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CS Professional · Internal and Forensic Audit · Internal Controls

Under the Companies Act, 2013, the terms of reference of the Audit Committee of a listed public company must, among other things, include which of the following functions relating to internal controls?

The Audit Committee's terms of reference must include evaluation of internal financial controls and risk management systems. This is expressly listed in section 177(4). Preparing financial statements and appointing the Company Secretary are not Audit Committee functions under that provision.

  1. AEvaluation of internal financial controls and risk management systemsCorrect
  2. BFixing the remuneration of the internal auditor's staff
  3. CPreparing the company's standalone financial statements
  4. DApproving the appointment of the Company Secretary

Explanation

Section 177(4)(vii) lists evaluation of internal financial controls and risk management systems as a term of reference of the Audit Committee. The other options are management or Board functions, not stated Audit Committee terms of reference.

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