PCOA14 Prelim Exam - 123 PDF

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THIS MODULE IS FOR THE EXCLUSIVE USE OF THE UNIVERSITY OF LA SALETTE, INC. ANY FORM OF REPRODUCTION, DISTRIBUTION, UPLOADING, OR POSTING ONLINE IN ANY FORM OR BY ANY MEANS WITHOUT THE WRITTEN PERMISSION OF THE UNIVERSITY IS STRICTLY PROHIBITED.1Univeristy of La Salette, Inc. College of Accountancy D...

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Univeristy of La Salette, Inc. College of Accountancy Dubinan East, Santiago City PCOA 014 – Governance, Business Ethics, Risk Management and Internal Control Prelim Examination General Instruction: This examination is good for 3 hours. Upload your answers in LMS using excel format. Multiple Choice: Choose the letter that corresponds your answer. (14 points) 1. The basic principle of “transparency and full disclosure” for effective corporate governance responds positively to the following questions except a. Does the board of directors’ safeguard integrity in financial reporting? b. Does the board meet the information needs of investment communities? c. Can an outsider meaningfully analyze the firm’s actions and performance? d. Has the board built long-term sustainable growth in shareholders’ value for the corporation? 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? 3. “Transparency and full disclosure” principle advocates the following except a. Sound disclosure policies and practices b. Solid foundations for management oversight c. Meeting the information needs of investment communities d. Safeguards integrity in financial reporting 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.

THIS MODULE IS FOR THE EXCLUSIVE USE OF THE UNIVERSITY OF LA SALETTE, INC. ANY FORM OF REPRODUCTION, DISTRIBUTION, UPLOADING, OR POSTING ONLINE IN ANY FORM OR BY ANY MEANS WITHOUT THE WRITTEN PERMISSION OF THE UNIVERSITY IS STRICTLY PROHIBITED.

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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 directors, officers and employees. 6. To encourage enhanced performance by the board and management, it is recommended that the following should be adopted except a. Disclosure of the process for performance evaluation of the board, its Committees, individual directors and by executives. b. A remuneration committee. c. Distinguish between non-executive director’s remuneration from that of executives. d. Establish policies on risks oversight and management. 7. The characteristic of good governance where fair legal framework are enforced impartially is a. Participation b. Rule of Law c. Equity d. Accountability 8. Approving annual financial reports and other public documents are specific responsibilities of a. Management b. Board of Directors c. Shareholders d. Employees 9. Providing oversight of the internal and external audit function, the process of preparing the annual financial statements and public reports on internal control are the responsibility of a. Board of directors b. Chief executive officer c. Chief financial officer d. Audit committee of the board of directors 10. Who is responsible for ensuring the accuracy, timeliness of public reporting of financial and other information for public companies? a. External auditors b. Securities and Exchange Commission c. Shareholders d. Board of Accountancy

11. Who performs audit of companies for compliance with company policies and laws, audits efficiency of operations and periodic evaluation and tests of controls? a. External auditors b. Internal auditors c. Commission on audit d. Chief accountant 12. An independent director is expected to a. Apply expertise and skills in the corporations’ best interest b. Asset management to keep performance objectives at the top of its agenda c. Respect the collective, cabinet nature of the board's decision d. Act as conduit between the board and the organization 13. Audit committee activities and responsibilities include which of the following? a. Selecting the external audit firm. b. Approving corporate strategy c. Reviewing management performance and compensation d. None of the above. 14. Which of the following audit committee responsibilities has the SEC mandated? a. Obtaining each year, a report by the internal auditor that addresses the company's internal control procedures, any quality control or regulatory problems, and any relationships that might threaten the independence of the internal auditor. b. Discussing in its meetings the company's earnings press releases, as well as financial information and earnings guidance provided to analysts. c. Reviewing with the internal auditor any audit problems or difficulties that they have had with management. d. All of the above. Essay: Answer the following questions. (36 points) 1. What does governance mean? (5 points) 

Governance refers to the process how elements in society exert authority and influence, execute policies and decisions concerning public life. It is how government decision making affects people in that nation.

2. Explain whether the following statement is true or false. "Governance is exercised only by the government of a country". (5 points)

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Governance does not limit only to the government of a country. Governance can also be applied even if you’re not in politics. Exercising of governance help organizations effectively and efficiently allocate resources to achieve good results. With that, I disagree that governance is exercised only by the government of a country.

3. Explain the three basic principles of effective corporate governance. (10 points) 

Transparency and Full Disclosure The full disclosure principle is a concept that requires a business to report all necessary information. The main purpose behind the full disclosure principle is to avoid managers not disclosing any information that could be of great importance and affect the businesses financial situation.

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Accountability Accountability is the process of disclosure of all practices and results, referring to previous principles. In order to maintain the principle of transparency; the disclosed information must be completely true, regardless of whether it is positive or negative.

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Corporate Control Corporate control is the process of controlling as well as monitoring activities within a company. Corporate control structure is designed to ensure that planned objectives are reached. Moreover, it reduces and corrects any arising changes and inefficiencies.

4. Does good governance require absolute rules that must be adopted by all organization? (8 points) Good governance does not require absolute rules; rules are made and should be followed by the company no matter what. It all depends on the employees. They should follow the rules set by the company the best they can. good governance doesn't come on what the rules states, but on how those people being governed the rules act. 5. Why is there a need for a corporation to maintain a comprehensive and cost-efficient communication channels to shareholders and other investors? (4) 

To ensure that there is timely and accurate dissemination of material, and relevant information to its shareholders to enable them to make knowledgeable decision.

“The Lord is with me; I will not be afraid. What can mere mortals do to me? The Lord is with me; he is my helper. I look in triumph on my enemies. It is better to take refuge in the Lord than to trust in humans. It is better to take refuge in the Lord than to trust in princes.” – (Psalm 118:69) End of examination...