ACCA Corporate Governance and Ethics 5

Question 1

Under the ACCA Code of Ethics, the 'integrity' fundamental principle requires a professional accountant to be:

Accepted Answer

Straightforward and honest in all professional and business relationships

Answer

Integrity requires accountants to be straightforward, honest, and not associate with misleading information or statements.

Question 2

The 'self-review threat' to auditor independence occurs when:

Accepted Answer

An audit firm audits financial statements that include figures the firm itself prepared

Answer

A self-review threat arises when an auditor is required to evaluate work that they or their firm previously performed, impairing objectivity.

Question 3

Which of the following is an example of an INTERNAL corporate governance mechanism?

Accepted Answer

Executive remuneration linked to performance targets set by the remuneration committee

Answer

Internal governance mechanisms are those controlled by the company itself, such as board structure, audit committees, and performance-linked pay policies.

Question 4

In the context of risk governance, the 'three lines of defence' model allocates which role to internal audit?

Accepted Answer

Third line: independent assurance over the effectiveness of governance and risk management

Answer

Internal audit serves as the third line of defence, providing independent assurance to the board that the first two lines are operating effectively.

Question 5

Which statement about executive remuneration best reflects good governance practice?

Accepted Answer

Remuneration packages should link a significant portion of pay to long-term performance metrics aligned with shareholder interests

Answer

Good governance requires that executive pay be structured to incentivize long-term value creation for shareholders, with variable elements tied to performance.

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA - Association of Chartered Certified Accountants Practice Test

ACCA Corporate Governance and Ethics 5