ACCA SP Corporate Governance 1

Question 1

According to the UK Corporate Governance Code, what approach must listed companies take if they do not comply with a specific provision?

Accepted Answer

They must explain their reasons for non-compliance

Answer

The UK Corporate Governance Code operates on a 'comply or explain' basis, requiring companies to either comply with provisions or publicly explain why they have not.

Question 2

Which theory identifies the conflict of interest that arises when managers may prioritise their own interests over those of shareholders?

Accepted Answer

Agency theory

Answer

Agency theory specifically addresses the principal-agent relationship, where agents (managers) may not always act in the best interests of principals (shareholders).

Question 3

Under the UK Corporate Governance Code, after how many years of service is a non-executive director generally no longer considered independent?

Accepted Answer

9 years

Answer

The UK Corporate Governance Code states that non-executive directors who have served for more than nine years should no longer be considered independent without specific justification.

Question 4

Which board committee is primarily responsible for reviewing the company's financial reporting processes and the effectiveness of internal controls?

Accepted Answer

Audit committee

Answer

The audit committee oversees internal and external audit functions, financial reporting integrity, and the effectiveness of the company's internal control systems.

Question 5

In a unitary board structure, which of the following best describes the board's composition?

Accepted Answer

Both executive and non-executive directors serving on a single board

Answer

A unitary board structure combines both executive and non-executive directors on a single board, which is the standard model in UK corporate governance.

ACCA Strategic Professional Practice Test

ACCA Strategic Professional Practice Test

ACCA SP Corporate Governance 1