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

Kaveri Textiles Ltd's Audit Committee is reviewing the appointment of the statutory auditor. The managing director suggests the committee only 'note' the board's choice of auditor and fee. Under the Companies Act, 2013, what is the Audit Committee's role?

The Audit Committee recommends to the board the appointment, remuneration and terms of appointment of the auditor. It does not just note the board's choice, and it does not appoint the auditor itself, because the appointment is made by the members in general meeting.

  1. AIt only receives the decision for information after the AGM
  2. BIt recommends the appointment, remuneration and terms of appointment of the auditor to the boardCorrect
  3. CIt fixes the auditor's remuneration without any reference to the board
  4. DIt appoints the auditor directly, bypassing the shareholders

Explanation

The Audit Committee's terms of reference include recommending to the board the appointment, remuneration and terms of appointment of auditors. It does not merely note the decision. It also does not itself appoint the auditor, since appointment is made by members at the general meeting on the board's recommendation.

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