Provisions relating to audit committee

• Applicability of section 177 i.e. Constitution of Audit Committee:

Where a company is required to constitute an Audit Committee under section 177, all appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee

1. listed public companies ,
2. all public companies with a paid up capital of 10 crore rupees or more ,
3. all public companies having turnover of one hundred crore rupees or more
4. all public companies, having in aggregate , outstanding loans or borrowings or debenture or deposits exceeding 50 crore rupees or more . 

Where a company is required to constitute an Audit Committee under section 177, all appointments, including the filling of a casual vacancy of an auditor under this section shall be made after taking into account the recommendations of such committee.

It is important to know that in addition to listed public companies, following classes of companies shall constitute an Audit Committee -

1. all public companies with a paid up capital of ten crore rupees or more;
2. all public companies having turnover of one hundred crore rupees or more;
3. all public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

• Manner and procedure of selection and appointment of auditors

Following is the procedure for selection and appointment of auditor ,

1. In case of a company that is required to constitute an Audit Committee under section 177, the committee, and, in cases where such a committee is not required to be constituted, the Board, shall take into consideration the qualifications and experience of the individual or the firm proposed to be considered for appointment as auditor and whether such qualifications and experience are commensurate with the size and requirements of the company.

It may be noted that while considering the appointment, the Audit Committee or the Board, as the case may be, shall have regard to any order or pending proceeding relating to professional matters of conduct against the proposed auditor before the Institute of Chartered Accountants of India or any competent authority or any Court.

2. The Audit Committee or the Board, as the case may be, may call for such other information from the proposed auditor as it may deem fit.
3.  where a company is required to constitute the Audit Committee, the committee shall recommend the name  of an individual or a firm as auditor to the Board for consideration and

in other cases, the Board shall consider and recommend an individual or a firm as auditor to the members in the annual general meeting for appointment.

4. If the Board agrees with the recommendation of the Audit Committee, it shall further recommend the appointment of an individual or a firm as auditor to the members in the annual general meeting
5. If the Board disagrees with the recommendation of the Audit Committee, it shall refer back the recommendation to the committee for reconsideration citing reasons for such disagreement.
6. If the Audit Committee, after considering the reasons given by the Board, decides not to reconsider its original recommendation, the Board shall record reasons for its disagreement with the committee and send its own recommendation for consideration of the members in the annual general meeting; and if the Board agrees with the recommendations of the Audit Committee, it shall place the matter for consideration by members in the annual general meeting.
7. The auditor appointed in the annual general meeting shall hold office from the conclusion of that meeting till the conclusion of the sixth annual general meeting, with the meeting wherein such appointment has been made being counted as the first meeting.