CA Final · Advanced Auditing, Assurance and Professional Ethics · Internal Audit
In a listed public company, the audit committee is reviewing the internal audit function. The internal auditor reports a significant weakness in controls over inter-corporate loans. Which statement about the Audit Committee's powers under Section 177 is correct?
The Audit Committee may discuss the issue with internal and statutory auditors and management, and under Section 177(6) may investigate matters such as inter-corporate loans and investments, obtain external professional advice, and have full access to company records. It needs no shareholder approval for this.
- AIt may discuss related issues with the internal and statutory auditors and management, and may obtain external professional advice and have full access to company records when investigatingCorrect
- BIt may only act on matters referred by the statutory auditor, and has no access to records
- CIt can investigate only after getting shareholders' approval by ordinary resolution
- DIt must refrain from scrutiny of inter-corporate loans, as that is solely a Board function
Explanation
Section 177(5) lets the committee discuss related issues with internal and statutory auditors and management. Section 177(6) gives authority to investigate matters in sub-section (4), which includes scrutiny of inter-corporate loans and investments, with power to obtain external professional advice and full access to records. The other options contradict these provisions.
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