Corporate Governance and Ethics MCQ and Answer PDF

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Corporate Governance and Ethics MCQ

1. Which of the following is not one the underlying principles of the corporate governance Combined Code of Practice?

  1. Openness
  2. Integrity
  3. Accountability
  4. Acceptability

Answer: Acceptability

2. Which of the following is not one of the elements of financial reporting?

  1. Assets.
  2. Liabilities.
  3. Expenses.
  4. Cash flows.

Answer: Cash flows.

3. Which of the following is NOT one of the primary elements of a strong organizational compliance program?

  1. A written code of conduct
  2. An ethics officer
  3. Significant financial expenditures
  4. A formal ethics training program

Answer: Significant financial expenditures

4. Which of the following regarding residual loss is correct?

  1. Bonding costs do not have an effect on residual loss.
  2. Residual loss is incurred by the agent because an agency relationship exists.
  3. Under agency theory, residual loss can be reduced to zero by good governance.
  4. A reduction in residual loss is likely to be the result of an increase in monitoring costs.

Answer: A reduction in residual loss is likely to be the result of an increase in monitoring costs.

5. Better access to certain markets, differentiation of products, and the sale of pollution-control technology are ways in which better environmental performance can:

  1. increase revenue
  2. increase costs
  3. decrease revenue
  4. decrease costs

Answer: increase revenue

6. Under the _____________, both internal and external corporate governance mechanisms are intended to induce managerial actions that maximize profit and shareholder value.

  1. Shareholder theory.
  2. Agency theory.
  3. Stakeholder theory.
  4. Corporate governance theory.

Answer: Shareholder theory.

7. Which of the following regarding agency theory is correct?

  1. Agency theory only applies to large entities.
  2. Agents act in the best interest of the principal.
  3. Agents are assumed to be in a position of power.
  4. Agency theory defines the relationship between agents and directors.

Answer: Agents are assumed to be in a position of power.

8. What type of justice exists if employees are being open, honest, and truthful in their communications at work?

  1. Procedural
  2. Distributive
  3. Ethical
  4. Interactional

Answer: Interactional

9. When a firm charges different prices to different groups of customers, it may be accused of:

  1. cultural relativism
  2. money laundering
  3. facilitating payments
  4. price discrimination

Answer: cultural relativism

10. Where in the annual report would you expect to find mandatory social and environmental reporting?

  1. The financial statements and the chairman’s report.
  2. Notes to the financial statements and directors’ report.
  3. Corporate governance information and the auditor’s report.
  4. The Directors’ declaration and the Chief Executive Officer’s report.

Answer: Notes to the financial statements and directors’ report.

11. Which moral philosophy seeks the greatest good for the greatest number of people?

  1. Consequentialism
  2. Utilitarianism
  3. Egoism
  4. Ethical formalism

Answer: Utilitarianism

12. Which of the following descriptions applicable to different types of directors and their independence is incorrect?

  1. Independent executive director.
  2. Independent non-executive director.
  3. Non-independent executive director.
  4. Non-independent non-executive director.

Answer: Independent executive director.

13. Which of the following is a problem presented by ethics audits?

  1. They may be used to reallocate resources.
  2. They identify practices that need improvement.
  3. Selecting auditors may be difficult.
  4. They may pinpoint problems with stakeholder relationships.

Answer: Selecting auditors may be difficult.

14. Which of the following is not a CSR theory?

  1. Rights theory.
  2. Legitimacy theory.
  3. Stakeholder theory.
  4. Enlightened self-interest.

Answer: Rights theory.

15. Which of the following is not a social sustainability issue?

  1. Child labour.
  2. Biodiversity.
  3. Ethical trading.
  4. Supply chain management.

Answer: Biodiversity.

16. Which of the following is not an agency cost?

  1. Residual loss.
  2. Bonding costs.
  3. Congruency loss.
  4. Monitoring costs.

Answer: Congruency loss.

17. Which of the following is not an example of a duty or responsibility of directors?

  1. Having a conflict of interest but declaring it to the board of directors.
  2. Continuing to transact with creditors when the company’s liabilities exceed the assets.
  3. Researching and asking questions relating to the company’s operations so as to be informed.
  4. Choosing to personally carry out instructions from the board rather than requesting subordinates to do so.

Answer: Continuing to transact with creditors when the company’s liabilities exceed the assets.

18. Which of the following is not an impact that underpins corporate social responsibility?

  1. Social.
  2. Political.
  3. Economic.
  4. Environmental.

Answer: Political.

19. Which of the following is not likely to have a direct impact on environmental sustainability?

  1. Laws prohibiting fracking.
  2. The introduction of new carbon tax.
  3. A repeat of the global financial crisis.
  4. Restrictions on greenhouse gas emissions.

Answer: A repeat of the global financial crisis.

20. Codes of conduct and codes of ethics

  1. are formal statements that describe what an organization expects of its employees.
  2. become necessary only after a company has been in legal trouble.
  3. are designed for top executives and managers, not regular employees.
  4. rarely become an effective component of the ethics and compliance program.

Answer: are formal statements that describe what an organization expects of its employees.

21. External audit of the accounts of a limited company is required

  1. because it is demanded by the company’s bankers
  2. by the Companies Act 2006
  3. at the discretion of the shareholders
  4. to detect fraud

Answer: by the Companies Act 2006

22. For referent power to be effective, what must exist between individuals in the relationship?

  1. Antipathy
  2. Rivalry
  3. History
  4. Empathy

Answer: Empathy

23. In terms of the ASX Principles, which of the following regarding the composition of the nomination committee of a listed company is most correct?

  1. A minimum of three members chaired by an executive director.
  2. A majority of independent directors chaired by an independent director.
  3. A majority of three members of whom most are independent directors.
  4. A minimum of one independent director who also chairs the committee.

Answer: A majority of independent directors chaired by an independent director.

24. In terms of the National Greenhouse and Energy Reporting Act, which of the following entities would be required to register with the Clean Energy Regulator?

  1. A facility that emitted 23.5kt of greenhouse gases.
  2. A corporate that consumed 199TJ of energy.
  3. A facility that produced 150TJ of energy.
  4. A corporate that emitted 26Kt of greenhouse gases.

Answer: A facility that produced 150TJ of energy.

25. Managerial ethics can be characterised by all of the following levels except

  1. immoral management
  2. amoral management
  3. demoral management
  4. moral management

Answer: demoral management

26. Most companies begin the process of establishing organizational ethics programs by developing

  1. ethics training programs
  2. codes of conduct
  3. ethics enforcement mechanisms
  4. hidden agendas

Answer: codes of conduct.

27. One of the objectives of the Sarbanes-Oxley Act was to:

  1. Increase the cost of compliance with federal regulations.
  2. Force foreign companies to delist from U.S. capital market exchanges.
  3. Improve the quality and transparency of financial reporting.
  4. Increase the compliance burden for small companies.

Answer: Improve the quality and transparency of financial reporting.

28. Stakeholders are considered more important to an organization when:

  1. they can make use of their power on the organization
  2. they do not emphasize the urgency of their issues
  3. their issues are not legitimate
  4. they can express themselves articulately

Answer: they can make use of their power on the organization

29. Stakeholders are considered more important to an organization when:

  1. they can make use of their power on the organization
  2. they do not emphasize the urgency of their issues
  3. their issues are not legitimate
  4. they can express themselves articulately

Answer: they can make use of their power on the organization

30. The _____________ dimension of social responsibility refers to a business’s societal contribution of time, money, and other resources.

  1. Ethical
  2. Philanthropic
  3. Volunteerism
  4. Strategic

Answer: Philanthropic

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