PTA4 Flashcards
For each item, select which statement (A or B) is the best answer choice. If both or neither are correct, select the appropriate response.
A. KCC must establish an audit committee with a majority of independent directors.
B. KCC’s audit committee must establish procedures for handling whistleblower complaints.
Answer: B is correct.
Answer A is incorrect, because all members of the audit committee, not just a majority, must be independent. Answer B is correct, however. This is mandated by SOX for public companies.
For each item, select which statement (A or B) is the best answer choice. If both or neither are correct, select the appropriate response.
A. KCC must adopt a code of ethics for its CFO.
B. KCC’s audit committee must contain at least two “financial experts.”
Answer: Both are incorrect.
Choice A is wrong because KCC may choose not to adopt a code of ethics for its CEO and simply bear the brunt of criticism for not having done so. It must explain its decision not to adopt such a code, but it need not adopt one. Choice B is wrong because the law requires only one financial expert for the audit committee.
