ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,

RISK MANAGEMENT AND INTERNAL CONTROL

Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

Materials:
LEARNING OBJECTIVE: Student Activity Sheet;
pencil with eraser and ball pen
This assessment measures the competence of the student in terms
of his/her application of knowledge and skills in the following topics:
1. Corporate Governance
2. Business Ethics
3. Risk management
4. Internal Control

ACC 112 - CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT AND INTERNAL
CONTROL
THIRD PERIODIC EXAMINATION

GENERAL DIRECTIONS
READ THIS PAGE BEFORE STARTING THE ASSESSMENT

This test is composed of one (1) section and has a total score of eighty (80) points. You have one (1) hour
to finish this examination. The composition is as follows:
(1) Multiple-choice question Section. The questions in this section is with four answer choices. The test
is composed of eighty (80) questions and is rated as one (1) point each.
 All things unnecessary for the test must be put in front of the testing area. Use BLACK or BLUE ink
ballpen only. Write all your answers on the designated space. Further, erasures are strictly NOT
allowed and will invalidate your answers.
 You may NOT use smart phones or reference materials during the testing session. Only the allowed
calculators should be used.
 Try to answer all questions. In general, if you have some knowledge about a question, it is better to
try to answer it. You will not be penalized for guessing.
 Be sure to allocate your time carefully so you can complete the entire test within the exam session.
You may go back and review your answers at any time during the exam session.
 Those who are caught cheating or doing acts not allowed during the exam shall be instructed to
surrender their test papers and shall leave the testing room immediately. Subsequently, their papers
shall be rated as ZERO.

This concludes the instruction page.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

You may now begin answering.

MULTIPLE CHOICE

1. Corporate governance is best defined as:

a. The extent to which the content of workplace decisions is aligned with a firm’s stated strategic
direction.
b. The formal system of oversight, accountability, and control for organizational decisions and
resources.
c. The philosophy that a board or CEO holds regarding counting methods.
d. The exercise of control and authority by those in mid-management positions.

2. Research suggests that firms with ____ perform better, especially when collaboration among top
management team members is important.
a. greater emphasis on stock options.
b. larger proportion of insiders on the board of directors.
c. smaller pay gap between the CEO and other top executives.
d. benchmarking used for top executive pay.

3. A primary objective of corporate governance is to:

a. ensure that the interests of top-level managers are aligned with the interests of shareholders.
b. determine and control the strategic direction of an organization, so that the top executives are
focused on maximizing corporate profits.
c. resolve conflicts among corporate employees.
d. lobby legislators to pass laws that are aligned with the organization’s interests.

4. Corporate governance revolves around the relationship between which two parties.
a. shareholders and the board of directors.
b. shareholders and managers.
c. the board of directors and managers.
d. none of the these.

5. Complete the following: In small firms, managers often own a ____ percentage of the firm, which
means there is ____ separation between ownership and managerial control.
a. small; large
b. large; small
c. small; small
d. large; large

6. The separation between firm ownership and management creates a(n) ____ relationship.
a. agency
b. governance
c. control

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

d. dependent.

7. A major conflict of interest between top executives and owners, is that top executives wish to diversify
the firm in order to ____, while owners wish to diversify the firm to ____.
a. generate free cash flows, reduce the risk of total firm failure.
b. increase the price of the firm’s stock, increase the dividends paid out from free cash flows.
c. reduce their employment risk, increase the company’s value.
d. reduce the risk of total firm failure, reduce their total portfolio risk.

8. As ownership of the corporation is diffused, shareholders’ ability to monitor managerial decisions.

a. increases.
b. decreases
c. remains constant
d. is eliminated

9. Monitoring by shareholders is usually accomplished through:

a. management consultants.
b. government auditors
c. the firm’s top managers
d. the board of directors.

10. Boards of directors are now becoming more involved in:

a. the strategic decision-making process.
b. selecting the new CEO’s.
c. the firm’s tax issues.
d. government relations.

11. One means that is considered to improve the effectiveness of outside directors is:
a. mandating that all outside directors be drawn from government or academia rather than industry.
b. requiring that outside directors be former executives of the firm.
c. requiring outside directors to own significant equity stakes in the firm.
d. requiring that outside directors be truly objective by having no ownership interest in the firm.

12. Executive compensation is a governance mechanism that seeks to align managers’ and owners’
interests through all of the following EXCEPT:
a. bonuses.
b. long-term incentives such as stock options.
c. Salary.
d. penalties for inadequate firm performance.

13. When Board members being linked to more than one company, this is:
a. interlocking directorate.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

b. stakeholder commitment.
c. illegal.
d. conflict of interest.

14. Following are underlying principles of the corporate governance EXCEPT:

a. integrity
b. accountability
c. openness
d. acceptability

15. Director’s responsibilities are unlikely to include:

a. a duty to keep proper accounting records
b. a duty of care
c. a fiduciary duty
d. duty to propose high dividends for shareholders

16. What is Ethics to do with:

a. Right and wrong.
b. wider community
c. Business.
d. Social responsibility.

17. To be successful, business ethics training programs need to:

a. promote the use of emotions in making tough ethical decisions
b. educate employees on formal ethical frameworks and model of ethical decision making.
c. be limited to upper executives
d. focus on personal opinions of employees

18. Professional competence is a principle of:

a. Professional Ethics
b. Business Ethics
c. Personal Ethics.
d. Ethics.

19. The first step in making decisions that are ethically responsible is to:
a. determine the facts.
b. consider the available alternatives.
c. monitor and learn from the outcomes.
d. identify and consider the impact of the decision on stakeholders.

This document is the property of PHINMA EDUCATION

 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

20. In the ethical decision-making process, identify the steps that might arise in reverse order, depending
on the circumstance.
a. Identifying the ethical issues; considering the impact of the decision on stakeholders.
b. Determining the facts; identifying the impact of the decision on stakeholders.
c. Identifying the impact of the decision on stakeholders; considering the available alternatives.
d. Determining the facts; identifying the ethical issues.
21. Examples of direct misrepresentation about the product include the following except:
a. adulteration.
b. short merging.
c. short measurement.
d. over persuasion.

22. “_____” include all of the groups and/or individuals affected by a decision, policy, or operation of a firm
or individual.
a. Stakeholders.
b. Shareholders.
c. Employees
d. Owners.

23. In the ethical decision-making process, once we have examined the facts, identified the ethical issues
involved, and identified the stakeholders, we need to next _____.
a. consider the available alternatives.
b. consider how a decision affects stakeholders.
c. consider the available alternatives.
d. identify stakeholders.

24. When unethical acts are discovered in a firm, in most instances:

a. they are caused by unwilling participants.
b. the cause is due to external stakeholders.
c. the perpetrators are caught and prosecuted
d. there was knowing cooperation or complicity from within the company.

25. A written statement of policies and guides the behaviour of all employees is called:
a. code of ethics.
b. word of ethics.
c. ethical dilemma.
d. none of the above.

26. Among the commitments of the Finance and Accounting Section of an organization is:

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

a. a) To pay taxes in compliance with all laws.

b. To have appropriate tools to receive, monitor and act on internal and external complaints of
employees.
c. To communicate rules and guidelines on giving gifts, entertainment tokens of hospitality and
contributes to/from public or private organization.
d. To prohibit contracting a third party to be bribe or commit corrupt practices in behalf of the company.

27. Which of the following is an example where business ethics apply?

a. Conduct of international business.
b. Nowhere.
c. In the personal life of staff.
d. None of the above.

28. Most companies begin the process of establishing organizational ethics programs by developing:
a. ethics training programs.
b. code of conduct.
c. ethics enforcement mechanisms.
d. hidden agendas.

29. Which of the following is the basic definition of ethics?

a. moral guidelines for behavior.
b. rules for acknowledging the spirit of the law.
c. rules or principles that define right and wrong conduct.
d. principles for legal and moral development.

30. Which of the following should help reduce the incidence of unethical behavior in an
organization?
a. Understanding that individual moral standards, the influence of managers and coworkers, and
opportunity influence ethical behavior.
b. Maximizing ethical conflict in work groups.
c. Expanding opportunity by providing punishments for violations of the rules.
d. Retaliating against whistleblowers.

31. Unethical behavior in business can be reduced if management does all of the following except:
a. establishes clear policies on unethical behavior.
b. limits opportunities for unethical behavior.
c. punishes unethical behavior firmly.
d. depends totally on employees' personal ethics.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

32. ____ is the act of an employee exposing an employer's wrongdoing to outsiders.

a. Fraud.
b. Whistleblowing.
c. Ethical misconduct.
d. Corruption.

33. If Sony was investigated for allegedly raising prices of its PlayStation excessively during the Christmas
buying season and thereby manipulating the supply of games available at
that time, this would be an ethical issue concerned primarily with:
a. communication
b. fairness and honesty
c. cost control
d. game rules.

34. Managers use the ______ of their position to influence employees' decisions and actions.
a. authority
b. standards
c. scope
d. responsibility

35. Enterprise Risk Management:

a. is only applicable to insurance firms.
b. is an outdated method of dealing with risk.
c. works best when evaluating risk is distinct company silos.
d. is a process that examines all risk collectively.

36. The most difficult and important step in risk management process generally is:
a. evaluating risk.
b. identifying risk.
c. reviewing program.
d. selecting the best method(s) to handle the risk.

37. Risk retention is not ideal if:

a. the risk is unimportant.
b. you did not identify the risk.
c. the exposure is potentially catastrophic.
d. the frequency is so low it almost will never happen.

38. If the chance of loss is high and loss severity is high, the most appropriate risk management tool is:

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

a. risk avoidance
b. risk reduction
c. risk transfer
d. risk assumption

39. Which of the following statements about financial risks is not true?
a. Many financial risks are attributable to fluctuations in value.
b. Financial risks arise from events that prevent a firm from conducting its normal scope of operations.
c. An example of a financial risk is one associated with unfavorable credit rating.
d. Price risks associated with input costs are a form of financial risk.

40. All of the following are considered a financial risk handled by financial risk management except:
a. currency risk
b. liquidity risk
c. product marketability risk
d. commodity price risk

41. It is argued that effective risk management is vital to the survival of an organization because:
a. most business organization are exposed to a wide variety of risk
b. many business failures can be attributed to inadequate policies
c. most organizations are exposed to interest rate risk.
d. All of the given answers.

42. Risk management objectives and policies should be established by:

a. the chief executive officer.
b. the chief financial officer.
c. the board of directors.
d. the company’s shareholders.

43. Risk exposure that may impact on the normal day-to-day running of a business are called:
a. transactional.
b. operational.
c. financial.
d. functional.

44. Which of the following is NOT an example of financial risk exposure for a company?
a. When interest rates increase and a larger proportion of mortgage payments are in default for a
bank.
b. When a local currency decreases for an exporter.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

c. When a company has taken out a short-term loan and floating interest rates increase.
d. When interest rates increase for highly geared company.

45. An important first step in a risk management strategy for a company is to:
a. analyze the impact of the risk exposure.
b. establish related risk and product controls.
c. select appropriate risk management strategies.
d. continually monitor the existing strategies.

46. Which of the following statements is FALSE?

a. Part of company’s credit policy considers how much credit a customer should be granted.
b. Cost-benefit analysis can be used to evaluate an investment of a back-up computer center or
outsource the back-up to an outside center provider.
c. After identification of all its risk exposure, an organization must seek to remive all these risks.
d. Procedural control of a risk management strategy documents all the products that can be used by
the organization.
47. When a company suffers severe damage to one of its drilling platforms, this is an example of:
a. technological risk
b. financial risk’
c. business risk
d. operational risk.

48. The risk that the real rate of return will be lesser than the nominal or stated rate of return due to
fluctuation of rate of return to inflation is referred to as:
a. Liquidity risk.
b. Purchasing power risk.
c. Business risk.
d. Default risk.

49. Operation risk is manifested in all of the following except:

a. Interest rate volatility.
b. Process stoppage.
c. Technological obsolescence.
d. Management Fraud.

50. Which of the following is not an internal control weakness related to factory equipment?
a. Checks issued in payment of acquisitions of equipment are not signed by the controller.
b. All acquisitions of factory equipment are required to made by the department in need of the
equipment.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

c. Factory equipment replacement are generally made when estimated useful lives, as indicated in the
depreciation schedules, have expired.
d. Proceeds from sales of fully depreciated equipment are credited to other income.
51. If preparation of a periodic scrap report is essential in order to maintain adequate control over the
manufacturing process, the data for this report should be accumulated in the:
a. Accounting Department.
b. Warehousing Department.
c. Production Department.
d. Budget Department.

52. Risk Management includes all of the following processes except:

a. Risk Monitoring and Control.
b. Risk Identification.
c. Risk Avoidance
d. Risk Response Planning

53. A risk response which involves eliminating a threat is called:

a. Mitigation
b. Avoidance
c. Avoidance
d. Transfer.

54. Risk mitigation involves all but which of the following:

a. Developing system standards (policies, procedures, responsibility standards).
b. Obtaining insurance against loss.
c. Identification of project risks.
d. Performing contingent planning.

55. When should a risk be avoided?

a. When the risk event has a low probability of occurrence and low impact.
b. When the risk event is unacceptable -- generally one with a very high probability of occurrence and
high impact.
c. When it can be transferred by purchasing insurance.
d. A risk event can never be avoided.

56. The ISO 31000 standard separates risk management areas into:
a. frameworks, processes and audit.
b. .principles, frameworks and compliance.
c. principles, frameworks and processes

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

d. principles, processes and compliance

57. Which of the following is not one of the three primary objectives of effective internal control?
a. reliability of financial reporting.
b. efficiency and effectiveness of operations.
c. compliance with laws and regulations.
d. assurance of elimination of business risks.

58. A company frequently sells products at a price below inventory cost. Essential controls in the risk
assessment process would include:
a. adequate controls that address the risk of overstating inventory.
b. adequate controls that address the risk of not including a purchased item in inventory.
c. adequate controls that address the risk of understatement of inventory.
d. adequate controls that address the risk of overstatement of cost of goods sold.

59. Internal controls are not designed to provide reasonable assurance that:
a. all frauds will be detected.
b. transactions are executed in accordance with management's authorization.
c. access to assets is permitted only in accordance with management's authorization.
d. company personnel comply with applicable rules and regulations.

60. If the following statements about internal controls, which one is least likely to be correct?
a. No one person should be responsible for the custodial responsibility and the recording responsibility
for an asset.
b. Transactions must be properly authorized before such transactions are processed.
c. Because of the cost-benefit relationship, a client may apply controls on a test basis.
d. Control procedures reasonably ensure that collusion among employees cannot occur.
61. Which of the following is correct with respect to the design and use of business documents?
a. Not all documents used for internal purposes need to be prenumbered.
b. Documents should be designed for single purposes only to avoid confusion in their use.
c. Documents should be designed to be understandable only by those who use them.
d. Documents designed for external use must be prenumbered.

62. Which of the following best describes the purpose of control activities?
a. the actions, policies and procedures that reflect the overall attitudes of management.
b. the identification and analysis of risks relevant to the preparation of financial statements.
c. the policies and procedures that help ensure that necessary actions are taken to address risks to
the achievement of the entity's objectives.
d. activities that deal with the ongoing assessment of the quality of internal control by management.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

63. Which of the following activities would be least likely to strengthen a company's internal control?
a. separating accounting from other financial operations.
b. maintaining insurance for fire and theft.
c. fixing responsibility for the performance of employee duties.
d. carefully selecting and training employees.

64. Which of the following components of the control environment define the existing lines of responsibility
and authority?
a. Organizational Structure.
b. Management philosophy and operating style.
c. Human resource policies and practices.
d. Management integrity and ethical values.

65. Which of the following statements is most correct with respect to separation of duties?
a. Employees should not have temporary and permanent custody of assets.
b. Employees who authorize transactions should not have custody of related assets.
c. It is permissible to allow an employee to open cash receipts and record those receipts.
d. Employees who authorize transactions should have recording responsibility for these transactions.

66. Which of the following groups establishes and maintains the company's internal controls?
a. Internal control.
b. Board of Directors.
c. Management.
d. Audit Committee.
67. To promote operational efficiency, the internal audit department would ideally report to:
a. line management.
b. senior management.
c. Chief Accounting officer.
d. audit committee.

68. Which of the following is not one components of internal control according to COSO?
a. Communication processes related to stakeholders.
b. Monitoring of controls.
c. Risk assessment process.
d. Control procedures.7

69. Which of the following is not an application control?

a. Chart of accounts.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

b. Manual follow-up of exception reports.

c. Numerical sequence checks.
d. Access security.
70. Which of the following are not general IT controls?
a. Edit checks of input data.
b. System software acquisition.
c. Back-up and recovery.
d. Controls over data center and network operations.

71. There are a number of specific elements that usually contribute to a successful control environment and
which may be used as indicators of the quality of the control environment of a particular organization.
Which of the following is not one of these elements?
a. Segregation of duties in management.
b. Organizational structure.
c. Human resource policies and practices.
d. Assignment of authority and responsibility.

72. Which of the following makes for an effective control environment with regards to commitment to
competence?
a. Its culture is one in which quality and competence are openly valued.
b. Increase interaction between senior management and operating management.
c. Assure independence from management.
d. Reduce pressure to meet unrealistic performance targets.

73. Implementation of a control means that the control exists and that:
a. All necessary personnel are trained to operate the control.
b. The entity s using it.
c. The control was properly designed.
d. The control is documented.

74. Internal controls:

a. are implemented by and are the responsibility of the auditors.
b. consist of policies and procedures designed to provide reasonable assurance that the
company achieves its objectives and goals.
c. guarantee that the company complies with all laws and regulations.
d. only apply to SEC companies.

75. Two key concepts that underlie management's design and implementation of internal control are:
a. cost and materiality.

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

b. absolute assurance and costs.

c. inherent limitations and reasonable assurance.
d. collusion and materiality.

76. One of the primary reasons that an organization should monitor and regularly review its risk
management process is to:
a. consider whether lessons could be learned for future management of risks.
b. ensure that all significant risks are eliminated immediately.
c. evidence that all risks are measured in financial terms only.
d. evidence that an internationally-recognized framework is followed at all times.

77. Understanding the potential causes of risk events will primarily help an organization to:
a. comply with corporate governance standards.
b. eliminate all risks.
c. improve internal audit procedures.
d. reduce frequency of loss.

78. A necessary element of internal control is:

a. database
b. systems design
c. information and communication
d. system analysis

79. A bank reconciliation should be prepared periodically because:

a. The company's records and the bank's records are in agreement.
b. the bank must make sure that its records are correct.
c. the bank has not recorded all of its transactions.
d. any differences between the company's records and the bank's records should be determined, and
any errors made by either party should be discovered and corrected.

80. Which of the following factors may increase risks to an organization?

a. Geographic dispersion of company operations; Presence of new information technologies
No ;Yes
b. Geographic dispersion of company operations; Presence of new information technologies
Yes ;No
c. Geographic dispersion of company operations; Presence of new information technologies
No ;No
d. Geographic dispersion of company operations; Presence of new information technologies
Yes ;Yes

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 ACC112: CORPORATE GOVERNANCE, BUSINESS ETHICS,
RISK MANAGEMENT AND INTERNAL CONTROL
Students Activity Sheet Module #26

Name: ____________________________________________________________ Class number: _______

Section: ____________ Schedule: _____________________________________ Date: _______________

-NOTHING FOLLOWS-

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