{"id":6572,"date":"2025-11-12T16:27:39","date_gmt":"2025-11-12T10:57:39","guid":{"rendered":"https:\/\/www.akgvg.com\/blog\/?p=6572"},"modified":"2025-11-12T16:27:39","modified_gmt":"2025-11-12T10:57:39","slug":"audit-committee-under-section-177-key-role-impact","status":"publish","type":"post","link":"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/","title":{"rendered":"Audit Committee Under Section 177: Key Role &#038; Impact"},"content":{"rendered":"<p>Corporate governance has a very crucial role in ensuring transparency, accountability, and ethical operations in an organization. To enhance good governance practices and financial discipline, the Companies Act, 2013 brought on board several provisions that empower the independent oversight of the company operations. Among the most important of these is Section 177, concerned with the Audit Committee, which is an important tool of internal control and corporate honesty.<\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#What_is_Section_177_of_the_Companies_Act_2013\" >What is Section 177 of the Companies Act, 2013?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#Applicability_of_Section_177\" >Applicability of Section 177<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#Composition_of_the_Audit_Committee\" >Composition of the Audit Committee<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#Functions_and_Responsibilities_of_the_Audit_Committee\" >Functions and Responsibilities of the Audit Committee<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#Significance_of_Section_177\" >Significance of Section 177<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-under-section-177-key-role-impact\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_Section_177_of_the_Companies_Act_2013\"><\/span><strong><b>What is Section 177 of the Companies Act, 2013?<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 177 requires certain companies to constitute an Audit Committee to supervise financial reporting, internal audits, and adherence to regulatory demands. The aim is to have a body that serves as an independent watchdog that would guarantee that the financial statements of a company reflect a true and fair picture and that internal operations of a company are working properly.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Applicability_of_Section_177\"><\/span><strong><b>Applicability of Section 177<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 177 applies to the following companies:<\/p>\n<ol>\n<li>All listed public companies; and<\/li>\n<li>Other public companies that meet any of the following criteria:<\/li>\n<\/ol>\n<ul>\n<li style=\"list-style-type: none;\">\n<ul>\n<li>Paid-up share capital of \u20b910 crore or more<\/li>\n<li>Turnover of \u20b9100 crore or more<\/li>\n<li>Aggregate, outstanding loans, or borrowings exceeding \u20b950 crore<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>Private companies are generally not required to form an Audit Committee unless specifically directed under certain rules or by regulatory authorities.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Composition_of_the_Audit_Committee\"><\/span><strong><b>Composition of the Audit Committee<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 177 provides that the Audit Committee should be comprised of at least three directors with majority of them being independent directors. The independent director must also hold the position of the Chairperson of the committee, and the auditors and key managerial personnel of the company can be invited to attend the meetings when necessary.<\/p>\n<p>Such a structure will guarantee the committee operates without partiality and that objective scrutiny of management resolutions and financial reporting is possible by independent members.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Functions_and_Responsibilities_of_the_Audit_Committee\"><\/span><strong><b>Functions and Responsibilities of the Audit Committee<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Audit Committee plays a critical role in maintaining corporate transparency and accountability. Its primary functions include:<\/p>\n<ol>\n<li><b><\/b><strong><b>Reviewing Financial Statements: <\/b><\/strong>Examining quarterly and annual financial statements before submission to the board to ensure accuracy and compliance with accounting standards.<\/li>\n<li><b><\/b><strong><b>Internal Control and Risk Management: <\/b><\/strong>Evaluating the company\u2019s internal financial controls, risk management framework, and efficiency of internal audit systems.<\/li>\n<li><b><\/b><strong><b>Auditor Oversight: <\/b><\/strong>Recommending the appointment, remuneration, and terms of appointment of statutory auditors and reviewing their independence and performance.<\/li>\n<li><b><\/b><strong><b>Related Party Transactions: <\/b><\/strong>Approving or modifying related party transactions to prevent conflicts of interest.<\/li>\n<li><b><\/b><strong><b>Whistleblower Mechanism: <\/b><\/strong>Overseeing a vigil mechanism\u00a0for employees to report unethical practices or fraud within the organization.<\/li>\n<\/ol>\n<h2><span class=\"ez-toc-section\" id=\"Significance_of_Section_177\"><\/span><strong><b>Significance of Section 177<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Section 177 lends credibility to the fact that the decision-making process is supported by transparency and accountability in companies. This reduces the chances of financial fraud, misreporting and misuse of company funds because the Audit Committee is enabled to play the role of an independent evaluator. It also increases the confidence of the investment, since the shareholders will be convinced that the financial health of the company is under close supervision.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong><b>Conclusion<\/b><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Essentially, Section 177 of Companies Act, 2013\u00a0is one of the pillars of corporate governance in India. It supports the role of oversight, integrity and accountability in business operations. This section promotes ethical behavior among organizations by ensuring that they set up an Audit Committee to safeguard the interests of stakeholders and promote sustainable development by good financial management and transparency.<\/p>\n<p><strong><b>This content is meant for information only and should not be considered as an advice or legal opinion, or otherwise.\u00a0<\/b><\/strong><a href=\"https:\/\/www.akgvg.com\/\"><strong><u><b>AKGVG &amp; Associates<\/b><\/u><\/strong><\/a><strong><b>\u00a0does not intend to advertise its services through this.<\/b><\/strong><\/p>\n<blockquote><p><strong>Also Read:<\/strong> <a href=\"https:\/\/www.akgvg.com\/blog\/audit-committee-companies-act-and-sebi\/\">Audit Committee (Companies Act And Sebi)<\/a><\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>Corporate governance has a very crucial role in ensuring transparency, accountability, and ethical operations in an organization. To enhance good governance practices and financial discipline, the Companies Act, 2013 brought on board several provisions that empower the independent oversight of the company operations. Among the most important of these is Section 177, concerned with the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":6574,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[329],"tags":[479,469,473,277],"class_list":["post-6572","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","tag-secretarial","tag-secretarial-audit","tag-secretarial-service","tag-secretarial-support"],"_links":{"self":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/6572","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/comments?post=6572"}],"version-history":[{"count":1,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/6572\/revisions"}],"predecessor-version":[{"id":6575,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/posts\/6572\/revisions\/6575"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media\/6574"}],"wp:attachment":[{"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/media?parent=6572"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/categories?post=6572"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.akgvg.com\/blog\/wp-json\/wp\/v2\/tags?post=6572"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}