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CS Professional · Compliance Management, Audit and Due Diligence · Concepts of Various Audits

Himalaya Textiles Ltd, a listed company, has an audit committee whose chairperson, Ms. Rao, is an independent director. The CFO proposes that the committee should only review the final annual financial statements after they are signed by the auditor. Which view best reflects the role of the audit committee?

The audit committee should review the financial statements and the auditor's report, including any qualifications, before they go to the Board for approval. Its oversight role is pre-approval, so post-signing or post-filing review, or a role confined to fixing audit fees, is incorrect.

  1. AThe committee should review the financial statements before they are submitted to the Board for approval, along with the auditor's qualifications, if anyCorrect
  2. BThe committee has no role in financial statements, which are the exclusive domain of the statutory auditor
  3. CThe committee should review the statements only after they are filed with the Registrar
  4. DThe committee's role is limited to approving the auditor's fee, with no review of the financial statements

Explanation

The audit committee's core function includes examining the financial statements and the auditor's report before submission to the Board. Reviewing them only after signing or filing defeats the oversight purpose. Limiting the role to fee approval ignores its wider mandate.

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