MCQ Questions on Governance

What was the primary reason for Enron's collapse?

• Aggressive accounting practices masked losses

• Poor employee engagement and motivation

• Decline in global energy market demand

• Lack of investment in renewable energy

Which financial mechanism did Enron abuse to hide debt?

• Off-balance sheet Special Purpose Entities (SPEs)

• Leveraged Employee Stock Ownership Plans (ESOPs)

• Pension fund transfers to shell companies

• Reverse merger financing arrangements

In a well-governed company, what is the role of the board of directors?

• Provide strategic oversight and protect stakeholder interests

• Review employee leave requests and payroll data

• Approve all external vendor relationships personally

• Monitor IT support tickets and user access controls

Which key governance failure allowed Enron's misconduct to persist?

• Lack of independence among audit committee members

• Absence of social media policies for executives

• Misalignment of office workstations and structures

• Excessive focus on customer feedback scores

Which of the following is a principle of good corporate governance?

• Accountability, transparency, fairness, and responsibility

• Centralization, bureaucracy, tradition, and secrecy

• Advertising, outsourcing, profits, and stock splits

• Innovation, franchising, mergers, and sustainability

What was Arthur Andersen's role in the Enron scandal?

• Acted as the external auditor and destroyed documents

• Operated Enron's marketing division independently

• Provided Enron with renewable energy subsidies

• Regulated Enron's commodity futures operations

Which governance improvement could have most prevented Enron's fraud?

• Strengthening internal audit independence and ethics culture

• Offering staff discounts on electricity and gas services

• Increasing the executive team's social media presence

• Launching more retail energy product advertisements

What is the function of a risk management framework in corporate governance?

• Identify, assess, and mitigate strategic and operational risks

• Assign daily meeting rooms to departmental staff only

• Develop employee incentive packages and gym subsidies

• Create branding guidelines for marketing activities

Which of the following reflects poor board behavior?

• Ignoring whistleblower reports and red flag warnings

• Reviewing quarterly financial statements proactively

• Asking internal auditors to escalate control issues

• Rotating committee members every fiscal year

What lesson can be drawn from Enron about executive compensation?

• Incentives based solely on short-term profits are dangerous

• Bonuses must always be higher than base salaries annually

• All directors should avoid taking equity-based incentives

• Compensation should depend only on company expansion