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ACCA Strategic Professional · Strategic Business Leader · Governance scope and approaches

Halden Foods plc has a board that sets strategy, appoints and monitors executives, and reports to shareholders. A director argues that corporate governance is only about preventing fraud in the accounts. Which statement best describes the scope of corporate governance in the SBL syllabus?

Corporate governance is the system by which an organisation is directed and controlled. Its scope includes strategy, accountability to stakeholders, risk oversight, performance and compliance, so it is much wider than fraud prevention or the audit of accounts.

  1. AIt covers the systems and processes by which an organisation is directed and controlled, including accountability to stakeholders and performance as well as complianceCorrect
  2. BIt is limited to the statutory audit of the financial statements and the detection of fraud
  3. CIt concerns only the day-to-day operational decisions made by line managers
  4. DIt covers only the relationship between the company and its tax authorities

Explanation

Governance is the system by which organisations are directed and controlled. It includes strategic direction, accountability, risk oversight and reporting, and not merely fraud prevention. The fraud-only view is too narrow because it ignores the board's strategic and performance role.

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