CS Professional · Internal and Forensic Audit · Internal Controls
Ganga Steel Ltd, a listed public company, is evaluating its internal financial controls. Which statement correctly links the Companies Act, 2013 to this evaluation, in a way consistent with the monitoring concept?
Section 177(4) of the Companies Act, 2013 includes evaluation of internal financial controls and risk management systems in the Audit Committee's terms of reference. The other statements misstate the law: auditors cannot vote, independent directors must be a majority, and Section 138 names a chartered or cost accountant or other professional.
- AUnder Section 177(4), the Audit Committee's terms of reference include evaluation of internal financial controls and risk management systemsCorrect
- BUnder Section 138, the internal auditor must be a company secretary
- CUnder Section 177(7), auditors have the right to vote in Audit Committee meetings on the auditor's report
- DUnder Section 177(2), the Audit Committee must have a majority of non-independent directors
Explanation
Section 177(4)(vii) includes evaluation of internal financial controls and risk management systems in the Audit Committee's terms of reference. Section 138 allows a chartered accountant, cost accountant or other professional decided by the Board, not specifically a company secretary. Section 177(7) gives auditors a right to be heard but not to vote. Section 177(2) requires independent directors to form a majority.
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