ACCA Audit and Assurance (F8) Practice Exam

What is a primary responsibility of the Audit Committee related to external audits?

1. Prepare annual financial statements

2. Determine the scope of the external audit

3. Negotiate salaries for auditors

4. Conduct employee performance reviews

The correct answer is: Determine the scope of the external audit

The primary responsibility of the Audit Committee regarding external audits is to determine the scope of the external audit. This involves defining the areas that the external auditors will focus on during their examination, including the key risks, relevant financial reporting frameworks, and specific aspects of the financial statements that require thorough scrutiny. By determining the scope, the Audit Committee ensures that the audit is tailored to the organization's specific circumstances, thereby enhancing the effectiveness of the audit process. It is crucial for the Audit Committee to engage with both management and the external auditors to ensure that the audit plans align with the organization’s risk profile and reporting requirements. In contrast, preparing annual financial statements is typically the responsibility of management, not the Audit Committee. Negotiating salaries for auditors, while it may involve some oversight from the Audit Committee, is not their main duty, and conducting employee performance reviews falls outside the committee's focus, as their primary concern is oversight of the financial reporting and audit process, rather than human resources management.