Audit Committee

An audit committee is a sub-committee of a company's Board of Directors responsible for overseeing the integrity of the company's financial reporting, internal control systems, internal audit function, and external audit process. In India, the constitution of an audit committee is mandatory for all listed companies under Section 177 of the Companies Act, 2013 and SEBI's LODR Regulations — with at least two-thirds of committee members required to be Independent Directors and the chairperson mandated to have financial and accounting expertise. The audit committee's key responsibilities include: reviewing quarterly and annual financial statements before board approval, recommending the appointment and remuneration of external auditors, reviewing the adequacy of internal audit systems and internal financial controls, approving related party transactions, and scrutinising the management's accounting judgements and estimates. For equity investors in Indian listed companies, the composition and functioning of the audit committee is a critical corporate governance indicator — an active, qualified, and truly independent audit committee reduces the risk of financial misreporting and accounting fraud. Cases of audit committee failures — such as in the IL&FS crisis and certain BSE-listed small-cap companies where committees rubber-stamped management decisions — highlight the importance of genuine independence in this oversight role.