EXAMINATION PAPER

2016 FIRST SEMESTER

SUBJECT CORPORATE GOVERNANCE DATE 31 MAY 2016

SUBJECT CODE CGE101 DURATION THREE (3) HOURS

Examiner(s) Prof. RH Mynhardt

Moderator Mr A Knipe

SUBJECT-SPECIFIC INSTRUCTIONS
1. Answer ALL the questions unless otherwise instructed.
2. Read the questions carefully before attempting their answers.
3. You may answer questions in any sequence, but you must keep the numbers the same as in this
examination paper.
4. Number the questions and any sub-questions clearly, using the same numbering used in this
examination paper.
5. Draw a line after each completed question.
6. If you decide to change the answer to a question, draw a clear line through the answer you do
not want to be assessed.
7. Rough work – Do this in your examination answer book and clearly indicate that it is not part of
your answer.

GENERAL INSTRUCTIONS
1. Notes, files, textbooks or any other such aids are NOT allowed in the examination room.
2. Mobile phones (cell phones) are NOT allowed.
3. Computers are NOT allowed.
4. Calculators ARE allowed. Show ALL calculations.
5. Please remember to write your name, surname and student number on the examination script
(answer book).
6. Only use a black or blue pen.
7. By accepting this examination script, you agree to abide by Southern Business School’s Rules
and Regulations, including those governing examinations.

DO NOT TURN THIS PAGE UNTIL INSTRUCTED TO DO SO!

CGE101
THIS EXAMINATION PAPER CONSISTS OF FOUR PAGES CORPORATE GOVERNANCE
INCLUDING THIS COVER PAGE (THIS IS PAGE 1 OF 4)
 CGE101 – CORPORATE GOVERNANCE
EXAMINATION PAPER – 2016 FIRST SEMESTER

Question 1 [7]
MULTIPLE – CHOICE QUESTIONS
The following sub-questions each contains ONE statement but with multiple possible
answers. Only ONE of the answers is correct. Read each statement carefully and then
decide which ONE of the options is the correct one. In your examination script (answer
book), write down only the number of the sub-question and next to it the letter that
represents the answer you have selected.
Example: If you are of the opinion that for sub-question 1.8 option C is correct,
then write down: 1.8 C

1.1 The King III report places great emphasis on _____.

A. sustainability
B. community management
C. the company’s staff

1.2 The Board should act as the focal point for _____.
A. the company’s products and services
B. the country’s government
C. corporate governance

1.3 Who appoints the company’s Chief Executive Officer (CEO)?

A. The company’s staff.
B. The community.
C. The company’s Board.

1.4 Companies should disclose the remuneration of each individual _____.

A. staff member
B. director
C. member of senior management

1.5 Which of the following describes an independent non-executive director?

A. A person who does not receive remuneration which is contingent upon the
performance of the company.
B. A person who represents a controlling or major shareholder.
C. A person who is a professional advisor to the company.

1.6 Which one of the following “moral duties” of the Board can be described as:
Directors should have the knowledge and skill required to be directors of a
company.
A. Commitment.
B. Competence.
C. Care.

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CGE101 – CORPORATE GOVERNANCE
EXAMINATION PAPER – 2016 FIRST SEMESTER

1.7 An ethics risk assessment should be undertaken to consider _____.

A. determining the company’s credit risk profile
B. establishing a process of identifying perceptions on profitability
C. the identification of tactical risk through engagement with stakeholders

Question 2 [8]
TRUE/FALSE QUESTIONS
Consider the following list of statements. Each statement is either TRUE or FALSE.
You must read each statement and then select the option that you believe is correct as
your answer. In your answer book, write down only the question number and next to
the number either TRUE or FALSE.
Example: If you are of the opinion that sub-question 2.1 is true, then write down:
2.9 True

2.1 The overall objective of IT governance is to understand the issues and strategic
importance of IT.
2.2 The Board should ensure that there is an effective principle-based internal
audit.
2.3 Management of the company should specify the elements of a control
framework which identifies a clear link between the company’s risk
management and the independent assurance processes.
2.4 The Board should strive to achieve the correct balance between its various
stakeholder groupings in order to advance the interests of the company.
2.5 The Board should comprise a balance of executive and non-executive directors,
with a majority of executive directors.
2.6 The Board should take account of the legitimate interests of stakeholders in its
decisions.
2.7 The Board should appreciate that strategy, risk, performance and sustainability
are totally separable.
2.8 The external audit function should provide independent and objective assurance
to the Audit Committee that risk management and internal controls are effective.

Question 3 [25]
You are the chairperson of your company’s Audit Committee. Describe the Audit
Committee’s responsibilities for recommending the appointment of the external auditor
and the oversight of the external audit process.

Question 4 [10]
Discuss the following principle of the KING III report on corporate governance:
The Board should ensure that the company acts as and is seen to be a responsible
corporate citizen.
(Hint: In your answer, pay attention to corporate citizenship, including the triple bottom
line and sustainable development.)

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 CGE101 – CORPORATE GOVERNANCE
EXAMINATION PAPER – 2016 FIRST SEMESTER

Question 5 [30]
You are the newly appointed Head of Internal Audit of your company. The Board of
Directors has decided that the Internal Audit Department should be more instrumental
in the activities of the company. Write a report to the Board and address the following
specific aspects:
5.1 The risk-based approach that the Internal Audit Department will follow. (5)
5.2 The relationship between the Internal Audit Department and the Audit
Committee, the Governance Committee and the Risk Committee. (8)
5.3 Specific assistance provided to the Audit Committee. (10)
5.4 Key responsibilities of Internal Audit. (4)
5.5 Staffing of the Internal Audit Department. (3)
(Hint: KING III – Principle 5).

Question 6 [20]
Your company is an open-cast mine situated close to a residential area. Lately a
number of articles have appeared in the newspapers where your company has been
accused of spoiling the environment because of the ugly holes being dug into the
ground. You are also accused of taking financial advantage of the community. It now
has an effect on your workforce.
Describe ten (10) methods how your company should promote mutual respect between
the company and its stakeholders.
(Hint: One of the methods is that the company and its stakeholders should adhere to a
similar standard of corporate governance to encourage mutual respect.)

EXAMINATION PAPER TOTAL: [100]

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