liabilities
Litigation
Compensation
Directors
Compensation Review
Directors’
independence and performance
Audit
Committee Effectiveness’
Diversity
and Inclusion
Auditor,
Independence, and transparency
Company
ratings
Conclusion
I am attaching a example of work completed for another case which we Home Depot and Lowes as an examples and I have highlighted in yellow the section you need to review for how to complete the work:
To access the 2019 annual report of Linamar Corporation use the following links:
Financial Reporting (Fraud) Risks: Evaluate the pressure on management of the two companies to commit fraud. Also evaluate the opportunity for fraud by considering the effectiveness of the internal controls or corporate governance structures of Linamar
Fraud Triangle – Note that the 3 corners of the fraud triangle are Pressure, Opportunity, and Rationalization.
The risk of fraud is HIGH if Incentive/Pressure is high; Opportunity to commit fraud is high; and there is Rationalization (the fraud can be rationalized by the perpetrator).
(i) Examples of scenarios where Incentive/Pressure is HIGH:
Potential violation or debt covenants or agreements; high proportion of management (top officers of the Company) compensation in the form of stock options; increased competition within the industry; technology changes; economic recession; upcoming issuance or sale of new stock or bonds by the company.
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(ii) Examples of scenarios where Opportunity to commit fraud is HIGH:
Internal Control risk is high: The risk that the controls will fail to prevent or detect and correct fraud and other irregularities. Note that the control environment is one of the most important components of internal control. Further, one of the key components of an effective control environment is effective corporate governance.
(iii) Indicators of effective Internal Controls (Corporate Governance) include:
Board effectiveness (proportion of independent directors; # of meetings in a year). Higher proportion of independent directors is an indicator of an effective corporate governance. A higher number of board meetings is also an indicator of effective corporate governance.
CEO duality = Is the CEO/President also the Chair of the Board? CEO duality (that is, CEO serving as the Board Chair) is an indicator of weak corporate governance.
Audit committee effectiveness (accounting and financial reporting expertise of the members; are they all independent? How many times did the committee meet in the year?
The Company emphasizes adhering to Code of business conduct and ethics
The Company emphasizes the importance of Whistleblower mechanisms
The Company demonstrates a commitment to hiring competent employees
(iv) To evaluate the effectiveness of Linamar and Magna’s corporate governance, review the following information in the Proxy statement (Management Information Circular) of each company:
About the Directors (director bios), Corporate Governance Practices, The Role of the Executive Chairman, Independent directors, Mandate of the Board, Director Qualifications and Continuing Education including director attendance, Ethical Business Conduct, Board Committees, Mandate of the Audit Committee.
Linamar’s Proxy statement (Management Information Circular):
https://www.linamar.com/sites/default/files/reports/2019%20Management%20Information%20Circular.pdf
You may also review general corporate governance information such as Corporate governance policy, Charter of expectations for directors, ethics programs, board committee charters, majority voting policy on each company’s website.
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