law: Companies (Amendment) Act, 2000
  140.
  
  Insertion of new section 292A.-
  After
  
  section 292 of the principal Act, the following section shall be inserted,
  
  namely:-
  "292A.
  
  Audit Committee.-
  (1)
  
  Every public company having paid-up capital of not less than five crores of
  
  rupees shall constitute a committee of the Board known as Audit Committee which
  
  shall consist of not less than three directors and such number of the directors
  
  as the Board may determine of which two-thirds of the total number of members
  
  shall be directors, other than managing or whole-time directors.
  (2)
  
  Every Audit Committee constituted under sub-section (1) shall act in accordance
  
  with terms of reference to be specified in writing by the Board.
  (3)
  
  The members of the Audit Committee shall elect a chairman from amongst
  
  themselves.
  (4)
  
  The annual report of the company shall disclose the composition of the Audit
  
  Committee.
  (5)
  
  The auditors, the internal auditor, if any, and the director-in-charge of
  
  finance shall attend and participate at meetings of the Audit Committee but
  
  shall not have the right to vote.
  (6)
  
  The Audit Committee should have discussions with the auditors periodically
  
  about internal control systems, the scope of audit including the observations
  
  of the auditors and review the half-yearly and annual financial statements
  
  before submission to t e Board and also ensure compliance of internal control
  
  systems.
  (7)
  
  The Audit Committee shall have authority to investigate into any matter in
  
  relation to the items specified in this section or referred to it by the Board
  
  and for this purpose, shall have full access to information contained in the
  
  records of the comp ny and external professional advice, if necessary.
  (8)
  
  The recommendations of the Audit Committee on any matter relating to financial
  
  management including the audit report, shall be binding on the Board.
  (9)
  
  If the Board does not accept the recommendations of the Audit Committee, it
  
  shall record the reasons therefor and communicate such reasons to the
  
  shareholders.
  (10)
  
  The chairman of the Audit Committee shall attend the annual general meetings of
  
  the company to provide any clarification on matters relating to audit.
  (11)
  
  If a default is made in complying with the provisions of this section, the
  
  company, and every officer who is in default, shall be punishable with
  
  imprisonment for a term which may extend to one year, or with fine which may
  
  extend to fifty thousand r pees, or with both.".