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Governance, Business Ethics, Risk Management & Internal
Control Chapter QUIZ #3
BS Accountancy (Palawan State University)
Studocu is not sponsored or endorsed by any college or university
Governance, Business Ethics, Risk Management & Internal
Control Chapter QUIZ #3
BS Accountancy (Palawan State University)
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2. GOVERNANCE, BUSINESS ETHICS, RISK
MANAGEMENT & INTERNAL CONTROL
Bachelor of Science in Accountancy
AE18 – Governance, Business Ethics, Risk Management & Internal Control
CHAPTER QUIZ
Assessment Questions:
1. What does governance means?
Governance is the process of decision-making and the process by which decisions are implemented (or
not implemented) by the exercise of power or authority by leaders of the country or organizations.
2. Explain whether the following statement is true or false. “Governance is exercised only by the
government of a country”.
There are processes of governing in which it can whether be undertaken by the government of a
country, by a market or a network ,over a social system inclusing tthe laws, norms, power or language
of an organized society making the statement above to be not true. Moreover, governance can also be
used in several contexts such as corporate governance, international governance, national governance
and local governance..
3. Explain how governance can be used in the following contexts and give appropriate examples:
a. National Governance
This pertains to the National Government and an example would be the Philippine National
Government. Hence, this government has the authorization to act based on legal consitution, federal
laws and civil standards. Citizens benefit from both programs and agencies built by this government.
Thus, it is the management of the country’s affair.
b. Local Governance
Local governance means that the local authorities are responsible and have the power to their
communities on the disbursement of money and ensuring that this represents value. The local
politicians and personnel operate within local governance frameworks of checks and balances to
ensure that the decision-making is lawful, transparent and consultative. An example would be the
Local Government of Puerto Princesa City.
c. Corporate Governance
Corporate Governance means managing a company, ensuring its effectiveness as a whole as well as its
success. The goal of this type of governance is to enhance shareholders’ value and protect the interests
of other stakeholders by improving the corporate performance and accountability. Moreover, it is also
about what the board of directors of a company does, how it sets the values of the business firm. An
example would be SM Investments Corporation.
d. International Governance
International governance imposes multilevel and networked relations as well as interactions in
managing and facilitating the linkages across policy levels and domains .Moreover, it uses
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3. GOVERNANCE, BUSINESS ETHICS, RISK
MANAGEMENT & INTERNAL CONTROL
governance to rule in a global level providing unity, peace and security. An example would be
the World Health Organization.
4. Explain briefly the eight (8) basic characteristics of good governance.
1. Participation – The participation by both men and women is the key cornerstone of good
governance. It could either be direct or through legitimate institutions or representatives.
2. Rule of Law – This is the fair legal framework that are enforced impartially which also requires full
protection of human rights, particularly those of minorities.
3. Transparency – This refers to the decision taken and enforcement done in a manner that follows
rules and regulations. Likewise, information is freely available and directly accessible to those who
will be affected by such decisions and their enforcement.
4. Responsiveness – Good governance requires institutions and processes tn serving the needs all
stakeholders within a reasonable timeframe.
5. Consensus-Oriented – good governance requires mediation of different interests in society to reach a
broad consensus on what is in the best interest of the whole community. Moreover, it also requires a
broad long-term perspective on what is needed for sustainable human development and how to achieve
the goals of such development.
6. Equity & Inclusiveness – This means that all members do not feel excluded from the mainstream of
society. Hene, this requires all groups, but particularly the most vulnerable, have opportunities to
improve or maintain their well-being.
7. Effectiveness and Efficiency – Processes and institutions produce results that meet the needs of
society while making the best use of resources at their disposal. This also covers the sustainable use of
natural resources and the protection of the environment.
8. Accountability – This is the key requirement of good governance. An organization or an institution
is accountable to those who will be affected by its decision or actions. Accountability cannot be
enforced without transparency and rule of law.
5. Explain whether the statement is correct or not. “Transparency and
accountability are synonymous.”
The statement above is not correct. Transparency is often associated with accountability but they are
not synonymous.Transparency is when information is freely available and directly accessible to those
who will be affected by such decisions and their enforcement while accountability is when an
organization or an institution is accountable to those who will be affected by its decision or actions.
Accountability cannot be enforced without transparency and rule of law.
6. Explain whether the statement is correct or not. “Responsiveness usually
results to effectiveness and efficiency”.
The statement above is true. Responsiveness means that the institutions and processes try to serve the
needs all stakeholders within a reasonable timeframe. This usually leads to effectiveness and efficiency
of such governancee since both are measure on how responsive one governing body is.
7. Define Corporate Governance.
Corporate governance is defined as the system of rules, practices and processes by which business
corporations are directed and controlled. It basically involves balancing the interests of a company’s
many stakeholders, such as shareholders, management, customers, suppliers, financiers, government
and the community.
8. What does corporate governance structure involve?
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4. GOVERNANCE, BUSINESS ETHICS, RISK
MANAGEMENT & INTERNAL CONTROL
The corporate governance structure specifies the distribution of rights and responsibilities among
different participants in the corporation, such as the board, managers, shareholders, and other
stakeholders, and spells out the rules and procedures for making decisions on corporate affairs. By
doing this, it also provides the structure through which the objectives are set and the means of attaining
those objectives and monitoring performance.
9. State the purpose of corporate governance.
The fundamental aim of corporate governance is to enhance shareholders’ value and protect the
interests of other stakeholders by improving the corporate performance and accountability.
10. Explain the basic objectives of corporate governance.
The following are the basic objectives of corporate governance:
1. Fair and Equitable Treatment of Shareholders – a corporate governance structure ensures equitable
and fair treatment of all shareholders of the company
2. Self-assessment – corporate governance enables the firm to assess their behavior and actions before
they are scrutinized by regulatory agencies
3. Increase Shareholders’ Wealth - protect the long-term interests of the shareholders. Firms with
strong corporate governance structure are seen to have higher valuation attached to their shares by
businessmen.
4. Transparency and Full Disclosure – good corporate governance aims at ensuring a higher degree of
transparency in an organization by encouraging full disclosure of transactions in the company
accounts.
11. Explain the three basic principles of effective corporate governance
The three basic principles of effective corporate governance are :
1. Transparency and Full Disclosure- This answers the question, “Is the board telling us what is
going on?” Likewise, it should provide sound disclosure policies and practices, solid foundations
for management oversight and safeguards integrity in financial reporting.
2. Accountability- This answers the question, “Is the board taking responsibility?” Moreover, it
should provide clarification of the board’s role and that of management.
3. Corporate Control- This answers the question, “Is the board doing the right thing?” Hence, it
should provide building long-term sustainable growth in shareholders’ value for the corporation.
Multiple Choice Questions:
D 1. The basic principle of “transparency and full disclosure” for effective corporate governance
responds positively to the following questions except.
a. Does the board of directors safeguard integrity in financial reporting?
b. Does the board meet the information needs of investments communities?
c. Can an outsider meaningfully analyze the firm’s actions and performance?
d. Has the board built long-term sustainable growth in shareholders’value for the corporation?
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5. GOVERNANCE, BUSINESS ETHICS, RISK
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A 2. The basic principle of “accountability” for effective corporate governance responds positively to the
following questions except.
a. Does the board recognize and manage risk?
b. Does the board lay solid foundations for management oversight?
c. Does the composition mix of the board membership ensure an appropriate range and risk of
expertise diversity, knowledge added value?
d. Does the board promote objective, ethical and responsible decision making?
B 3. “Transparency and Full Disclosure” principle advocates the following except
a. Sound disclosure policies and practices
b. Solid foundations for management oversight
c. Meeting the information needs of investment communities
d. Safeguards integrity in financial reporting
A 4. The rights of shareholders can be effectively upheld through the following measures except
a. By establishing an audit committee
b. By designing and disclosing a communications strategy to promote affective communication with
shareholders
c. By encouraging active participation at general meetings
d. By requiring the external auditor to attend the annual general meeting and to answer questions
about the audit
D 5. To safeguard integrity in financial reporting the business firm should do the following except
a. Establish an audit committee
b. Request the external auditor to attend the annual general meeting
c. Disclose the functions reserved to the board and those delegated to management
d. Disclose the policy concerning trading in company securities by directors, officers and
employees
B 6. To encourage enhanced performance by the board and management, it is recommended that the
following should be adopted, except
a. Disclosure of the process for performance evaluation of the board, its committees, individual
directors and by executives.
b. A remuneration committee
c. Distinguish between non-executive director’s remuneration from that of executives
d. Establish policies on risks oversight and management
B 7. The characteristics of good governance where fair legal framework are enforced impartially is
a. Participation
b. Rule of Law
c. Equity
d. Accountability
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