ICCT Colleges Foundations, Inc.

CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT

and INTERNAL CONTROL (CAE01)

CHAPTER 3 – ACTIVITY

ESSAY:
Direction: Explain the following statements/questions in not less than 5 sentences.
1. Assume that management had determined that its organization’s audit committee is not
effective. How do the weaknesses in audit committee affect management’s evaluation of
internal control over financial reporting? Would an ineffective audit committee constitute
a material weakness in internal control over financial reporting? State the rationale for
your response.
 If an audit committee has weak directors with little financial knowledge and
inadequate independence, management would have to consider that to be control
deficiency. Ineffective oversight by the audit commit would likely indicate the
presence of a material weaknesses in internal control over financial reporting, as it
is indicated that an essential part of internal control may be lacking.
2. Why is there a need for a corporation to maintain a comprehensive and cost-efficient
communication channels to shareholders and other investors?
 The company should maintain a comprehensive and cost-efficient communication
channel for disseminating relevant information. This channel is crucial for
informed decision-making by investors, shareholders and other interested users.
The company may include media and analysis briefings as channels of
communication to ensure timely and accurate dissemination of public, material,
and relevant information to the stakeholders. It increases awareness of company
within the investment community, ensures key messages are delivered
consistently and facilitate the availability of capital at lower cost.
3. What is the objective of the company in having a strong and effective internal control
system?
 Internal control is relevant to everyone in a workplace. It represents our moral
responsibility to understand and comply with policies and procedures, as well as
to hold ourselves and one another accountable. It is designed to provide
reasonable assurance regarding the achievement of objectives in different
categories. The primary purpose of internal controls is to help safeguard an
organization and further its objectives. It functions to minimize risks and protect
assets, ensure accuracy of records, etc.
4. To what may the shareholder’s rights relate?
  The company believes that the rights and interests of minority shareholders are
aligned to those of the controlling shareholders, not only in terms of returns on
their investments but also in sustainability of Group’s businesses. It ensures
timely disclosures to shareholders regarding their respective business and that
shareholders receive dividends in accordance with established dividend policies.
Generally, as a shareholder, you have right to access financial records, right to sue
for wrongful acts, right to vote, etc. the board is committed to treat all
shareholders fairly and equitability.
5. How many participation of employee in corporate governance be encouraged?
 Involving employees in decision making can be beneficial for your business and
employees. When you let employees help with decisions, it shows that you trust
them. Even if you only let employees give input to assist you in making the final
decision, you still show that you value their opinions. Asking employees for their
opinions can give you different perspectives to make better decisions. While you
have an overarching idea of your business, your employees are in the day-to-day
trenches. Employees often work more closely with customers, so they know what
buyers need and request. Employees can also come up with revenue-generating
and cost-saving ideas. Letting employees make decisions frees you up for work in
other areas.