ACCA AS Ethics and Corporate Governance 2

Question 1

Which of the following is a primary function of an audit committee in a listed company?

Accepted Answer

Overseeing the integrity of financial reporting and reviewing internal controls

Answer

Setting executive remuneration packages

Answer

Approving major capital expenditure projects

Answer

Managing the company's day-to-day operational risk

Question 2

A remuneration committee in a listed UK company is primarily responsible for:

Accepted Answer

Setting remuneration policy and packages for executive directors to attract, retain, and motivate them

Answer

Determining the pay of non-executive directors only

Answer

Administering the company's employee pension scheme

Answer

Approving all salary increases across the entire organisation

Question 3

Which corporate governance theory holds that managers act as trustworthy stewards of corporate assets and naturally align their interests with shareholders?

Accepted Answer

Stewardship theory

Answer

Agency theory

Answer

Stakeholder theory

Answer

Transaction cost theory

Question 4

What is the primary purpose of a nomination committee on a listed company board?

Accepted Answer

Leading the process for board appointments and succession planning

Answer

Nominating the external auditors for shareholder approval at the AGM

Answer

Setting the agenda and business for the annual general meeting

Answer

Approving all senior management promotions below board level

Question 5

Under the UK Corporate Governance Code, which combination of roles should NOT be held by the same individual?

Accepted Answer

Chair and Chief Executive Officer

Answer

Chief Executive Officer and Chief Financial Officer

Answer

Senior Independent Director and Non-Executive Director

Answer

Chief Financial Officer and Head of Internal Audit

Question 6

'Tunnelling' in the context of corporate governance refers to:

Accepted Answer

The transfer of assets or profits from a company to its controlling shareholders at the expense of minority shareholders

Answer

Whistleblowers using confidential channels to report misconduct

Answer

Secret arrangements between board members to manipulate share prices

Answer

Moving corporate headquarters to low-tax jurisdictions

Question 7

In the context of UK corporate governance, institutional investors such as pension funds and insurance companies are significant because:

Accepted Answer

They hold large concentrated shareholdings and can exert significant influence over board accountability

Answer

They are prohibited from voting at company AGMs under the Companies Act 2006

Answer

They are exempt from all disclosure requirements under FCA rules

Answer

They are required by law to vote against all executive pay resolutions