ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance
What is the main purpose of the audit committee under governance codes?
The audit committee provides independent oversight of financial reporting, internal controls and the relationship with the external auditor. It does not prepare the accounts, set directors' pay, which is the remuneration committee's role, or decide dividends, which is a board matter.
- ATo prepare the company's financial statements
- BTo set the remuneration of executive directors
- CTo provide independent oversight of financial reporting, internal control and the external audit relationshipCorrect
- DTo decide the company's dividend policy
Explanation
The audit committee, normally made up of independent non-executive directors, reviews the integrity of financial reporting, monitors internal controls and risk systems, and oversees the external auditor's independence and appointment. Preparing the financial statements is management's task, remuneration is for the remuneration committee, and dividends are a board decision.
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