1. Under the Bangladesh Corporate Governance Code at least one-fifth of the directors must be independent, and any fraction is rounded up. A listed company has 11 directors. What is the minimum number of independent directors?

A) 2
B) 1
C) 4
D) 3

Correct: D difficult Independent directors

11 / 5 = 2.2, and the Code treats a fraction as the next whole number, so at least 3. If you chose 2 you rounded down. If you chose 4 you rounded up twice. If you chose 1 you used the audit committee minimum of one independent member.

2. Which audit committee for a listed company in Bangladesh complies with the Corporate Governance Code?

A) Three members, including the chairperson of the board and one independent director, with the company secretary as secretary
B) Four non-executive directors, including one independent director, with the company secretary acting as secretary
C) Two non-executive directors, both independent, with the company secretary acting as secretary
D) Three members: two non-executive directors and the managing director, one of the non-executives being independent

Correct: B difficult Audit committee

The audit committee must have at least three members, all non-executive directors other than the board chairperson, with at least one independent director; the company secretary acts as secretary. Including the chairperson, including an executive such as the managing director, or having fewer than three members each breaches a requirement.

3. Which THREE would prevent a person from qualifying as an independent director under the Bangladesh Corporate Governance Code? (Select THREE.)

Multiple response
A) Holding 0.5% of the company's shares
B) Having been an executive of the company 18 months ago
C) Having been a partner of the statutory audit firm two years ago
D) Already serving as an independent director in four other listed companies
E) Being a brother of a sponsor who holds 6% of the shares

Correct: B, C, E complex Independence criteria

An independent director must not have been an executive in the preceding two years or a partner or executive of the audit firm in the preceding three years, and must not be a family member of a sponsor or shareholder holding 1% or more. Holding under 1% of shares is allowed, and serving in up to five listed companies in total is permitted. If you chose A or D you applied the wrong threshold.

4. Consider independent directors in Bangladesh. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The post of independent director may remain vacant for up to 120 days.   No

2. Independent directors are subject to retirement by rotation.   No

3. The tenure is three years, extendable for one further tenure only.   Yes

4. The Board appoints them and shareholders approve at the AGM.   Yes

Correct: N, N, Y, Y difficult Independent director terms

(1) No: the limit is 90 days. (2) No: they are exempt from retirement by rotation under the Companies Act 1994. (3) Yes. (4) Yes.

5. Consider corporate governance. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The Corporate Governance Code applies to companies listed on DSE and CSE.   Yes

2. The Code operates as a pure 'comply or explain' regime.   No

3. Stewardship theory assumes managers need strong monitoring because they pursue self-interest.   No

Correct: Y, N, N difficult Code and governance theory

(1) Yes. (2) No: it is largely a mandatory compliance system, though BSEC may grant specific exemptions. (3) No: that is agency theory; stewardship assumes managers act in the owners' interests.

6. A vacancy arises on the same day in the audit committee and in the nomination and remuneration committee (NRC) of a listed company. Under the BSEC Corporate Governance Code 2018 as described in the workbook, by when must the board fill each vacancy?

A) Audit committee within one month; NRC within 180 days
B) Audit committee within 90 days; NRC within 90 days, as for vacancies among independent directors
C) Audit committee within 180 days; NRC within one month, because the NRC has a wider remit
D) Audit committee within one month; NRC within one month, since both are board committees

Correct: A complex Filling committee vacancies

The Code requires audit committee vacancies to be filled within one month and NRC vacancies within 180 days. The 90-day period applies to a vacancy in the office of an independent director.

7. A listed company's NRC has six members, two of whom are independent directors. Four members attend a meeting, but none of them is an independent director. Which statement is correct?

A) The meeting is quorate, because four members is at least two-thirds of six
B) The meeting is not quorate, because an independent director must be present even though four of six members attended
C) The meeting is quorate, because the Code requires only two members to attend
D) The meeting is not quorate, because the Code requires at least five of the six members

Correct: B complex NRC quorum

The quorum is two members or two-thirds of the members, whichever is higher (here four), and the presence of an independent director is mandatory. Four members without an independent director therefore fails the quorum.

8. Which THREE statements about the external audit of a listed company in Bangladesh are correct, according to the workbook? (Select THREE.)

Multiple response
A) The audit committee oversees the selection of the external auditor and recommends the appointment to the board
B) The board alone appoints the auditor with no shareholder vote
C) The appointment must be approved by shareholders at the AGM
D) The compliance certificate must be obtained from the statutory auditor
E) A firm of chartered accountants cannot be appointed as statutory auditor for a consecutive period exceeding three years
F) An auditor may be reappointed indefinitely if the engagement partner changes every year

Correct: A, C, E complex External audit of listed companies

The audit committee recommends, the board proposes, and shareholders approve at the AGM; a firm may not serve more than three consecutive years. The Code compliance certificate comes from a practising professional accountant or secretary other than the statutory auditor.

9. Consider the NRC under the Code. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The NRC must have at least three members, including an independent director.   Yes

2. NRC members may be executive directors if they have relevant experience.   No

3. The NRC chairperson must be an independent director.   Yes

4. The NRC must meet at least once in a financial year.   Yes

5. An NRC member may receive consultancy fees from the company in addition to director's fees.   No

Correct: Y, N, Y, Y, N difficult Nomination and remuneration committee

(1) Yes. (2) No: all members must be non-executive directors. (3) Yes. (4) Yes. (5) No: apart from director's fees or honorarium, no remuneration may be received for advisory or consultancy roles.

10. Consider board structure under the Code. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. A listed company's board must have between 5 and 20 directors.   Yes

2. The managing director or CEO may hold the same post in another listed company.   No

3. The chair of the board and the MD or CEO must be different persons.   Yes

4. No independent director of the holding company is required to serve on the board of a subsidiary.   No

5. The holding company's board reviews the minutes of the subsidiary's board meetings.   Yes

Correct: Y, N, Y, N, Y difficult Board structure and subsidiaries

(1) Yes. (2) No: the MD/CEO must not hold the same post in another listed company. (3) Yes. (4) No: at least one independent director of the holding company must sit on the subsidiary board. (5) Yes.

11. A candidate holds 0.8% of the company's shares, was an executive of the company 18 months ago and is not an auditor. Under the BSEC Corporate Governance Code 2018 as described in the workbook, is he eligible to be an independent director?

A) Yes, because he is not an auditor
B) No, because he was an executive within the preceding two years
C) Yes, because his shareholding is below 1%
D) No, because independent directors must hold at least 5% of the shares

Correct: B complex Independent director eligibility

An independent director must hold less than 1% of the shares and must not have been an executive in the preceding two years. The 0.8% shareholding is acceptable but the 18 months since executive service disqualifies him.

12. An audit committee of a listed company has six members, including an independent director. What is the minimum number of members who must be present for a quorum, and what else is required?

A) Two, with any member present
B) Four, with an independent director among those present
C) Six, with all members present
D) Three, with the board chair present

Correct: B complex Audit committee quorum

The quorum is two members or two-thirds of the members, whichever is higher; for six members that is four, and an independent director must be present.

13. A listed company has a board of seven directors. Under the Code, at least one-fifth must be independent, with fractions rounded up. What is the minimum number of independent directors?

A) Three
B) Two
C) One
D) Seven

Correct: B complex Number of independent directors

One-fifth of seven is 1.4, which rounds up to two. Rounding down would give one.

14. The chair of a listed company's NRC cannot attend the AGM. What does the Code require?

A) The AGM must be adjourned until the chair can attend
B) No one needs to attend because the committee does not report to shareholders
C) Another NRC member attends to answer shareholders' queries and the reason for the chair's absence is recorded in the AGM minutes
D) The company secretary must answer all queries on the committee's behalf

Correct: C difficult NRC chair at the AGM

The NRC chair attends the AGM to answer shareholders' queries; if absent, another member is selected to attend and the reason is recorded in the AGM minutes.

15. A listed company obtains its annual corporate governance compliance certificate from its statutory auditor. What is the issue?

A) None, because statutory auditors must give the certificate
B) The certificate must come from the audit committee chair
C) The certificate must come from a practising professional accountant or secretary other than the statutory auditor
D) The certificate is not required for listed companies

Correct: C difficult Compliance certificate

The Code requires a yearly compliance certificate from a practising professional accountant or secretary who is not the statutory auditor or audit firm, disclosed in the annual report.

16. A board gives its long-serving CEO wide autonomy, believing she is motivated by pride in the company and will act in shareholders' interests without close monitoring. Which governance theory underlies this approach?

A) Agency theory
B) Transaction cost theory
C) Stakeholder theory
D) Stewardship theory

Correct: D complex Governance theories

Stewardship theory assumes managers are motivated to act in the company's interest. Agency theory assumes divergent interests and a need for monitoring.

17. Which THREE are among the roles of the NRC? (Select THREE.)

Multiple response
A) Approving the auditor's fee
B) Issuing the compliance certificate
C) Preparing the statutory financial statements
D) Recommending a remuneration policy for directors and top executives
E) Devising a policy on board diversity
F) Formulating criteria for director qualifications and independence

Correct: D, E, F difficult Role of the NRC

The NRC recommends criteria for qualifications, remuneration policy and diversity policy. It does not prepare accounts or issue the compliance certificate.

18. Which TWO are conditions for an independent director? (Select TWO.)

Multiple response
A) Is an independent director in six listed companies
B) Is not an executive in the preceding two years
C) Is a partner of the company's audit firm
D) Is appointed without board approval
E) Holds less than 1% of shares

Correct: B, E difficult Independent director qualifications

Independence requires a small shareholding and no executive role in the preceding two years. Audit firm connections and multiple independent directorships beyond five are not allowed.

19. Which TWO are typical functions of the audit committee? (Select TWO.)

Multiple response
A) Overseeing the financial reporting process
B) Recommending the appointment of external auditors
C) Setting executive salaries
D) Appointing the chair of the board
E) Preparing the budget

Correct: A, B difficult Audit committee functions

The audit committee oversees reporting and recommends auditors. Remuneration is for the NRC.

20. Consider the independence criteria. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. A person holding 1.5% of the shares cannot be an independent director.   Yes

2. A person who is an independent director in five listed companies is disqualified.   No

3. A person who was an executive three years ago is disqualified for that reason alone.   No

4. A person who was an executive of the company's audit firm within the preceding three years is disqualified.   Yes

Correct: Y, N, N, Y complex Independent director disqualifiers

(1) Yes: independent directors hold less than 1%. (2) No: the limit is more than five listed companies. (3) No: the executive restriction covers the preceding two years. (4) Yes.

21. Consider the NRC. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The NRC must have at least three members, including an independent director.   Yes

2. An external expert appointed as adviser has a vote.   No

3. A vacancy is filled by the board within 180 days.   Yes

4. Executive directors may be members.   No

5. The NRC chair is an independent director.   Yes

Correct: Y, N, Y, N, Y complex NRC

(1) Yes. (2) No: advisers are non-voting. (3) Yes. (4) No. (5) Yes.

22. Consider the audit committee. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The quorum is two members or two-thirds of members, whichever is higher.   Yes

2. A vacancy may be filled within 180 days.   No

3. Its chair is an independent director who attends the AGM.   Yes

4. It must meet at least once a year.   No

Correct: Y, N, Y, N complex Audit committee

(1) Yes. (2) No: within one month. (3) Yes. (4) No: it must meet at least four times a year.

23. Consider board composition. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The MD may be the MD of another listed company.   No

2. The board has between five and twenty directors.   Yes

3. The chair may also be the MD.   No

4. The chair is chosen from the non-executive directors.   Yes

Correct: N, Y, N, Y difficult Board composition

(1) No. (2) Yes. (3) No. (4) Yes.

24. Consider governance of subsidiaries. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. The holding company's NRC chair must chair the subsidiary's board.   No

2. The holding company's audit committee reviews subsidiary financial statements.   Yes

3. At least one independent director of the holding company serves on the subsidiary's board.   Yes

4. Minutes of the subsidiary's board meetings need not be reviewed at holding company level.   No

Correct: N, Y, Y, N difficult Subsidiaries

(1) No. (2) Yes. (3) Yes. (4) No: the holding company's board reviews them.

25. Consider governance theories. For each statement, select Yes if it is correct and No if it is not.

Yes/No grid

1. Stakeholder theory holds that the board owes duties only to shareholders.   No

2. Agency theory supports monitoring and aligned incentives.   Yes

3. Stewardship theory assumes managers will pursue their own interests unless closely monitored.   No

4. Agency theory assumes managers may pursue their own interests.   Yes

Correct: N, Y, N, Y difficult Governance theories

(1) No. (2) Yes. (3) No: that is the assumption of agency theory. (4) Yes.