Question

Why is it important that an audit committee not have any executive directors as members?

Why is it important that an audit committee not have any executive directors as members?

Homework Answers

Answer #1

It is important that an audit committee not have any executive directors as members due to the following reasons

-Increased independence- If the members present on the Audit Committe are Executive directors of the company then they are a part of the management itself, so the independence of the Audit Committee becomes a question.

When only non executive directors are appointed and independence is increased corporate governance and internal control are all enanced.

If the members on the committee are not independent then the stakeholders would not be able to rely on the financials issued.

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