Question 1

CASE SCENARIO: AquaPure Utilities Co
AquaPure Utilities Co is a recently privatized water utility company. You are an audit manager at Blue & Co, responsible for the audit of AquaPure for the year ended 31 December 20X5. AquaPure operates highly specialized water treatment facilities. Management has requested that Blue & Co provide a valuation service for a newly constructed, complex water filtration plant, as AquaPure lacks the internal expertise to value it for inclusion in the financial statements. The filtration plant represents 15% of AquaPure's total assets. Furthermore, during the year, AquaPure was fined by the environmental regulator for a minor chemical spill, which the financial controller has refused to disclose in the financial statements, arguing it is not material by size.

QUESTION:
As a listed utility company, AquaPure is required to have an Audit Committee. Which of the following best describes the ideal composition of AquaPure's Audit Committee according to corporate governance best practices?

Accepted Answer

Recall the UK Corporate Governance Code (or equivalent international best practice) requirements for Audit Committees.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Thinking that executive directors (like the CFO) can sit on the audit committee. They may attend by invitation, but cannot be members.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA AA — Audit and Assurance Practice Exam 6

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