GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL CONTROL

PRELIMINARY EXAMINATION SHEET

BSA – 2ND YEAR
S.Y.: 2022-2023, Second Semester

NAME Section

INSTRUCTIONS:
1. You are given only two (2) hours to answer the questions below.
2. Keep your eyes on your own paper. Remember, any form of cheating is prohibited. Once caught
cheating, 5 points will be automatically deducted from your over-all score.
3. This exam consists of 2 pages, 2 parts and with a total of 15 items.

GOOD LUCK!

PART 1 - MULTIPLE CHOICE: Choose only the best answer from the choices provided.

1. What is Corporate Governance?

a. It deals with running the business in its day-to-day operations.
b. It deals with an oversight or monitoring of corporate performance and operating results.
c. It deals with the deterrence of fraud and ensures that profit goals are achieved.
d. It deals with creating sustainable value for its shareholders.
2. Which of the following should be implemented to avoid agency problem?
a. Link compensation to performance evaluation.
b. Conduct external and internal audits.
c. Establish internal controls.
d. All of the above.
3. Audit Committee activities and responsibilities include which of the following?
a. Selecting the external audit firm.
b. Approving the corporate strategy.
c. Reviewing the management performance and determining compensation.
d. None of the above.
4. In small and family-owned business, is it acceptable that the managers are also members of the
Board?
a. No, because for an appropriate oversight the Board must be both objective and competent.
b. No, because managerial performance will not be truthful and will not its intended objectives.
c. Yes, since the business has no public accountability due to its size and nature.
d. Yes, since in case of poor managerial performance or fraudulent activities only the family
members will suffer the consequences.
5. The characteristics of good governance where fair legal framework are enforced impartially is…
a. Participation
b. Rule of Law
c. Equity
d. Accountability
6. Mr. X, holding a directorship position concurrently from two other companies, accepted an offer
to hold another directorship position in Company C. Is this case acceptable?
a. No, because a director can hold only up to two (2) concurrent directorship position.
b. No, because it would compromise his commitment to other two companies.
c. Yes, if his schedule still allows and he has sufficient time to prepare for meetings.
d. Yes, if he notified Company C of his incumbent directorship with other two companies.
 7. “Transparency and Full Disclosure” principle advocates the following, except:
a. Sound disclosure policies and procedures.
b. Solid foundations for management oversight.
c. Meeting the information needs of investing communities.
d. Safeguards integrity in financial reporting.
8. Who performs audit of companies for compliance with company policies and laws, audits
efficiency of operations and periodic evaluation and tests of control?
a. External Auditors
b. Internal Auditors
c. Commission on Audit
d. Chief Accountant
9. The company should implement the following to safeguard the integrity in financial reporting.
Which is not?
a. Establish an audit committee.
b. Request the external auditor to attend 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 &
employees.
10. 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 effective communication
with shareholders.
c. By encouraging active participation at general meetings.
d. By requiring the external auditor to attend the annual report meeting and to answer
questions about the audit.

PART 2 – TRUE OR FALSE: Write TRUE, if the statement is correct. JUSTIFY, if your answer is FALSE.

1. Transparency and Accountability are synonymous.

2. The companies vested with public interest shall have independent directors constituting at least
20% of the board members.
3. A non-executive director can hold only up to two (2) concurrent directorship position.
4. Responsiveness usually results to effectiveness and efficiency.
5. A well-governed organization is one which implements effective risk management and internal
control systems.