ExpertACCA · Question 05 · Audit Framework and Regulation
CASE SCENARIO: AquaPure Utilities Co
AquaPure Utilities Co is a recently privatized water utility company. You are an audit manager at Blue & Co, responsible for the audit of AquaPure for the year ended 31 December 20X5. AquaPure operates highly specialized water treatment facilities. Management has requested that Blue & Co provide a valuation service for a newly constructed, complex water filtration plant, as AquaPure lacks the internal expertise to value it for inclusion in the financial statements. The filtration plant represents 15% of AquaPure's total assets. Furthermore, during the year, AquaPure was fined by the environmental regulator for a minor chemical spill, which the financial controller has refused to disclose in the financial statements, arguing it is not material by size.
QUESTION:
As a listed utility company, AquaPure is required to have an Audit Committee. Which of the following best describes the ideal composition of AquaPure's Audit Committee according to corporate governance best practices?
CASE SCENARIO: AquaPure Utilities Co
AquaPure Utilities Co is a recently privatized water utility company. You are an audit manager at Blue & Co, responsible for the audit of AquaPure for the year ended 31 December 20X5. AquaPure operates highly specialized water treatment facilities. Management has requested that Blue & Co provide a valuation service for a newly constructed, complex water filtration plant, as AquaPure lacks the internal expertise to value it for inclusion in the financial statements. The filtration plant represents 15% of AquaPure's total assets. Furthermore, during the year, AquaPure was fined by the environmental regulator for a minor chemical spill, which the financial controller has refused to disclose in the financial statements, arguing it is not material by size.
QUESTION:
As a listed utility company, AquaPure is required to have an Audit Committee. Which of the following best describes the ideal composition of AquaPure's Audit Committee according to corporate governance best practices?
Answer options:
A mix of executive and non-executive directors, chaired by the CEO.
Comprised entirely of independent non-executive directors, with at least one having recent and relevant financial experience.
Comprised of major shareholders and the Finance Director.
Comprised of at least three non-executive directors, the majority of whom must be independent.
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