What is audit committee - tradecareer

                                            AUDIT COMMITTEE

Audit Committee is one of the main pillars of the corporate governance mechanism in 

any company. The Committee is charged with the principal oversight of financial 

reporting and disclosure.

The constitution of Audit Committee is mandated under the Companies Act, 2013 and 

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Audit Committee Provisions in Companies Act Section 177 of the Companies Act, 

2013

Constitution of Audit Committee: As per the provisions of the Companies Act, 2013, 

the following companies are required to constitute an Audit Committee:-

1. Every Listed Public Companies, or

2. Unlisted public companies having:

(a) Paid-up capital of Rs. 10 Crore or more;

(b) Turnover of Rs. 100 Crore or more;

(c) Aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 

50 Crore or more.

                                                                            


Note: The calculation of above paid-up share capital or turnover or outstanding loans 

etc. shall be based on the last audited Financial Statements. The Companies Act, 2013 

provides 1 year from the date of its enforcement for reconstitution of the Audit 

Committee.

Members: The Audit Committee shall comprise of minimum 3 directors with majority 

of the directors being Independent Directors. The majority of members of Audit 

Committee should be financial literate.

Chairman: The Chairman of the Audit Committee should be financially literate.

Special Note: The requirement of Independent directors forming a majority is not 

applicable to Section 8 companies.

Role of Audit Committee:

a) The recommendation for appointment, remuneration and terms of appointment of 

auditors;

b) Review and monitor the auditors' independence and performance, and effectiveness 

of audit process;

c) Examination of the financial statement and the auditors' report thereon;

d) Approval or any subsequent modification of transactions of the company with 

related parties;

e) Scrutiny of inter-corporate loans and investments;

f) Valuation of undertakings or assets of the company, wherever it is necessary;

g) Evaluation of internal financial controls and risk management systems;

h) Monitoring the end use of funds raised through public offers and related matters.

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