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CS Professional · Internal and Forensic Audit · Forensic Audit: Laws and Regulations

A forensic auditor at Bharat Steel Ltd, a listed public company, suspects related party loans were routed without approval. The auditor wants to know which body in the company has the statutory authority to investigate matters relating to related party transactions and obtain external professional advice. Under Section 177 of the Companies Act, 2013, who holds this authority?

The Audit Committee holds this authority. Section 177(6) empowers it to investigate any matter relating to the items in sub-section (4), including related party transactions, or referred by the Board, to obtain external professional advice and to have full access to the company's records.

  1. AThe Audit Committee, which may investigate matters in sub-section (4) or referred by the Board and obtain professional advice from external sourcesCorrect
  2. BThe Nomination Committee, with the consent of the statutory auditor
  3. CThe Company Secretary alone, with the approval of shareholders
  4. DThe Registrar of Companies, on receipt of a complaint

Explanation

Section 177(6) gives the Audit Committee authority to investigate any matter relating to the items in sub-section (4), which include approval of related party transactions, or referred by the Board. It may obtain professional advice from external sources and has full access to company records. The other bodies have no such statutory authority under this section.

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