Skip to content

CMA Final · Cost and Management Audit · Operational Audit and Internal Audit under Companies Act, 2013

Under Section 177 of the Companies Act, 2013, what is the minimum composition requirement of an Audit Committee?

An Audit Committee must have at least three directors, and independent directors must form a majority. It need not consist wholly of independent directors. Additionally, the majority of members including the Chairperson must be able to read and understand financial statements.

  1. AAt least two directors, with the majority being independent directors
  2. BAt least three directors, with independent directors forming a majorityCorrect
  3. CAt least three directors, all of whom must be independent directors
  4. DAt least five directors, with a non-executive majority

Explanation

Section 177(2) requires a minimum of three directors with independent directors forming a majority. Option C is wrong because it demands all independent, which the Act does not. The proviso adds that a majority including the Chairperson must be able to read and understand financial statements.

Did you get it right without looking?

One question tells you little. A timed set on Operational Audit and Internal Audit under Companies Act, 2013 shows your real accuracy, how long you take and where you lose marks.

Practise Operational Audit and Internal Audit under Companies Act, 2013Free diagnostic mock

More Operational Audit and Internal Audit under Companies Act, 2013 questions