CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Effectiveness and Building Better Boards
The board of Kaveri Infra Ltd, a listed public company, did not accept a recommendation made by its audit committee on a matter within its terms of reference. To support transparency and accountability, what does the Companies Act, 2013 require?
The Board's report must disclose that the audit committee's recommendation was not accepted, together with the reasons. This disclosure requirement strengthens accountability and transparency, letting shareholders see where the board departed from its committee's advice.
- ANothing, because the board may freely disregard committee recommendations
- BThe audit committee must resign and be reconstituted
- CThe matter must be referred to the auditors for a binding decision
- DThe Board's report must disclose the non-acceptance along with the reasons for itCorrect
Explanation
Section 177(8) requires the Board's report to disclose the audit committee composition and, where a recommendation was not accepted, to state it along with reasons. This makes the board answerable to shareholders. Option A ignores this disclosure duty.
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