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Business Accounting and Finance

Tony Davies, University of Wales, Lampeter, UK
Brian Pain, University of Luton, UK

Corporate governance

Self-test Questions


1	The framework for establishing good corporate governance and accountability was originally set up by the
		A)	Rowntree Committee
		B)	Cadbury Committee
		C)	Thornton Committee
		D)	Nestle Committee


2	Which of the following is not one the underlying principles of the corporate governance Combined Code of Practice?
		A)	openness
		B)	acceptability
		C)	accountability
		D)	integrity


3	External audit of the accounts of a limited company is required
		A)	to detect fraud
		B)	at the discretion of the shareholders
		C)	because it is demanded by the company's bankers
		D)	by the Companies Act 1985/1989


4	Directors' responsibilities are unlikely to include
		A)	a duty of care
		B)	a duty to keep proper accounting records
		C)	a fiduciary duty
		D)	a duty to propose high dividends for shareholders


5	A company may become insolvent if it
		A)	cannot meet its budgeted level of profit
		B)	makes a loss
		C)	has negative working capital
		D)	cannot pay creditors in full after realisation of its assets


6	A director of a limited company may not be liable for wrongful trading if he/she
		A)	introduced into the balance sheet an asset based on a valuation of its brands sufficient to meet any shortfall
		B)	took every step to minimise the potential loss to creditors
		C)	increased the valuation of its stocks to cover any potential shortfall
		D)	brought in some expected sales from next year into the current year


7	Fraudulent trading may be
		A)	a criminal offence committed only by directors of a limited company
		B)	a civil and a criminal offence committed by any employee
		C)	a civil offence committed by any employee
		D)	a civil and a criminal offence committed only by directors of a limited company


8	Disqualification of directors may result from breaches under the
		A)	Companies Act 1985/1989 and Insolvency Act 1986
		B)	Health and Safety at Work Act 1974
		C)	Financial Services Act 1986
		D)	Sale of Goods Act 1979


9	Directors may not be disqualified for
		A)	paying themselves too much
		B)	being convicted of drunken driving
		C)	persistent breaches of company legislation
		D)	paying inadequate attention to the company finances


10	Which of the following actions will not help directors to protect themselves from non-compliance with their obligations and responsibilities?
		A)	including a disclaimer clause in their service contracts
		B)	seeking professional help
		C)	keeping themselves fully informed about company affairs
		D)	ensuring that regular management accounts are prepared by the company

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