Corporate governance

There were a few questions on corp governance with the synergies questions. The gain to target company was cash paid (in this case stock) - original company book value The gain to acquirer was synergies - (stock paid - original company book value) There was a question of which was a good instance of good corporate governance. I was torn between the meeting without the management and the board of directors consisting of 5 to 10 outsiders. I know thats a good ratio. I picked meeting.

meeting, CFA text says 75% independent BOD is best practice

ratio has to be 75%. The answer was meetings

best practices are 75% of the board as independent

meetings was it

man, didn’t the question ask what was not an example of good governance? what were the other two choices, other than board composition and meetings frequency?

ceo chairman same person

oh, yes, so i probably answered correctly. It’s getting blurry.

meetings - agreed

Meeting was the only good one… The other 3 were bad practies

Don’t know if anyone got the one right with audit committee having authority to approve non-audit service from external audit companies.

Yep the board 5/10 is not good enough. It was meetings. Are they allowed to approve non-audit service from external audit companies? I put no, audit is audit; not consultancy.

cp0821, i put that they should have authority

Checked the audit committee one out right after the test. The answer was YES YES-or correct correct however that was worded. There was ONE sentence in the text about the non-audit services. What a jip…

Is it the question like this: 1) For independent board members to pick outside auditors (I answered yes). 2) For board (audit committee?) to approve non-audit service (I said yes, but probably wrong).

over05 Wrote: ------------------------------------------------------- > Is it the question like this: > > 1) For independent board members to pick outside > auditors (I answered yes). > 2) For board (audit committee?) to approve > non-audit service (I said yes, but probably > wrong). Over05, I answered Yes for (2) and the reason is …, from L1 I remember the committee should consult outside experts, so i thought even Pricewatercoopers is an audit firm, they can be hired for consultation which is what is happening in the real market… - just my guess

The answer is 1) For independent board members to pick outside auditors YES 2) For board (audit committee?) to approve non-audit service YES I checked it up in the text

Weak

Seems like -1 for me. I chose non-audit consulting from auditors do not require audit committee approval. CFA500, you are right - the following says “the audit committee has the authority to approve or reject other proposed non-audit engagements with the external audit firm.” http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2005.n6.4003

What could be non audit service?