Association of Chartered Certified Accountants (ACCA) Certification Practice Test

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Which of the following is a feature of poor corporate governance?

Effective communication
Involvement of the board
Lack of supervision
Independent oversight

The correct answer is: Lack of supervision

A feature of poor corporate governance is characterized by a lack of supervision. This situation reflects an absence of proper oversight mechanisms within an organization. When there is inadequate supervision, it often leads to unchecked behavior among management and employees, which can result in unethical practices, mismanagement of resources, and a lack of accountability. Without proper supervision, organizations may struggle to maintain control over their operations, ultimately undermining the integrity and trust that stakeholders expect in a well-governed entity. In contrast, effective communication promotes transparency and fosters positive relationships within the organization, while the involvement of the board is crucial in decision-making and monitoring processes. Independent oversight ensures that there is a separate layer of scrutiny to keep managerial actions in check. These features are vital in establishing strong corporate governance and maintaining stakeholder confidence.