1.

Source: (SEC-Code of Corporate Governance for Publicly-Listed Companies)

SEC Memorandum Circular No. 19
Series of 2016

Corporate Governance – the system of stewardship and control to guide organizations in fulfilling their
long-term economic, moral, legal and social obligations towards their stakeholders. Corporate
governance is a system of direction, feedback and control using regulations, performance standards and
ethical guidelines to hold the Board and senior management accountable for ensuring ethical behavior –
reconciling long-term customer satisfaction with shareholder value – to the benefit of all stakeholders
and society.
Its purpose is to maximize the organization’s long-term success, creating sustainable value for its
shareholders, stakeholders and the nation.

Board of Directors – the governing body elected by the stockholders that exercises the corporate
powers of a corporation, conducts all its business and controls its properties.

Management – a group of executives given the authority by the Board of Directors to implement the
policies it has laid down in the conduct of the business of the corporation.

Independent director – a person who is independent of management and the controlling shareholder,
and is free from any business or other relationship which could, or could reasonably be perceived to,
materially interfere with his exercise of independent judgment in carrying out his responsibilities as a
director.

Executive director – a director who has executive responsibility of day-to-day operations of a part or the
whole of the organization.

Non-executive director – a director who has no executive responsibility and does not perform any work
related to the operations of the corporation.

Conglomerate – a group of corporations that has diversified business activities in varied industries,
whereby the operations of such businesses are controlled and managed by a parent corporate entity.

Internal control – a process designed and effected by the board of directors, senior management, and
all levels of personnel to provide reasonable assurance on the achievement of objectives through
efficient and effective operations; reliable, complete and timely financial and management information;
and compliance with applicable laws, regulations, and the organization’s policies and procedures.

Enterprise Risk Management – a process, effected by an entity’s Board of Directors, management and
other personnel, applied in strategy setting and across the enterprise that is designed to identify
potential events that may affect the entity, manage risks to be within its risk appetite, and provide
reasonable assurance regarding the achievement of entity objectives.2

Related Party – shall cover the company’s subsidiaries, as well as affiliates and any party (including their
subsidiaries, affiliates and special purpose entities), that the company exerts direct or indirect control
over or that exerts direct or indirect control over the company; the company’s directors; officers;
shareholders and related interests (DOSRI), and their close family members, as well as corresponding
persons in affiliated companies. This shall also include such other person or juridical entity whose
interest may pose a potential conflict with the interest of the company.

Related Party Transactions – a transfer of resources, services or obligations between a reporting entity
and a related party, regardless of whether a price is charged. It should be interpreted broadly to include
not only transactions that are entered into with related parties, but also outstanding transactions that
are entered into with an unrelated party that subsequently becomes a related party.

Stakeholders – any individual, organization or society at large who can either affect and/or be affected
by the company’s strategies, policies, business decisions and operations, in general. This includes,
among others, customers, creditors, employees, suppliers, investors, as well as the government and
community in which it operates.

Source: REVISED CODE OF CORPORATE GOVERNANCE

SEC Memorandum Circular No. 6
Series of 2009

Corporate Governance – the framework of rules, systems and processes in the corporation that governs
the performance by the Board of Directors and Management of their respective duties and
responsibilities to the stockholders;

Board of Directors – the governing body elected by the stockholders that exercises the corporate
powers of a corporation, conducts all its business and controls its properties;

Exchange – an organized market place or facility that brings together buyers and sellers, and executes
trades of securities and/or commodities;

Management – the body given the authority by the Board of Directors to implement the policies it has
laid down in the conduct of the business of the corporation;

Independent director – a person who, apart from his fees and shareholdings, is independent of
management and free from any business or other relationship which could, or could reasonably be
perceived to, materially interfere with his exercise of independent judgment in carrying out his
responsibilities as a director;

Executive director – a director who is also the head of a department or unit of the corporation or
performs any work related to its operation;

Non-executive director – a director who is not the head of a department or unit of the corporation nor
performs any work related to its operation;

Non-audit work – the other services offered by an external auditor to a corporation that are not directly
related and relevant to its statutory audit functions, such as, accounting, payroll, bookkeeping,
reconciliation, computer project management, data processing, or information technology outsourcing
services, internal audit, and other services that may compromise the independence and objectivity of an
external auditor;
Internal control – the system established by the Board of Directors and Management for the
accomplishment of the corporation’s objectives, the efficient operation of its business, the reliability of
its financial reporting, and faithful compliance with applicable laws, regulations and internal rules;

Internal control system – the framework under which internal controls are developed and implemented
(alone or in concert with other policies or procedures) to manage and control a particular risk or
business activity, or combination of risks or business activities, to which the corporation is exposed;

Internal audit – an independent and objective assurance activity designed to add value to and improve
the corporation’s operations, and help it accomplish its objectives by providing a systematic and
disciplined approach in the evaluation and improvement of the effectiveness of risk management,
control and governance processes;

Internal audit department – a department or unit of the corporation and its consultants, if any, that
provide independent and objective assurance services in order to add value to and improve the
corporation’s operations;

Internal Auditor – the highest position in the corporation responsible for internal audit activities. If
internal audit activities are performed by outside service providers, he is the person responsible for
overseeing the service contract, the overall quality of these activities, and follow-up of engagement
results.

2. Corporate Raiding - The act or practice of an investor or a group of investors buying a majority
stake or a significant minority stake in a publicly-traded company such that it can dismiss current
managers and replace them with handpicked successors. Raiding often occurs when the
company's share price has recently fallen significantly. It is less commonly called venture
arbitrage. (The Free Dictionary by Farlex)

3. Fraud - Any attempt to deceive another for financial gain. A clear example of fraud is selling a
new issue that does not really exist. That is, the company can collect money from investors and,
rather than use it to finance operations, pocket the money and do nothing. There are a number
of types of fraud. Common types include forgery of documents, false claims in insurance, and
filing bankruptcy to avoid debt rather than because of financial hardship. (The Free Dictionary
by Farlex)

4. Engagement - a promise, obligation, or other condition that binds. (The Free Dictionary by
Farlex)

5. Engagement Processes - is an ongoing task and assumes the “key” stakeholders will be involved
in a project or policy process from its inception right through to implementation and subsequent
review.
(https://www.dhhs.tas.gov.au/about_the_department/your_care_your_say/steps_in_the_en
gagement_process)

6. Technical Competence - are behaviours directly related to the nature of training and the
technical proficiency required to excercise effective control. (Skybrary)
 7. Professional Independence - It argues that the profession must maintain its independence from
the political branches of government in order to preserve clients' willingness to communicate
openly with their lawyers, though it accepts the lawyer's duty to disclose client perjury to an
adjudicative tribunal. (jstor.orgs)

8. Objectivity - is a noun that means a lack of bias, judgment, or prejudice. Maintaining one's
objectivity is the most important job of a judge. The meaning of objectivity is easy to remember,
when you see that the word "object" embedded within it. (Vocabulary.com)

9. Integrity - is a personal quality of fairness that we all aspire to — unless you're a dishonest,
immoral scoundrel, of course. Having integrity means doing the right thing in a reliable way. It's
a personality trait that we admire, since it means a person has a moral compass that doesn't
waver. (Vocabulary.com)

10. Core Competencies - are the resources and/or strategic advantages of a business, including the
combination of pooled knowledge and technical capacities, that allow it to be competitive in the
marketplace. (Investopedia)

11. Corrective Problem - It focuses on the systematic investigation of the root causes of identified
problems or identified risks in an attempt to prevent their recurrence. (Wikipedia)

12. Progressive Problem - happening or developing gradually or in stages. (Oxford Dictionary)

13. Opportunistic Problem - is the conscious policy and practice of taking advantage of
circumstances. (Wikipedia)

14. Business Planning - The process of determining a commercial enterprise's objectives, strategies
and projected actions in order to promote its survival and development within a given time
frame. (businessdictionary.com)

15. Business Process - a collection of linked tasks which find their end in the delivery of a service or
product to a client. A business process has also been defined as a set of activities and tasks that,
once completed, will accomplish an organizational goal. (appian.com)

16. Reengineering - Fundamental rethinking and radical redesign of business process to achieve
dramatic improvements in critical measures of performance such as cost, service, and speed.
(businessdictionary.com)

17. Management Fraud – may involve falsifying financial information such as transactions, trades
and accounting entries in order to benefit the perpetrator of the crime.
(www.reference.com)

18. Board Balance Scorecard – is a strategic planning and management system that organizations use to
connect the dots between big picture strategy elements such as mission, vision, core values, strategic
focus areas and the more operational elements.
(www.balancedscorecard.org)
19. Audit Committee – is one of the major operating committees of a company’s board of
directors that is in charge of overseeing financial reporting and disclosure. The audit
committee’s role includes the oversight of financial reporting, the monitoring of accounting
policies, and oversight of any external auditors, regulatory compliance and the discussion of risk
management policies with management (www.investopedia.com)

20. Three Tie Security Checks –

21. Rules-based code of ethics - Rules-based accounting sets those standards in the form of
detailed rules. It is therefore very specific but also very complicated because many rules are
needed to cover the numerous situations accountants face when preparing financial statements.
(https://smallbusiness.chron.com/difference-between-principles-rules-based-accounting-
standards-81972.html)

22. Policy on Accountability, Integrity and Vigilance – it is a set of policies that governs on the
commitment of the company to accountability, integrity and vigilance. Accountability is the
willingness to accept responsibility for one’s action. Integrity is the firm adherence to a code of
especially moral. Vigilance refers to being careful in noticing problems.
(Merriam-Webster Dictionary)

23. Marketing research – the process of gathering, analyzing, and interpreting information
about a market, a product or service to be offered for sale in that particular market. It also
gathers information about the past, present and potential customers for the product or service;
research into the characteristics, spending habits, location and needs of your business’s target
market, the industry as a whole, and the particular segment.
(www.entrepreneur.com/encyclopedia/market-research)

24. Strategic Management - is the management of an organization’s resources to achieve its

goals and objectives. Strategic management involves setting objectives, analyzing the
competitive environment, analyzing the internal organization, evaluating strategies and ensuring
that management rolls out the strategies across the organization.
(Www.investopedia.com/terms/s/strategic-management.asp)

25. Project Feasibility Study - is an analysis used in measuring the ability and likelihood to
complete a project successfully including all relevant factors. It must account for factors that
affect it such as economic, technological, legal and scheduling factors. Project managers use
feasibility studies to determine potential positive and negative outcomes of a project before
investing a considerable amount of time and money into it.
(https://www.investopedia.com/terms/f/feasibility-study.asp)

26. Appraisal of Accounting System

27. Managerial Accounting - Managerial accounting, also known as cost accounting, is the
process of identifying, measuring, analyzing, interpreting, and communicating information to
managers for the pursuit of an organization's goals. The key difference between managerial and
financial accounting is managerial accounting information is aimed at helping managers within
the organization make decisions.
(https://www.investopedia.com/terms/m/managerialaccounting.asp)
 28. Business Recovery –is executed in the immediate aftermath of a problem. Its objective is to
take the firm to a recovered condition equal or nearly equal to the condition before the
problem. (www.businessdictionary.com)

29. Dispute Analysis and Investigation –

30. Forensic Accounting - Forensic accounting utilizes accounting, auditing and investigative
skills to conduct an examination into a company's financial statements. Forensic accounting
provides an accounting analysis suitable for court.
(https://www.investopedia.com/terms/f/forensicaccounting.asp)

31. Fraud Audit - A fraud audit is a detailed examination of the financial records of a business,
with the intent of finding instances of fraud. A fraud audit is actually a consulting service, rather
than a type of audit, since the outcome does not involve giving an opinion on a client's financial
statements.
(https://www.accountingtools.com/articles/2017/5/10/fraud-audit)

32. Governance – is the establishment of policies, and continuous monitoring of their proper
implementation, by the members of the governing body of an organization. It includes the
mechanisms required to balance the powers of the members, and their primary duty of
enhancing the prosperity and viability of the organization.
(www.businessdictionary.com/definition/governance)

33. Corporate Governance -the system of stewardship and control to guide

organizations in fulfilling their long-term economic, moral, legal and social
obligations towards their stakeholders. (SEC,2016)

34. Code of Ethics - states the principles and expectations governing the behavior of individuals and organizations
in the conduct of internal auditing. It describes the minimum requirements for conduct, and behavioral expectations
rather than specific activities. ( https://global.theiia.org/standards-guidance/mandatory-guidance/Pages/Code-of-
Ethics.aspx)

35. Fraud - Business - It is an inventional deception, misappropriation of a company's assets, or manipulation of its
financial data to the advantage of the perpetrator. (Discussion slide)

36. Risk Assessment - The identification, evaluation, and estimation of the levels of risks involved in a situation,
their comparison against benchmarks or standards, and determination of an acceptable level of risk.(
www.businessdictionary.com/definition/risk-assessment.html)

37. Internal Control - the system established by the Board of Directors and
Management for the accomplishment of the corporation’s objectives, the
efficient operation of its business, the reliability of its financial reporting, and
faithful compliance with applicable laws, regulations and internal rules. ( SEC, 2009)

38. Internal Audit - an independent and objective assurance activity designed to add value to and improve the
corporation’s operations, and help it accomplish its objectives by providing a systematic and disciplined approach in
the evaluation and improvement of the effectiveness of risk management, control and governance process. (SEC,
2009)

39. Bribery - Involves giving, offering, soliciting, or receiving things of value to influence an official in the
performance of his or her lawful duties. ( discussion slide)
40. Conflict of interest - occurs when an employee acts on behalf of a third part during the discharge of his or her
duties or has self- interest in the activity being performed. ( discussion slide)

44. Corporate Integrity - means considering ethics and integrity across the organization, not simply delegating
ownership to the compliance team or responsible business functions, and managing this as much more than a
response to regulatory risk. ( https://www.bsr.org/en/our-insights/blog-view/culture-behavior-and-corporate-
integrity-2.0)

42. Trust Index - assessment system that provides a comprehensive and multidimensional look at the current levels
of trust within your organization. ( https://www.selfmgmt.com/products/hr-tools-and-surveys/organizational-trust-
index/)

43. Values-based code of ethics - is a guide of principles designed to help professionals conduct business honestly
and with integrity. ( https://www.investopedia.com/terms/c/code-of-ethics.asp)

44. Financial Accounting Information Governance - Provides a framework for understanding the operation of
accounting information in an economy and discuss broad range of important findings. (
https://www.newyorkfed.org/research/epr/03v09n1/0304bush.html)

45. COSO framework - The Framework defines essential enterprise risk management components, discusses key
ERM principles and concepts, suggests a common ERM language, and provides clear direction and guidance for
enterprise risk management. ( https://www.coso.org/Pages/erm-integratedframework.aspx)

46. Components of COSO - control environment represents the culture of internal controls at the organization. risk
assessment is an activity whereby all of the activities, and associated risks, in an organization are looked at and each
considered on a spectrum of either low risk or high risk. Control activities are those procedures and internal controls
put in place to mitigate risks, particularly those that management considered too risky during the risk assessment.
Information and communication is how management communicates the culture of compliance and the specific
policies individuals need to follow. monitoring activities are activities managers use to monitor processes or internal
controls within the organization. ( https://study.com/academy/lesson/what-is-coso-internal-control-framework-
objectives-components.html)

47. SOX - The Sarbanes-Oxley Act of 2002 cracks down on corporate fraud. It created the Public Company
Accounting Oversight Board to oversee the accounting industry. It banned company loans to executives and gave
job protection to whistleblowers. The Act strengthens the independence and financial literacy of corporate boards. It
holds CEOs personally responsible for errors in accounting audits. ( https://www.thebalance.com/sarbanes-oxley-
act-of-2002-3306254)

48. Employee Fraud - an instance in which an employee of the Company or its Affiliates has committed fraud as
evidenced by (i) a written or email admission of guilt by the relevant employee, (ii) a conviction of such employee
for fraud in a court of law ( https://www.lawinsider.com/dictionary/employee-fraud)

49. Management Fraud- may involve falsifying financial information, such as

transactions, trades and accounting entries in order to benefit the perpetrator of
the crime. Insider trading, bribes, back dating of stock options and misuse of
company property for personal gain are also fraudulent. (Source:
Reference,.com)
50. Creative Accounting- consists of accounting practices that follow required laws
and regulations, but deviate from what those standards intend to accomplish.
Creative accounting capitalizes on loopholes in the accounting standards to
falsely portray a better image of the company. Although creative accounting
practices are legal, the loopholes they exploit are often reformed to prevent such
behaviors. (Source: Investopedia)
51. Accounting Information System- is the collection, storage and processing of
financial and accounting data used by internal users to report information to
investors, creditors and tax authorities. An accounting information system is
generally a computer-based method for tracking accounting activity in
conjunction with information technology resources. An accounting information
system combines traditional accounting practices, such as the Generally
Accepted Accounting Principles (GAAP), with modern information technology
resources. (Source: Investopedia)
52. 2010 FRIA (Financial Rehabilitation and Insolvency Act)- an act providing for
the rehabilitation or liquidation of financially distressed enterprises and
individuals. (Source: lawphil.net)
53. 2013 Rules of Procedures on Corporate Rehabilitation (under the 2010
FRIA) (Source: source.gosupra.com)
Rule 1: Coverage and General Provisions
Rule 2: Court-supervised Rehabilitation
A. Initiation of Proceedings
B. Provisions Common to Voluntary and Involuntary Proceedings/action
on Petition and Commencement of Proceedings
C. the Rehabilitation Receiver, Management Committee, and Creditor's
Committee
D. Determination of Claims
E. Use, Preservation and Disposal of Assets and Treatment of Assets
and Claims After Commencement Date
F. Avoidance Proceedings
G. Treatment of Secured Creditors
 H. Administration of Proceedings
I. Termination of Proceedings

Rule 3: Pre-negotiated Rehabilitation

Rule 4: Out-of-court or Informal Restructuring Agreement or Rehabilitation

Plan

Rule 5: Cross-border Insolvency Proceedings

Rule 6: Procedural Remedies

Rule 7: Miscellaneous and Final Provisions

54. Big “G” (Macro) Governance- Thepolicy‐makinglayer. It is the abstraction,

concept or larger purpose. It’s the ideas, concepts and purposes which those
institutions were created to serve, which, if you’d like, you can think about also an
input (although that’s a not perfect comparison). This could be the idea, for
example, that governments should provide objective and fair mediation spaces
based on regional and national social values and legal principle to mitigate and
resolve conflicts over property between or among citizens. (Source:
damaindiana.org & The Art of Governance)
55. Corporate or Little “g” Governance- Thecontrolslayer. It represents the
physical institutions, point of interaction or in a workflow perspective the “output”
of government, including laws, rules, employees, budgets meetings and
buildings. A court, which hears the case of one community member suing
another over a disagreement on property lines, is an example of “government.”
(Source: damaindiana.org & The Art of Governance)
56. Risk Management- is the process of identification, analysis and acceptance or
mitigation of uncertainty in investment decisions. Essentially, risk management
occurs when an investor or fund manager analyzes and attempts to quantify the
potential for losses in an investment and then takes the appropriate action (or
inaction) given his investment objectives and risk tolerance. (Source:
Investopedia)
57. Conflicts of Interest- occurs when a corporation or person becomes unreliable
because of a clash between personal and professional affairs. Such a conflict
occurs when a company or individual has a vested interest, such as money,
status, knowledge or reputation, which puts into question whether they can be
unbiased in their decision-making. When such a situation arises, the party is
usually asked to remove themselves, and it is often legally required of them.
(Source: Investopedia)
a. IFAC (International Federation of Accountants): is the global organization
for the accountancy profession dedicated to serving the public interest by
strengthening the profession and contributing to the development of strong
international economies. A professional accountant in public practice may be
faced with a conflict of interest when performing a professional service. A
conflict of interest creates a threat to objectivity and may create threats to the
other fundamental principles. (Source: ifac.org)
b. OECD (The Organisation for Economic Co-operation and Development):
is a group of 34 member countries that discuss and develop economic and
social policy. OECD members are democratic countries that support free
market economies. (Source: Investopedia) OECD helps countries modernise
their approach for managing conflict of interest by mapping “at risk” areas and
positions within the public service. It identified a set core principles and
standards for the design and implementation of conflict-of-interest policies:
The Guidelines for Managing Conflict of Interest in the Public Service.
(Source: oecd.org)
c. ENRON Scandal & Bankruptcy: The Fall of a Wall Street Darling- he story
of a company that reached dramatic heights, only to face a dizzying fall. Its
collapse affected thousands of employees and shook Wall Street to its core.
At Enron's peak, its shares were worth $90.75; when it declared bankruptcy
on December 2, 2001, they were trading at $0.26. To this day, many wonder
how such a powerful business, at the time one of the largest companies in the
U.S, disintegrated almost overnight and how it managed to fool the regulators
 with fake holdings and off-the-books accounting for so long. (Source:
Investopedia)
58. Corruption- is dishonest behavior by those in positions of power, such as
managers or government officials. Corruption can include giving or accepting
bribes or inappropriate gifts, double dealing, under-the-table transactions,
manipulating elections, diverting funds, laundering money and defrauding
investors. (Source: Investopedia)
59. Economic Cycles- is the natural fluctuation of the economy between periods of
expansion (growth) and contraction (recession). Four stages: (Source:
Investopedia)
a. Expansion- the economy experiences relatively rapid growth, interest rates
tend to be low, production increases and inflationary pressures build.
b. Peak- is reached when growth hits its maximum output. Peak growth typically
creates some imbalances in the economy that need to be corrected.
c. This correction occurs through a period of contraction when growth slows,
employment falls and prices stagnate.
d. Trough- is reached when the economy hits a low point in growth from which a
recovery can begin.
60. Globalization- represents the global integration of international trade,
investment, information technology and cultures. (Source: Investopedia)
61. Litigation Support- provides assistance of an accounting nature in a matter
involving existing or pending litigation. It deals primarily with issues related to the
quantification of economic damages. A typical litigation support assignment
would be calculating the economic loss resulting from a breach of contract.
(Source: forensicaccounting.com)
62. Piracy of Intellectual Property- refers to the unauthorized use, reproduction,
and/or distribution of protected material such as computer software, video
games, music, or movies. Piracy has become an increasing concern in recent
years because of the rise of the Internet and the speed with which copyrighted
material can be distributed globally to a large number of people. (Source: SAGE
Knowledge)
63. Supply chain constraints, restraints- core idea in TOC is that every system
such as profit-making firms must have at least one constraint that limits the
system from getting more of whatever it strives for and consequently determines
the output of the system (Noreen et al., 1995).
64. Industry consolidation- is a situation in which separate companies become
one. It is sometimes described as a merger, although technically these are two
different situations. In a merger, a new business is formed when one company
absorbs the other; in a consolidation, companies join forces on relatively equal
terms to form one new company. However, the two terms are often used
interchangeably. (Source: Bizfluent)