Everything about Audit Committee

COMPANY LAW

Everything about Audit Committee

The requirement of Audit Committee as per sub section (1) of section (177) of the Companies Act, 2013  has been limited to

1. Every Listed Public Company.
2. The Following Class of Companies

• All public companies with a paid-up share capital of Rs. 10/- crores   or more; or.
• All public companies having turnover of Rs. 100/- crore or more; or
• All public companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding Rs. 50/- crore

Note:  The paid-up share capital, turnover, outstanding loans, debentures and deposits, as the case may be as existing on the date of last audited financial statements shall be taken into record.

Composition of committee

Minimum 3 directors with majority of people being Independent directors

Majority of the people should have the ability to read financial statements

Functions of the committee

1. Recommendation for appointment, remuneration and terms of appointment of auditors of the company.
2. review and monitor the auditor’s independence and performance, and effectiveness of audit process.
3. examination of the financial statement and the auditors’ report thereon.
4. approval or any subsequent modification of transactions of the company with related parties.
5. scrutiny of inter-corporate loans and investments.
6. valuation of undertakings or assets of the company, wherever it is necessary;
7. evaluation of internal financial controls and risk management systems;
8. monitoring the end use of funds raised through public offers and related matters.

Scope of Audit Committee

• Audit Committee may the call for the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statements before their submission to the Board.
• Discussing the related issues with the internal, statutory auditors and the management of the Company.
• Audit Committee has the authority to investigate into matters referred by Board.
• To obtain professional advice from external sources.
• Having full access to the records of the Company.

The KMP shall also have a right to be heard in the meetings of the Audit Committee when it considers the auditor report, though they shall not have voting rights.

The Board’s report of the Company shall disclose the composition of an Audit Committee and where the Board had not accepted any recommendation of the Audit Committee, the same shall be disclosed in such report along with the reasons for not accepting the recommendation.