Audit committee
The requirements for the execution of the clause 49 can be categorized into mandatory and non-mandatory requirements and the Audit Committee is one of the mandatory requirements.
The audit committee should consist of minimum three directors. Out of which two thirds are independence directors. All members should be financially literate and we can say they are able to read and understand basic financial statements. At least one member should have accounting or related financial expertise. Chairman should be independence director and he shall present at AGM to answer shareholders queries. Audit committee may invite executive (finance head) to present at the meetings. Finance Director, Head of Internal Audit and Statutory Auditors may present as invitees for meetings. Company Secretary shall act as the secretary of company.
Meeting: The committee should meet at least four times a year and not more than four months shall elapse between two meetings.
Quorum: Two members or one third of the members whichever is greater but at least two independent members should be present.
Power & Duties:
· Investigate within its term of reference, seek information from employees, and obtain outsiders or legal advice.
· Oversight of financial reporting and disclosure.
· Recommending appointment, re-appointment, and removal of statutory auditors and fixation of their fees.
· Approval of payment to statutory auditors for other services rendered by him.
· The Audit Committee should review the following with management:
§ The annual financial statement before submission to board
§ Quarterly financial statement before submission to board for approval
§ Statement of uses/application of funds received through an issue
§ Performance of statutory and internal auditors
§ Adequacy of internal audit function
§ Discussion with internal auditors any significant findings and follow-up
§ Finding of internal investigation for fraud etc
§ Pre-audit and post-audit discussions with statutory auditors
§ Look into the reasons for substantial defaults in the payments to Depositors, Debenture Holders, Share Holders, and creditors
§ Management discussion and analysis
§ Related party transactions
§ Management letter/ letter of internal audit weaknesses reported by statutory auditors
§ Internal audit reports relating to internal control weakness
§ Appointment, removal and the term of remuneration to chief internal auditors
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