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CMA Intermediate · Corporate Accounting and Auditing · Statutory Audit under the Companies Act, 2013

Which of the following statements about the Audit Committee, as set out in section 177 of the Companies Act, 2013, is correct?

The Audit Committee must have at least three directors, with independent directors forming a majority. The majority of members, including the Chairperson, must be able to read and understand financial statements. Auditors have a right to be heard but are not members and do not vote.

  1. AThe Audit Committee must consist of a minimum of three directors with independent directors forming a majorityCorrect
  2. BThe Audit Committee must consist of a minimum of two directors with independent directors forming a majority
  3. CThe Audit Committee must consist of a minimum of three directors with the auditors forming a majority
  4. DThe Audit Committee may consist of any number of directors with no requirement of independent directors

Explanation

Section 177(2) requires a minimum of three directors with independent directors forming a majority. The minimum is not two, auditors are not members, and independent directors are required.

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