ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance
Which of the following is the main reason that governance codes recommend having non-executive directors on the board?
Non-executive directors are recommended because they provide independent judgement and constructive challenge to executive directors. They are not part of day-to-day management, so they can scrutinise strategy and performance objectively. They do not prepare the accounts or guarantee profits.
- AThey bring independent judgement and challenge to the executive directorsCorrect
- BThey manage the day-to-day operations of the business
- CThey prepare the financial statements for audit
- DThey guarantee that the company will be profitable
Explanation
Non-executive directors are not involved in daily management, so they can offer independent oversight and challenge to the executives. They do not run operations, prepare the accounts (management's task), or guarantee profit.
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