Governance and Management: Structures, Duties and Control
This domain covers how organisations are directed and controlled, and how managers plan, organise, lead and control. On governance, understand the board's composition, the role of independent non-executive directors, audit and risk committees, segregation of duties, and the agency problem between owners and managers. Know the principles of good governance: accountability, transparency, fairness and responsibility. Familiarise yourself with the distinction between conformance and performance roles.
Management questions test the functions of planning, organising, directing and controlling, plus motivation and leadership theories, span of control, delegation and organisational structures. Corporate social responsibility and stakeholder theory appear regularly.
Traps include confusing the roles of the board and management, treating internal audit as part of management, and misapplying leadership theories. Questions often ask who is responsible for what: the board sets strategy and oversight, management executes. Another trap is assuming that a strong governance code guarantees good behaviour.
Worked example: segregation of duties
In a small purchasing function, one clerk orders goods, receives them and approves payment. The control weakness is that one person controls the whole cycle, allowing fraud. The remedy is to separate authorisation, custody and recording. Rule of thumb: no single person should control a transaction from start to finish.