Page 171 - F1 - AB Integrated Workbook STUDENT 2018-19

Governance and social responsibility in business

2.6 Remuneration committees

A remuneration committee is a committee made up of non-executive
directors which is responsible for deciding on the pay and incentives
offered to executive directors.

The board of a listed company should establish a remuneration committee of at least
three (or two in the case of smaller companies) independent NEDs.

The whole of Board of Directors should be responsible for deciding the level of
remuneration for NEDs.

2.7 Audit committee

An audit committee consists of independent NEDs who are
responsible for monitoring and reviewing the company’s internal
financial controls and the integrity of the financial statements.

The audit committee acts as an interface between the full board of directors and both
the internal and external auditors.

Responsibilities of audit committees include:

 Reviewing accounting policies and financial statements as a whole to ensure
they are appropriate and balanced

 Reviewing systems of internal controls and risk management within the
organisation

 Agreeing the work agenda for the internal audit department, as well as
reviewing the results of internal audit work

 Making recommendations to the board, for them to put to the shareholders,
relating to the appointment and removal of the external auditors as well as their
remuneration and terms of engagement

 Liaising with the external auditors, in particular relating to the review and
monitoring of the external auditor’s independence and objectivity as well as the
effectiveness of the audit process

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