According to law the company is required to publish some information about it’s working after a fixed period of time,i.e, either annually or half yearly or quarterly. But how come we get to know whether the information provided is true or not? How come we get to know whether the company is following all company laws regarding remuneration and stakeholders or not? We get to know about all these things through the reports made by different board committees comprising of independent as well as non- independent directors.According to the Company Law there are some committees that are mandatory for every company with set criteria. One such committee is the Audit Committee.This article gives all information regarding Audit Committees.
Audit Committee is the most important committee comprising of independent directors .The main function of this committee is to review the company’s financial reports and ensure that the information provided in the reports is credible.It also ensures that this financial information is made available to all the stakeholders and the disclosure is made timely. It even monitors the working of internal as well as external auditors.It even recommends external auditors to the board.It also ensures that there is legal compliance in the matters of financial statements.It identifies financial risks and takes suitable action against them.
According to the Companies Act 2014, every public company with paid up capital of INR 10 crores or more, turnover of INR 100 crores or more and aggregate claims of INR 50 crores or more, shall constitute an Audit Committee. No such criteria is given for private companies but every listed company should have an Audit Committee.This committee shall consists of minimum 3 directors with independent directors in majority. The chairperson must be an independent director.Meetings should be held at least 4 times in a year and gap between two meetings should not be more than 4 months. This committee has the power to investigate or seek information about any activity of the company.
This was all about the legal requirements as per Indian Companies Act 2014 for Audit Committees.