A HAND CHART ON REVISED CLAUSE 49 OF
THE LISTING AGREEMENT
Part - 2
By
CS D HEM SENTHIL RAJ AND CS K VINOTH
CLAUSE 49 (III) of Listing
Agreement
CLAUSE 49 (III) (A) –
QUALIFIED AND INDEPENDENT AUDIT COMMITTEE
Clause
49(III) (A) of Listing Agreement not only insist the listed company/entity for
constituting a Audit Committee, but it has given a mandate to every listed
company/entity to constitute a qualified Independent Audit Committee which
comprises of financially literate members who have the ability to read and
understand the basic financial statements with at least one member who shall
have accounting or related financial management expertise.
Minimum – Three Members.
Chairman – Independent
Director.
Member – At least 2/3rd
of the Member to be Independent Directors.
Person
to be Present as Invitees to Audit Committee Meeting
Ø Finance Director of
the Company, if any or CFO.
Ø Head of Internal Audit.
Ø Representative of the
Statutory Auditor.
Ø Company Secretary as
the Secretary of the Audit Committee.
CLAUSE 49 (III) (B) – MEETING
OF AUDIT COMMITTEE
Minimum Number of
Meeting: 4
times a year
Quorum:
Two
Members or One third of the Members whichever is higher. (Min 2 ID Mandatory)
CLAUSE 49 (III) (C) –
POWERS OF AUDIT COMMITTEE
Ø To investigate any
activity within terms of reference.
Ø To seek Information
from Employees.
Ø To obtain legal or
other professional advice.
Ø To seek attendance of
outsider with relevant expertise.
CLAUSE 49 (III) (D) – ROLE OF AUDIT
COMMITTEE
This clause list outs
the various role of Audit Committee, however we have mentioned below some of
the important roles of Audit Committee for information.
Ø
To
oversight the company’s financial reporting policy.
Ø
Recommendation
for appointment, remuneration and terms of appointment of auditors of the
company.
Ø Reviewing the
Quarterly financial statement before submission to board approval.
Ø Approval of
appointment of CFO etc.
CLAUSE 49 (III) (E) –
REVIEW OF INFORMATION BY AUDIT COMMITTEE
Audit Committee should mandatorily review
the following information:
Ø Management Discussion
and Analysis of Financial Condition and results of operation.
Ø Statement of Related
Party transaction.
Ø Management
Letters/Letters of Internal Control Weaknesses issued by the Statutory Auditor.
Ø Internal Audit Report
and Internal control weaknesses.
Ø Appointment, removal
and terms of remuneration of the Chief Internal Auditor.
FAQ’s IN CLAUSE 49 (III)
of Listing Agreement
Whether
members of Audit Committee are required to be present at the Annual General
Meeting of the Company?
Members of Audit
Committee are not required to be present at the AGM, however the Chairman of
Audit Committee is required to be present at the AGM to answer the Shareholder’s
Queries.
Can an
outsider be present in the Audit Committee Meeting?
With prior approval of
Audit Committee an outsider can be present as an invitee for the purpose of
providing any relevant expertise suggestions or opinion as the case may be.
Whether
payments made to Auditors for rendering any other services will require Audit
Committee approval?
Yes.
Whether
an Audit Committee chairman is to elected by the Board/committee?
The Audit
Committee Chairman is required to be elected by the Board of Directors.
Whether
recommendation for appointment, remuneration and terms of appointment of Statutory
Auditor, Internal Auditor, Cost Auditor and Secretarial Auditor is to be given
by Audit Committee?
Appointment,
remuneration and terms of appointment of Statutory Auditor, Internal Auditor
and Cost Auditor require the recommendation of Audit Committee. However
appointment, remuneration and terms of appointment of Secretarial Auditor require
only the Board approval.
Whether
board has power to reject the recommendation given by the Audit Committee?
Yes, however the board
should give the reason for not accepting/rejecting the recommendation given by
the Audit Committee.
Can an
Audit Committee recommend different Remuneration for Joint Auditors in case of
Statutory Auditors?
Yes
Whether
Audit Committee approval is required in both Holding and Subsidiary companies for
appointing a person as Group CFO in Holding and Subsidiary Company?
Yes, the appointment
has to undergo the approval of Audit Committee of both the holding and
subsidiary company.
Whether
Audit Committee meeting can be held through circulation?
Yes
Whether
Audit Committee recommendation has to taken up in the ensuing board meeting?
It is not necessary to
take the Audit Committee recommendation in the ensuing Board Meeting, however
the recommendation given by the Audit Committee can be taken up in any board
meeting.
Intimation
of Date and outcome of Audit Committee has to be intimated to the Stock
Exchange?
Not required.
Can an
Audit Committee meeting be adjourned?
Adjournment concept is
not applicable to Committee.
Can an
Executive Director be a member of Audit Committee?
Yes, but subject to
fulfilling the criteria of qualification and composition of Audit Committee.
Whether
an Audit Committee can be re-constituted without Board’s approval in case of
re-constitution of Audit Committee is required during the
consideration/approval of quarterly results by the Audit Committee?
Option 1:
The company can
convene a Board Meeting for the purpose of re-constitution of Audit committee
prior to the Meeting of audit Committee and subsequently hold another Board
Meeting for consideration/approval given by the Audit Committee for approval of
quarterly results.
Option 2:
The company can pass a
circular resolution for re-constitution of Audit Committee prior to the Audit
Committee Meeting.
Whether
the concept of video conferencing facility is applicable for Audit Committee
Meeting?
No. The Concept of
video conferencing facility is applicable only for Board Meeting and not for
committee meetings.
What is
the remedy available in case the Audit Committee does not approve and recommend
the financial results (except last quarter) to the Board?
The company can take
up the other agenda items in the Board except the approval of financial
results, however in the outcome of Board Meeting to be intimated to the Stock
Exchange should provide for valid reasons for not considering the
results.
The Board should
ensure that the recommendation of financial results by Audit Committee is taken
up within the stipulated time period of 45 days from the end of quarter.
What is the remedy available to the company in case of not approving the financial statements within the stipulated time limit of 45 days?
The Company has to under an obligation
to pay the penal fees for not considering the financial results within 45 days.
The penalty levied shall be Rs.
1000/- per day up to 15 days.
Beyond 15 days the company is liable to pay 0.25%
of the Paid up Capital of the Company.
By
CS K VINOTH
CS D HEM SENTHIL RAJ
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