EG M4 - Part A Module Quiz 1 - KnowledgEquity

4/5/24, 11:38 PM EG M4 – Part A Module Quiz 1 - KnowledgEquity
MY RESULTS MY COURSES
DASHBOARD GEETANJALI
Ethics & Governance

74%
SEARCH KNOWLEDGE BASE
ASK THE EXPERT
SUBJECT OVERVIEW AND FAQS
PRACTICE EXAMS
MODULE 1
MODULE 2
MODULE 3
QUICK FIRE QUIZ (M1 - M3)
MODULE 4
PART A: GOVERNANCE SUCCESS FACTORS
PART A MODULE QUIZ 1
PART B: OPERATIONAL OBLIGATIONS
PART B MODULE QUIZ 2
PART C: PROTECTING FINANCIAL MARKETS
PART C MODULE QUIZ 3
MODULE 5
QUICK FIRE QUIZ (M4 - M5)
REVISION
EXTRA MILE
ACCESSIBILITY
BACK TO COURSE
EG M4 – Part A Module Quiz 1
https://knowledgequity.com.au/course/ethics-governance/eg-m4-part-a-module-quiz-1?ru=study-essentials-2023-s2 1/13
You have submitted the quiz.
RETAKE QUIZ
Back to Course
EG M4 – Part A Module Quiz 1
YOU SCORED 9 OUT OF A POSSIBLE 10 [90%]
Question 1 Marks: 1
The terms of reference for XYZ Ltd’s board of directors states that the
appointment of all board members expire at the end of every financial year and
new directors appointed or existing directors reappointed subject to shareholder
approval.
This differs from other companies operating in the same industry since their
terms of reference require one third of directors to every year so that their board
of directors are replaced over a three year period.
Which of the following Best describes the process for the appointment of
directors on the board of XYZ Ltd?
Answer Options
You answered D. The correct answer is D
USER SELECTION CORRECT ANSWER
A Yearly.
B Annual.
C Staggered.
D De-staggered.
Answer Explanation
D is correct because the process adopted by the ABC Ltd board is called de-
staggering.
This approach refers to placing all directors up for election each year rather than
using a staggered approach.
C is incorrect because the approach described here is the opposite to

'staggering', which is the process by which directors and removed and replaced
over time.
A and B are incorrect because even though the event is happening yearly or
annually, these are not as accurate a description as 'de-staggered', and the
question asks what is the best description.
Module: 4 > Part: A > 4.1 Mitigating the risk of financial failure >
Page: 218-239
Question 2 Marks: 1
Which of the following regarding the removal or termination of a director is not
correct?
Answer Options
You answered D. The correct answer is D
A A director can be removed by a resolution by other directors.
B Directors may choose to resign before the end of their term.
C Shareholders can vote to remove a director at a general meeting.
A group holding 5 per cent of the share capital can remove individual
D
directors.
Answer Explanation
D is correct because the group holding 5% cannot remove individual directors.

Rather they have the ability to call an extraordinary general meeting and put the
resolution to remove the director to the vote. There still needs to be a 50 per cent
majority of votes cast in favour of the ordinary resolution before the director can
be removed.
A is incorrect because this is allowed in some countries but there must be a

reason for the resolution.
B is incorrect because directors are also like employees and have to choice to
terminate their contract should they wish to do so.
C is incorrect because this done in most jurisdictions and shareholders have the
right to vote to remove a director at the general meeting.
Page: 218-239
Question 3 Marks: 1
The shareholding of ZY Ltd can basically be summarised into two groups. The
first group comprises shareholding by senior executives who together hold 80
per cent of ZY Ltd shares. The second group comprises 5000 individual
shareholders who together hold the remaining 20 per cent of the shares.
If the individual shareholders are not happy with the remuneration packages of
the directors, how can they activate the two-strikes rule?
Answer Options
You answered A. The correct answer is A
1250 of the individual shareholders need to vote 'No' to the

A
remuneration report.

B

C
The two-strike rule can never be activated by the individual

D
shareholders since they hold only 20 per cent of voting rights.
Answer Explanation
A is correct because 25% of 'eligible shareholder' need to vote 'no' to the

The senior executives have a conflict because of their key management positions
and thus, they are not permitted to vote. So, 25% of 5000 shareholders is 1250.
Page: 218-239
Question 4 Marks: 1
Regarding audits and related regulation, which of the following is correct?
Answer Options
You answered B. The correct answer is B
The external auditors report directly to senior executives within the

A
organisation.
External auditors apply the international Standards on Auditing when

B
conducting an audit engagement.
The auditor is responsible for preparing the financial statements and

C
expressing an opinion relating to them.
Boards are responsible for ensuring that both internal and external
D
auditors are equally independent of the organisation.
Answer Explanation
B is correct because external auditors comply with the ISAs which is the
International Standards on Auditing.
A is incorrect because reporting to senior executives would affect the auditors'

independence. External auditors report to the intended users which in most
cases are the shareholders.
C is incorrect because management and the board is responsible for preparing

the financial statements not the auditor.
D is incorrect because internal auditors will never be of equal independence to

external auditors since they are employed within the organisation.
Page: 226
Question 5 Marks: 1
Which of the following best describes an independent director of a listed
corporation?
Answer Options
You answered C. The correct answer is C
A non-executive director who holds 20 per cent of the shares in the

A
corporation
An executive director who is a CEO but who receives no additional

B
remuneration for being on the board
A non-executive director who receives a flat fee for being a director

C and who accepts no additional consulting, advisory or performance-
related fees
A full-time employee of a bank who is appointed to the board at the

request of the bank (a major lender to the corporation) and is
D
instructed by the bank to always vote in the interests of the
corporation’s shareholders
Answer Explanation
C is correct because a non-executive director who receives a flat fee for being a
director and who accepts no additional consulting, advisory or performance-
related fees satisfies fully the requirements of independence as seen in the ASX
CGC guidelines and in the UK FRC Corporate Governance Code.
A is incorrect because a non-executive director who holds 20 per cent of the

shares in the corporation has a strong personal interest in the corporation.
Independence is not an absolute concept and it is the board’s responsibility to
determine independence.
B is incorrect because an executive director who is a CEO, but who receives no

additional remuneration for being on the board, will not be independent. An
employee will never be independent from the point of view of shareholders. Such
a person has too many ties (including incentive payments) to satisfy any notion
of independence.
D is incorrect because a person appointed to the board (with initial appointment

by the board) at the request of a major lender of a corporation, is one of many
circumstances where the person appointed would be termed a ‘nominee
director’.
Note that all director appointments to the board (i.e. made by the board before
reference to shareholders) must eventually be approved by a majority
shareholder vote. Such a vote will usually be required to take place (as mandated
by the company constitution) at the next general meeting held by the company —
so if there is no earlier meeting, then this would (at the latest) take place as part
of the voting at the next general meeting of the company.
Nominee directors, like all directors, are required to act in good faith in the
interest of the company as a whole and to use their power as directors for proper
purposes in relation to the company as a whole.
The legal expression ‘company as a whole’ means the shareholders of the

corporation as a body of persons who own the corporation.
Despite the common legal duty of all directors towards the shareholders as a
whole, some directors are considered independent and others are not.
The fact that the employee has been told by the employer (the bank) that they
should vote in the interests of the shareholders in no way changes the fact that
they are on the board as a result of the major commercial interest that exists
between the corporation and the bank.
The employee’s opinion that they are independent is irrelevant. The board (on
which they are a director) has the responsibility to determine independence and
it is impossible that the employee is independent.
Executive remuneration and performance > Page: 229
Question 6 Marks: 1
When shareholders are dissatisfied with the remuneration packages proposed for
a company’s executives, they can move to ‘spill the board’.
In this process, which of the following statements are correct?
I. It enables a clean sweep of the existing board. II. It increases the power of
independent shareholders. III. It requires a minimum of 25 per cent of eligible
shareholders to vote against the remuneration report. IV. It requires a minimum of
25 per cent of eligible shareholders to vote in favour of the resolution to spill.
Answer Options
A I and II only
B I and IV only
C II and III only
D II and IV only
Answer Explanation
C is correct because items (II) and (III) are the correct statements.
Twenty-five per cent of eligible shareholders must vote against the remuneration
to move for a spill, and this voting process gives greater voting power than usual
to independent shareholders as key management personnel (KMPs) are not able
to vote and KMPs generally hold a lot of shares.
Item I is incorrect because the managing director and two additional directors
must be retained to maintain board continuity, so there is not a clean sweep of
the existing board.
Item IV is incorrect because a successful spill motion requires a minimum of 50

per cent of the eligible shareholders to vote in favour of the resolution, not 25 per
cent.
Page: 218-239
Question 7 Marks: 1
Various arguments are forwarded for increasing the proportion of women on
boards, from equal opportunity to increasing the diversity of perspectives,
knowledge and backgrounds to increasing share value, as noted in the Credit
Suisse report.
Which of the four countries below is most likely to see the greatest board gender
diversity?
Answer Options
You answered A. The correct answer is A
A France.
B Australia.
C Malaysia.
D the United Kingdom.
Answer Explanation
A is correct because like other European counties that have enacted mandatory
minimums, the percentage of women on boards of large companies is around 40
per cent.
B is incorrect because Australian reforms have achieved only 20 per cent.
C is incorrect. Malaysia has set a 30 per cent target of women board members
by 2016, lower than the European mandatory minimums.
D is incorrect. While the module does not specify the UK’s percentage it is not
one of the European countries that have enacted mandatory minimums.
Diversity > Page: 226-228
Question 8 Marks: 1
Which of the following is not an example of ‘window dressing’ with respect to
financial statements.
Answer Options
A Earnings management by deferring income to a later period.
More favourable presentation than if transactions had been treated

B
appropriately.
C Reporting in accordance with required laws and regulations.
D Presenting results in a misleading way.
Answer Explanation
C is the correct answer as this is not an example of window dressing.
Reporting in accordance with required laws and regulations reflects the true and
fair nature of the financial statements in a truthful and honest way without the
results being shown in a way that is not a true and accurate reflection.
A, B and D are all examples of ‘window dressing’.
Diversity > Page: 226-228
Question 9 Marks: 0
In Australia, in common with most countries, which of the following is specifically
required by law to become a company director?
Answer Options
You answered B. The correct answer is D
A To be a natural person of at least 16 years of age.
B To be fully certified as a qualified company director.
C To have specific qualifications in appropriate business disciplines.
To be a person not currently disqualified from managing a

D
corporation.
Answer Explanation
D is correct because you are not allowed to become a director if you have been
disqualified from managing a corporation.
A is incorrect because you must be a natural person of at least 18 years of age.
B is incorrect because while boards would look for directors with appropriate
experience and skills, there are no compulsory certifications required.
C is incorrect because while boards would look for directors with appropriate
experience and skills, there are no specific educational qualifications.
Page: 218-239
Question 10 Marks: 1
Disqualification of a director or an officer of a company in Australia, in common
with most countries, occurs because of some legally defined commercially
unacceptable behaviour or relevant legal wrongdoing.
Which of the following is not a specific wrong leading to disqualification?
Answer Options
A Financial market misconduct
B Responsibility for multiple insolvencies
Exercising business judgment that leads to very substantial losses for

C
the firm
Civil and criminal wrongs in relation to anti-competitive conduct in

D
markets for goods and services
Answer Explanation
C is correct because if a director exercises informed business judgment that

leads to very substantial losses, normally the courts will not seek to hold the
director liable for the losses or impose disqualification.
The courts accept that business decision-making is complex and takes place in
conditions of uncertainty, and if a director has exercised reasonable business
judgment at the time this is acceptable behaviour even if the decision proves a
wrong one.
A, B and D are specific wrongs that make directors liable for disqualification, so
these options are incorrect.
Page: 218-239
©KNOWLEDGEQUITY
ABN 80 128 394 472

EG M4 - Part A Module Quiz 1 - KnowledgEquity

Uploaded by

Copyright:

Available Formats

You might also like

EG M4 - Part A Module Quiz 1 - KnowledgEquity

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

EG M4 - Part A Module Quiz 1 - KnowledgEquity

Uploaded by

Copyright:

Available Formats

4/5/24, 11:38 PM EG M4 – Part A Module Quiz 1 - KnowledgEquity

Ethics & Governance

SEARCH KNOWLEDGE BASE

ASK THE EXPERT

SUBJECT OVERVIEW AND FAQS

QUICK FIRE QUIZ (M1 - M3)

PART A: GOVERNANCE SUCCESS FACTORS

PART A MODULE QUIZ 1

PART B: OPERATIONAL OBLIGATIONS

PART B MODULE QUIZ 2

PART C: PROTECTING FINANCIAL MARKETS

PART C MODULE QUIZ 3

QUICK FIRE QUIZ (M4 - M5)

EG M4 – Part A Module Quiz 1

You have submitted the quiz.

EG M4 – Part A Module Quiz 1

YOU SCORED 9 OUT OF A POSSIBLE 10 [90%]

C is incorrect because the approach described here is the opposite to

A A director can be removed by a resolution by other directors.

B Directors may choose to resign before the end of their term.

C Shareholders can vote to remove a director at a general meeting.

D is correct because the group holding 5% cannot remove individual directors.

A is incorrect because this is allowed in some countries but there must be a

1250 of the individual shareholders need to vote 'No' to the

2500 of the individual shareholders need to vote 'No' to the

5000 of the individual shareholders need to vote 'No' to the

The two-strike rule can never be activated by the individual

A is correct because 25% of 'eligible shareholder' need to vote 'no' to the

USER SELECTION CORRECT ANSWER

The external auditors report directly to senior executives within the

External auditors apply the international Standards on Auditing when

The auditor is responsible for preparing the financial statements and

A is incorrect because reporting to senior executives would affect the auditors'

C is incorrect because management and the board is responsible for preparing

D is incorrect because internal auditors will never be of equal independence to

A non-executive director who holds 20 per cent of the shares in the

An executive director who is a CEO but who receives no additional

A non-executive director who receives a flat fee for being a director

A full-time employee of a bank who is appointed to the board at the

A is incorrect because a non-executive director who holds 20 per cent of the

B is incorrect because an executive director who is a CEO, but who receives no

D is incorrect because a person appointed to the board (with initial appointment

The legal expression ‘company as a whole’ means the shareholders of the

In this process, which of the following statements are correct?

C II and III only

Item IV is incorrect because a successful spill motion requires a minimum of 50

D the United Kingdom.

B is incorrect because Australian reforms have achieved only 20 per cent.

A Earnings management by deferring income to a later period.

More favourable presentation than if transactions had been treated

C Reporting in accordance with required laws and regulations.

D Presenting results in a misleading way.

C is the correct answer as this is not an example of window dressing.

A, B and D are all examples of ‘window dressing’.

A To be a natural person of at least 16 years of age.

B To be fully certified as a qualified company director.

C To have specific qualifications in appropriate business disciplines.

To be a person not currently disqualified from managing a