CPA CFE Strategy and Governance 1

Question 1

In Porter's Five Forces framework, which force analyzes the ease with which new competitors can enter a market?

Accepted Answer

Threat of new entrants

Answer

The threat of new entrants examines barriers to entry such as capital requirements, economies of scale, brand loyalty, access to distribution channels, and regulatory barriers. High barriers reduce the threat and protect existing firms' profitability.

Question 2

What is the primary role of the board of directors in corporate governance?

Accepted Answer

Overseeing management, setting strategic direction, and protecting shareholder interests

Answer

The board of directors provides oversight of management, sets strategic direction, ensures accountability, and protects the interests of shareholders and other stakeholders. Day-to-day operations are delegated to management under the board's supervision.

Question 3

A company pursues a cost leadership strategy. Which of the following actions best supports this strategy?

Accepted Answer

Achieving economies of scale, tight cost controls, and operational efficiencies

Answer

Cost leadership requires a company to become the lowest-cost producer in its industry. This is achieved through economies of scale, process efficiencies, tight overhead control, access to low-cost inputs, and leveraging the experience curve to reduce costs below competitors.

Question 4

Under Canadian corporate governance guidelines, what is the recommended composition of the audit committee?

Accepted Answer

Entirely independent directors who are financially literate

Answer

Canadian securities regulations (National Instrument 52-110) require audit committees to be composed entirely of independent directors, and each member must be financially literate. The committee oversees financial reporting, external audit, and internal controls.

Question 5

What does a SWOT analysis evaluate?

Accepted Answer

Internal strengths and weaknesses, and external opportunities and threats

Answer

SWOT analysis is a strategic planning tool that evaluates an organization's internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats). It provides a framework for aligning capabilities with environmental conditions.

CPA CFE Practice Test

CPA CFE Practice Test

CPA CFE Strategy and Governance 1