I.

Identification – Write the correct to each question provided, incomplete answers will not be accepted:

1. This is the process of decision making and the process which decisions are implemented (or not
implemented) through the exercise of power or authority by leaders of the country or organizations.

2. This characteristic of good governance that requires mediation of the different interests in society to reach a
broad consensus on what is the best interest of the whole community and how this can be achieved.

3. This characteristic of good governance that ensures that all of its members feel that they have a stake in it and
do not feel excluded from the mainstream of society

4. This is defined as the system of rules, practices and processes by which business corporations are directed
and controlled.

5. This objective of corporate governance provides that the latter aims at ensuring a higher degree of
transparency in an organization by encouraging full disclosure of transactions in the company accounts.

6. This objective of corporate governance provides that the latter enables firms to assess their behavior and
actions before they are scrutinized by regulatory agencies.

7. This party in corporate governance is responsible to provide effective oversight through election of board
members, approval of major initiatives such as buying or selling stock, annual reports on management
compensation from the board.

8. They are the major representative of stockholders to ensure that the organization is run according to the
organization’s charter and that there is proper accountability

9. Their responsibility is to manage the organization effectively, provide accurate and timely reports to
shareholders and other stakeholders.

10. They provide oversight of the internal and external audit function and the process of preparing the annual
financial statements as well as public reports on internal control.

11. They set accounting and auditing standards dictating underlying financial reporting and auditing concepts;
set the expectations of audit quality and accounting quality

12. They ensure the accuracy, timeliness and fairness of public reporting of financial and other information for
public companies.

13. They perform audits of company financial statements to ensure that the statements are free of material
misstatements including misstatements that may be due to fraud.

14. They perform audits of companies for compliance with company policies and laws, audits to evaluate the
efficiency of operations, and periodic evaluation and tests of controls.

15. This unethical practice is the practice of placing the product in containers of exaggerated sizes and
misleading shapes to give a false impression of its actual contents.
 16. This unethical practice is the practice of debasing a pure or genuine commodity by imitating or
counterfeiting it, by adding something to increase its bulk or volume, or by substituting an inferior product
for a superior one for the purpose of profit or gain.

17. This is the unethical practice wherein the measuring stick or standard is shorter than the real length or
smaller in volume than the standard.

18. This is characterized by omitting adverse or unfavorable information about the product or service. Under
this are caveat emptor, deliberate withholding of information and business ignorance.

19. An unethical practice of board of directors that is done by voting themselves and the executive officers huge
per diems, large salaries, big bonuses that do not commensurate to the value of their services.

20. An unethical practice of board of directors that occurs when a broker or another person with access to
confidential information uses that information to trade in shares and securities of a corporation, thus giving
him an unfair advantage over the other purchases of these securities.

II. True or False: Write “True” if the statement is correct, write “False” if the statement is incorrect and write the word/s
that make/s the statement incorrect.

21. Good governance requires fair legal frameworks that are enforced partially. It also requires full protection of
human rights, particularly those of majorities.

22. Participation by both men and women is a key cornerstone of good governance. Participation should be
direct.

23. The company should be headed by a competent, working board to foster the long-term success of the
corporation, and to sustain it competitiveness and profitability in a manner consistent with its corporate
objectives and the long-term best interests of its managers/board of directors and other stakeholders.

24. The Code of corporate governance will adopt the “comply or explain” approach. This approach combines
mandatory compliance and disclosure.

25. The “Principles” can be considered as high-level statements of corporate governance good practice, and are
applicable to all companies.

26. The “Recommendations” are objective criteria that are intended to identify the specific features of corporate
governance good practice that are recommended for companies operating according to the Code.

27. The “Explanations” strive to provide companies with additional information on the recommend best
practice.

28. According to the Code, the Board should be composed of majority of executive directors.

29. The Board should ensure that it is assisted in its duties by a Corporate Secretary, who should be a member of
board of directors. The Secretary is primarily responsible to the Chairman or president of the company and
its shareholders.

30. The compliance officer should not be a member of the board of directors.
 31. There are three key elements of the fiduciary duty of the board members: the duty of care, the duty of
loyalty, and the duty free.

32. The Board should be headed by a competent and qualified Chief Executive Officer (CFO)

33. The board should establish board committees that focus on specific board functions to aid in the optimal
performance of its roles and responsibilities.

34. Persuasion is the process of appealing to the emotions of a prospective customer and urging him to buy an
item of merchandise he needs. Persuasion is legitimate and necessary in the selling of goods if it is done in
the interest of a buyer.

35. Conflict of interest arises when an employee who is duty bound to protect and promote that interests of his
employer violates this obligation by getting himself into a situation where his decision or actuation is
influenced by what he can gain personally from it rather than what his employer can gain from it.

III. Essay
1. Why is ethical behavior necessary? (5 points)
2. Why do people act unethically? Cite an example (5 points)
3. Why there is a need for professional ethics? (5 points)