Free IICA Independent Director Test Exam Flashcards

An independent director is a director other than a managing director, whole-time director, or nominee director. The individual must also satisfy the independence criteria in section 149(6).

At least one-third of the total number of directors must be independent directors. A fraction in that one-third calculation is rounded up to one.

At the first Board meeting in which the person participates, at the first Board meeting of every financial year thereafter, and whenever circumstances change in a way that may affect independence.

No. An independent director is not entitled to stock options. Subject to the Act, the director may receive meeting fees, reimbursement of participation expenses, profit-related commission approved by members, and permitted remuneration where profits are absent or inadequate.

A term may run for up to five consecutive years. Reappointment requires a special resolution and disclosure of the reappointment in the Board's report.

The person must complete a three-year cooling-off period before appointment again. During that period, the person must not be appointed in, or associated with, the company in another capacity, directly or indirectly.

Liability is limited to matters that occurred with the director's knowledge attributable through Board processes and with consent or connivance, or where the director did not act diligently.

The director acts to promote the company's objects for members as a whole and in the best interests of the company, employees, shareholders, and community, while protecting the environment.

The director must exercise due and reasonable care, skill, and diligence, and must exercise independent judgment. Attendance alone does not satisfy that standard.

The director must avoid a situation in which the interest conflicts, or may possibly conflict, with the company's interest. Applicable disclosure and participation restrictions must also be followed.

It has at least three directors, with independent directors forming a majority. A majority of members, including the chairperson, must be able to read and understand financial statements.

It recommends the auditor's appointment, remuneration, and terms, and reviews the auditor's independence, performance, and the effectiveness of the audit process.

It must provide adequate safeguards against victimisation and allow direct access to the Audit Committee chairperson in appropriate or exceptional cases.

The Board must have an optimum mix of executive and non-executive directors, include at least one woman director, and comprise at least 50% non-executive directors.

With a regular non-executive chair, at least one-third of the Board must be independent. Without one, at least half must be independent. At least half is also required when that non-executive chair is a promoter or is related to specified promoters or management personnel.

It must have at least three directors, at least two-thirds independent directors, all members financially literate, and at least one member with accounting or related financial-management expertise.

At least four times in a financial year, with no more than 120 days between consecutive meetings. Quorum is two members or one-third of the committee, whichever is greater, including at least two independent directors.

It must have at least three directors, all non-executive, with at least two-thirds independent directors. Its chairperson must be an independent director.

The appointment, reappointment, or removal of an independent director is subject to shareholder approval by special resolution, including the voting route in the regulation's provisos where applicable.

Without management or non-independent directors present, they review the performance of non-independent directors, the Board as a whole and the chairperson, and assess the quality, quantity, and timeliness of management-to-Board information.

The director confirms meeting the regulation 16 independence criteria and being unaware of circumstances that could impair objective independent judgment or expose it to external influence. The Board must assess the declaration's veracity.

It relates directly or indirectly to a company or its securities, is not generally available, and would likely materially affect the securities' price when made public. The regulations list ordinary examples, but the definition is not limited to that list.

A connected person, or any person who possesses or has access to unpublished price sensitive information. A job title is not required for the possession-or-access limb.

Only in furtherance of legitimate purposes, performance of duties, or discharge of legal obligations. A recipient of UPSI for a legitimate purpose is treated as an insider and must be notified to maintain confidentiality.

It records the nature of the UPSI, who shared it, who received it, and PAN or another authorised identifier where PAN is unavailable. It must be maintained internally with controls such as time stamps and audit trails, and ordinarily preserved for at least eight years after the relevant transaction.

An insider must not trade in securities listed or proposed to be listed while in possession of UPSI. The regulations contain specific defences and exceptions, so a director should obtain compliance review rather than assume a trade is permitted.

Assets = Liabilities + Equity. Every correctly recorded transaction preserves this equality, even when several accounts change at once.

A balance sheet shows assets, liabilities, and equity at a point in time. A statement of profit and loss reports income and expenses over a period.

Revenue and expenses are recognised when earned or incurred under accrual accounting, not necessarily when cash moves. Credit sales, payables, depreciation, provisions, and working-capital changes can separate profit from cash flow.

Operating activities show cash from core operations; investing activities show purchases and disposals of long-term assets and investments; financing activities show transactions involving borrowings and owners' capital.

Current assets divided by current liabilities indicates short-term balance-sheet liquidity. A higher ratio is not automatically better because slow inventory or overdue receivables may inflate current assets.

It focuses on more liquid current assets, commonly cash, short-term investments, and receivables, and excludes inventory and other less readily convertible items before dividing by current liabilities.

Debt divided by shareholders' equity indicates the extent to which debt financing is used relative to owners' capital. Compare like-for-like definitions and industry peers before drawing a conclusion.

Gross profit divided by revenue, multiplied by 100. It shows the share of revenue remaining after the directly attributable cost of goods or services, before operating expenses, finance costs, and tax.

Net profit attributable to equity holders divided by average shareholders' equity is a common formulation. It shows profit generated relative to owners' capital, but leverage can raise both the ratio and financial risk.

Current assets minus current liabilities. It is a liquidity measure, but the quality and timing of receivables, inventory, and payables matter more than the total alone.

Cash collection may be weakening or revenue recognition may deserve closer review. The Board should examine ageing, credit terms, customer concentration, subsequent collections, and expected-credit-loss assumptions before concluding why.

Qualified means a material issue is not pervasive; adverse means material and pervasive misstatement; disclaimer means the auditor cannot obtain sufficient evidence and the possible effects may be material and pervasive.

The Board provides direction, approves major strategy and risk boundaries, appoints and oversees leadership, and holds management accountable. Management executes strategy and runs day-to-day operations.

Objective judgment free from relationships, incentives, or pressure that impair challenge. Meeting a formal eligibility test is necessary, but effective independence also requires questioning evidence and forming one's own view.

The business model, financial condition, ownership, litigation and regulatory exposure, governance record, Board dynamics, expected workload, access to information, and available director-indemnity and insurance arrangements.

Disclose it promptly and fully, follow the applicable law and policy on participation or recusal, and ensure the decision and safeguards are properly documented. Silence does not preserve independence.

Respectful challenge exposes weak assumptions, alternatives, and risks before a decision is fixed. A chair should draw out minority views and prevent hierarchy or groupthink from suppressing relevant evidence.

It is timely, concise, accurate, comparable, and explicit about assumptions, alternatives, risks, and decisions required. Directors should request missing source data rather than accept an attractive summary at face value.

To identify how the Board, committees, and individual directors can improve composition, preparation, information flow, challenge, decision-making, and follow-through. It should produce actions, owners, and review dates rather than a compliance score alone.

A related party may influence terms away from the company's interests. Directors should verify identification, business purpose, pricing and alternatives, required approvals, abstentions, disclosures, and post-approval monitoring.

Safe and accessible reporting channels, protection against retaliation, independent triage, competent investigation, confidentiality, remediation, and reporting to an oversight body such as the Audit Committee.

The Board approves the nature and amount of risk the company is prepared to accept in pursuing objectives, checks alignment with strategy and capacity, and monitors whether actual exposures and breaches stay within that boundary.

Establish reliable facts, protect people and critical operations, clarify decision rights, oversee lawful and timely disclosure, test management's response and liquidity, preserve evidence, and review causes and remediation after stabilisation.

Identify materially affected stakeholders, understand lawful duties and likely impacts, compare options and mitigations, and document the reasoning. Stakeholder analysis informs judgment; it does not eliminate accountability to the company and applicable law.