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IAI Actuarial Core Principles · Business Finance · Corporate governance and the regulation of companies

In a listed company's governance structure, what is the primary role of the audit committee?

The audit committee oversees financial reporting, internal controls and the relationship with the external auditor, including auditor independence. It is typically made up of independent non-executive directors. Remuneration and nomination are handled by other committees, and operations belong to management.

  1. ATo set the remuneration of executive directors
  2. BTo nominate new directors for election by shareholders
  3. CTo oversee financial reporting, internal controls and the relationship with the external auditorCorrect
  4. DTo decide the company's dividend policy each year
  5. To manage the day-to-day trading operations of the company

Explanation

The audit committee, normally made up of independent non-executive directors, reviews the integrity of financial statements, the internal control and risk systems, and the auditor's independence and appointment. Remuneration and nomination are handled by separate committees, while dividends and operations are for the full board and management.

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