AUDIT COMMITTEE

                                                                          AUDIT COMMITTEE

                                                                               SECTION  177

                                                                                 ACT – 2013

Formation of audit committee is a step towards more powerful corporate governance. As per companies act 2013 more power has been given to audit committee. Audit committee acts in a company just like a supervisor on the overall performance of the management. Audit committee is not only a important part of company’s management under companies act but also important provision of listing agreement as per SEBI act.   

                       Here we discuss about Audit committee as per companies act 2013. As per companies act 2013 Audit committee plays a more vital role than ever before. Among many other committee Audit committee is also made by board of director.

            

  All the provisions are discussed below:-

Formation on audit committee:

Audit committee shall be constituted by the BOD =>

1.       Every listed company.

2.       All public companies with a paid-up capital 10 crore rupees or more.

3.       All public companies having turnover 100 crore or more.

4.       All public companies having in aggregate outstanding loans or borrowings or debenture or deposits exceeding 50 crore or more.

Composition of an audit committee:

                                                                        Minimum number of director is => 3. With independent director forming the majority.

Responsibility of an audit committee:

                                                                                Every audit committee shall act in accordance with the terms of reference specified in writing by the board :

1.       The recommendation for appointment, remuneration and terms of appointment of auditors of the company.

2.       Review or monitor the auditor independence & performance and effectiveness of audit process.

3.       Examination of financial statement and the auditor report thereon.

4.       Approval of any subsequent modification of transactions of the company with related parties.

5.       Scrutiny of inter-corporate loans and investment.

6.       Valuation of undertakings or assets of the company whenever it is necessary.

7.       Monitoring of end use of funds raise through public offers and related parties.

8.       Evaluation of internal control and risk management.

Disclosure in board’s report:

1.       Composition of the audit committee shall be disclosed in the board’s report  u/s134(3).

2.       Where board had not accepted any recommendation of the audit committee, the same shall be disclosed in boards report u/s 134(3) along with the reasons thereof.

Role of auditor in audit committee:

                                                                      According to sec 177(7) the audit committee is empowered to :

1.       Call for comments of the auditor about:

1.       Internal control system.

2.       The scope of audit including the observation of the auditors.

3.       Review of financial statement before their submission to the board.

Right to be heard in the meeting of audit committee:

                                                                The auditor of a company and the key managerial personnel shall have a right to be heard in the meeting of the audit committee when it consider the auditor’s report  but shall not have the right to note.

Penalty for contravention:

                                                Company => fine=> minimum => 1 lakh.

                                                                                       Maximum=> 5 lakh.

                              Every officer => imprisonment => maximum => 1 year.

                                                                Fine=> minimum=> 25000

                                                                             Maximum=> 100000