Arham Logistics Limited, a listed company, has duly constituted an Audit Committee. One of the matters considered by the Audit Committee, was quarterly internal audit report. Board was informed by Chairman of the Audit C
CS Professional · Governance, Risk Management, Compliances and Ethics · PYQS · June 2022
Arham Logistics Limited, a listed company, has duly constituted an Audit Committee. One of the matters considered by the Audit Committee, was quarterly internal audit report. Board was informed by Chairman of the Audit Committee that there was no adverse remark reported in the internal audit report. An independent Director requested a copy of internal audit report, which was denied by CFO stating that it is only the prerogative of Audit Committee to consider internal audit report and hence copy of the same need not be placed in the Board meeting or circulated. Based on the above facts, answer the following questions: Whether this stand taken by CFO will amount to undermining the authority of the Board of Directors ?
Answer & Explanation:
Audit Committee is formed by the Board of Directors and all actions of Audit Committee are subject to approval/noting by the Board of Directors. Committees are formed to aid the Board in discharge of its functions and a committee cannot undermine the authority of the Board. Hence, the Board of Directors is the highest authority in hierarchy under which Audit Committee functions. It is true that certain matters remain in domain of Audit Committee, but ultimately, it requires concurrence of Board of Directors. Internal Audit Report is an important report covering various aspects of the operations of the Company, important financial matters like ageing of creditors, debtors, inventory, ledger scrutiny etc. which directly relates to Financial Statements. In view of above, stand taken by CFO amounts to undermining the authority of the Board.
Topics: Corporate Governance
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