AAA – L3 – SA – Q5.1 – The regulatory environment

What are the functions of an audit committee?

Question

Which of the following are functions of the audit committee?

1 Policy on giving non-audit work to the audit firm

2 Review of the performance of the external auditor

3 Review of the external auditor’s working papers

4 Review with the external auditors their report on the financial statements

A 1,2 and 3 only

B 1,3 and 4 only

C 2,3 and 4 only

D 1,2 and 4 only

Answer

Explanation: The audit committee is responsible for setting policies on non-audit work by the audit firm (1), reviewing the external auditor’s performance (2), and discussing the auditor’s report on financial statements (4). Reviewing the auditor’s working papers (3) is not a standard function, as these are the auditor’s property and not routinely shared. Thus, option D (1,2, and 4) is correct.

Tags: Audit committee, Auditor performance, Financial Statements, Governance, Non-Audit Work
Level: Level 3

Topic: The regulatory environment

Uploader: Salamat Hamid