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CS Executive · Company Law and Practice · Accounts and Auditors

Bharat Agro Producer Company Ltd's articles are silent on audit frequency, but its Board argues it may appoint a cost accountant as internal auditor, relying on the general internal audit section applicable to prescribed companies. Which statement is correct under the Act's text?

The Board is wrong. A Producer Company must have its accounts internally audited by a chartered accountant, at the interval and in the manner set by its articles. The general freedom to use a cost accountant or other professional does not override this specific requirement, and no exemption exists.

  1. ACorrect, because a cost accountant is expressly allowed for every company
  2. BCorrect, because the Board may choose any professional for any company
  3. CIncorrect, because internal audit of a Producer Company must be by a chartered accountant, with interval and manner as specified in its articlesCorrect
  4. DIncorrect, because Producer Companies are exempt from internal audit

Explanation

Section 378ZF applies specifically to Producer Companies, mandating internal audit of accounts by a chartered accountant at the interval and in the manner specified in the articles. The flexibility of section 138 to use a cost accountant or other professional does not displace this. Producer Companies are not exempt; the requirement is mandatory for every such company.

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