Which one

of the
following
statements
is true?
  Conflicts of interests between management and stakeholders can
   result in bankruptcies or major frauds.
It is the responsibility of internal audit to design and monitor controls
   that reasonably assure that objectives are met.
The management board approves the mission, vision, objectives and
   strategy of the entity.
Corporate governance addresses the principal–agent relationship
   between management and directors on the one hand and the
relationship between the company and suppliers on the other.

Common stock that is widely distributed among individuals describes

what type of corporate governance structure?
  Network.
  
Public.
  
Supervisory.
  
Market.
  

Which of the following is not something performed by the company’s

board?
  Defines the company’s strategy.
  
Day to day supervision of the sales manager.
  
Oversees management and ensures the quality of information provided
   to shareholders and to financial markets through the financial
statements.
Appoints the corporate officers responsible for managing the company
   and implementing this strategy.

The Sarbanes–Oxley Act requires that executive officers attest to all

the following except:
  Their conclusions about effectiveness of internal control.
  
All deficiencies in internal control or any fraud has been disclosed to
   regulators.
The statements fairly present the company’s financial condition.
  
Based on their knowledge there are no untrue statements or omissions
   of material fact.

In a two-tier structure of corporate governance:

  Members of the supervisory board are appointed by the executive board.
  
The chair of the non-executive board is also chair of the executive
   board.
Non-executives are responsible for the day-to-day operations.
  
CEO and chair of the board are split.
  

A board member is independent when:

  She is a family member of the CEO.
  
She is a top executive of the company supervised.
  
She represents the shareholders – not other constituencies.
  
She has no relationship of any kind whatsoever with the corporation, its
   group or the management of either that is such as to colour her
judgement.

Which of the following is not a responsibility of audit committees?

  Management compensation.
  
Reviewing corporate reporting processes.
  
Relations with the independent auditor.
  
Monitoring management.
  
 To support the supervisory role of the audit committee, the Sarbanes–
Oxley Act requires the auditor to report directly to the audit committee:
I. All critical accounting policies and practices in use by the publicly
listed company.
II. Generally accepted audit standards alternatives discussed with
management and any alternative preferred by the audit firm.
III. Other material written communications such as management
letters and unadjusted audit differences.

I II III

a. Yes Yes Yes

b. No Yes Yes

c. Yes Yes No

d. Yes No Yes

  a
  
d
  
b
  
c
  

The 2012 EU Commission Communication ‘Action Plan: European

company law and corporate governance’ strives to:
  Enhance competition between companies and investors.
  
Improve the framework for cross-border operation of companies.
  
Encourage short-term shareholder engagement.
  
Prevent countries from introducing a two-tier board structure.
  

Which of the following is not a code of corporate governance?

  Cromme.
  
 Vienot.
  
The Sarbanes–Oxley.
  
King.
  

Section 407 of the Sarbanes–Oxley Act states that the SEC shall issue
rules to require listed companies to disclose whether at least one
member of its audit committee is a ‘financial expert’. Which of the
following statements is not true of the ‘financial expert’?
  The listed company must disclose the name of the audit committee
   financial expert and whether that person is independent.
The financial expert must have experience in the preparation or auditing
   of financial statements of other SEC listed companies.
The company should consider if the financial expert has experience with
   internal accounting controls.
The company should consider if the financial expert has an
   understanding of generally accepted accounting principles and financial
statements.

According to agency theory:

  Information asymmetry does not exist.
  
The management board is the agent.
  
Self-interest plays no role.
  
The management board is the principal.
  

Sustainability reporting consists of:

  Social and environmental issues.
  
Economic, social and environmental issues.
  
Economic issues.
  
Environmental issues.
  
 According to Anglo-Saxon best practice, the board represents:
  Minority shareholders.
  
Shareholders – not other constituencies.
  
All constituencies.
  
The employees.
  

According to best practice the audit committee:

  Is responsible for designing adequate internal controls.
  
Nominates the executive board.
  
Oversees the accounting department.
  
Selects the auditor.
  

XBRL refers to:

  Standard language for business reporting.
  
A tool for generating a web-based audit report.
  
Financial reporting software.
  
An automated audit tool.
  

Internal control objectives are, among others:

  Segregation of duties.
  
Control environment and monitoring.
  
Risk assessment.
  
Compliance with law and regulations.
  
 In 2006 the International Forum of Independent Audit Regulators
(IFIAR) was established to:
  Provide a focus for contacts with shareholders.
  
Block any further merges between large audit firms.
  
Share knowledge of the audit market environment and practical
   experience of independent audit regulatory activity.
Promote legal enforcement of non-compliance with law and regulation.
  

A whistleblower procedure should be implemented:

  As a tool of public relations.
  
To support the internal audit department.
  
As a tool of management.
  
For receipt, retention and treatment of complaints received by the
   company regarding accounting, internal controls or auditing matters.

An internal audit department:

  Is a tool of management.
  
Guarantees reliable information processing.
  
Reports directly to the shareholders.
  
Is managed by the external auditor.
  
1.

Which one of the following statements is true?

The management board approves the
Your Answer: mission, vision, objectives and strategy of
the entity.
Correct Answer: Conflicts of interests between
management and stakeholders can result
in bankruptcies or major frauds.

2.

Common stock that is widely distributed among individuals describes what type of corporate
governance structure?

Market.
Your Answer:

3.

Which of the following is not something performed by the company’s board?

Oversees management and ensures the quality of information provided to

Your Answer: shareholders and to financial markets through the financial statements.
Correct Answer: Day to day supervision of the sales manager.

4.

The Sarbanes–Oxley Act requires that executive officers attest to all the following except:

All deficiencies in internal control or any fraud has been disclosed to regulators.
Your Answer:

5.

In a two-tier structure of corporate governance:

Non-executives are responsible for the day-to-day operations.

Your Answer:
Correct Answer: CEO and chair of the board are split.

6.

A board member is independent when:

She is a family member of the CEO.

Your Answer:
Correct Answer: She has no relationship of any kind whatsoever with the corporation, its
group or the management of either that is such as to colour her judgement.

7.

Which of the following is not a responsibility of audit committees?

Management compensation.
Your Answer:

8.

To support the supervisory role of the audit committee, the Sarbanes–Oxley Act requires the auditor
to report directly to the audit committee:
I. All critical accounting policies and practices in use by the publicly listed company.
II. Generally accepted audit standards alternatives discussed with management and any alternative
preferred by the audit firm.
III. Other material written communications such as management letters and unadjusted audit
differences.

I II III

a. Yes Yes Yes

b. No Yes Yes

c. Yes Yes No

d. Yes No Yes

b
Your Answer:
Correct Answer: a
9.

The 2012 EU Commission Communication ‘Action Plan: European company law and corporate
governance’ strives to:

Enhance competition between companies and investors.

Your Answer:
Correct Answer: Encourage short-term shareholder engagement.

10.

Which of the following is not a code of corporate governance?

Cromme.
Your Answer:
Correct Answer: The Sarbanes–Oxley.

11.

Section 407 of the Sarbanes–Oxley Act states that the SEC shall issue rules to require listed
companies to disclose whether at least one member of its audit committee is a ‘financial expert’.
Which of the following statements is not true of the ‘financial expert’?

The listed company must disclose the name of the audit committee financial
Your Answer: expert and whether that person is independent.
Correct Answer: The company should consider if the financial expert has experience with
internal accounting controls.

12.

According to agency theory:

The management board is the agent.

Your Answer:

13.

Sustainability reporting consists of:

Economic issues.
Your Answer:
Correct Answer: Economic, social and environmental issues.
14.

According to Anglo-Saxon best practice, the board represents:

Shareholders – not other constituencies.

Your Answer:

15.

According to best practice the audit committee:

Is responsible for designing adequate internal controls.

Your Answer:
Correct Answer: Selects the auditor.

16.

XBRL refers to:

Financial reporting software.

Your Answer:
Correct Answer: Standard language for business reporting.

17.

Internal control objectives are, among others:

Compliance with law and regulations.

Your Answer:

18.

In 2006 the International Forum of Independent Audit Regulators (IFIAR) was established to:

Share knowledge of the audit market environment and practical experience of

Your Answer: independent audit regulatory activity.

19.

A whistleblower procedure should be implemented:

 As a tool of public relations.
Your Answer:

20.

An internal audit department:

Is a tool of management.
Your Answer:

 Corporate governance is _____.

a. the way key stakeholders interact to make decisions
b. the way shareholders vote
c. the power of the board of directors
d. the way the CEO makes decisions

2. Which of the follow are examples of how power may be distributed in

corporate governance?
a. Votes per share
b. Rights or interests allowed to be considered in major decision-making
c. A 2/3 majority rule for votes of the board of directors
d. All of the answers are correct.

Which of the following is NOT considered a key player in corporate

governance?
shareholder

director

CEO

supplier

1. Corporate governance is the set of mechanisms used to manage the relationship

among stakeholders and to determine and control the strategic direction and
performance of an organization. T
2. Corporate governance involves oversight in areas where owners, managers, and
members of Boards of Directors may have conflicts of interest. T
 3. Corporate governance is a means to establish harmony between parties (the firm's
owners and its top-level managers) whose interests may conflict. T
4. In modern corporations-especially those in the United States and United
Kingdom-a primary objective of corporate governance is to ensure that the
interests of top-level managers are aligned with the interests of shareholders. T
5. Recent emphasis on corporate governance stems mainly from the failure of
corporate governance mechanisms to adequately monitor and control top-level
managers' decisions. T
e. The three internal corporate governance mechanisms are ownership concentration, Board
of Directors, and the market for corporate control.

f. Corporate governance is all of the following EXCEPT: A) mechanisms used to determine

and control the strategic direction and performance of organizations. B) a means to
establish and maintain harmony between owners and top managers whose interests may
conflict. C) ensuring that top managers' interests are aligned with the interests of
stockholders. D) Resolve conflicts among corporate employees.

g. In the United States, the fundamental goal of business is to: A) ensure customer
satisfaction. B) Maximize shareholder wealth. C) provide job security. D) generate
profits.
h. Multiple Choice
i. Q 71
j. In the United States, a firm's key stakeholder(s) is(are) the: A) government. B)
executives. C) shareholders. D) customers.
k. Multiple Choice