The correct option is (c) Board of Directors.

Explanation:

An audit committee is a committee of the Board of Directors that is responsible for overseeing a company's financial reporting and disclosure processes. It is an independent and objective body that helps the Board of Directors fulfill its oversight responsibilities for financial reporting, internal controls, and audit processes.

The terms of reference of the audit committee are specified by the Board of Directors. The Board of Directors is responsible for setting the objectives, scope, and authority of the audit committee. The terms of reference should be specific and clearly define the audit committee's roles and responsibilities. The terms of reference should cover the following areas:

1. Purpose and objectives: The audit committee's purpose and objectives should be clearly defined. The committee's role in overseeing financial reporting, internal controls, and audit processes should be specified.

2. Membership: The membership of the audit committee should be specified. The qualifications, experience, and independence of the members should be clearly defined.

3. Meetings: The frequency and conduct of meetings should be specified. The agenda, attendance, and minutes of meetings should be documented.

4. Reporting: The audit committee's reporting responsibilities should be specified. The committee should report to the Board of Directors on a regular basis.

5. Authority: The audit committee's authority should be clearly defined. The committee should have the authority to engage independent auditors, consultants, and advisors.

In conclusion, the terms of reference of the audit committee are specified by the Board of Directors. The terms of reference should be specific and clearly define the audit committee's roles and responsibilities.