Audit Committee

Audit Committee has a critical role to play in ensuring the integrity of financial management of the company. This committee adds assurance to the shareholders that the auditors, who act on their behalf, are in a position to safeguard their interests. Besides the requirements of Clause 49, section 292 A of the Act requires every public company having paid-up capital of Rs 5 crores or more shall constitute a committee of the board to be known as Audit Committee. As per the Act, the committee shall consist of atleast three directors; two-third of the total strength shall be directors other than managing or whole time directors. The Annual Report of the company shall disclose the composition of the Audit Committee. The recommendations of the committee on any matter relating to financial management including Audit Report, shall be binding on the board. In case board does not accept the recommendations so made, the committee shall record the reasons thereof, which should be communicated to the shareholders, probably through the Corporate Governance Report. The committee shall act in accordance with the terms of reference to be specified in writing by the board. The committee should have periodic discussions with the auditors about the Internal Control Systems and the scope of audit including the observations of the auditors. If the default is made in complying with the said provision of the Act, then the company and every officer in default shall be punishable with imprisonment for a term extending to a year or with fine upto Rs. 50000 or both.