P92 - Ch 4

  1. In relation to managing coporate risk, what are the directors responsible for?
    • determine the level of risk that is appropriate for the company to bear
    • ensure that there is a sound system of internal control to safegaurd shareholder's investments and the company's assets
    • ensure regular risk assessments are carried out
  2. What are the statutory functions of the Companies House?
    • to incorporate and dissolve companies
    • to examine and hold documents under the Companies act
    • to make this information available to the public
  3. What do the registration documents set out?
    • company name
    • whether company is public or private
    • whether the liability of the company is to be limited and if so by shares of by gaurantee
    • the company's registered office
    • statement of the proposed officers
    • the proposed articles of association
  4. What are the Articles of Association?
    The Articles of Association contain the main provisions governing the relationship between the shareholders and the company as well as moderating the balance of power between the shareholders themselves.
  5. In the case of a quoted company, what must the business review include?
    the main trends and factors likely to affect the future development, perfromance and positions of the company's business

    • information about
    • >environmental matters
    • >the company's employees
    • >social and community issues
    • >information about persons with whom the company has contractual or other arrangements that are essential to the business
  6. What are the duties of the company secretary?
    • maintaining the statutory registers
    • give notice of the AGM
    • send special and extraordinary resolutions to the companies house
    • ensuring that statutory forms are filed promptly
    • supply copies of accounts to members of the company 21 days before a meeting
    • keep minutes of directors meetings and general meetings
    • making company accounts and documents available for inspection
  7. What must the external auditor check?
    • the finacial statements give a true and fair view and compy with the relevant legal and regulatory requirements
    • the information given in the director's report is consistent with the accounts
    • the specified parts for the directors remuneration report comply with the legislation
    • the company has kept proper accounting records
  8. The internal audit function can assist directors with the implementation of good corporate governance by...
    • maintaining a sound system of internal control by reviewing how the company identifies and manages risk
    • reviewing board reports to ensure that the present a balanced and understandable viewpoint
    • ensuring directors are up to date with new accounting and audit issues
    • communicating with external auditors to ensure a unified approach
    • ensuring the board receives correct the communications and information required from the external auditors
  9. Items on the agenda of a board meeting...
    • apologies
    • note the quorum
    • approval of previous minutes
    • matters arising from previous minutes
    • matters adjourned from previous meeting
    • routine matters
    • new matters
    • AOB
    • date of next meeting
  10. Scope and recommendations of the Walker Review
    Review coporate goveranance in financial institutions following major failures in the banking system

    • Non-execs and devote more time to their roles
    • Induction and regular training for non-execs
    • Tougher scruitiny of non-execs by FSA
    • Institutional investors should be less passive and engage earlier if problems are suspected
    • FRC to sponsor stewardship code
    • Chairperson to face annual re-election
  11. Under the Turnbull Guidance, what should boards of listed companies consider?
    • nature & extent of risks facing the company
    • extents & categories of risk which are acceptable for the company to bear
    • likelihood of risks materialising
    • the company's ability to mitigate potential impact if risks materialise
    • costs involved in managing risk
  12. Under the Turnbull Guidance what should the board of listed companies do when reviewing the effectiveness of internal control?
    • assess how the risks have been identified, evaluated and managed
    • assess the effectivness of current internal controls
    • consider whether necessary actions have been taken in relation to significant failings & weaknesses
    • consider whether findings indicate a need for more extensive internal control measures
  13. Under the Smith Guidance, what are the main roles & responsibilities of the audit committee?
    • monitoring financial statements and announcements relating to financial performance and reviewing financial reporting judgements contained therein
    • review the company's internal fincial controls and risk managment systems
    • monitor & review the internal audit function
    • recommend external auditor and appove their remuneration and terms of engagement
    • monitor & review ext. auditor's independence and objectivity
  14. Scope and topics in the Higgs Report
    Scope: The role and effectiveness of Non-Execs

    • Guidance of the role of the chairperson
    • the role of non-execs
    • summary of duties of audit committee
    • summary of duties of remuneration committee
    • due diligence checklist for new board members
    • induction checklist
    • performance evaluation guidance
  15. Duties placed on board members by the Penrose Report
    • Obtain a proper understanding of the issues being considered
    • Question effectively and dedicate sufficient time to acquiring sufficient understanding of issues before making decisions
  16. Objectives of the European Commission in relation to company law & corporate governance
    • providing protection for shareholders and other parties concerned
    • ensuring freedom of establishment
    • fostering efficiency and competitiveness
    • promoting cross-border co-operation between companies
    • stimulating discussions between member-states on the modernisation of company law and corporate governance
  17. Key points in the Sarbanes-Oxley Act 2002 (USA)
    • all companies listed on US stock exchanges must comply with SOX
    • purpose is to protect investors by improving accuracy and reliability of corporate disclosures
    • aimed at overcoming corporate scandals (WorldCom, Enron)
    • highlights the need for auditor independance, corp responsibility and enhanced corporate disclosures
  18. Key issues relating to Data Protect Act 1998
    • directors & officers of corporate bodies can be held liable for offences committed by their institutions
    • individuals can go directly to court if they feel that their rights under the act have been breached
    • personal data may only be transfered to non-EU areas provided that certain conditions have been met
    • subject access requests made on behalf of 3rd parties for criminal/medical histories are forbidden
Card Set
P92 - Ch 4
Main aspects of corporate governance