Corporate Governance and Ethics Flashcards
7 cards from real ACCA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Corporate Governance and Ethics flashcards as text
Under the ACCA Code of Ethics, the 'integrity' fundamental principle requires a professional accountant to be:
Answer: Straightforward and honest in all professional and business relationships
Integrity requires accountants to be straightforward, honest, and not associate with misleading information or statements.
The 'self-review threat' to auditor independence occurs when:
Answer: An audit firm audits financial statements that include figures the firm itself prepared
A self-review threat arises when an auditor is required to evaluate work that they or their firm previously performed, impairing objectivity.
Which of the following is an example of an INTERNAL corporate governance mechanism?
Answer: Executive remuneration linked to performance targets set by the remuneration committee
Internal governance mechanisms are those controlled by the company itself, such as board structure, audit committees, and performance-linked pay policies.
In the context of risk governance, the 'three lines of defence' model allocates which role to internal audit?
Answer: Third line: independent assurance over the effectiveness of governance and risk management
Internal audit serves as the third line of defence, providing independent assurance to the board that the first two lines are operating effectively.
Which statement about executive remuneration best reflects good governance practice?
Answer: Remuneration packages should link a significant portion of pay to long-term performance metrics aligned with shareholder interests
Good governance requires that executive pay be structured to incentivize long-term value creation for shareholders, with variable elements tied to performance.
A company's board of directors has decided to pursue a strategy that benefits a major shareholder but damages the interests of minority shareholders. This is an example of:
Answer: Tunneling or expropriation, a corporate governance failure
Tunneling refers to the extraction of value from a company by controlling shareholders at the expense of minority shareholders, representing a serious governance failure.
Which body is responsible for developing and maintaining the International Ethics Standards Board for Accountants (IESBA) Code of Ethics?
Answer: International Federation of Accountants (IFAC)
IESBA operates under the International Federation of Accountants (IFAC) and develops the global Code of Ethics for professional accountants.