Step-by-Step Procedure

Step 1: Notice and Agenda for the Committee Meeting – at least 7 days before the meeting

(Applicable to Companies required to constitute an Audit Committee)

Section 177 of the Companies Act, 2013 read with SS-1; Regulation 18 of the SEBI (LODR) Regulations, 2015

• Notice of the meeting is required to be given in writing to every member of the Committee, by hand, post or electronic means, along with the agenda, notes on agenda and supporting papers.
• Papers relating to unpublished price sensitive information, such as financial results, may be circulated at shorter notice with the consent of a majority of the members, including at least one independent director, as permitted under SS-1.
• Statutory auditors, internal auditors and the CFO are usually invited for items that concern them. The auditors and KMP have the right to be heard but no right to vote.

Step 2: Holding the Committee Meeting – on the date fixed

(Applicable to Companies required to constitute an Audit Committee)

Section 177(4) of the Companies Act, 2013; Regulation 18(2) and (3) read with Part C of Schedule II of the SEBI (LODR) Regulations, 2015

The meeting is required to have the prescribed quorum present. Members attending through video conferencing are counted for quorum. Key items typically placed before the Committee include:

• Review of quarterly and annual financial statements and results, and the auditors’ report, before submission to the Board
• Approval of related party transactions and subsequent modifications, including omnibus approvals for repetitive transactions
• Recommendation of the appointment, remuneration and terms of the statutory auditors, and review of their independence
• Review of internal audit reports, internal financial controls and risk management systems
• Scrutiny of inter-corporate loans and investments, and valuation of undertakings or assets where necessary
• Review of the functioning of the vigil mechanism (whistle blower policy)
• Approval of the appointment of the CFO, and review of utilisation of issue proceeds (Listed Company)

Step 3: Recommendations to the Board – before the Board Meeting

(Applicable to Companies required to constitute an Audit Committee)

Section 177(8) of the Companies Act, 2013

The Committee’s recommendations, such as on the financial statements and auditors, are placed before the Board. Where the Board does not accept a recommendation of the Audit Committee, the reasons are required to be disclosed in the Board’s report.

Step 4: Minutes of the Committee Meeting – draft within 15 days, signed within 30 days

(Applicable to Companies required to constitute an Audit Committee)

Section 118 of the Companies Act, 2013 read with Paragraph 7 of SS-1

• Draft minutes are required to be circulated to all members of the Committee within 15 days of the meeting. Members may give their comments within 7 days of receipt.
• Minutes are required to be entered in the Minutes Book within 30 days of the meeting and signed by the Chairperson of the Committee.
• A copy of the signed minutes is required to be circulated to all members within 15 days of signing.

Step 5: Disclosure of Composition and Changes – website within 2 working days; corporate governance report within 21 days of quarter-end

(Applicable in case of Listed Company)

Regulations 27(2) and 46 of the SEBI (LODR) Regulations, 2015

• The composition of the Audit Committee is required to be hosted on the company’s website, and any change is required to be updated within 2 working days.
• The composition and the meetings held during the quarter are required to be reported in the quarterly compliance report on corporate governance, filed with the stock exchanges within 21 days of the end of each quarter.
• The number of meetings held and the attendance of each member are required to be disclosed in the Board’s report and the corporate governance report in the annual report.