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IAI Actuarial Core Principles · Business Finance · Corporate governance and the regulation of companies

Which of the following is the principal function of the audit committee of a listed company's board?

The audit committee reviews the integrity of financial reporting, the effectiveness of internal controls and the external audit process. Pay is handled by the remuneration committee, appointments by the nomination committee, and dividends by the whole board, so those options are wrong.

  1. ASetting the remuneration of executive directors
  2. BSelecting candidates for new board appointments
  3. CReviewing the integrity of financial reporting, internal controls and the external audit processCorrect
  4. DDeciding the dividend to be paid each year
  5. Negotiating the company's borrowing terms with banks

Explanation

The audit committee oversees financial statements, internal control and risk systems, and the relationship with the external auditor. Remuneration is for the remuneration committee, appointments for the nomination committee, and dividends are for the full board.

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