ACCA - Association of Chartered Certified Accountants Corporate Governance and Ethics Questions and Answers

Question 1

A company's management team is awarded significant bonuses based on achieving high short-term revenue growth.
To meet their targets, they approve several high-risk projects that boost immediate sales but have uncertain long-term profitability and could damage the company's reputation.
This situation is a classic example of which concept in corporate governance?

Accepted Answer

The agency problem

Answer

Stakeholder conflict

Answer

Poor risk appetite formulation

Answer

A failure of internal reporting

Question 2

According to the principles of good corporate governance, what is the primary responsibility of the nominations committee?

Accepted Answer

Leading the process for board appointments and ensuring a balanced and effective board.

Answer

Setting the remuneration packages for executive directors and senior management.

Answer

Reviewing the integrity of the company's financial statements and internal controls.

Answer

Developing and implementing the company's overall risk management strategy.

Question 3

An accountant discovers a new product has a minor defect that is not dangerous but will be very costly to recall. The accountant's manager argues against the recall, stating, 'The cost of the recall will harm our profits, potentially leading to job losses and a drop in shareholder value. The negative impact on these large groups far outweighs the minor inconvenience to a few customers.' The manager's argument is most closely aligned with which ethical perspective?

Accepted Answer

Utilitarianism

Answer

Deontology

Answer

Virtue ethics

Answer

Egoism

Question 4

Many corporate governance codes, including the UK Corporate Governance Code, operate on a 'comply or explain' basis. What is the fundamental principle behind this approach?

Accepted Answer

To allow companies flexibility to depart from the code's provisions if they provide a transparent and robust justification to their shareholders.

Answer

To legally mandate specific governance structures, making any deviation a criminal offence.

Answer

To provide a rigid set of rules that all listed companies must follow without exception.

Answer

To offer a set of voluntary recommendations that companies can choose to ignore without any requirement to disclose their non-compliance.

Question 5

Which of the following statements best describes the primary difference between the shareholder view and the stakeholder view of corporate purpose?

Accepted Answer

The shareholder view prioritises the interests of the company's owners, while the stakeholder view considers the interests of a wider group including employees, customers, and society.

Answer

The shareholder view is legally mandated for all public companies, while the stakeholder view is a voluntary framework for private companies.

Answer

The shareholder view is focused on long-term sustainability, whereas the stakeholder view prioritises short-term profits.

Answer

The shareholder view focuses on profit maximisation above all else, while the stakeholder view completely ignores financial performance.

Question 6

An audit firm has provided audit services to a listed company for 12 years. The lead audit partner has been in place for the last eight years and has developed a close friendship with the client's Finance Director. According to the ACCA's Code of Ethics and Conduct, which fundamental threat to objectivity is most prominent in this situation?

Accepted Answer

Familiarity threat

Answer

Self-review threat

Answer

Advocacy threat

Answer

Intimidation threat