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

Ganga Agro Producer Company, registered under the Companies Act, 2013, asks its accountant, a cost accountant, to carry out the internal audit of its accounts at intervals mentioned in its articles. What is the correct position?

A Producer Company must have its accounts internally audited by a chartered accountant under Section 378ZF, at the interval and in the manner its articles specify. A cost accountant is therefore not acceptable, even though Section 138 allows one for other prescribed companies, and Board approval cannot change this.

  1. AAcceptable, since Section 138 allows a cost accountant to be internal auditor
  2. BAcceptable, provided the Board approves the cost accountant
  3. CNot acceptable, because Section 378ZF requires the internal audit of a Producer Company's accounts to be done by a chartered accountantCorrect
  4. DNot acceptable, because a Producer Company cannot have internal audit at all

Explanation

Section 378ZF specifically requires every Producer Company to have internal audit of its accounts carried out, at the interval and manner specified in articles, by a chartered accountant. The wider Section 138 choice of cost accountant or other professional does not apply to this specific requirement. Option D is wrong as internal audit is mandatory for it.

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