A retail company is planning to list on a stock exchange within the next three months, and management has been advised by the company’s auditors about the need for compliance with corporate governance provisions. In particular, the finance director is looking to recruit non-executive directors as he understands that Angel will need to establish an audit committee. The finance director has two potential non-executive directors whom he is considering approaching to join the board of Angel. Joseph Lindon is currently an executive sales director of a listed multi-national banking company; he sits on an audit committee of another company as a non-executive director and is agreeable to being paid a fixed fee which is not related to profits. Mark Curly is currently a finance director of a small retail company, which does not compete with Angel; he has expressed an interest in a fixed seven-year contract, and he is the brother of Angel’s chief executive. Required: a) Define an audit committee and explain three roles. b) Explain four benefits to Angel Co of establishing an audit committee c) Discuss two advantages and two disadvantages of appointing: (i) Joseph Lindon; and. (ii) Mark Curly as non-executive directors of Angel Co.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A retail company is planning to list on a stock exchange within the next three months, and management has been advised by the company’s auditors about the need for compliance with corporate governance provisions. In particular, the finance director is looking to recruit non-executive directors as he understands that Angel will need to establish an audit committee.

The finance director has two potential non-executive directors whom he is considering approaching to join the board of Angel. Joseph Lindon is currently an executive sales director of a listed multi-national banking company; he sits on an audit committee of another company as a non-executive director and is agreeable to being paid a fixed fee which is not related to profits. Mark Curly is currently a finance director of a small retail company, which does not compete with Angel; he has expressed an interest in a fixed seven-year contract, and he is the brother of Angel’s chief executive.

Required:

a) Define an audit committee and explain three roles.
b) Explain four benefits to Angel Co of establishing an audit committee
c) Discuss two advantages and two disadvantages of appointing: (i) Joseph Lindon; and. (ii) Mark Curly as non-executive directors of Angel Co.

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