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CS Professional · Internal and Forensic Audit · Internal Controls

Ananya Textiles Ltd is a listed company. While preparing the Directors' Responsibility Statement, the Board asks what it must state about internal financial controls. Which statement matches the Companies Act, 2013 (section 134(5))?

The Directors' Responsibility Statement of a listed company must state that the directors laid down internal financial controls to be followed by the company and that those controls are adequate and were operating effectively, as required by section 134(5)(e).

  1. AThe directors had laid down internal financial controls to be followed by the company and such controls are adequate and were operating effectivelyCorrect
  2. BThe directors had appointed an internal auditor who certified the controls as effective
  3. CThe directors had obtained a statutory auditor's guarantee that no fraud occurred during the year
  4. DThe directors had laid down internal financial controls only for the treasury function

Explanation

Section 134(5)(e) requires directors of a listed company to state that they had laid down internal financial controls and that these are adequate and were operating effectively. The other options add certification, guarantee or limited scope that the section does not mention.

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