ACCA Advanced Audit and Assurance (AAA) Practice Exam

Which of the following is NOT a requirement for an individual to serve as the chair?

1. Must have prior experience as a chief executive

2. Must be independent

3. Cannot be a former chief executive of the same company

4. Term limit established

The correct answer is: Must have prior experience as a chief executive

The reasoning behind selecting that an individual does not need prior experience as a chief executive to serve as chair is grounded in the independence and governance structures that are essential to the role. While past executive experience can certainly be beneficial and provide relevant insights, it is not an explicit requirement in many governance frameworks. A chair is primarily responsible for ensuring that the board as a whole functions effectively, which involves facilitating meetings, maintaining a strategic focus, and ensuring good governance practices are upheld. Thus, having prior experience as a chief executive may not necessarily correlate with the ability to fulfill these specific responsibilities. The concept of independence is critical; being independent from the organization's management is an essential requirement for a chair to help foster objective and impartial oversight of management practices. Additionally, a rule against a former chief executive serving as chair serves to avoid conflicts of interest and ensure that there is a clear delineation between executive and board leadership. Moreover, having a term limit encourages fresh perspectives and prevents entrenchment in board roles, supporting good governance practices. Therefore, the chair's role does not hinge on prior chief executive experience, making it a non-requirement.