Explain the provisions of the Companies Act, 2013 relating to the constitution of an audit committee. What role does the audit committee play in the management of a company ?

Constitution of audit committee In accordance with the provisions of the Companies Act, 2013, as contained under Section 177 read with Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014, the Board of Directors of every listed company and public companies having paid up share capital of ₹10 crore or more; public companies having turnover of ₹100 crore or more; public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding ₹50 crore or more shall constitute an Audit Committee. The Committee shall consist of a minimum of 3 directors with independent directors forming a majority. Provided that majority of members of Audit Committee including the Chairperson shall be persons with ability to read and understand, the financial statement. Role of audit committee Sub-section 4 of the section provides that the audit committee shall act in accordance with the terms of references specified in writing by the Board which shall specifically include: (i) the recommendation for appointment, remuneration and terms of appointment of auditors of the company; (ii) review and monitor the auditor's independence and performance, and effectiveness of audit process; (iii) examination of the financial statement and the auditors' report thereon; (iv) approval or any subsequent modification of transactions of the company with related parties; (v) scrutiny of inter-corporate loans and investments; (vi) valuation of undertakings or assets of the company, wherever it is necessary; (vii) evaluation of internal financial controls and risk management systems; (viii) monitoring the end use of funds raised through public offers and related matters. The audit committee has the power to investigate any of the above matters referred to it by the Board. The audit committee may call for the auditors for commenting on the internal controls systems, the scope of audit, including the observations of the auditors and review of the financial statements. The audit committee, shall oversee the vigil mechanism, wherever so constituted.