Corporate Governance

Question 1

What is the primary duty of the board of directors?

Answer 1

To monitor management behavior.

Question 2

What is the responsibility of the Nominating or Corporate Governance Committee of the board of directors?

Answer 2

Oversees the board

Responsible for hiring new CEO

Question 3

What is the responsibility of the audit committee of the board of directors?

Answer 3

The audit committee appoints and oversees the external auditor.

Question 4

What is the duty of the compensation committee of the board of directors?

Answer 4

The compensation committee handles the CEO’s compensation package.

Question 5

What does the NYSE and NASDAQ require of the board of directors?

Answer 5

They require the board to be independent.

Question 6

What is the main goal in an executive compensation package?

Answer 6

The package should ensure that the goals of management should match those of the shareholders.

Question 7

How can an executive compensation package ensure that goals of management align with those of shareholders?

Answer 7

Executive compensation should create an incentive for management to govern in a shareholder-friendly way that doesn’t sacrifice the long-term success of the enterprise for short-term gain.

Question 8

Which influences help mold the direction that management takes?

Answer 8

They range from internal (Board of Directors- Audit Committee- Internal Control) to external (Creditors- SEC- IRS)

These influences should not be tainted by undue influence from management or have financial ties to management such as compensation-related duties

Question 9

What is shirking?

Answer 9

When management doesn’t act in the best interest of shareholders.

It can be alleviated by tying compensation to stock performance or company profit.

Question 10

What requirements are imposed on a public company under Sarbanes-Oxley?

Answer 10

Management must submit a report on the effectiveness of Internal Control in the 10K.

Management must disclose significant Internal Control deficiencies.

CEO/CFO must certify that the financial statements comply with securities laws and fairly present the financial condition of the company.

Question 11

What characteristics are promoted by the COSO framework on Internal Control?

Answer 11

Reliable financial reporting

Effective and efficient operations

Compliance

Question 12

What are the elements of the control environment?

Answer 12

Integrity & Ethics
Competence
The Board of Directors & Audit Committee
Management's Operating Style
Organizational Structure
Authority & Roles of Responsibilities
HR Policies

Question 13

What are control activities?

Answer 13

A component of Internal Control that includes actions being taken to promote the control environment.

Question 14

What are the basic elements of Internal Control?

Answer 14

Control Environment
Risk Assessment
Control Activities
Information and Communication
Monitoring

Question 15

What is the significance of the Information and Communication aspect of Internal Control?

Answer 15

Management must have access to relevant and timely information to make good decisions.

Question 16

How does Monitoring affect Internal Control?

Answer 16

Internal Control activities must be constantly monitored and evaluated for effectiveness.

Question 17

What activities does the COSO framework for enterprise risk management include?

Answer 17

Identifies Risk Factors
Promotes Risk Response Decisions
Compares Management Risk vs. Shareholder Goals
Aids in evaluating opportunities
Promotes Quicker Capital movement

Does NOT eliminate all risk

Question 18

What are possible responses to risk under the COSO framework for enterprise risk management?

Answer 18

Avoid or Reduce

Share or Accept

Question 19

The board members have fiduciary duties to

Answer 19

Act loyally, Act with due diligence, Act with duty of care

Question 20

Requirements related to board of directors of listed companies

Answer 20

The majority of directors required to be independent
The director is nto indpendedt if they were recently employed by the company.
Non management directors are to regularly meet on a scheduled basis
An entity must maintain independent audit committee

Question 21

Three committee required by the public company

Answer 21

Audit committee ,nomination committee, compensation committee
The nominating committee is responsible for the overall corporate governance
Audit committee- It has to be made of independednt directors and atleast one of them has to be financial expert. Need not be a CPA. IT is responsible for overseeing the financial reporting process and make sure the stake holders are getting reports in a timely manner.Under section 404 titile IV of SOX.
Compensation committee- responsible for fixing compensation for directors and executives of corporation

Question 22

SEC

Answer 22

Securities exchange act of 1934- Componenets to monitor corporate finance. Division of corporate finance,Division of enforcement, Office of the chief accountant

Question 23

Jobs

Answer 23

Jump start our business startups

Question 24

Internal control principles

Answer 24

CRIME
Control environment
Risk assessment
Control activities
Information and communication
Monitoring

Question 25

PIPS-Types of control activities

Answer 25

Performance Indicator, Information processing, physical controls segregation of duties

Question 26

ARCCS

Answer 26

Authorisation of transactions
Recording
custody
Comparisions

Question 27

LImitation of internal control

Answer 27

COCO- Collusion
Override by the management
Competance
Cost benefit contraints
Obselonce