CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Governance Influencers
The audit committee of Zenith Motors Ltd is reviewing the reappointment of its audit firm, which has audited the company for years. Which step best reflects the audit committee's role as a governance influencer over the auditor?
The audit committee should recommend the auditor's appointment and remuneration and review the auditor's independence and performance. This keeps the statutory auditor insulated from management and promoter influence, which strengthens the auditor's role as an independent gatekeeper for shareholders.
- AAllow the promoter to fix the auditor's remuneration privately
- BRecommend appointment and remuneration of the auditor and review the auditor's independence and performanceCorrect
- CLeave the review entirely to the internal auditor
- DDelegate the decision to the CFO since the CFO deals with the auditor daily
Explanation
The audit committee recommends the appointment, remuneration and terms of the auditor and reviews independence and performance, protecting the auditor from management influence. Promoter or CFO control creates a conflict. The internal auditor does not oversee the statutory auditor.
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