CORPORATE GOVERNANCE

Which of the following regarding corporate governance is correct?

• Corporate governance can temper growth.

• Good corporate governance can result in excessive risk-taking

• Corporate governance often result in prompt and effective decision-making.

• The aim of corporate governance is to protect the interests of shareholders and the local economies.

Which of the following regarding agency theory is correct?

• Agency theory only applies to large entities.

• Agents act in the best interest of the principal.

• Agents are assumed to be in a position of power

• Agency theory defines the relationship between agents and directors.

Which of the following is not an example of a duty or responsibility of directors?

• Having a conflict of interest but declaring it to the board of directors.

• Continuing to transact with creditors when the company's liabilities exceed the assets.

• Researching and asking questions relating to the company's operations so as to be informed

• Choosing to personally carry out instructions from the board rather than requesting subordinates to do so

The framework for establishing good corporate governance and accountability was originally set up by the:

• Nestlé Committee

• Cadbury Committee

• Thornton Committee

• Rowntree Committee

Which of the following is not one the underlying principles of the corporate governance Combined Code of Practice?

• acceptability

• integrity

• accountability

• openness

External audit of the accounts of a limited company is required

• by the Companies Act 2016

• because it is demanded by the company’s bankers

• to detect fraud

• at the discretion of the shareholders

Directors’ responsibilities are unlikely to include

• a duty to keep proper accounting records

• a duty to propose high dividends for shareholders

• a fiduciary duty

• a duty of care

A company may become insolvent if it

• makes a loss

• cannot meet its budgeted level of profit

• has negative working capital

• cannot pay creditors in full after realisation of its assets

Which of the following actions will not help directors to protect themselves from non-compliance with their obligations and responsibilities?

• ensuring that regular management accounts are prepared by the company

• keeping themselves fully informed about company affairs

• including a disclaimer clause in their service contracts

• seeking professional help

The concept of transparency means "a well-managed company should be aware of

and respond to issues of social concern".

• TRUE

• FALSE