(a) "Audit committees do not prepare financial reports, nor do they conduct audits. But they have an essential role to play in ensuring the integrity and transparency of corporate reporting" - explain what is the role of an audit committee in ensuring the integrity and transparency of corporate reporting? Is an audit committee mandatory in Australia? (9)

(b) What do the ASX Corporate Governance Principles say about having an internal audit function? (5)

(c) Baxby Fashion Ltd is a long-established Australian company, based in Brisbane that manufactures office cloths. Started in 1995 as a family-owned business, it expanded rapidly with branches around Australia and was listed on the Australian Securities Exchange (ASX) in 2000. The governance structure of Baxby Fashion includes seven directors, four of whom are executive directors and three of whom are non-executive directors. The four executive directors are Sue Berry (CEO), Gordon Dawn (CFO), Neal Arthur (marketing director) and Bluberry Richard (chief information officer). The three nonexecutive directors are Rogers Burrit (who joined the board in 2013 as the independent chair), Lucy Brian (a widely recognised furniture designer) and Tully McDonald (a solicitor who has been on the board since Baxby Fashion was listed). The Baxby Fashion board has three subcommittees: remuneration, nomination and audit. The audit committee consists of Tully McDonald (chair), Bluberry Richard and Lucy Brian. Provide three compliance concerns with the current structure of the audit committee, according to the ASX's Corporate Governance Principles and Recommendations. Explain your answers. (10)

(d) From 2014, Baxby Fashion Ltd to provide high-quality fashion products based on the latest trends at reasonable prices. At the June 2018 board meeting, Tully McDonald, who is currently the chair, advised the rest of the board that he had just signed an agreement to set up and run fashion-watch kiosks in large department stores, in a major venture with Colette Hayman Handbags, a fashion handbag manufacturer. The board was stunned that this was the first that they had heard of the venture, and the CFO, Gordon Dawn, expressed concern that they had no experience of this type of operation and that they knew nothing about Colette Hayman Handbags. However, Edward said that it was a 'done deal' and that he was confident of its success. He said he was very impressed with Mark Hayman from Colette Handbags, with whom he had held several meetings to discuss the project, and that he expected future sales arising from the venture to be significant. Identify two key ASX Corporate Governance Council principles that have been breached and explain how Edward has breached them. (10)