The directors of Big Pharma Ltd have been in discussion with their legal and financial advisers, in addition to representatives of the London Stock Exchange. These discussions have been arranged because the directors of Big Pharma feel that it is now an appropriate time to seek capital expansion through listing in order to achieve projected growth in the business over the next five years. The board has been advised that the company will have to comply with The UK Corporate Governance Code in order to meet London Stock Exchange listing requirements, including establishing an audit committee.

Jo Abulla is the chair and CEO of Big Pharma Ltd. All the directors have executive management responsibilities within Big Pharma Ltd, and each director has a significant shareholding in the company.

You are the engagement partner for Big Pharma Ltd. Jo Abulla has asked you to attend the next board meeting and explain to the board whether changes are required to the constitution of the board to comply with The UK Corporate Governance Code.

In addition, Jo Abulla has asked you to explain the role of the audit committee and how this will impact on the role of the external auditor and the external auditor’s communication with the board.

Required:

Prepare briefing notes for the board meeting that you have been asked to attend, to include:

(a) an outline of how the board should be constituted to comply with The UK Corporate Governance Code

(b) an explanation of the responsibilities of the external auditors and the audit committee in relation to the case above

(c) a description of the relationships between them with respect to both the internal control system and audited financial statements.