ExpertMedium1 markMultiple Choice
Syllabus B: Organisational structure, culture, governance and sustainabilitySyllabus BCorporate GovernanceAudit Committee
ACCA · Question 35 · Syllabus B: Organisational structure, culture, governance and sustainability
Section A
According to corporate governance best practices, who should comprise the Audit Committee of a publicly listed company?
Section A
According to corporate governance best practices, who should comprise the Audit Committee of a publicly listed company?
Answer options:
A.
A mix of Executive and Non-Executive Directors
B.
Independent Non-Executive Directors only
C.
The external auditors and the Chief Financial Officer
How to approach this question
The Audit Committee oversees the financial reporting of the executives. Therefore, executives cannot be on it. It must be 100% independent.
Full Answer
B.Independent Non-Executive Directors only✓ Correct
Corporate governance codes (such as the UK Corporate Governance Code) stipulate that the Audit Committee should consist entirely of independent Non-Executive Directors (NEDs). This ensures they can objectively scrutinize the financial statements and internal controls without conflicts of interest.
Common mistakes
Thinking the CFO should be on the committee because it deals with finance. The CFO is invited to meetings but is not a member.
Practice the full ACCA BT — Business & Technology Practice Exam 4
52 questions · hints · full answers · grading
More questions from this exam
Q01Section A
AstroDyne is a commercial space-tech startup developing low-earth orbit satellite depl...MediumQ02Section A
Titanium Forge, a heavy manufacturing plant, is planning a massive expansion that will...EasyQ03Section A
Verdant Retreats operates ultra-luxury eco-lodges in remote rainforests. They recently...MediumQ04Section A
GhostBites operates a network of 'cloud kitchens' (delivery-only food preparation faci...MediumQ05Section A
GreenYield is an agricultural organization owned entirely by the farmers who supply ra...Easy