- 5 Marks
Question
a) Boards rely on the Audit Committee to offer effective oversight of the financial reporting process, making it one of the cornerstones for effective corporate governance. Effective Audit Committee is vital for protecting investors and the health of the capital markets.
Required:
i) Identify THREE (3) requirements in the composition of Audit Committees in accordance with the best practice in Corporate Governance. (3 marks)
ii) List TWO (2) functions of an Audit Committee. (2 marks)
Answer
a) i) Requirements in the composition of Audit Committees:
- The Audit committee should comprise at least three directors, the majority of whom should be non-executive.
- The appointed directors should ideally have adequate knowledge of finance, accounts, and the basic legal framework governing the corporate body.
- The Chairman of the committee should be a non-executive director.
- The Managing Director, Finance Director, Chief Internal Auditor, and external auditor representative should be invited to attend meetings.
ii) Functions of Audit Committee:
- Recommend the appointment of external auditors of the corporate body.
- Review with the auditors their report on the financial statements of the corporate body.
- Assist the board in developing policies that would enhance the operations of the corporate body.
- Tags: Audit Committees, Best Practices, Composition, Corporate Governance, Functions
- Level: Level 2
- Uploader: Dotse