Who should serve on an audit committee?
As per section 177 of the Companies Act, 2013 audit committee shall consists of 3 or more directors with independent directors forming majority. Provided that the members of audit shall be the persons who have ability to read and understand the financial statements.
Dear Friend, **Meaning** An audit committee is either a task force or a standing committee that has been given authority by the board of directors to provide accountability for the nonprofit's independent audit. While the full board retains oversight authority, the audit committee’s smaller size allows it to carry out its responsibilities in a more manageable environment. To ensure that the audit process is objective, an audit committee should be an "independent" body, meaning that no one on the audit committee is also employed by the nonprofit (or the audit firm). Such independence frees the audit committee to make unbiased judgments about internal financial procedures and the performance of the nonprofit's staff - as well as the performance of the auditors - without undue pressure that would exist if the members of the audit committee were employees of the nonprofit (or the audit firm). The best audit committees are those that set the appropriate tone at the top. Who should be on the committee and who should assume the role as the financial expert and the committee chair? When evaluating whether members have the required expertise, audit committees should assess if its candidates have the capacity or background to fully grasp the issues related to the specific industry in which the nonprofit operates.