ACCA Advanced Audit and Assurance (AAA) Practice Exam

Who is considered as management within an entity?

1. Shareholders

2. Non-executive directors

3. Executive responsible individuals

4. External auditors

The correct answer is: Executive responsible individuals

In the context of an entity, management is typically viewed as those individuals who are involved in the day-to-day operations and decision-making processes necessary for the running of the organization. This group primarily consists of executive responsible individuals who have been given authority to make operational decisions, allocate resources, and oversee employees. Their responsibilities include setting strategic goals, managing staff, and ensuring that the organization's objectives are met efficiently and effectively. This contrasts with the other groups mentioned. Shareholders own the entity but do not engage in its day-to-day management; they may influence major decisions through voting at meetings but are not included in the operational management. Non-executive directors provide oversight and guidance rather than being involved in daily operations and decision-making, thereby not fitting the definition of management in this context. Lastly, external auditors are not part of the entity's management; they perform independent assessments of the financial statements to provide an unbiased opinion on their accuracy and compliance with applicable standards. Thus, executive responsible individuals are aligned with the activities and responsibilities that define management within an entity.