A company's audit committee is normally made up of which type of director?
Answer and explanation
Correct answer: B. Independent non-executive directors
- Step 1: The audit committee oversees financial reporting, internal control and the external auditor.
- Step 2: Independence is essential, so it consists of independent non-executive directors.
Answer
Independent non-executive directors.
Why not the others: Executive directors only: Executive directors would be reviewing their own work, which is a conflict of interest. Both are executives who prepare the information the committee reviews. The committee is formed from the directors and not from shareholders.
Practise more Governance and sustainability.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Governance and sustainability questions
- Which problem arises when the managers of a company, acting as agents, pursue their own interests rather than those of the shareholders?
- What is the main role of non-executive directors on a company's board?
- Under a 'comply or explain' approach to corporate governance, what must a listed company do if it does not follow a provision of the governa…
- Which of the following describes a rules-based approach to corporate governance?
- What is the purpose of a remuneration committee?
- A company reports on its performance in relation to environmental, social and governance (ESG) factors. Which of these is a governance facto…