CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards
The Audit Committee of Kaveri Auto Ltd, a listed public company, wants an independent valuation of a subsidiary before approving an investment, and needs external professional advice. The CFO says the committee may act only on information the management chooses to share. What does section 177 provide?
The committee can obtain professional advice from external sources and has full access to information in the company's records. Section 177(6) gives it this authority for matters within its remit, so the CFO's view is wrong and no shareholder or auditor approval is required.
- AThe CFO is right, as the committee can act only on management information
- BThe committee can seek professional advice from external sources and has full access to company recordsCorrect
- CThe committee must first obtain shareholders' approval for external advice
- DThe committee may take external advice only if the statutory auditor consents
Explanation
Section 177(6) gives the Audit Committee authority to investigate matters within its terms of reference or referred by the Board, to obtain external professional advice and to have full access to the company's records. No shareholder or auditor consent is needed. This power supports the committee's independence and the board's effectiveness.
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