9/1/24, 8:55 AM EG M3 – Mini Quiz – Part B - KnowledgEquity
EG M3 – Mini Quiz – Part B
YOU SCORED 3 OUT OF A POSSIBLE 4 [75%]
Question 1 Marks: 1
Which of the following is not a responsibility of the board of a large public company?
Answer Options
You answered C. The correct answer is C
USER SELECTION CORRECT ANSWER
A Selecting and recommending auditors to shareholders at general meetings.
B Approving and working with and through the CEO.
C Managing the day-to-day operations of the corporation.
Determining that the company accounts confirm with Australian Accounting
D
standards and are true and fair.
Answer Explanation
C is correct because managing the day-to-day operations of the corporation is not a
responsibility of the board of a large public company.
In AWA Ltd v. Daniels (1992) 10 ACLC 933, Rogers CJ concluded that the role of the
board in modern companies is to set policy and organisational objectives (performance)
and then ensure that adequate controls and review procedures are in place
(conformance) to ensure effective implementation by management (performance).
However, Rogers CJ observed that the board is not in place to actually run the business
itself. That part of the governance process is delegated to the CEO, although the board
must remain informed and is responsible for taking timely action where fundamental
CEO failures arise.
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9/1/24, 8:55 AM EG M3 – Mini Quiz – Part B - KnowledgEquity
Rogers CJ stated: The board of a large public corporation cannot manage the
corporation’s day-to-day business. That function must by business necessity be left to
the corporation’s executives. If the director of a large public corporation were to be
immersed in the details of day-to-day operations, the director would be incapable of
taking more abstract, important decisions at board level (© State of New South Wales
through the Department of Justice, p. 1013).
A, B and D are incorrect because they all refer to responsibilities of the board. Refer to
Table 3.4.
Module: 3 > Part: B > 3.6 Corporate governance framework > The
board > Page: 151-156
Question 2 Marks: 1
A board committee is best described as a subset of the board formed to achieve which
of the following outcomes?
Answer Options
You answered A. The correct answer is A
USER SELECTION CORRECT ANSWER
A Enhance the effectiveness of the board.
B Report to shareholders on specific issues.
C Enable directors to reduce their individual liability.
D Being independent by having exclusively independent directors.
Answer Explanation
A is correct because the effectiveness of the board, and particularly of non-executive
directors, is likely to be enhanced by the establishment of appropriate subcommittees
of the board, usually simply referred to as ‘committees’.
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9/1/24, 8:55 AM EG M3 – Mini Quiz – Part B - KnowledgEquity
These committees enable the distribution of workload to allow a more detailed
consideration to be given to important matters, such as executive remuneration and
external financial reporting.
B is incorrect because committees report to the overall board, not directly to
shareholders.
C is incorrect because these committees do not reduce the responsibility of the board
as a whole and care needs to be taken to ensure that all those concerned understand
their functions. It is important to note that normally the board of directors is still
responsible for decisions made by the committees.
D is incorrect because an independent committee may be beneficial, but this is not the
sole purpose of setting up a committee. A committee will focus on a particular area
such as audit or remuneration.
Module: 3 > Part: B > 3.6 Corporate governance framework > Page:
148-164
Question 3 Marks: 0
Which of the following statements is not true?
Answer Options
You answered A. The correct answer is C
USER SELECTION CORRECT ANSWER
A Strategy without accountability may lead to recklessness.
B Governance = Conformance + Performance.
C Profitability is the most important strategic objective of an organisation.
D Accountability without strategy may lead to paralysis.
Answer Explanation
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9/1/24, 8:55 AM EG M3 – Mini Quiz – Part B - KnowledgEquity
C is correct because this is not a true statement. Many organisations do not have profit
as an objective (charities, government entities), and for those that do focus on profit it
is not automatically the most important strategic objective.
A, B and D are incorrect because they are all true statements covered in the material in
Part B: Corporate Governance and are fundamental principles with respect to the
understanding that corporate governance is not to be seen as an inhibitor of business.
Module: 3 > Part: B > 3.5 Importance of governance > Page: 146-147
Question 4 Marks: 1
What is the name given to the body that oversees the activities of a corporate
organisation?
Answer Options
You answered B. The correct answer is B
USER SELECTION CORRECT ANSWER
A The auditors
B The board of directors
C The shareholders
D The audit committee
Answer Explanation
B is correct because the Corporations Act (s.198A) states the ‘business of a company is
to be managed by or under the direction of the directors’.
A, C and D are incorrect because the auditors, the shareholders and the audit
committee do not oversee the activities of a corporation.
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9/1/24, 8:55 AM EG M3 – Mini Quiz – Part B - KnowledgEquity
Module: 3 > Part: A > 3.3 Nature of corporations and division of
corporate powers > Page: 136-138
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