Chapter 3 - Corporate governance Flashcards
What must you be to qualify as an NED and what needs to be considered? (5 things)
Independent in character and in judgement:
Employee of company within the last 5 years?
Had material business relationship with the company within the last 3 years?
Received additional remuneration from the company (on top of director’s fee)
Shares which make her a significant shareholder
What are the advantages of NEDs
More objective
Provide external experience
Can challenge and help develop propels on strategy
Provide “comfort factor” to shareholders via “performance monitoring” of both Company and Board
What is the minimum number of NEDs recommended in an audit committee and what are the 2 roles of the committee?
3 (recommended by appointment committee)
Responsibilities in respect of internal control
Responsibilities concerning relations with the external auditors
What are the 3 internal audit aspects of audit committee responsibility?
Monitor and review effectiveness of internal audit function (appoint head of team, ensure sufficient resources)
Review the internal audit plan and receive regular reports on results
Review company’s internal control system and risk management systems
What are the 4 external audit aspects of audit committee responsibility?
Monitor integrity of financial statements of company
Make recommendations to board for appointment,, remuneration and terms of engagement of external auditor
Monitor and review external auditor’s independence, objectivity and effectiveness via reviewing rotation and QC procedures of auditors to ensure good quality audit
Review auditors “letter of weakness” to ensure all issues raised are acted upon by the company’s management
What is whistle-blowing and who oversees how an entity’s whistle-blowing procedures operate?
When employee raises concern about possible fraud, crime or other serious risk that could threaten various stakeholders and the company’s reputation
Large companies = the audit committee
Small companies = the BOD
What kind of companies is the UK Corporate governance code aimed at?
London stock exchange companies
What 5 sections do companies need to focus on if complying with UK Corporate governance?
Leadership Effectiveness Accountability Directors remuneration Relations with shareholders
What are the CIMA code of ethics?
CIPOP Confidentiality Objectivity Professional competence and due care Integrity Professional behaviour
Name 5 threats to CIMA fundamental principles
Self-interest threat Self-review threat Advocacy threats Familiarity threats Intimidation threat
