NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance
Which of the following is most clearly a corporate governance red flag that a research analyst should highlight about a listed company?
Frequent resignations of statutory auditors without adequate explanation are a governance red flag because they may signal accounting disagreements or disclosure problems. Independent audit committee chairs, separate chairperson and managing director roles, and disclosed related party transactions are positive governance practices.
- AAudit committee chaired by an independent director
- BFrequent resignation of statutory auditors without adequate explanationCorrect
- CSeparation of the roles of chairperson and managing director
- DDisclosure of related party transactions in annual reports
Explanation
Repeated or unexplained auditor exits suggest possible disagreements over accounting or disclosures and are a recognised warning sign. The other options are features of good governance, such as independent audit oversight, role separation and transparency.
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