Which of the following statements about governance is true?

• A. The chairman of the audit committee is an independent director
• B. The compliance officer reports directly to the President of the board
• C. Both statements are true
• D. Both statements are false

Answer: (A)

In governance, independence is crucial for objective oversight of financial reporting, internal controls, and risk management. The audit committee exists to scrutinize these areas, and its chair should be an independent director to ensure the committee can challenge management without undue influence. This independence is what makes the statement about the chairman of the audit committee being an independent director true and consistent with governance best practices.

The compliance function is typically structured to maintain its independence and effectiveness, often reporting to the board through the audit committee or directly to the board, rather than to the President or other leadership figures on the board. When the compliance officer reports to the President of the board, it can blur lines of accountability and undermine independence, so that statement is not aligned with common governance practice.

Therefore, the only true statement is that the chairman of the audit committee should be an independent director.