Deck 5: An Introduction to Corporate Governance

Question 1

Complete the definition of the broad concept of good governance using the following terms:
1. are accountable, fair and transparent
2. control
3. laws
4. own
5. provide a maximum return
6. rules and practices
7. shareholders
8. Stakeholders
-Good governance refers to the framework of ________________ by which those who ________________ a company or organization ensure that they act with integrity and ________________ to ________________ who have a relationship with the entity.

Answer 1

rules and practices, control , are accountable fair and transparent , stakeholders .

Question 2

The UK Corporate Governance Code is described as taking a narrow concept of corporate governance. Which of the following best describes this concept?

A) Corporate governance focuses on the relationship between directly affected stakeholder groups.
B) Assessing corporate governance is the responsibility of the auditor.
C) Corporate governance focuses on ensuring the corporation acts in the best interests of the shareholders.
D) Corporate governance is focussed on ensuring that the corporation follows the appropriate laws and regulations.

Answer 2

Corporate governance focuses on ensuring the corporation acts in the best interests of the shareholders.

Question 3

Which of the following is NOT a reason provided as to why the chairman and chief executive of a company should not be the same person?

A) Both roles require significant time commitments that would make it difficult for one person to be effective at both.
B) The chairman, as a member of the board of directors, is responsible for the appointment, remuneration and performance of the chief executive.
C) Combining the chairman and the chief executive gives one person considerable power over both the strategic direction and the operations of the company.
D) Because the chief executive and chairman sit on the board of directors this would give one person two votes at the board.

Answer 3

Because the chief executive and chairman sit on the board of directors this would give one person two votes at the board.

Question 4

Which of the following is NOT a responsibility of the Board of Directors in accordance with the main principles of The UK Corporate Governance Code? ?

A) The board is responsible for determining the principle risks it is willing to take in achieving its strategic objectives and enacting appropriate risk management.
B) The board should seek out the views of major shareholders.
C) The board should oversee the operational activities of an organization to ensure that they are undertaken in an efficient and effective manner.
D) The board's roles include challenging and contributing to strategy development.

Question 5

Which of the following is a reason that the Department of Business, Energy and Industrial Strategy has given for board diversity being a key priority?

A) It will lead to greater innovation.
B) It will lead to more informed decision making.
C) It will lead to more effective challenging of management.
D) All of the above.

Question 6

Which of the following is NOT one of the roles and responsibilities of the audit committee in accordance with The UK Corporate Governance Code? ?

A) Selecting and appointing the external auditor
B) Monitoring and reviewing the internal audit function
C) Reviewing significant financial reporting judgements in the financial statements
D) Developing and implementing policy on the engagement of the external auditor to provide non-audit services

Question 7

The UK Stewardship Code aims 'to promote the long-term success of companies in such a way that the ultimate providers of capital also prosper'. To whom is the code intended to apply?

A) Management
B) Institutional Investors
C) Directors
D) Company Stakeholders

Question 8

Which of the following statements is NOT true about the FRC's 2016 Audit Firm Governance Code? ?

A) It is required to be followed by any audit firm that audits a company listed on the main market of the London Stock Exchange.
B) It is intended to enhance trust and confidence in the value of audit amongst the public.
C) Its purpose is to promote transparency and confidence in the operations of audit firms.
D) The code enhances the disclosures that would be seen in an audit firm's transparency report.