Kingpin804

A properly qualified board member is of vital importance to proper corporate governance within a firm. Board members who lack the requisite skills, knowledge and expertise to conduct a thorough review of the firm’s activities are:

A) more likely to defer to management when making decisions.

B) less likely to participate fully in decision-making matters during board meetings.

C) more likely to consult with outside interests to assist in decision-making.

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Board members must be properly qualified, having the knowledge and experience which is required to advise management in light of the firm’s specific situations encountered. Both remaining answers are incorrect.

Kingpin804

Which of the following might be an undesirable trait of a member of the board of directors?

A) Lack of legal or regulatory problems as a result of working with other firms.

B) Service on the board for more than 10 years.

C) Experience with the technologies, products, and services the firm offers.

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Service on the board for more than 10 years may indicate knowledge and experience, but may result in a member becoming too close to management.

Kingpin804

A critical corporate governance issue is ensuring that the board and its members have the requisite experience needed to properly govern the firm for the shareholders’ benefit. When considering board member qualifications, investors and shareholders should consider whether board members can act with care and competence as a result of their experience with all of the following EXCEPT:

A) the competitive landscape the firm faces.

B) legal issues.

C) technologies, products, services which the firm offers.

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Knowledge of the firm’s competitive landscape is likely beyond what a board member should have intimate knowledge about. The other items are all issues a board member should be knowledgeable about. Other issues board members should have experience with include financial operations, accounting and auditing topics, and business risks the firm faces.

Kingpin804

Which of the following practices should be included in a firm’s code of ethics?

A) Prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.

B) Providing the board with relevant corporate information in a timely manner and prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.

C) Providing the board with relevant corporate information in a timely manner and allowing board members or other insiders to purchase stock before shareholders can make purchases.

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The firm’s code of ethics establishes the basic principles of integrity, trust, and honesty. Two of the practices listed in the reading discuss providing the board with relevant corporate information in a timely manner and prohibiting board members or other insiders from purchasing stock before shareholders can make purchases.

Kingpin804

A strong corporate code of ethics is vitally important. Which of the following statements concerning a firm’s code of ethics is least likely accurate?

A) A firm’s code of ethics should require clear disclosure of any advantages given to the firm’s insiders that are not also offered to shareholders.

B) A firm’s code of ethics sets standards for ethical conduct based on basic principles of integrity, trust and honesty.

C) As part of investor review of the firm’s ethical climate, investors should determine whether the firm gives the board access to relevant corporate information in a timely manner.

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The firm’s code of ethics should prohibit practices that give advantages to company insiders that are not also offered to shareholders.

Kingpin804

The audit committee of a company’s Board of Directors is most likely to act in the interests of shareholders when:

A) the committee has authority to prevent the company from engaging in non-audit business relationships with its external auditors.

B) a company officer other than the CEO controls the audit budget.

C) a reliable communication “firewall” is in place between the committee and the company’s internal auditors.

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The audit committee is responsible for evaluating the financial information that the company provides to shareholders. This committee should be able to approve or reject the company’s proposed non-audit engagements with its external auditing firm. The audit committee, not management, should control the audit budget, and there should be no restrictions on communication between the committee and the company’s internal auditors.

Kingpin804

A special-purpose board committee with which of the following responsibilities would be least likely to act in the best interests of the shareholders?

A) Takeover defense.

B) Corporate governance.

C) Mergers and acquisitions.

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A committee responsible for takeover defense would most likely be acting in the interests of the company's current management rather than in the interests of shareholders.

Kingpin804

Investors have a duty to determine whether the board has properly established committees of independent board members to help carry out various board functions. Which of the following statements about the “audit committee” is least accurate?

A) The audit committee should ensure that the audit is conducted consistent with generally accepted auditing standards (GAAS).

B) Firm management is responsible for hiring and supervising the independent external auditors, but the audit committee has strict oversight responsibilities.

C) The audit committee should ensure that the independent auditors have authority over the audit of the entire corporate group, which includes foreign subs and affiliates.

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The audit committee is responsible for hiring and supervising the independent external auditors, in order to ensure that the auditors’ priorities are consistent with the best interests of shareholders. Both remaining statements are correct.

Kingpin804

Which of the following statements concerning Board committees is least accurate?

A) The nominations committee is responsible for recruiting qualified board members and preparing an executive management succession plan.

B) Members of the audit committee should be independent experts in accounting and finance.

C) The audit committee has authority over the procedures used to audit the entire corporate group including subsidiaries and affiliates.

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The independent auditor has authority over the audit procedures. The audit committee is responsible for hiring and supervising the independent auditor.

Kingpin804

Which of the following policies regarding shareowner rights for equity investors is most likely detrimental to the shareowners’ interests?

A) The company uses a third-party entity to tabulate shareowner votes.

B) Shareowners are permitted to vote either by paper ballot or a proxy voting service.

C) Shareowners can approve changes to the corporate structure only with a supermajority vote.

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Provisions that require a supermajority can even make changes strongly supported by shareowners more difficult to enact.