Chapter 1 - 2 (Review Questions)
Chapter 1 - 2 (Review Questions)
3. Explain how governance can be used in the following context and give appropriate example:
a. National governance – Governance in the national scale is the exercise of political and economic
authority to cater public’s affairs in all aspects accommodate the citizen’s welfare.
b. Local governance – Local governance, on the other hand, covers a small area by which the leader
makes decision through his power and authority. He is authorized to implement policies and
laws in just a smaller scale compare to national setting. An example of which is the town council.
c. Corporate governance – Its primary feature involves the protection of shareholders and proper
communication of policies within a corporation.
d. International governance – International governance affects more than one country or region as
it covers the political cooperation and transactions that are beyond borders. It is a movements
towards negotiating responses to problems that involves connecting states.
5. Transparency and accountability are synonymous. Explain whether the statement are
correct or not.
This is incorrect. We might think that these two characteristics are similar but it isn’t
Transparency is concerned with the information that he company is providing to both external
and internal users. It should be able to deliver the correct information to be used primarily in
decision-making. On the other hand, accountability covers the one who will be accountable for the
outcomes of the decisions to those who are affected by it. Accountability cannot be enforced
without transparency, thus it is interrelated to one another.
2. The basic principle of “accountability" for effective governance answers the following
questions positively, except
a. Does the board recognize and manage risk?
b. Does the board lay solid foundations for management oversight?
c. Does the composition mix of board membership ensure an appropriate range and risk of
expertise diversity, knowledge added value?
d. Does the board promote objective, ethical and responsible decision making?
4. The rights of shareholders can be effectively upheld through the following measures except
a. By establishing an audit committee
b. By designing and disclosing a communications strategy to promote affective communication
with shareholders.
c. By encouraging active participation at general meetings.
d. By requiring the external auditor to attend the annual general meeting and to answer
questions about the audit.
5. To safeguard integrity in financial reporting, the business firm should do the following
except
a. Establish an audit committee
b. Request the external auditor to attend the annual general meeting
c. Disclose the functions reserved to the board and those delegated to management
d. Disclose the policy concerning trading in company securities by directors, officers and
employees.
7. The characteristic of good governance where fair legal framework are enforced impartially
is
a. Participation
b. Rule of Law
c. Equity
d. Accountability
2. Does good governance require absolute rules that must be adopted by all organizations?
There is no absolute rules that all organizations follow as one group differs from the other.
Each organizations have unique features including its structure, procedures and nature therefore
they adopt different rules that fits to the needs of the organization and is necessary in order to
pursue its objectives.
2. Performance
Ensuring the organization’s long term viability and enhancing the financial position.
Formulating and overseeing implementation of corporate strategy
Approving the plan, budget and corporate policies
Agreeing key performance indicators (KPIs)
Monitoring/assessing assessment, performance of the organization, the board itself,
management and major projects
Overseeing the risk management framework and monitoring business risks
Monitoring developments in the industry and the operating environment
Oversight of the organization, including its control and accountability systems
Approving and monitoring the progress of major capital expenditure, capital management
and acquisitions and divestitures
3. Compliance/Legal Conformance
Understanding and protecting the organization’s financial position
Requiring and monitoring legal and regulatory compliance including compliance with
accounting standards, unfair trading legislations, occupational health and safety and
environmental standards
Approving annual financial reports, annual reports and other public documents/ sensitive
reports
Ensuring an effective system of internal controls exists and is operating as expected