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.