JRK Ltd, a rapidly expanding company. Revenue has increased by about 20% p.a. for the last five years, to the current level of $50m. Net profits are also high, with an acceptable return being provided for the four shareholders. The internal audit department was established last year to assist the board of directors in their control of the company. The Managing Director is keen to adhere to good corporate governance practice with respect to internal audit and external audit. However, he is also aware that the other board members do not have complete knowledge of corporate governance or detailed knowledge of International Auditing Standards. A key element of corporate governance is the audit committee. The Managing Director intends to recommend that an audit committee is formed. However, the Managing Director is mindful of the "problems/challenges/issues" associated with the independence of the audit committee members. 

Required 

a. Explain how the internal audit department can assist the board of directors in the adherence of good corporate governance practice.

b. Explain how an audit committee could improve the effectiveness of the external auditor's work.

c. Identify and explain at least one (1) of the "problems/challenges/issues" of ensuring the 'independence' of the members of the audit committee. Identify and explain at least two  other disadvantages to JRK Ltd of an audit committee.

Answer rating: 100% (QA)

a The internal audit department can assist the board of directors in adhering to good corporate governance practice in the following ways 1 Evaluating and strengthening internal controls The internal ... View the full answer