Friday, February 21, 2014
Tuesday, February 18, 2014
ICMAI RESULT FOR DEC 2013 FOUNDATION EXAMINATION
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133991 134053 134056 134109 134167 134275 134276 134279 134280 134281 134282 134283
134287 134293 134353 134355 134357 134359 134363 134364 134365 134437 134438 134441
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138445 138446 138449 138450 138454 138465 138467 138474 138476 138478 138482 138488
138492 138495 138503 138514 138523 138525 138528 138531 138533 138535 138537 138538
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141172 141173 141174 141176 141177 141178 141179 141180 141181 141182 141183 141185
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141786 141788 141789 141790 141792 141795 141796 ***END***
Saturday, February 15, 2014
The role of stakeholders in Corporate Governance
The role of stakeholders in Corporate Governance
by law and encourage active cooperation between corporations and stakeholders in creating
wealth, jobs, and the sustainability of financially sound enterprises.
A. The corporate governance framework should assure that the rights of stakeholders that are
protected by law are respected.
B. Where stakeholder interests are protected by law, stakeholders should have the opportunity
to obtain effective redress for violation of their rights.
C. The corporate governance framework should permit performance-enhancing mechanisms
for stakeholder participation.
D. Where stakeholders participate in the corporate governance process, they should have access
to relevant information.
by law and encourage active cooperation between corporations and stakeholders in creating
wealth, jobs, and the sustainability of financially sound enterprises.
A. The corporate governance framework should assure that the rights of stakeholders that are
protected by law are respected.
B. Where stakeholder interests are protected by law, stakeholders should have the opportunity
to obtain effective redress for violation of their rights.
C. The corporate governance framework should permit performance-enhancing mechanisms
for stakeholder participation.
D. Where stakeholders participate in the corporate governance process, they should have access
to relevant information.
Audit Committee Disclosures
Audit Committee Disclosures
(A) Basis of related party transactions
(i) A statement in summary form of transactions with related parties in the ordinary course of business
shall be placed periodically before the audit committee.
(ii) Details of material individual transactions with related parties which are not in the normal course
of business shall be placed before the audit committee.
(iii) Details of material individual transactions with related parties or others, which are not on an arm’s
length basis should be placed before the audit committee, together with Management’s justification
for the same.
(B) Disclosure of Accounting Treatment
Where in the preparation of financial statements, a treatment different from that prescribed in an
Accounting Standard has been followed, the fact shall be disclosed in the financial statements,
together with the management’s explanation as to why it believes such alternative treatment is
more representative of the true and fair view of the underlying business transaction in the Corporate
Governance Report.
(C) Board Disclosures – Risk management
The company shall lay down procedures to inform Board members about the risk assessment and
minimization procedures. These procedures shall be periodically reviewed to ensure that executive
management controls risk through means of a properly defined framework.
(D) Proceeds from public issues, rights issues, preferential issues etc.
When money is raised through an issue (public issues, rights issues, preferential issues etc.), it shall disclose
to the Audit Committee, the uses / applications of funds by major category (capital expenditure, sales
and marketing, working capital, etc), on a quarterly basis as a part of their quarterly declaration of
financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized
for purposes other than those stated in the offer document/prospectus/notice and place it before the
audit committee. Such disclosure shall be made only till such time that the full money raised through the
issue has been fully spent. This statement shall be certified by the statutory auditors of the company. The
audit committee shall make appropriate recommendations to the Board to take up steps in this matter.
(E) Remuneration of Directors
(i) All pecuniary relationship or transactions of the non-executive directors vis-à-vis the company shall
be disclosed in the Annual Report.
(ii) Further the following disclosures on the remuneration of directors shall be made in the section on
the corporate governance of the Annual Report:
(a) All elements of remuneration package of individual directors summarized under major groups,
such as salary, benefits, bonuses, stock options, pension etc.
(b) Details of fixed component and performance linked incentives, along with the performance
criteria.
(c) Service contracts, notice period, severance fees.
(d) Stock option details, if any – and whether issued at a discount as well as the period over which
accrued and over which exercisable.
(iii) The company shall publish its criteria of making payments to non-executive directors in its annual
report. Alternatively, this may be put up on the company’s website and reference drawn thereto
in the annual report.
(iv) The company shall disclose the number of shares and convertible instruments held by non-executive
directors in the annual report.
(v) Non-executive directors shall be required to disclose their shareholding (both own or held by /
for other persons on a beneficial basis) in the listed company in which they are proposed to be
appointed as directors, prior to their appointment. These details should be disclosed in the notice
to the general meeting called for appointment of such director.
(F) Management
(i) As part of the directors’ report or as an addition thereto, a Management Discussion and Analysis
report should form part of the Annual Report to the shareholders. This Management Discussion &
Analysis should include discussion on the following matters within the limits set by the company’s
competitive position:
(a) Industry structure and developments.
(b) Opportunities and Threats.
(c) Segment–wise or product-wise performance.
(d) Outlook
(e) Risks and concerns.
(f) Internal control systems and their adequacy.
(g) Discussion on financial performance with respect to operational performance.
(h) Material developments in Human Resources / Industrial Relations front, including number of
people employed.
(ii) Senior management shall make disclosures to the board relating to all material financial and
commercial transactions, where they have personal interest, that may have a potential conflict
with the interest of the company at large (for e.g. dealing in company shares, commercial dealings
with bodies, which have shareholding of management and their relatives etc.)
Explanation: For this purpose, the term “senior management” shall mean personnel of the company
who are members of its. core management team excluding the Board of Directors). This would
also include all members of management one level below the executive directors including all
functional heads.
(A) Basis of related party transactions
(i) A statement in summary form of transactions with related parties in the ordinary course of business
shall be placed periodically before the audit committee.
(ii) Details of material individual transactions with related parties which are not in the normal course
of business shall be placed before the audit committee.
(iii) Details of material individual transactions with related parties or others, which are not on an arm’s
length basis should be placed before the audit committee, together with Management’s justification
for the same.
(B) Disclosure of Accounting Treatment
Where in the preparation of financial statements, a treatment different from that prescribed in an
Accounting Standard has been followed, the fact shall be disclosed in the financial statements,
together with the management’s explanation as to why it believes such alternative treatment is
more representative of the true and fair view of the underlying business transaction in the Corporate
Governance Report.
(C) Board Disclosures – Risk management
The company shall lay down procedures to inform Board members about the risk assessment and
minimization procedures. These procedures shall be periodically reviewed to ensure that executive
management controls risk through means of a properly defined framework.
(D) Proceeds from public issues, rights issues, preferential issues etc.
When money is raised through an issue (public issues, rights issues, preferential issues etc.), it shall disclose
to the Audit Committee, the uses / applications of funds by major category (capital expenditure, sales
and marketing, working capital, etc), on a quarterly basis as a part of their quarterly declaration of
financial results. Further, on an annual basis, the company shall prepare a statement of funds utilized
for purposes other than those stated in the offer document/prospectus/notice and place it before the
audit committee. Such disclosure shall be made only till such time that the full money raised through the
issue has been fully spent. This statement shall be certified by the statutory auditors of the company. The
audit committee shall make appropriate recommendations to the Board to take up steps in this matter.
(E) Remuneration of Directors
(i) All pecuniary relationship or transactions of the non-executive directors vis-à-vis the company shall
be disclosed in the Annual Report.
(ii) Further the following disclosures on the remuneration of directors shall be made in the section on
the corporate governance of the Annual Report:
(a) All elements of remuneration package of individual directors summarized under major groups,
such as salary, benefits, bonuses, stock options, pension etc.
(b) Details of fixed component and performance linked incentives, along with the performance
criteria.
(c) Service contracts, notice period, severance fees.
(d) Stock option details, if any – and whether issued at a discount as well as the period over which
accrued and over which exercisable.
(iii) The company shall publish its criteria of making payments to non-executive directors in its annual
report. Alternatively, this may be put up on the company’s website and reference drawn thereto
in the annual report.
(iv) The company shall disclose the number of shares and convertible instruments held by non-executive
directors in the annual report.
(v) Non-executive directors shall be required to disclose their shareholding (both own or held by /
for other persons on a beneficial basis) in the listed company in which they are proposed to be
appointed as directors, prior to their appointment. These details should be disclosed in the notice
to the general meeting called for appointment of such director.
(F) Management
(i) As part of the directors’ report or as an addition thereto, a Management Discussion and Analysis
report should form part of the Annual Report to the shareholders. This Management Discussion &
Analysis should include discussion on the following matters within the limits set by the company’s
competitive position:
(a) Industry structure and developments.
(b) Opportunities and Threats.
(c) Segment–wise or product-wise performance.
(d) Outlook
(e) Risks and concerns.
(f) Internal control systems and their adequacy.
(g) Discussion on financial performance with respect to operational performance.
(h) Material developments in Human Resources / Industrial Relations front, including number of
people employed.
(ii) Senior management shall make disclosures to the board relating to all material financial and
commercial transactions, where they have personal interest, that may have a potential conflict
with the interest of the company at large (for e.g. dealing in company shares, commercial dealings
with bodies, which have shareholding of management and their relatives etc.)
Explanation: For this purpose, the term “senior management” shall mean personnel of the company
who are members of its. core management team excluding the Board of Directors). This would
also include all members of management one level below the executive directors including all
functional heads.
Review of information by Audit Committee
Review of information by Audit Committee
The Audit Committee shall mandatorily review the following information:
1. Management discussion and analysis of financial condition and results of operations;
2. Statement of significant related party transactions (as defined by the audit committee), submitted
by management;
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
The Audit Committee shall mandatorily review the following information:
1. Management discussion and analysis of financial condition and results of operations;
2. Statement of significant related party transactions (as defined by the audit committee), submitted
by management;
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
Audit Committee
Audit Committee
(A) Qualified and Independent Audit Committee
A qualified and independent audit committee shall be set up, giving the terms of reference subject to
the following:
(i) The audit committee shall have minimum three directors as members. Two-thirds of the members
of audit committee shall be independent directors.
(ii) All members of audit committee shall be financially literate and at least one member shall have
accounting or related financial management expertise
Explanation 1: The term “financially literate” means the ability to read and understand basic financial
statements i.e. balance sheet, profit and loss account, and statement of cash flows.
Explanation 2: A member will 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.
(iii) The Chairman of the Audit Committee shall be an independent director;
(iv) The Chairman of the Audit Committee shall be present at Annual General Meeting to answer
shareholder queries;
(v) The audit committee may invite such of the executives, as it considers appropriate (and particularly
the head of the finance function) to be present at the meetings of the committee, but on occasions
it may also meet without the presence of any executives of the company. The finance director,
head of internal audit and a representative of the statutory auditor may be present as invitees for
the meetings of the audit committee;
(vi) The Company Secretary shall act as the secretary to the committee.
(B) Meeting of Audit Committee
The audit committee should meet at least four times in a year and not more than four months shall elapse
between two meetings. The quorum shall be either two members or one third of the members of the audit
committee whichever is greater, but there should be a minimum of two independent members present.
(C) Powers of Audit Committee
The audit committee shall have powers, which should include the following:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee.
3. To obtain outside legal or other professional advice.
4. To secure attendance of outsiders with relevant expertise, if it considers necessary.
(D) Role of Audit Committee
The role of the audit committee shall include the following:
1. Oversight of the company’s financial reporting process and the disclosure of its financial information
to ensure that the financial statement is correct, sufficient and credible.
2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement
or removal of the statutory auditor and the fixation of audit fees.
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 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 (2AA) of section 217 of the Companies Act, 1956
(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) Qualifications 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, performance of statutory and internal auditors, adequacy of
the internal control systems.
7. 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.
8. Discussion with internal auditors any significant findings and follow up there on.
9. 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.
10. 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.
11. 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.
12. To review the functioning of the Whistle Blower mechanism, in case the same is existing.
13. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee
(A) Qualified and Independent Audit Committee
A qualified and independent audit committee shall be set up, giving the terms of reference subject to
the following:
(i) The audit committee shall have minimum three directors as members. Two-thirds of the members
of audit committee shall be independent directors.
(ii) All members of audit committee shall be financially literate and at least one member shall have
accounting or related financial management expertise
Explanation 1: The term “financially literate” means the ability to read and understand basic financial
statements i.e. balance sheet, profit and loss account, and statement of cash flows.
Explanation 2: A member will 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.
(iii) The Chairman of the Audit Committee shall be an independent director;
(iv) The Chairman of the Audit Committee shall be present at Annual General Meeting to answer
shareholder queries;
(v) The audit committee may invite such of the executives, as it considers appropriate (and particularly
the head of the finance function) to be present at the meetings of the committee, but on occasions
it may also meet without the presence of any executives of the company. The finance director,
head of internal audit and a representative of the statutory auditor may be present as invitees for
the meetings of the audit committee;
(vi) The Company Secretary shall act as the secretary to the committee.
(B) Meeting of Audit Committee
The audit committee should meet at least four times in a year and not more than four months shall elapse
between two meetings. The quorum shall be either two members or one third of the members of the audit
committee whichever is greater, but there should be a minimum of two independent members present.
(C) Powers of Audit Committee
The audit committee shall have powers, which should include the following:
1. To investigate any activity within its terms of reference.
2. To seek information from any employee.
3. To obtain outside legal or other professional advice.
4. To secure attendance of outsiders with relevant expertise, if it considers necessary.
(D) Role of Audit Committee
The role of the audit committee shall include the following:
1. Oversight of the company’s financial reporting process and the disclosure of its financial information
to ensure that the financial statement is correct, sufficient and credible.
2. Recommending to the Board, the appointment, re-appointment and, if required, the replacement
or removal of the statutory auditor and the fixation of audit fees.
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 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 (2AA) of section 217 of the Companies Act, 1956
(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) Qualifications 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, performance of statutory and internal auditors, adequacy of
the internal control systems.
7. 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.
8. Discussion with internal auditors any significant findings and follow up there on.
9. 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.
10. 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.
11. 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.
12. To review the functioning of the Whistle Blower mechanism, in case the same is existing.
13. Carrying out any other function as is mentioned in the terms of reference of the Audit Committee
EXTRACTS OF CLAUSE 49 OF LISTING AGREEMENT AND SECTION 292A OF THE COMPANIES ACT, 1956
EXTRACTS OF CLAUSE 49 OF LISTING AGREEMENT AND SECTION 292A OF THE COMPANIES ACT, 1956
Clause 49 - Corporate Governance
The company agrees to comply with the following provisions:
I. Board of Directors
(A) Composition of Board
(i) The Board of directors of the company shall have an optimum combination of executive and
non-executive directors with not less than fifty percent of the board of directors comprising of nonexecutive
directors.
(ii) Where the Chairman of the Board is a non-executive director, at least one-third of the Board should
comprise of independent directors and in case he is an executive director, at least half of the Board
should comprise of independent directors.
(iii) For the purpose of the sub-clause (ii), the expression ‘independent director’ shall mean a nonexecutive
director of the company who:
(a) apart from receiving director’s remuneration, does not have any material pecuniary relationships
or transactions with the company, its promoters, its directors, its senior management or its holding
company, its subsidiaries and associates which may affect independence of the director;
(b) is not related to promoters or persons occupying management positions at the board level
or at one level below the board;
(c) has not been an executive of the company in the immediately preceding three financial
years;
(d) is not a partner or an executive or was not partner or an executive during the preceding three
years, of any of the following:
i) the statutory audit firm or the internal audit firm that is associated with the company, and
ii) the legal firm(s) and consulting firm(s) that have a material association with the company.
(e) is not a material supplier, service provider or customer or a lessor or lessee of the company,
which may affect independence of the director; and
(f) is not a substantial shareholder of the company i.e. owning two percent or more of the block
of voting shares.
Explanation - For the purposes of the sub-clause (iii):
(b) Associate shall mean a company which is an “associate” as defined in Accounting Standard (AS)
23, “Accounting for Investments in Associates in Consolidated Financial Statements”, issued by the
Institute of Chartered Accountants of India.
(c) “Senior management” shall mean personnel of the company who are members of its core
management team excluding Board of Directors. Normally, this would comprise all members of
management one level below the executive directors, including all functional heads.
(d) “Relative” shall mean “relative” as defined in section 2(41) and section 6 read with Schedule IA of
the Companies Act, 1956.
(iv) Nominee directors appointed by an institution which has invested in or lent to the company shall
be deemed to be independent directors.
Clause 49 - Corporate Governance
The company agrees to comply with the following provisions:
I. Board of Directors
(A) Composition of Board
(i) The Board of directors of the company shall have an optimum combination of executive and
non-executive directors with not less than fifty percent of the board of directors comprising of nonexecutive
directors.
(ii) Where the Chairman of the Board is a non-executive director, at least one-third of the Board should
comprise of independent directors and in case he is an executive director, at least half of the Board
should comprise of independent directors.
(iii) For the purpose of the sub-clause (ii), the expression ‘independent director’ shall mean a nonexecutive
director of the company who:
(a) apart from receiving director’s remuneration, does not have any material pecuniary relationships
or transactions with the company, its promoters, its directors, its senior management or its holding
company, its subsidiaries and associates which may affect independence of the director;
(b) is not related to promoters or persons occupying management positions at the board level
or at one level below the board;
(c) has not been an executive of the company in the immediately preceding three financial
years;
(d) is not a partner or an executive or was not partner or an executive during the preceding three
years, of any of the following:
i) the statutory audit firm or the internal audit firm that is associated with the company, and
ii) the legal firm(s) and consulting firm(s) that have a material association with the company.
(e) is not a material supplier, service provider or customer or a lessor or lessee of the company,
which may affect independence of the director; and
(f) is not a substantial shareholder of the company i.e. owning two percent or more of the block
of voting shares.
Explanation - For the purposes of the sub-clause (iii):
(b) Associate shall mean a company which is an “associate” as defined in Accounting Standard (AS)
23, “Accounting for Investments in Associates in Consolidated Financial Statements”, issued by the
Institute of Chartered Accountants of India.
(c) “Senior management” shall mean personnel of the company who are members of its core
management team excluding Board of Directors. Normally, this would comprise all members of
management one level below the executive directors, including all functional heads.
(d) “Relative” shall mean “relative” as defined in section 2(41) and section 6 read with Schedule IA of
the Companies Act, 1956.
(iv) Nominee directors appointed by an institution which has invested in or lent to the company shall
be deemed to be independent directors.
CONFEDERATION OF INDIAN INDUSTRIES (CII) CODE FOR DESIRABLE CORPORATE GOVERNANCE
CONFEDERATION OF INDIAN INDUSTRIES (CII) CODE FOR DESIRABLE CORPORATE GOVERNANCE
The CII code has recommended the following 14 key aspects which should be shared with the
board :
» Annual operating plans and budgets together with updated long-term plans.
» Capital budgets, manpower and overhead budgets.
» Quarterly results for the company as a whole and its operating divisions for business segments.
» Show cause, demand and prosecution notices received from the revenue authorities which are
considered to be materially important.
» Internal audit reports, including cases of theft and dishonesty of a material nature.
» Fatal or serious accidents, dangerous occurrences, and any affluent or pollution problems.
» Default in payment of interest or nonpayment of the principal on any public deposit, and/or to
any secured creditors or financial institutions.
» Defaults such as nonpayment of inter-corporate deposits by or to the company, or materially
substantial non-payments for goods sold by the company.
» Any issue which involves possible public or product liability claims of a substantial nature, including
any judgment or order which may have either passed, strictures on the conduct of the company,
or taken an adverse view regarding another enterprise that can have negative implications for
the company.
» Details of my joint venture or collaboration agreement.
» Transactions that involve substantial payment towards goodwill, brand equity, or intellectual
property.
» Recruitment and remuneration of senior officers just below the board level, including appointment
or removal of the Chief Financial Officer and the Company Secretary.
» Labour problems and their proposed solutions.
» Quarterly details of foreign exchange exposure and the steps taken by management to limit the
risk of adverse exchange rate movement, if material.
These issues can be classified into financial issues and non-financial issues which are not required to be
presented to the Board statutorily
Explaining the nature of key information that should reach board as per CII Code.
Financial Issues :
» Operating plans and budgets
» Capital budgets
» Quarterly results as a whole and by business segment
» Joint venture and collaboration
» Foreign exchange exposures
» Defaults in payments
» Failure in collection
Non-Financial Issues :
» Internal audit report
» Fatal accidents
» Show causes, contingencies, claims, Labour problems
» Important recruitments.
The CII code has recommended the following 14 key aspects which should be shared with the
board :
» Annual operating plans and budgets together with updated long-term plans.
» Capital budgets, manpower and overhead budgets.
» Quarterly results for the company as a whole and its operating divisions for business segments.
» Show cause, demand and prosecution notices received from the revenue authorities which are
considered to be materially important.
» Internal audit reports, including cases of theft and dishonesty of a material nature.
» Fatal or serious accidents, dangerous occurrences, and any affluent or pollution problems.
» Default in payment of interest or nonpayment of the principal on any public deposit, and/or to
any secured creditors or financial institutions.
» Defaults such as nonpayment of inter-corporate deposits by or to the company, or materially
substantial non-payments for goods sold by the company.
» Any issue which involves possible public or product liability claims of a substantial nature, including
any judgment or order which may have either passed, strictures on the conduct of the company,
or taken an adverse view regarding another enterprise that can have negative implications for
the company.
» Details of my joint venture or collaboration agreement.
» Transactions that involve substantial payment towards goodwill, brand equity, or intellectual
property.
» Recruitment and remuneration of senior officers just below the board level, including appointment
or removal of the Chief Financial Officer and the Company Secretary.
» Labour problems and their proposed solutions.
» Quarterly details of foreign exchange exposure and the steps taken by management to limit the
risk of adverse exchange rate movement, if material.
These issues can be classified into financial issues and non-financial issues which are not required to be
presented to the Board statutorily
Explaining the nature of key information that should reach board as per CII Code.
Financial Issues :
» Operating plans and budgets
» Capital budgets
» Quarterly results as a whole and by business segment
» Joint venture and collaboration
» Foreign exchange exposures
» Defaults in payments
» Failure in collection
Non-Financial Issues :
» Internal audit report
» Fatal accidents
» Show causes, contingencies, claims, Labour problems
» Important recruitments.
Functions of Audit Committee under Section 292A
Functions of Audit Committee under Section 292A
Sub-section (2) of Section 292A provides that every Audit Committee constituted shall act in
accordance with terms of reference to be specified in writing by the Board. Sub section (6) provides
that the Audit Committee should have periodic discussions with the auditors on the following
matters :
(c) Internal control systems;
(d) The scope of audit including the observations of the auditors
(e) Review of the half-yearly and annual financial statements before submission to the Board and also
ensure compliance of internal control systems; and
(f) Compliance of Internal Control Systems.
Sub-section (7) of Section 292A further provides that the Audit Committee shall have the authority
to investigate into any matter :
(a) In relation to the items specified in section 292A; and
(b) In relation to the items referred to it by the Board of Directors.
Sub-section (7) further provides that the Audit Committee shall have full access to information
contained in the records of the company and external professional advice if necessary.
Sub-section (8) provides that the recommendations of the Audit Committee on any matter relating
to financial management, including the audit report, shall be binding on the Board. Sub-section (9)
provides that in case, the Board does not accept the recommendations of the Audit Committee, it
shall record the reasons for non-acceptance and communicate such reasons to the shareholders.
12.10.5 Penalty for Contravention of Section 292A:
Sub-section (11) of Section 292A provides that the company and every officer who is in default in
complying with the provisions of this section 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.
12.10.6 Meetings of the Audit Committee:
Clause 49 to the listing agreement provides that the Audit Committee should meet at least four
times in a year and not more than four months shall elapse between two meetings. The quorum
shall be either two members or one-third of the members of Audit Committee whichever is greater.
However, there should be a minimum of two independent members present. In view of quarterly
results, it becomes otherwise also essential to meet at least once in a quarter. However, there is
no bar on the maximum number of sittings by an Audit Committee. The Companies Act, 1956 has
assigned a role to these committees and does not provide anything about the minimum numbers
of meetings.
AUDIT COMMITTEES AND CORPORATE GOVERNANCE
AUDIT COMMITTEES AND CORPORATE GOVERNANCE
Audit Committee Statute in India
Audit Committees. The new provision covers every public company having a paid-up capital of Rs. 5
crore and above. The Board of Directors is required to constitute an audit committee consisting of not
less than three directors and such number of other directors as the Board may determine of which twothirds
of the total number of members shall be directors, other than managing or whole time directors.
Similarly, Clause 49 of the uniform listing agreement prescribed by Securities and Exchange Board of
India (SEBI), which is applicable to all companies listed in India, requires the setting up of a qualified
and independent Audit Committee.
Sub-section (6) of Section 292A requires that 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.
Sub-section (7) of Section 292A provides that the Audit Committee shall have authority to investigate into
any matter inter-alia in relation to these matters and shall have full access to the information contained
in the records of the company and external professional advice, if necessary.
The clause 49 of the listing agreement provides that the audit committee shall have powers which
should include the following :
(b) to investigate any activity within its terms of reference;
(c) to seek information from any employee;
(d) to obtain outside legal or other professional advice; and
(e) to secure attendance of outsiders with relevant expertise, if it considers necessary.
This clause further provides that the role of the audit committee shall inter-alia include the following:
(b) Oversight of the company’s financial reporting process and the disclosure of its financial information;
(c) Recommending the appointment and removal of external auditor, fixation of audit fee and also
approval for payment for any other services;
(d) Reviewing the annual financial statements with management before submission to the board;
(e) Reviewing external and internal auditors with the management and the adequacy of internal
control systems;
(f) Reviewing the adequacy of internal audit system;
(g) Discussion with Internal Auditors of any significant findings and follow-up action thereon;
(h) Discussion with External Auditors; and
(i) Reviewing the company’s financial and risk-management policies.
Sub-section (8) and sub-section (9) of Section 292A provides that the recommendations of the Audit
Committee will be binding on the Board. In case the Board does not accept the recommendations of
the Audit Committee, it will have to record the reasons and communicate the same to the shareholders.
In short, the provisions related to Audit Committees can be summarized as under :
» All public limited companies having paid up capital of Rs. 5 crores or more are required to establish
a committee of the Board known as Audit Committee.
» The Committee shall have at least three directors as members.
» Two-third of the total number of members shall be non-executive directors.
» The Audit Committee shall act in accordance with terms of reference to be specified in writing by
the Board.
» The Statutory Auditors, the Internal Auditor, if any and director in-charge of finance shall attend
and participate the meetings of Audit Committee but shall not have the right to vote.
» The Audit Committee should have discussions with the auditors periodically about internal control
system, the scope of audit and review of the half yearly and annual financial statements before
presenting the same to the Board.
» The Audit Committee shall have right to investigate any matter covered under the broad terms of
reference.
» In case of any default, 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.
Audit Committee Statute in India
Audit Committees. The new provision covers every public company having a paid-up capital of Rs. 5
crore and above. The Board of Directors is required to constitute an audit committee consisting of not
less than three directors and such number of other directors as the Board may determine of which twothirds
of the total number of members shall be directors, other than managing or whole time directors.
Similarly, Clause 49 of the uniform listing agreement prescribed by Securities and Exchange Board of
India (SEBI), which is applicable to all companies listed in India, requires the setting up of a qualified
and independent Audit Committee.
Sub-section (6) of Section 292A requires that 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.
Sub-section (7) of Section 292A provides that the Audit Committee shall have authority to investigate into
any matter inter-alia in relation to these matters and shall have full access to the information contained
in the records of the company and external professional advice, if necessary.
The clause 49 of the listing agreement provides that the audit committee shall have powers which
should include the following :
(b) to investigate any activity within its terms of reference;
(c) to seek information from any employee;
(d) to obtain outside legal or other professional advice; and
(e) to secure attendance of outsiders with relevant expertise, if it considers necessary.
This clause further provides that the role of the audit committee shall inter-alia include the following:
(b) Oversight of the company’s financial reporting process and the disclosure of its financial information;
(c) Recommending the appointment and removal of external auditor, fixation of audit fee and also
approval for payment for any other services;
(d) Reviewing the annual financial statements with management before submission to the board;
(e) Reviewing external and internal auditors with the management and the adequacy of internal
control systems;
(f) Reviewing the adequacy of internal audit system;
(g) Discussion with Internal Auditors of any significant findings and follow-up action thereon;
(h) Discussion with External Auditors; and
(i) Reviewing the company’s financial and risk-management policies.
Sub-section (8) and sub-section (9) of Section 292A provides that the recommendations of the Audit
Committee will be binding on the Board. In case the Board does not accept the recommendations of
the Audit Committee, it will have to record the reasons and communicate the same to the shareholders.
In short, the provisions related to Audit Committees can be summarized as under :
» All public limited companies having paid up capital of Rs. 5 crores or more are required to establish
a committee of the Board known as Audit Committee.
» The Committee shall have at least three directors as members.
» Two-third of the total number of members shall be non-executive directors.
» The Audit Committee shall act in accordance with terms of reference to be specified in writing by
the Board.
» The Statutory Auditors, the Internal Auditor, if any and director in-charge of finance shall attend
and participate the meetings of Audit Committee but shall not have the right to vote.
» The Audit Committee should have discussions with the auditors periodically about internal control
system, the scope of audit and review of the half yearly and annual financial statements before
presenting the same to the Board.
» The Audit Committee shall have right to investigate any matter covered under the broad terms of
reference.
» In case of any default, 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.
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