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 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.
Read the following passage and answer the questions :
Jensen examines the dynamics of corporate takeovers and challenges prevailing misconceptions surrounding them. He argues that takeovers are not merely hostile disruptions but serve as a crucial mechanism of the market for corporate control. According to Jensen, inefficient management teams often fail to maximize shareholder value and takeovers act as disciplinary tool by transferring control to more competent managers. He emphasizes that while popular belief portrays takeovers as destructive to employees and communities, empirical evidence suggests that they frequently generate significant economic gains by reallocating resources to more productive uses. Jensen distinguishes between the folklore-emotional and political arguments against takeovers depicting as harmful to employees and society and the science, which demonstrates thier role in improving efficiency and shareholder wealth. He also addresses concerns about debt financing in leveraged buyouts, contending that high leverage can impose financial discipline on managers by reducing wasteful spending. Ultimately, Jensen frames takeovers as an essential corrective force within capitalism, countering managerial inefficiency and aligning corporate behavior with shareholder interests. His analysis laid the groundwork for modern corporate finance debates on governance, agency costs and the value-creating potential of mergers and acquisitions.
Statement (I) : The science of ethics is a normative science.
Statement (II) : Normative sciences judge the value of the facts in terms of an idea; concerned with judgements of ‘what ought to be’ but not with factual judgements.
Code :
Assertion (A) : Decisions in small matters largely tend to set a pattern for the more important ones you may make as managers.
Reasoning (R) : A multi-industry survey conducted in the USA indicated that 40% of the managers said that their superiors had at some time told them to do certain things unethical.
Code :
Deontological theory of ethics is concerned with which of the following ?
(a) Duty ethics
(b) Obligation ethics
(c) Rule based ethics
(d) Classical ethics
Code :
Match the items of List (I) with those of List (II); and choose the correct combination :
List - I List - II (a) Ethics are the principles of conduct governing an individual or profession. (i) John Donaldson (b) Ethics is the discipline dealing with what is good and bad, or right and wrong, or with moral duty and obligation. (ii) Keith Davis (c) Ethics are a set of rules that defines right and wrong conduct. (iii) Shea (d) Business ethics, in short can be described as the systematic study of moral (ethical) matters pertaining to business, industry or related activities, institutions, or practices and beliefs. (iv) R. Wayne Mondy Code :
Utilitarianism theory of ethics refers to which one of the following ?
Which among the following are also called Corporate Social Responsibility ?
(a) Corporate Conscience
(b) Corporate Citizenship
(c) Responsible Business
Code :
Important Questions from Corporate governance and business ethics
Which one of the following is not a norm of corporate governance ?
Which one among the following is not a true statement?
Who among the following has not given a model on Corporate Social Responsibility (CSR)?
For customers, which are the areas of ethical and social responsibility concerns?
A. Product Safety
B. Fair Price
C. Fair Wages
D. TQM
E. Proper disclosures and information
Choose the correct answer from the options given below:
"Corporate governance is to conduct the business in accordance with the owner's (shareholders) desires" is conceptualized by
