LOJERO, PRINCESS GLAIDINE C.

COA BLK 2A

Below is the summary of the SEC corporate governance requirements of companies publicly-listed in the
stock exchange. For each requirement, state how it is intended to help to address the risk of fraud in
publicly traded organizations.

a. Boards need to consist of at least 3 independent directors or 1/3 of the board which is higher.
 This is also practiced to ensure that no director or small group of directors can dominate the decision-
making process. It helps cope with the possibility of fraud within publicly traded organization as it ensures the
exercise of independent judgement on corporate affairs and proper oversight of managerial performance,
including prevention of conflict of interests and balancing of competing demands of the corporation.

b. Boards need to hold regular executive sessions of independent directors without management present.
 It helps in ensuring that the independent directors can openly and freely communicate their opinions
and suggestions to each other. Through these sessions, it is easier for them to deal with more sensitive or
confidential matters without receiving possible deceiving opinions from other non-independent members or the
management, which can sometimes be the basis for fraudulent acts. It helps address the risk of fraud in publicly
traded organizations as it ensures that proper checks and balances are in place within the corporation.

c. Boards must have a corporate governance committee composed at least 3 of independent directors.
 Boards are tasked with ensuring compliance with and proper observance of corporate governance
principles and practices. Corporate governance committee exists to assist the board in the performance of its
corporate governance responsibilities.

d. The corporate governance committee must have a written charter that addresses the
committee’s purpose and responsibilities, and there must be annual performance evaluation of the
committee.
 It serves as the standards for evaluating performance of the committee. Corporate governance
committee must have a written charter stating in plain terms their respective purposes, memberships, structures,
operations, reporting processes, resources, and other relevant information. It exists to avoid any overlapping
functions with other existing committees in a business organization.

e. Boards must have an audit committee with a minimum of three independent members.
 Audit committee exists to enhance the board’s oversight capability over the company’s financial
reporting, internal control system, internal and external audit processes, and compliance with applicable laws
and regulations. There must be a minimum of three independent members, including the chairman, to ensure
that they are formally and properly doing their duties and responsibilities without bias.

f. The audit committee must have a written charter that addresses the committee’s purpose and
responsibilities, and the committee must produce an audit committee report; there must also be an
annual performance evaluation of the committee.
 The audit committee must have a written charter which formally defines the role of internal audit and
the audit plan as well as oversees the implementation of the IA charter. It includes the audit committee’s
responsibility on assessing the integrity and independence of external auditor and exercising oversight to review
and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process.
There is also an annual performance evaluation of the committee to review and monitor the external auditor’s
suitability and effectiveness on an annual basis.