ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance
A listed company's board consists of the chief executive officer (CEO), who is also chair of the board, the finance director, and two non-executive directors who were previously senior managers of the company. The audit committee comprises the finance director and the CEO. Which combination of features most clearly conflicts with typical governance code best practice?
The combination of one person acting as both CEO and chair, and an audit committee with no independent non-executive members, most clearly conflicts with governance best practice. Codes require separated roles and independent oversight of financial reporting, which this structure lacks.
- AThe company has two non-executive directors and an executive finance director on the board
- BThe CEO and chair roles are combined, and the audit committee has no independent non-executive membersCorrect
- CThe board includes a director who was previously a manager of the company
- DThe finance director attends audit committee meetings by invitation
Explanation
Codes recommend separating the roles of chair and CEO to prevent one person holding unchecked power, and an audit committee of independent non-executives to give objective oversight of financial reporting and controls. Option 2 breaches both. Having executives on the board or attending the committee by invitation is normal, and a former manager is a weaker concern than these two breaches.
Did you get it right without looking?
One question tells you little. A timed set on Duties and responsibilities of those charged with governance shows your real accuracy, how long you take and where you lose marks.
More Duties and responsibilities of those charged with governance questions
- Which of the following is a typical right of ordinary shareholders in a company?
- Which of the following statements about the effect of the separation of ownership and control in large companies is correct?
- Which of the following statements about the nomination committee is correct?
- Under a principles-based corporate governance code with a 'comply or explain' approach, what must a listed company do if it does not follow …
- Who is primarily responsible for preparing financial statements that give a true and fair view (fair presentation) of a company's financial …
- Which of the following is the main purpose of a corporate governance code that operates on a 'comply or explain' basis?