Free ICA Specialist Certificate in Corporate Governance Practice Questions

Sample Practice Questions

Try these 10 sample questions from the ICA Specialist Certificate in Corporate Governance practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1What does a company's purpose describe in corporate governance?

   1. A.The reason the company existsCorrect answer: A
   2. B.The order in which jobs are graded
   3. C.The amount of capital it has issued
   4. D.The timetable for its next audit

   Explanation: The FRC states: "A company’s purpose is the reason for which it exists." Purpose explains the organisation’s reason for being; job grades, issued capital and audit scheduling describe other organisational matters.

   Reference: FRC Corporate Governance Code Guidance — Section 1, Purpose, paragraph 10

2. 2Under the UK Corporate Governance Code, which objective should guide the board's leadership of a company?

   1. A.Achieving the highest available quarterly profit regardless of future effects
   2. B.Maintaining current operations regardless of changing stakeholder needs
   3. C.Promoting long-term sustainable success and value for shareholdersCorrect answer: C
   4. D.Following the preferences of the largest investor in every decision

   Explanation: Principle A describes the board’s role as promoting "the long-term sustainable success of the company". That includes shareholder value and wider society; short-term profit, inertia or automatic obedience to one investor is not the governing objective.

   Reference: UK Corporate Governance Code 2024 — Section 1, Principle A, printed page 6

3. 3A company promotes responsible selling but rewards staff solely for volume, including sales that disregard customer needs. Which cultural weakness does this illustrate?

   1. A.Clear alignment of rewards with expected conduct
   2. B.Misaligned incentives that encourage contrary behaviourCorrect answer: B
   3. C.Independent assurance over sales-quality controls
   4. D.Consistent reinforcement of the stated company values

   Explanation: FRC guidance identifies "Misaligned incentives" as a possible culture problem and emphasises embedding values in incentives. Here the reward structure encourages behaviour contrary to the stated values; it does not demonstrate alignment or provide independent assurance.

   Reference: FRC Corporate Governance Code Guidance — Section 1, Culture, Figure 1 and paragraph 22

4. 4In the formal two-tier board structure described by Basel, what distinguishes the supervisory board?

   1. A.It performs the supervisory function and has no executive functions.Correct answer: A
   2. B.It combines all supervisory and day-to-day management duties.
   3. C.It consists only of the bank's operational department managers.
   4. D.It replaces both shareholder meetings and external supervision.

   Explanation: Basel describes a separate supervisory board "which has no executive functions." This distinguishes a two-tier allocation of supervision from executive management, rather than abolishing shareholder or regulatory roles.

   Reference: Basel Committee — Corporate governance principles for banks — Applicability, paragraph 18, printed page 6

5. 5In Basel's three-lines model, who owns and manages the risks incurred through a business unit's activities?

   1. A.The external auditor as part of the annual audit
   2. B.The business unit as the first line of defenceCorrect answer: B
   3. C.Internal audit as the owner of operating risks
   4. D.The supervisor as the unit's day-to-day manager

   Explanation: Basel states: "Business units are the first line of defence." They are accountable for ongoing management of risks they take; risk and audit functions do not remove that operating ownership.

   Reference: Basel Committee — Corporate governance principles for banks — Principle 1, paragraph 40, printed page 11

6. 6How does FRC guidance distinguish cyber resilience from a focus solely on preventing unauthorised penetration of IT systems?

   1. A.Cyber resilience means assuming successful prevention makes recovery unnecessary.
   2. B.Cyber resilience concerns financial reporting rather than continuity of operations.
   3. C.Cyber resilience includes protecting, detecting, responding to and recovering from attacks.Correct answer: C
   4. D.Cyber resilience transfers responsibility for incidents entirely to technology suppliers.

   Explanation: The FRC describes resilience as the ability to "protect, detect, respond to and recover from a cyber-attack." Prevention is important, but resilience also addresses detection, response and recovery; it is not a transfer of accountability to suppliers.

   Reference: FRC Corporate Governance Code Guidance — Section 4, Cyber Security — Risk Management

7. 7Which question is primarily answered by a corporate governance framework?

   1. A.How many units were sold last week?
   2. B.Who has authority to decide and is accountable?Correct answer: B
   3. C.What was the inventory purchase price?
   4. D.When will a customer's payment arrive?

   Explanation: ICA explains that governance mechanisms guide "how decisions are made, how power is exercised and how accountability is maintained." Authority and accountability are governance questions; the other options request individual operating or accounting facts.

   Reference: ICA — Grasping the Fundamentals of Corporate Governance — What Is Corporate Governance? — Ensuring transparency

8. 8A company has adopted strategic objectives but lacks the staff, policies and operating practices needed to deliver them. Which board responsibility is most directly engaged?

   1. A.Calculating every employee's monthly payroll deductions
   2. B.Negotiating each routine purchase from suppliers
   3. C.Replacing the executive team in all operational tasks
   4. D.Ensuring the resources and arrangements needed to meet objectivesCorrect answer: D

   Explanation: Principle A says the board should ensure "the necessary resources, policies and practices are in place". The board addresses organisational capability and monitors objectives without assuming each payroll, procurement or operating task.

   Reference: UK Corporate Governance Code 2024 — Section 1, Principle A, printed page 6

9. 9Business units protect their own targets, withhold useful information from each other and resist cross-functional cooperation. Which cultural warning sign named by the FRC is most directly illustrated?

   1. A.Psychological safety
   2. B.Acceptance of challenge
   3. C.Silo thinkingCorrect answer: C
   4. D.Shared purpose

   Explanation: The FRC lists "Silo thinking" as a sign of a possible culture problem. The behaviour reflects isolated departmental priorities rather than safety to speak, willingness to be challenged or a common organisational purpose.

   Reference: FRC Corporate Governance Code Guidance — Section 1, Culture, Figure 1

10. 10What should a bank board committee's charter or equivalent instrument set out under Basel's governance principles?

    1. A.Only the names of its current members and their personal investments
    2. B.Its mandate, scope and working procedures, including reporting to the boardCorrect answer: B
    3. C.Only the previous year's meeting dates and the committee's expenses
    4. D.Its authority to replace the full board's continuing responsibilities

    Explanation: Basel calls for a charter setting out the committee’s "mandate, scope and working procedures." It also covers reporting to the full board and member expectations. Membership or expenses alone is insufficient, and a charter does not extinguish board responsibility.

    Reference: Basel Committee — Corporate governance principles for banks — Principle 3, paragraph 64, printed page 15