Chapter 1 - Regulation

Question 0

What is good corporate governance?

Answer 0

Effective management

Support of non-execs

Fair appraisal of performance

Fair remuneration and benefits

Fair financial reporting

Sound system of internal control

Constructive relations with s/holders

Question 1

Why do clients pay for assurance services?

Answer 1

To reduce exposure to risk

Question 2

What are the features and differences between a unitary board and supervisory board?

Answer 2

Unitary - collective responsibility, no distinction in law between execs and non-execs, the need to establish board committees

Supervisory - executive management with operational responsibility, the board with purely oversight role

Question 3

What does sarbanes oxley enforce?

Answer 3

Sound system of control

Clear documentation of processes

Evidence of mgmt evaluation of control

Evidence of auditor evaluation of control

Evidence of audit committee control

Sign off procedures by CEO & CFO

Question 4

What are the objectives of an audit committee?

Answer 4

To increase public confidence in financial information

To assist directors in meeting responsibilities in financial reporting

To strength independence of external auditor

Question 5

What are the functions of an audit committee?

Answer 5

Review of internal control procedures

Review of internal audit function

Review of accounting policies and changes from new standards

Review of financial information and regular management information

Recommending nomination and remuneration of external auditors

Providing a channel for whistleblowing

Question 6

What are the benefits of an audit committee?

Answer 6

Improved credibility of financial information

Better quality of management accounting

Stronger control environment

Better communication between directors, auditors and management

Seen as strong corporate governance which can help arrange finance

Less burdensome to meet listing requirements of audit committee already established

Question 7

What are the drawbacks of an audit committee?

Answer 7

Difficulties recruiting the right non-execs with relevant skills, experience and time

Fear that purpose is to police management

Non execs burdened with detail

Additional cost