CIMA BA4 · Chapter 6 · Question 9 of 10
A listed company's audit committee consists of the finance director, the chief executive and one independent non-executive director. Which criticism is most valid?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The committee lacks independence, because it should be made up of independent non-executive directors
Explanation
Governance codes expect the audit committee of a listed company to comprise independent non-executive directors, at least one with recent and relevant financial experience. Executives on the committee would be overseeing their own work, a self-review problem. The external auditor attends to report but must not be a member, to preserve independence.
More The board of directors and board committees MCQs
- Q1Why do corporate governance codes recommend that the roles of chair and chief executive should not be held by the same individual?
- Q2Which of the following is a key role of non-executive directors?
- Q3Which board committee normally takes the lead in reviewing the integrity of the financial statements and the relationship with the…
- Q4Which of the following would most likely cause a non-executive director to be regarded as NOT independent?
- Q5What is the main purpose of a remuneration committee composed of independent non-executive directors?