Chapter 2 f8 acca corporate governance mcqs

ACCA AA Chapter 2: Corporate Governance - Practice

Exam (50 Questions)

Part 1: Questions

1 Which of the following is NOT an OECD Principle of Corporate Governance?

A It should ensure timely and accurate disclosure of all material matters in financial statements

B It should ensure a majority of independent non-executive directors on board com-mittees

C It should promote transparent and fair markets and support effective supervision and enforcement

D It should recognise the rights and ensure the equitable treatment of all stakeholders

2 Which of the following defines ’corporate governance’?

A The part of the board made up of non-executive directors (NEDs)

B The board of directors, trustees or governors of an entity

C The relationship between directors, shareholders and auditors

D The system by which companies are directed and controlled

3 Which of the following is NOT a requirement of the UK Corporate Governance Code?

A A smaller company should have at least two independent non-executive directors

B There should be a nomination committee to lead the process for board appointments

C Directors’ performance should be subject to annual review

D The roles of finance director and chief executive should not be exercised by the same individual

4 Which TWO of the following statements regarding corporate governance in the UK are

correct?

A All directors should be subject to re-election every three years

B Remuneration for non-executive directors cannot include share options

C A majority of members of the audit committee should be independent non-executive directors

D The board should establish a separate risk committee of independent non-executive directors

5 Which of the following statements is correct according to the UK Corporate Governance Code?

A A listed company must have an internal audit function

B The chief executive is responsible for leadership of the board

C Appointments to the board should be led by a remuneration committee

D The position of chair should not be held beyond nine years

6 The primary purpose of corporate governance is to:

A Maximize shareholder wealth

B Ensure effective direction and control of the company

C Guarantee compliance with all legal requirements

D Increase market share

7 Which of the following is a key role of non-executive directors (NEDs)?

A Managing daily operations

B Providing independent oversight and challenge

C Preparing financial statements

D Setting dividend policies

8 The OECD Principles emphasize:

A Board control over management only

B Transparency and accountability

C Maximizing profits

D Reducing employee turnover

9 According to the UK Corporate Governance Code, the board should:

A Delegate all decisions to the CEO

B Establish procedures to manage risk

C Avoid stakeholder engagement

D Focus only on financial performance

10 The role of the audit committee includes:

A Approving the companys strategy

B Overseeing financial reporting and internal controls

C Setting executive remuneration

D Managing operational risks

11 Which of the following is a benefit of good corporate governance?

A Increased operational costs

B Enhanced investor confidence

C Reduced transparency

D Limited stakeholder engagement

12 The UK Corporate Governance Code applies primarily to:

A Private companies

B Listed companies

C Non-profit organizations

D Government entities

13 Which committee is responsible for overseeing the appointment of new directors?

A Audit committee

B Remuneration committee

C Nomination committee

D Risk committee

14 The OECD Principles encourage:

A Equitable treatment of all shareholders

B Excluding minority shareholders

C Prioritizing executive remuneration

D Ignoring stakeholder rights

15 The UK Corporate Governance Code recommends that the board should include:

A Only executive directors

B A balance of executive and non-executive directors

C Only non-executive directors

D Only independent directors

16 Which of the following is a responsibility of the board under the UK Corporate Gover-nance Code?

A Setting the companys strategic aims

B Preparing tax returns

C Managing daily operations

D Conducting external audits

17 The OECD Principles do NOT include:

A Ensuring effective board performance

B Promoting mandatory executive bonuses

C Protecting shareholder rights

D Ensuring transparency in disclosures

18 The UK Corporate Governance Code suggests that the chair should:

A Be the chief executive

B Lead the board and ensure its effectiveness

C Manage financial reporting

D Oversee daily operations

19 Which of the following is a key feature of the OECD Principles?

A Limiting shareholder rights

B Ensuring accountability to shareholders

C Focusing only on financial performance

D Ignoring board diversity

20 The UK Corporate Governance Code recommends that the audit committee should:

A Include at least one executive director

B Be composed entirely of independent non-executive directors

C Manage the companys strategy

D Set remuneration policies

21 Which of the following is NOT a role of the remuneration committee?

A Setting executive pay

B Ensuring pay aligns with performance

C Overseeing financial reporting

D Reviewing incentive schemes

22 The OECD Principles promote:

A Transparent and fair markets

B Exclusive focus on shareholder profits

C Limiting board oversight

D Ignoring stakeholder interests

23 According to the UK Corporate Governance Code, the board should:

A Avoid risk management

B Monitor and review risk management systems

C Delegate risk management to auditors

D Ignore internal controls

24 Which of the following enhances corporate governance?

A Separation of the roles of chair and chief executive

B Combining the roles of chair and chief executive

C Excluding non-executive directors

D Ignoring shareholder feedback

25 The nomination committees role includes:

A Setting financial policies

B Leading the process for board appointments

C Managing external audits

D Approving operational budgets

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

A Ensuring board diversity

B Maximizing short-term profits

C Limiting shareholder rights

D Reducing board accountability

27 The UK Corporate Governance Code encourages:

A Annual board performance evaluations

B Permanent chair appointments

C Excluding non-executive directors

D Ignoring risk management

28 The OECD Principles emphasize the importance of:

A Stakeholder exclusion

B Board accountability

C Limiting transparency

D Ignoring minority shareholders

29 Which of the following is a responsibility of the audit committee?

A Setting executive remuneration

B Monitoring the integrity of financial statements

C Managing daily operations

D Approving dividends

30 The UK Corporate Governance Code suggests that non-executive directors should:

A Manage the companys operations

B Provide independent oversight

C Prepare financial statements

D Set corporate strategy

31 Which of the following is NOT a feature of good corporate governance?

A Transparency

B Accountability

C Excessive executive control

D Fair treatment of stakeholders

32 The OECD Principles encourage boards to:

A Ignore stakeholder interests

B Ensure effective monitoring of management

C Focus only on financial metrics

D Limit board diversity

33 The UK Corporate Governance Code recommends that the remuneration committee should:

A Include only executive directors

B Be composed of independent non-executive directors

C Manage financial reporting

D Oversee daily operations

34 Which of the following is a key objective of corporate governance?

A Enhancing long-term sustainability

B Maximizing short-term profits

C Reducing board oversight

D Limiting stakeholder engagement

35 The OECD Principles include:

A Ensuring timely and accurate disclosure

B Limiting board accountability

C Excluding minority shareholders

D Ignoring internal controls

36 The UK Corporate Governance Code suggests that the board should:

A Avoid stakeholder engagement

B Promote effective relationships with shareholders

C Delegate all decisions to the CEO

D Ignore risk management

37 Which of the following is a role of the board under the OECD Principles?

A Setting operational budgets

B Providing strategic oversight

C Managing daily operations

D Preparing financial statements

38 The UK Corporate Governance Code recommends that:

A The chair should be an executive director

B The board should include a majority of independent directors

C The CEO should lead the board

D The audit committee should include the CEO

39 Which of the following is NOT a responsibility of the board?

A Setting strategic objectives

B Overseeing financial reporting

C Managing daily operations

D Monitoring risk management

40 The OECD Principles promote:

A Limiting shareholder rights

B Ensuring equitable treatment of shareholders

C Ignoring board oversight

D Reducing transparency

41 The UK Corporate Governance Code encourages:

A Annual re-election of all directors

B Permanent board appointments

C Excluding non-executive directors

D Ignoring stakeholder feedback

42 Which of the following is a benefit of independent non-executive directors?

A Managing daily operations

B Providing objective oversight

C Preparing financial statements

D Setting operational budgets

43 The OECD Principles emphasize:

A Limiting board accountability

B Ensuring effective corporate governance frameworks

C Ignoring stakeholder rights

D Reducing transparency

44 The UK Corporate Governance Code suggests that the board should:

A Avoid risk oversight

B Establish a risk management framework

C Delegate all risk management to auditors

D Ignore internal controls

45 Which of the following is a key feature of the OECD Principles?

A Promoting board diversity

B Limiting shareholder rights

C Ignoring stakeholder interests

D Reducing board accountability

46 The UK Corporate Governance Code recommends that the nomination committee should:

A Include only executive directors

B Be led by an independent non-executive director

C Manage financial reporting

D Oversee daily operations

47 Which of the following is NOT a principle of the OECD framework?

A Ensuring board accountability

B Promoting mandatory executive bonuses

C Protecting shareholder rights

D Ensuring transparency

48 The UK Corporate Governance Code suggests that:

A The board should avoid stakeholder engagement

B The board should promote long-term sustainability

C The CEO should manage all board activities

D The chair should be an executive director

49 Which of the following is a role of the remuneration committee?

A Overseeing financial reporting

B Setting executive remuneration

C Managing daily operations

D Conducting external audits

50 The OECD Principles encourage:

A Limiting board oversight

B Ensuring effective monitoring of management

C Ignoring stakeholder interests

D Reducing transparency

51 The UK Corporate Governance Code recommends that the audit committee should:

A Include the CEO

B Be composed of independent non-executive directors

C Manage the companys strategy

D Set executive remuneration

52 Which of the following is a key objective of corporate governance under the OECD Principles?

A Maximizing short-term profits

B Ensuring long-term sustainability

C Limiting shareholder rights

D Reducing board accountability

Part 2: Answers with Explanations

1 B

Explanation: The OECD Principles of Corporate Governance focus on ensuring

trans-parency, accountability, shareholder rights, equitable treatment of stakeholders, and pro-moting fair markets While disclosure of material matters (A), equitable treatment (D), and fair markets (C) are explicit principles, requiring a majority of independent non-executive directors on board committees (B) is not a specific OECD requirement The OECD emphasizes board effectiveness but does not mandate specific compositions for committees

2 D

Explanation: Corporate governance is defined as the system by which companies are

di-rected and controlled, encompassing the relationships and processes that guide the com-panys operations and accountability Option A refers to a subset of the board, B describes the board itself, and C is a partial aspect of governance, but D provides the comprehen-sive definition as per the Cadbury Report and other standards

3 D

Explanation: The UK Corporate Governance Code requires smaller companies to have

at least two independent non-executive directors (A), a nomination committee for board appointments (B), and annual performance reviews for directors (C) However, it does not mandate separating the roles of finance director and chief executive (D); it only requires separation of the chair and chief executive roles to ensure balanced leadership

4 B, C

Explanation: The UK Corporate Governance Code states that non-executive directors

remuneration should not include share options (B) to maintain independence, and the audit committee should have a majority of independent non-executive directors (C) to ensure objective oversight However, directors of listed companies face annual re-election (A), not every three years, and a separate risk committee (D) is not mandatory, though risk oversight is required

5 D

Explanation: The UK Corporate Governance Code recommends that the chairs tenure

should not exceed nine years (D) to ensure board refreshment A listed company is not required to have an internal audit function (A), the chair (not the chief executive) leads the board (B), and board appointments are led by the nomination committee, not the remuneration committee (C)

6 B

Explanation: Corporate governance aims to ensure effective direction and control of the

company, balancing the interests of stakeholders and promoting long-term success Max-imizing shareholder wealth (A) is a business objective, not the primary purpose of gov-ernance Compliance (C) and market share (D) are secondary outcomes

7 B

Explanation: Non-executive directors (NEDs) provide independent oversight,

challeng-ing management decisions and ensurchalleng-ing accountability They do not manage operations (A), prepare financial statements (C), or set dividends (D), which are executive or board responsibilities

8 B

Explanation: The OECD Principles emphasize transparency and accountability to

stake-holders, ensuring fair and reliable reporting and governance practices Board control (A), profits (C), and employee turnover (D) are not primary focuses

9 B

Explanation: The UK Corporate Governance Code requires the board to establish

proce-dures for risk management and internal controls Delegating all decisions (A), avoiding stakeholders (C), or focusing only on financials (D) contradicts the Codes principles

10 B

Explanation: The audit committee oversees financial reporting, internal controls, and

au-ditor independence Strategy (A), remuneration (C), and operational risks (D) are handled

by other committees or the board

11 B

Explanation: Good corporate governance enhances investor confidence by ensuring

trans-parency and accountability It does not increase costs (A), reduce transtrans-parency (C), or limit engagement (D)

12 B

Explanation: The UK Corporate Governance Code applies primarily to listed

compa-nies, ensuring high governance standards for public entities Private companies (A), non-profits (C), and government entities (D) may follow other frameworks