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CA Final · Advanced Auditing, Assurance and Professional Ethics · Internal Audit

A chartered accountant serving as internal auditor of Zenith Retail Ltd. receives a complaint from an employee through the company's vigil mechanism alleging manipulation of inventory records by a senior manager. Under section 177 of the Companies Act, 2013, which feature must the vigil mechanism contain?

The vigil mechanism must have adequate safeguards against victimisation and allow direct access to the audit committee chairperson in appropriate or exceptional cases. Section 177 covers directors and employees, and requires disclosure of the mechanism on the website and in the Board's report.

  1. AA requirement that complaints be routed only through the manager concerned
  2. BAdequate safeguards against victimisation and provision for direct access to the audit committee chairperson in appropriate or exceptional casesCorrect
  3. CA bar on disclosing the mechanism's details on the company's website
  4. DA provision allowing only directors, not employees, to report concerns

Explanation

Section 177(9) covers both directors and employees, and 177(10) requires safeguards against victimisation and direct access to the audit committee chairperson in appropriate or exceptional cases. Details must be disclosed on the website, if any, and in the Board's report, so a bar on disclosure is wrong. Routing through the accused manager would defeat the purpose.

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