ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is meant by "those charged with governance"?

1. The entity's shareholders

2. The management team of the entity

3. The person or organisation overseeing strategic direction and accountability

4. The auditors of the entity

The correct answer is: The person or organisation overseeing strategic direction and accountability

"Those charged with governance" refers to individuals or groups within an organization who are responsible for overseeing its strategic direction and ensuring accountability. This generally includes the board of directors, audit committees, and other governing bodies that make significant decisions regarding the entity's operations, policies, and compliance with legal and regulatory requirements. This definition is crucial in auditing and assurance practice because it outlines who has the authority and responsibility for governance matters, directly influencing how audits are conducted and the level of oversight required. In the context of the other options, while shareholders may influence governance as owners of the company, they do not necessarily make day-to-day decisions or oversee management directly. The management team plays a significant role in executing the strategy but is not the body charged with governance itself; rather, they report to those charged with governance. Auditors, while critical for providing independent assurance, do not hold governance responsibilities within the organization. Their role is to evaluate and report on the effectiveness of governance, not to oversee it.