1. ‘The audit committee is usually responsible for supervising the relationship between the auditors and the company and of the conduct of the audit process. As the shareholders’ representatives, the...

1. ‘The audit committee is usually responsible for supervising the relationship between the auditors and the company and of the conduct of the audit process. As the shareholders’ representatives, the audit committee has ultimate authority for selecting, evaluating, and, if needed, replacing the independent auditor. As a consequence, the external auditors are ultimately accountable to the audit committee and shareholders’ general meeting.’

Discuss the following questions with regard to the above statement:

(a) To what extent is the relationship with the audit committee beneficial to auditors?

(b) How can the auditor’s performance be affected by an effective audit committee?

(c) What type of information should the external auditors provide to those charged with governance?

(d) To what extent does the composition of the audit committee and its independence affect

(1) the company’s financial reporting and (2) the auditor’s performance?