Directions: Choose the correct option for the given question and consider the following statements.

1. Corporate governance requires the appointment of audit committees by public limited companies.
2. The members of an audit committee should be those non-executive directors who do not represent the controlling group.
3. The independence of the statutory auditors is likely to be affected, if he deals directly with the audit committee. Which of the statements given above are correct?

Statement 1 is correct - corporate governance norms require public limited companies to establish audit committees. Statement 2 is correct - audit committee members should be independent non-executive directors not representing the controlling group to ensure objectivity. Statement 3 is incorrect - dealing directly with the audit committee actually enhances auditor independence by insulating auditors from management pressure. The audit committee acts as a bridge between auditors and management.