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ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance

Which of the following is a typical function of a company's audit committee under good corporate governance practice?

An audit committee reviews the integrity of the financial statements, oversees internal controls and manages the relationship with the external auditor, including their independence. Setting executive pay is for the remuneration committee, and preparing accounts and running operations remain management and board responsibilities.

  1. AReviewing the integrity of financial statements and overseeing the relationship with the external auditorCorrect
  2. BNegotiating the executive directors' salaries and bonuses
  3. CMaking day-to-day operational decisions for the finance department
  4. DPreparing the financial statements on behalf of the directors

Explanation

The audit committee, made up of independent non-executive directors, monitors the integrity of the financial statements, internal controls and the external auditor's independence and work. Setting executive pay is the remuneration committee's role, and operational decisions and preparation of the statements are management and director responsibilities.

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