Skip to content

CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

Bharat Polymers Ltd's Audit Committee has five members including its Chairperson. The board wants to ensure compliance with the financial literacy requirement in Section 177. Which arrangement complies?

The arrangement where a majority of members, including the Chairperson, can read and understand financial statements complies. This is the proviso to Section 177(2). It does not require every member to be an accountant, nor is one literate member enough.

  1. AOnly the Chairperson can read and understand financial statements
  2. BAt least one member can read and understand financial statements
  3. CA majority of members including the Chairperson can read and understand financial statementsCorrect
  4. DAll members must be qualified chartered accountants

Explanation

The proviso to Section 177(2) requires that a majority of members, including the Chairperson, be persons with the ability to read and understand the financial statement. Having only the Chairperson or only one member does not give a majority. No professional qualification is prescribed.

Did you get it right without looking?

One question tells you little. A timed set on Board Committees shows your real accuracy, how long you take and where you lose marks.

Practise Board CommitteesFree diagnostic mock

More Board Committees questions