Skip to content

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

Gramin Dairy Producer Company, registered under the Companies Act, 2013, has articles that specify the interval and manner of internal audit. The Board proposes that its accounts clerk, who is not a professional, carry out the internal audit to save cost. What is the correct position under section 378ZF?

The clerk cannot perform the audit. Section 378ZF requires a Producer Company's internal audit to be done by a chartered accountant, while the articles only specify its interval and manner. Neither audit committee approval nor quarterly reporting to the Board makes a non-CA eligible.

  1. AAllowed, because the articles govern the internal audit entirely
  2. BAllowed, if the audit committee approves the clerk
  3. CNot allowed, because the internal audit of a Producer Company's accounts must be carried out by a chartered accountant, though interval and manner are as specified in the articlesCorrect
  4. DAllowed, if the clerk reports to the Board every quarter

Explanation

Section 378ZF requires a Producer Company to have internal audit of its accounts carried out at the interval and in the manner specified in its articles, by a chartered accountant under the Chartered Accountants Act, 1949. The articles control timing and manner but not who may perform it. A clerk therefore cannot be appointed.

Did you get it right without looking?

One question tells you little. A timed set on Internal Audit shows your real accuracy, how long you take and where you lose marks.

Practise Internal AuditFree diagnostic mock

More Internal Audit questions