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ACCA Strategic Professional · Strategic Business Leader · The board of directors

Marlow Fabrications plc is listed and has a board of eleven directors. The chair, Ines Calder, wants a committee to review the integrity of the financial statements, liaise with the external auditor and oversee the internal control framework. Under typical corporate governance codes, which committee should carry out this role, and how should it be composed?

The audit committee should do this work, and it should consist of independent non-executive directors. Its core duties are reviewing the integrity of financial statements, liaising with the external auditor and overseeing internal control, and independence from management is needed so that its oversight is objective.

  1. AA remuneration committee made up mainly of executive directors
  2. BAn audit committee made up of independent non-executive directorsCorrect
  3. CA nominations committee chaired by the chief executive officer
  4. DA risk committee made up solely of the finance director and the heads of department

Explanation

Reviewing financial statement integrity, liaising with the external auditor and overseeing internal control are the core duties of the audit committee. To protect objectivity it should be made up of independent non-executive directors. Executive-dominated committees, as in the other options, would lack independence and would not match these duties.

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