Question
1.6 ABC Limited is a company listed on the JSE. The majority of the audit committee members
who have been appointed are independent non-executive directors. The chairperson of the
board and the chief executive officer are also members of the audit committee. There are
six members in total. The audit committee held three meetings during the year. The audit
committee recommends to the board which external audit provider should be appointed to
conduct the annual audit.
Based on the scenario above, which of the following statements are insufficiencies in the
audit committee’s structure based on King III?
who have been appointed are independent non-executive directors. The chairperson of the
board and the chief executive officer are also members of the audit committee. There are
six members in total. The audit committee held three meetings during the year. The audit
committee recommends to the board which external audit provider should be appointed to
conduct the annual audit.
Based on the scenario above, which of the following statements are insufficiencies in the
audit committee’s structure based on King III?
Ask by Curry Carroll. in South Africa
Mar 28,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
The audit committee’s structure is insufficient under King III because it includes the CEO and possibly the board chair, which compromises the committee’s independence.
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Beyond the Answer
The presence of the chairperson of the board and the chief executive officer as members of the audit committee raises concerns regarding independence, as their involvement may create conflicts of interest. King III emphasizes that the audit committee should comprise solely of independent non-executive directors to ensure unbiased oversight of the financial reporting process.
Additionally, while three meetings a year might seem adequate, King III advocates for the audit committee to meet more frequently to address various financial reporting matters effectively. Regular meetings foster thorough discussions and timely resolutions, ensuring a more robust and accountable oversight function.
