The objective of a system of corporate governance is to secure the effective, sound and efficient operation of companies. This objective transcends any legislation or voluntary code. Good corporate governance embraces not only making the company prosper but also doing business in a legal and ethical manner. A key element of corporate governance is the audit committee. The audit committee is a committee of the board of directors and is of a voluntary nature regulated by voluntary codes. Required: (a) Explain how an audit committee could improve the effectiveness of the external auditor's work. (b) Discuss the problems of ensuring the 'independence' of the members of the audit committee. (c) Discuss the view that the role of the audit committee should not be left to voluntary codes of practice but should be regulated by statute.
The objective of a system of corporate governance is to secure the effective, sound and efficient operation
of companies. This objective transcends any legislation or voluntary code. Good corporate governance
embraces not only making the company prosper but also doing business in a legal and ethical manner. A
key element of corporate governance is the audit committee. The audit committee is a committee of the
board of directors and is of a voluntary nature regulated by voluntary codes.
Required:
(a) Explain how an audit committee could improve the effectiveness of the external auditor's work.
(b) Discuss the problems of ensuring the 'independence' of the members of the audit committee.
(c) Discuss the view that the role of the audit committee should not be left to voluntary codes of
practice but should be regulated by statute.
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