Purpose: To ensure the integrity of financial statements, compliance with legal and regulatory requirements, and effectiveness of internal controls and risk management systems.
Applicability: Every listed company and any other class of companies as prescribed by the Central Government shall constitute an Audit Committee.
Timeline: The Audit Committee shall meet at least four times in a year, and not more than one hundred and twenty days shall elapse between two meetings.
Exemption: Small companies and one person companies are exempt from constituting an Audit Committee.
Penalty: In case of non-compliance, the company and every officer in default shall be punishable with a fine which may extend to Rs. 1,00,000.
Due date: The Audit Committee meetings must be held at least four times in a year, and not more than 120 days shall elapse between two meetings.
Forms: No specific form needs to be filled for constituting an Audit Committee, but the company needs to pass a Board resolution for the same.
Reporting authority: The Audit Committee reports to the Board of Directors.
Other details: The Audit Committee should consist of a minimum of three directors, and a majority of them should be independent directors. The Chairman of the Audit Committee shall be an independent director. The quorum for the meeting shall be either two members or one-third of the members of the Audit Committee, whichever is greater.
