Which governance body is typically responsible for overseeing internal controls and financial reporting?

• A. Audit committee.
• B. Nominating committee.
• C. Compensation committee.
• D. Corporate social responsibility committee.

Answer: (A)

The audit committee is the governance body responsible for overseeing internal controls and financial reporting. It acts as the independent oversight link between management, internal audit, and external auditors, focusing on the reliability of the financial statements, the effectiveness of internal controls, and compliance with laws and regulations. In many jurisdictions, laws and listing standards require the committee to be independent and to include financial expertise. It reviews the internal control framework (often aligned with frameworks like COSO), monitors control deficiencies and remediation, and oversees the external audit process, including the audit plan, independence of the auditors, and appointment. This setup ensures objective, credible financial reporting and helps safeguard investor trust.

The other committees have different purposes: a committee focused on board composition and nominations; a committee that sets executive compensation; and a committee that guides corporate social responsibility initiatives. While each plays an important governance role, they do not carry the primary responsibility for monitoring the integrity of financial reporting and the internal control system.