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CIMA F1 > Masterclass 1 (Topic 1-4) > Flashcards

Masterclass 1 (Topic 1-4) Flashcards

1
Q

What are the principles of Corporporate Governance?

A 
Leadership
Effectiveness
Accountability
Remuneration
Relations with Shareholders
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2
Q

What are the 2 systems of Corporate Governance?

A
  • Principles based approach (guidelines of best practice) used in the UK
  • Rules based approach (follow or recieve a fine) used in the US - SOX
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3
Q

3 Key areas of Corportate Governance

A

Segregation of roles
Committees
Internal audit

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4
Q

2 Key points of segregation of roles in Corportate Covernance

A
  • CEO & Chairman should be different people

- Non-exec directors & other day to day directors should be 50/50 split

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5
Q

What does segreation of roles help to do in corportate governance?

A
  • Reduce the risk of collusion

- Ensure directors act in the interest of shareholders

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6
Q

How many Committees should a business have in corporate convernance and what are they?

A

4 commitees

  • Audit
  • Remuneration
  • Nomination (recruitment of directors)
  • Risk (identify & mitigate risks)
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7
Q

What is the role of Internal Audit in Corporate Governance?

A
  • Review internal accounting procedures

- Internal accounting procedures

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8
Q

What is the purpose of corporate governance?

A

To control the board of a listed company to ensure they act in the best interest of the shareholders.

It is the system by which companies are directed and controlled

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9
Q

What are the features of governances codes - Leadership

A
  • Effective board responsible for the ling-term success of the company
  • Charman / CEO split
  • Non- exec directors for independance
  • Nomination and remuneration committees - payment,salary,bonus
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10
Q

What are the features of governances codes - Effectiveness

A
  • Formal, rigorous,transparent appointments
  • Induction,CPD,board performance
  • Timely information
  • Retirement by rotation - re-election at regular intervals
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11
Q

What are the features of governances codes - Accountability & Audit

A
  • Balanced and understandable assesment of company’s current and future prospects (different directors with a range of skills and knowledge)
  • Sound systemn of control - (internal audits)
  • Risk based approach
  • Intpendant external auditors
  • Audit committee
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12
Q

What are the features of governances codes - Remuneration

A
  • Sufficient to attratct retain and motivate, but not excessive
  • Significant proportion should be linked to perormance
  • Align interests - make shareholder
  • No director should infulence or set own salary
  • Unethical to pay poor performance
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13
Q

What are the features of governances codes - Relations to shareholders

A
  • Use of the AGM to discuss issues with shareholders.
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14
Q

Benefits of Corporate Governance

A
  • Reduces risk
  • Stimulates performance
  • Improves access to capital markets
  • Enhances the marketability of goods and services
  • Improves leadership
  • Demonstrates transparency and social accountability
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15
Q

Failures of Corporate Governance

A
  • Domination by single individual
  • Ineffective internal controls
  • Lack of board involvement
  • Poor supervision
  • Lack of independant scruitiny
  • Poor communication with Shareholders
  • Emphasis on short-term profitability
  • Misleading accounts - tesco scandal
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16
Q

What is the OECD Framework

A

OECD consists of 34 countries who want a ree market economy with one set of rules for corporate governance

17
Q

What are the 6 principles of the OECD Framework

A
  1. Effective corporate governance framework
  2. Shareholder right to ownership
  3. Fair treatment for shareholders
  4. Stakeholders role and rights
  5. Disclosure and transparency
  6. Responsibilites of the board.
18
Q

Sarbanes-Oxley Act 2002 - Key points

A
  • Auditor independance
  • Audit committee
  • Internal control report
  • Increased fiancial disclosures
  • US Stock exchange regulations
19
Q

According to the Conceptual Framework what are the enhancing qualitative characteristics of information that is relevant and faithfully presented?

A
  • Verifiability
  • Timeliness
  • Comparibility
  • Understandability
20
Q

According to the framework what are the elements of the financial statements?

A 
Income
Expenses
Equity
Liabilities
Assets

CIMA F1 (3 decks)

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