Question
Consider the following statements regarding the Audit
Committee under Section 177 of the Companies Act, 2013: Statement 1: The Audit Committee must consist entirely of Independent Directors. Statement 2: The Audit Committee has authority to investigate matters related to audit, financial statements, and internal controls. Statement 3: Auditors have a right to be heard when the Audit Committee considers the auditor's report but cannot vote in committee meetings. Statement 4: The Audit Committee can make omnibus approval for related party transactions. Which statements are correct?Solution
Section 177 prescribes Audit Committee provisions. Statement 1 is incorrect—Section 177(2) requires a majority of independent directors, not all independent directors. The chairman must be an independent director. Statement 2 is correct—Section 177(4) grants authority to investigate into items within the committee's scope. Statement 3 is correct—Section 177(7) grants auditors right to be heard but not to vote. Statement 4 is correct—Section 177(4) permits omnibus approval for related party transactions subject to conditions. Statements 2, 3, and 4 are correct.
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