John Carlo C. Pendon Richard A.

Matias
PCBEA-01-202P Professor

Governance, Business Ethics, Risk Management, and

Internal Control

Review Question for Chapter 2

1. "Small business enterprises do not need good governance" Do you agree? Explain.
• No, for small businesses to succeed, strong governance is still necessary. Being accountable,
transparent, responsive, effective, and efficient are all characteristics of good governance, thus even tiny
businesses must exhibit these characteristics if they want to win the respect and loyalty of their staff, the
government, and the general public. Any organization, whether it is private or public, small, medium, or
large, needs strong governance to direct commercial operations and encourage moral and legal behavior.

2. Does good governance require absolute rules that must be adopted by all organizations?

• As there is no straightforward universal formula for good governance, it is not necessary for all
organizations to adhere to a set of rigid standards. The size, structure, and requirements of the company,
as well as what could help them achieve their strategic goal, all influence the standards for good
governance.

3. What is the essence of any system of corporate governance?

The essence of any excellent corporate governance system is to give the board and management the freedom
to push their firm forward while doing so within a framework of effective accountability.

4. Where does the board of directors derive its authority?

Directors derive its authority from shareholders/owners.

5. To whom is the board of directors accountable?

The board of director is accountable to shareholders, external auditors, regulators, society and
others.

6. On what aspects do shareholders demand accountability from the board of

directors?"Responsiveness usually results to effectiveness and afficiency".
• Shareholders want the board of directors to be accountable for how well the resources given to management
and the boards have been used, such as financial performance, financial transparency, stewardship, quality of
internal control, and so on.
 7. What is management's responsibility as far as financial reporting is concerned?

In terms of financial reporting, management is responsible for determining which accounting principles best depict
the economic substance of company transactions, implementing a system of internal control that ensures
completeness and accuracy in financial reporting, and ensuring that the financial statements contain accurate and
complete disclosure.

8. Describe the broad role of the shareholders in a corporation.

Shareholders 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.

9. Describe the broad role of the Board of Directors.

They are the primary stockholder representative, ensuring that the organization is administered
in accordance with its mandate and that sufficient accountability exists. Increasing the organization's
long-term viability and financial position. Fundamentally, the board of directors' responsibility is to
choose the CEO or general manager of the company and to evaluate the company's overall direction and
strategy.10. Explain the basic objectives of corporate governance.

10. What are the specific activities of the board of directors?

The board's specific responsibilities include overseeing the overall operation, which includes establishing
the organization's vision, mission, values, and ethical standards; delegating an appropriate level of
authority to management; demonstrating leadership; and assuming responsibility for the business
relationship with the CEO, which includes his or her appointment, succession, performance
remuneration, and dismissal, among other things. Second, evaluating the corporation's performance,
which involves guaranteeing the organization's long-term viability and improving its financial position;
developing and managing the implementation of corporate strategy; and approving the plan, budget,
and corporate policies, among other things. Finally, ensuring that the corporation is in compliance with
the law, which includes knowing and preserving the organization's financial condition, as well as
approving annual financial reports, annual reports, and other public documents/sensitive reports.

MULTIPLE CHOICE QUESTIONS

1. B - Board of directors

2. D - Audit committee of the board of directors

3. B - Securities and exchange commission

4. B - Internal auditors

5. C - Respect the collective, cabinet nature of the board's decision