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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards

The Audit Committee of Kaveri Foods Ltd wants independent advice on the valuation of an undertaking it is reviewing, and asks for access to company records. The managing director objects that only the Board may hire outside advisers. Under section 177, what is correct?

The Committee may obtain external professional advice and has full access to company records. Section 177(6) gives it authority to investigate matters specified in section 177(4), which include valuation of undertakings or assets, so the managing director's objection has no basis.

  1. AThe objection is valid, as external advice requires prior Board approval in every case
  2. BThe Committee may obtain professional advice from external sources and has full access to company records for investigating matters in its terms of referenceCorrect
  3. CThe Committee may obtain advice only from the statutory auditors
  4. DThe Committee has access only to records the managing director chooses to release

Explanation

Section 177(6) gives the Audit Committee authority to investigate matters in section 177(4) or referred by the Board, with power to obtain professional advice from external sources and full access to company records. Valuation of undertakings or assets is within the listed items in section 177(4)(vi).

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