Acca aa s21 Notes

audit committee
of independent NEDs.
Remuneration
In essence, remuneration should be sufficient to attract, retain and motivate directors of sufficient 
quality… but avoid paying more than is necessary.
๏
A significant proportion of executive directors’ remuneration may be structured to link rewards 
to corporate and individual performance. In other words, profit related pay is encouraged. 
Directors should not receive high pay irrespective of company performance.
๏
There should be a formal and transparent procedure for developing policy on executive 
remuneration and for fixing the remuneration packages of individual directors. No director 
should be involved in deciding his or her own remuneration. This means that a remuneration 
committee (NEDs) should be formed to fix directors’ remuneration.
September 2021 to June 2022 exams
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4. The audit committee
The audit committee should be composed of 
independent
NEDs:
๏
a minimum of 
three
members (or two for smaller companies); 
๏
the chair of the board should not be a member;
๏
at least one member must have recent and relevant 
financial
experience; 
๏
the committee as a whole must have competence in the relevant business sector.
Liaison with 
external auditors:
• Scope of external audit
• Forum to link directors/auditors
• Deal with auditors’ reservations
• Obtain information for auditors
• Review independence and objectivity 
• Approve non-audit services
Review o
f 
internal audit
Monitor integrity of 
financial statements
Review of internal control