Assertion (A) : Bad corporate governance can cast doubt on a company's reliability. Reasoning (R) : Companies that do not cooperate sufficiently with auditors can publish non-compliant financial results. Code :
Both (A) and (R) are correct but (R) is not the right explanation of (A).
Option 2 is correct: both (A) and (R) are correct statements, but (R) is not the right explanation of (A).
Assertion (A) is true. Corporate governance is the system of rules, controls and accountability by which a company is directed. Weak or bad governance — opaque boards, poor internal controls, weak disclosure — genuinely undermines stakeholder confidence and casts doubt on a company's reliability. Cases like Enron and Satyam illustrate this.
Reasoning (R) is also a true statement in itself: companies that do not cooperate adequately with their auditors can indeed end up publishing non-compliant or misstated financial results.
However, (R) is only one narrow instance of poor governance (audit non-cooperation), whereas (A) is a much broader claim about reliability arising from many governance failures — board independence, related-party dealings, disclosure quality and more. A single specific example cannot serve as the complete and correct explanation of the general assertion, so the two are true independently rather than in an explanatory cause-and-effect relationship.
Why the other options are wrong: Option 1 wrongly treats the narrow example as a full explanation; Options 3 and 4 wrongly reject one of the two statements, but both are correct.
Takeaway: both statements stand, but R is too narrow to fully explain the broad assertion — hence “correct but not the right explanation.”
Similar Questions
Which among the following are also called Corporate Social Responsibility ?
(a) Corporate Conscience
(b) Corporate Citizenship
(c) Responsible Business
Code :
Which one among the following is not a part of Corporate Social Initiatives ?
Which of the following is/are the component(s) of Ethics by field of interest ?
What is the right sequence of four psychological sub-processes in ethical action given by James Rest ?
CSR is important because :
Assertion (A) : Corporate behaviour towards stakeholders is an important concept in practice and a central part of corporate Governance.
Reason (R) : It has to be ethical, legal and responsible behaviour for organisation, stakeholders and society.
Code :
Which one of the following is not a principle of corporate Governance ?
Match the items given in the List - I and List - II and suggest the correct code :
List - I List - II (a) Ethics (i) Right code of behaviour for a group or profession (b) Morality (ii) Prescribes right conduct for everyone (c) Moral standard (iii) Needs some inclination to follow morality (d) Meta Moral Standard (iv) Practical and pragmatic Code :
Assertion (A) : When a corporation acts ethically and socially responsible in its business decisions and strategic planning, then the corporation will be more sustainable.
Reason (R) : Socially responsible corporate behaviour is increasingly seen as essential to long-term survival of companies.
Statement-I: Ethical principles tend to be broader than legal principles.
Statement-II: Laws and ethics are closely related.
Codes:
Important Questions from Corporate governance and business ethics
Corporations are controlled and directed by which one of the following?
Which among the following is not a correct statement with regard to Corporate Governance in India ?
As per the Anglo-Saxon Model of Corporate Governance, the authority lies with the following. Arrange these in decreasing order of authority.
A. Board of Directors
B. Managers
C. Shareholders
D. Employees (Company)
E. Trade unions
Choose the correct sequence from the options given below
Assertion (A) : Corporate governance is an important instrument of investor protection.
Reason (R) : Strong corporate governance is indispensable to resilient and vibrant capital markets.
Which one of the following options is correct?
Which one of the following is not a norm of corporate governance ?
