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audit committee

nafisa (ACS) (189 Points)

21 June 2010

i want to know about audit committee under secretarial standards.

please help

Its very urgent.

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SIVASIVA (FCA, Future CA) (4935 Points)
Replied 21 June 2010

292A. Audit Committee
¹[292A. Audit Committee

(1) Every public company having paid-up capital of not less than five crores of rupees shall constitute a committee of the Board knows as "Audit Committee" which shall consist of not less than three directors and such number of other directors as the Board may determine of which two thirds of the total number of members shall be directors, other than managing or whole-time directors.

(2) Every Audit Committee constituted under sub-section (1) shall act in accordance with terms of reference to be specified in writing by the Board.

(3) The members of the Audit Committee shall elect a chairman from amongst themselves.

(4) The annual report of the company shall disclose the composition of the Audit Committee.

(5) The auditors, the internal auditor, if any, and the director-in-charge of finance shall attend and participate at meetings of the Audit Committee but shall not have the right to vote.

(6) The Audit Committee should have discussions with the auditors periodically about internal control systems, the scope of audit including the observations of the auditors and review the half-yearly and annual financial statements before submission to the Board and also ensure compliance of internal control systems.

(7) The Audit Committee shall have authority to investigate into any matter in relation to the items specified in this section or referred to it by the Board and for this purpose, shall have full access to information contained in the records of the company and external professional advice, if necessary.

(8) The recommendations of the Audit Committee on any matter relating to financial management, including the audit report, shall be binding on the Board.

(9) If the Board does not accept the recommendations of the Audit Committee, it shall record the reasons therefor and communicate such reasons to the shareholders.

(10) The chairman of the Audit Committee shall attend the annual general meetings of the company to provide any clarification on matters relating to audit.

(11) If a default is made in complying with the provisions of this section, the company, and every officer who is in default, shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to fifty thousand rupees, or with both.]

1. Ins. by 53 of 2000, sec. 140 (w.e.f. 13-12-2000).

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 21 June 2010

Hello,

Provisions regarding Audit Committee are basically governed by section 292A of the Companies Act, 1956 in case of Unlisted Public Company and in case if a listed company the same is governed by clause 49 of Listing Agreements read with section 292A of the Companies Act, 1956.

Some of the provisions related to Audit Committee given in Secretarial Standards are as follows:

1. The Chairman of Audit Committee where such committee exists should attend the AGM.

2. Where a company has an Audit Committee, this Committee should consider the financial statements before submission to the Board. Dividend should be recommended by the Board after consideration and approval of the financial statements. All requisite approvals should be obtained before declaration of Dividend. Dividend should not be declared subject to any condition such as the approval of financial institutions/banks or foreign collaborators or compliance with any other contractual obligation.

3. Where a company has an Audit Committee, this Committee should consider the interim financial statements which should then be submitted to the Board for consideration and declaration of Interim Dividend.

Best Regards

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