Audit Committee And Corporate Governance Flashcards
Requirements of qualified and independent audit committee accordion to sebi LODR
Min 3 directors with 2/3rd independent director but in case of listed entity having outstanding superior rights equity shares then shall only comprise of independent director
All member financially literate at least 1 should have accounting or related financial management expertise
Chairperson independent director
Chairperson present at AGM
Audit committee shall invite finance director or head of finance function head of internal audit or representative of statutory auditor to. Be present in the meeting of committee
CS to act as secretary to the committee
Meeting of audit committee according to sebi LODR
4 times in a year not more than 120 days shall elapse
2 member or 1/3 of the members weg but there should be minimum 2 independent director
Powers of audit committee
InvestiGte any activity
Seek information from any employee
Outside legal advice
Secure attendance of outsiders
Mandatory reviews areas of audit committee
Management discussion and analysis of financial conditions and results of operations
Statement of significant related party transactions
Management letter or letter of internal control by statutory auditor
Internal audit report to internal control weakness
Appointment, term or removal or remuneration of chief internal auditor
Statement of deviations - quarterly statement of deviations & annual statements of funds utilized for purpose other than those stated in prospectus
Auditors role in audit committee and certification of compliance with corporate governance
That he communicates frequently with the audit committee on key accounting or auditing issues
He address any questions or concerns voiced by audit committee
A assist and advice audit committee on improving corporate governance, oversight of financial reporting process, implementation of account policies and practices , compliance with accounting standards and improving the internal control system
Assist management and he audit committee to enable them to discharge there duties effectively
Auditors procedures for issuing certificate of compliance with governance requirements
Conduct verification with the guidance note on certificate of corporate governance issue by ICAI
SA’s would be applicable
Documentation of evidences
Obtaining management representation
Regulation 17-27 & regulation 46(2) shall be applicable on which listed entities
COMPANIES HAVING PAID UP EQUITY SHARE CAPITAL NOT EXCEEDING 10 crores and net worth not exceeding 25 crores as on the last day of the previous year
Companies equity share capital listed exclusively on the SME Exchange
Board composition under regulation 17
There must be optimum combination of executive and non executive directors at least one women director and not less than 50% comprising non executive directors
01/04/2019 - top 500, one independent women director
2020 - top 1000, one independent women director
Chairperson of board is a non executive - 1/3 independent directors
Chairperson of the board executive - 1/2 independent directors
If having outstanding SR equity - 1/2 independent directors
2019 - top 1000, min 6 directors on board
2020 - top 2000, minimum six directors on board
Non executive director shall not continue who has attained the age of 75 years unless special resolution passed to that effect
2020 - top 500, chairperson of the board - Non executive director and not related to MD or CEO as per definition of relative under companies act (not applicable if do not have any identifiable promoters as per shareholding pattern)
Meaning of independent director as per LODR
Non executive director other than nominee director
Person of integrity and possess relevant expertise
Not a promoter and not related to promoter or director of group Company
Only director remuneration apart from that no pecuniary relationship(2PY)
None of whose relative has pecuniary relationship or transaction amounting 2% or more of gross turnover or total income or 50 lacs whichever is higher(2PY)
NEITHER HIMSELF NOR ANY OF HIS RELATIVES
hold any KMP or employee of the company (3PY)
Employee partner or proprietor in firm of CA,CS OR CMA or
Any legal consultancy firm having 10% or more of gross turnover of such firm (3PY)
Holds with relative 2% or more of voting power
CEO of NPO that receives 25% or more of his receipt from the group co or promoter or directors or one that holds 2% or more of total voting power Is a material supplier, service provider or customer or lessor or lessse
Not less than 21 years of age
Who is not a non independent director of another company on the board of which any non independent director of the listed entity is an independent director
Remuneration of directors in LODR
BOD shall recommend remuneration for non executive directors and require prior approval of shareholders but no approval in case of sitting fees if within the prescribed limit approval should also specify maximum number of stock options to be given
Approval of shareholders by special resolution will be required every year in case of remuneration of a single non executive director exceeds the 50% of the total remuneration payable to all non executive directors
Fees or compensation payable to executive directors who are promoters or members of the promoter group shall require special resolution in GM IF -
annual remuneration payable exceed 5 crore or 2.5% of the net profit weh
If there is more than one such director the annual remuneration to such directors exceed 5% of the net profits
Approval shall be valid upto expiry of term of such director
Disclosure with regards to non executive directors
All pecuniary transactions of NED with company
Criteria of making payment
All elements of remuneration package
Details of fixed component and performance based component
Service contract and stock option details
Auditors duties with regard to remuneration of auditors
Minutes of BM and GM
AOA & MOA
Compliance of LODR regulations
ESOP value
Quorum according to LODR
2019- top 1000, 1/3 or 3 weh at-least one independent director
2020- top 2000, 1/3 or 3 weh at-least one independent director
Limit of directorship in listed entities according to LODR
2019 - not more than 8 listed entities but for independent director 7 listed entities
2020 - not more than 7 listed entities
If any person is WTD or MD then independent director in not more than 3 listed entities
Here only listed entities will be those whose EQUITY shares are listed on stock exchange
Limit of membership in committee in listed entities according to LODR
Not be a member in more than 10 committee or chairperson in more than 5 committee across all listed and public company whether listed or not but excluding remaining other companies
And for this purpose membership of audit committee and stakeholders relationship committee will only be considered
