Section 177 of The Companies Act, 2013
(a) The audit committee shall have minimum three directors as members.
(c)All members of audit committee shall be financially literate and at least one member shall have accounting or related financial management expertise.
Explanation (1).-For the purpose of this regulation, “financially literate” shall mean the ability to read and understand basic financial statements i.e. balance sheet, profit and loss account, and statement of cash flows.
Explanation (2).-For the purpose of this regulation , a member shall be considered to have accounting or related financial management expertise if he or she possesses experience in finance or accounting, or requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
(e)The Company Secretary shall act as the secretary to the audit committee.
(f) The audit committee at its discretion shall invite the finance director or head of the finance function, head of internal audit and a representative of the statutory auditor and any other such executives to be present at the meetings of the committee:
Provided that occasionally the audit committee may meet without the presence of any executives of the listed entity.
(2) The listed entity shall conduct the meetings of the audit committee in the following manner:
(b) The quorum for audit committee meeting shall either be two members or one third of the members of the audit committee, whichever is greater, with at least two independent directors.
(c)The audit committee shall have powers to investigate any activity within its terms of reference, seek information from any employee, obtain outside legal or other professional advice and secure attendance of outsiders with relevant expertise, if it considers necessary.
- Extension vide SEBI Circular dated 26.03.2020 provided for implementation of circular on non-compliance with certain provisions of the SEBI LODR and the Standard Operating Procedure for suspension and revocation of trading of specified securities dated 22.01.2020. The revised implementation date is for compliance periods ending on or after June 30, 2020 from earlier date of March 31, 2020. To view the circular, Click Here.
- Refer SEBI Circular on non-compliance with certain provisions of the SEBI LODR and the Standard Operating Procedure for suspension and revocation of trading of specified securities dated 22.01.2020 to be implemented for compliance periods ending on or after March 31, 2020. To view the circular Click Here
SEBI has extended the applicability of the amendments made to LODR Regulations dated 03/08/2021 to 01/01/2022 vide corrigendum notification dated 06/08/2021. To view the notification, Click Here
- Further Relaxation w.r.t. the quarter / financial year ending March 31, 2020 provided vide SEBI Circular dated 26.06.2020. The Audit Committee of the listed entity are exempted from observing the maximum stipulated time gap between two meetings for the meetings held or proposed to be held between the period December 1, 2019 and July 31, 2020. However, the Audit Committee shall ensure that they meet atleast four times a year, as stipulated under regulation 18(2)(a) of the LODR. To view the circular, Click Here.
- Relaxation w.r.t. the quarter / financial year ending March 31, 2020 provided vide SEBI Circular dated 19.03.2020. The Audit Committee of the listed entity are exempted from observing the maximum stipulated time gap between two meetings for the meetings held or proposed to be held between the period December 1, 2019 and June 30, 2020. However, the Audit Committee shall ensure that they meet atleast four times a year, as stipulated under regulation 18(2)(a) of the LODR. To view the circular, Click Here.
SEBI Corrigendum dated 06.08.2021
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 dated 05.05.2021
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2021 dated 03.08.2021
The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Fourth Amendment) Regulations, 2019 dated 29.07.2019
Circular dated 19.03.2020 regarding relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 due to the CoVID -19 virus pandemic
SEBI Circular on Further relaxations from compliance with certain provisions of LODR and the SEBI circular dated January 22, 2020 relating to SOP due to the CoVID -19 virus pandemic dated 26.03.2020
SEBI Circular on non-compliance with certain provisions of the SEBI LODR and the Standard Operating Procedure for suspension and revocation of trading of specified securities dated 22.01.2020
SEBI Circular on Resignation of statutory auditors from listed entities and their material subsidiaries dated 18.10.2019
SEBI Circular regarding relaxation of time gap between two board / Audit Committee meetings of listed entities owing to the CoVID-19 pandemic dated 26.06.2020
LODR – SCHEDULE II Part C
PART C: ROLE OF THE AUDIT COMMITTEE AND REVIEW OF INFORMATION BY AUDIT COMMITTEE
[See Regulation 18(3)]
A. The role of the audit committee shall include the following:
(1) oversight of the listed entity’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible;
(3) approval of payment to statutory auditors for any other services rendered by the statutory auditors;
(4) reviewing, with the management, the annual financial statements and auditor’s report thereon before submission to the board for approval, with particular reference to:
a. matters required to be included in the director’s responsibility statement to be included in the board’s report in terms of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013;
b. changes, if any, in accounting policies and practices and reasons for the same;
c. major accounting entries involving estimates based on the exercise of judgment by management;
d. significant adjustments made in the financial statements arising out of audit findings;
e. compliance with listing and other legal requirements relating to financial statements;
f. disclosure of any related party transactions;
g. modified opinion(s) in the draft audit report;
(5) reviewing, with the management, the quarterly financial statements before submission to the board for approval;
(6) reviewing, with the management, the statement of uses / application of funds raised through an issue (public issue, rights issue, preferential issue, etc.), the statement of funds utilized for purposes other than those stated in the offer document / prospectus / notice and the report submitted by the monitoring agency monitoring the utilisation of proceeds of a public or rights issue, and making appropriate recommendations to the board to take up steps in this matter;
(7) reviewing and monitoring the auditor’s independence and performance, and effectiveness of audit process;
(8) approval or any subsequent modification of transactions of the listed entity with related parties;
(9) scrutiny of inter-corporate loans and investments
(10) valuation of undertakings or assets of the listed entity, wherever it is necessary;
(11) evaluation of internal financial controls and risk management systems;
(12) reviewing, with the management, performance of statutory and internal auditors, adequacy of the internal control systems;
(13) reviewing the adequacy of internal audit function, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit;
(14) discussion with internal auditors of any significant findings and follow up there on;
(15) reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the board;
(16) discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern;
(17) to look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non-payment of declared dividends) and creditors;
(18) to review the functioning of the whistle blower mechanism;
(19) approval of appointment of chief financial officer after assessing the qualifications, experience and background, etc. of the candidate;
(20) Carrying out any other function as is mentioned in the terms of reference of the audit committee.
reviewing the utilization of loans and/ or advances from/investment by the holding company in the subsidiary exceeding rupees 100 crore or 10% of the asset size of the subsidiary, whichever is lower including existing loans / advances / investments existing as on the date of coming into force of this provision.
B. The audit committee shall mandatorily review the following information:
(1) management discussion and analysis of financial condition and results of operations;
(3) management letters / letters of internal control weaknesses issued by the statutory auditors;
(4) internal audit reports relating to internal control weaknesses; and
(5) the appointment, removal and terms of remuneration of the chief internal auditor shall be subject to review by the audit committee.
(6) statement of deviations:
(a) quarterly statement of deviation(s) including report of monitoring agency, if applicable, submitted to stock exchange(s) in terms of Regulation 32(1).
(b) annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice in terms of Regulation 32(7).