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Basic Question 1 of 28
The Board has the authority to decide whether to hire an external auditor, who should be hired, and how much to pay the auditor, subject to the CFO's (Chief Financial Officer's) approval. True or False?
User Contributed Comments 7
| User | Comment |
|---|---|
| gaai | Do they have a option to NOT hiring an external auditor ? |
| dblueroom | I believe it is their responsibility to hire external auditors to perform the annual audit. Also internal audit staff should report directly and routinely to this board. |
| viruss | Well, it is not entirely true (at least in most european countries) : the BOD propose to the General Meeting of Shareholders an external auditor and the decision has to be ratify by GMoS |
| johntan1979 | I think this practice is at best theoretical. In most companies that I know of and had worked for, nothing, I mean, NOTHING that involves money get by without the CFO's approval. |
| abellochs | No way the board can just decide to hire the auditor without CFO approval unless CFO in on that board. |
| cfastudypl | johntan1979, it is indeed theoretical because in practice, all cheques must get the CFO's approval, except perhaps board members now sign cheques, which will be very strange and negate the essence of independence of the board. However, I think the perspective here is that since the CEO is also a member of the board, he has to facilitate the payment of any hired consultant(s) by the board without the board members or committee necessarily having any contact with the CFO. |
| cfastudypl | And remember, any board's decision will have to be implemented by the CEO, and so the board's first mandate on any aspect of the company is to the CEO. |
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Learning Outcome Statements
describe corporate governance and mechanisms to manage stakeholder relationships and mitigate associated risks
CFA® 2024 Level I Curriculum, Volume 2, Module 3.