ACCA Applied Knowledge · Financial Accounting · Duties and responsibilities of those charged with governance
Which of the following is the main role of the audit committee of a listed company's board?
The audit committee oversees financial reporting, internal control and the external auditor relationship. It does not prepare the accounts, which is a management and director duty, nor set executive pay or nominate directors, which are the roles of the remuneration and nomination committees.
- ATo prepare the financial statements on behalf of the directors
- BTo oversee financial reporting, internal control and the relationship with the external auditorCorrect
- CTo set the remuneration of the executive directors
- DTo nominate candidates for appointment to the board
Explanation
An audit committee reviews the integrity of financial reporting, monitors internal controls and risk systems, and oversees the external auditor's work and independence. Setting executive pay is the remuneration committee's role, and nominating directors belongs to the nomination committee. Preparing the financial statements remains a management and directors' responsibility.
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