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CS Professional · Internal and Forensic Audit · Internal Controls

Kaveri Foods Pvt Ltd, an unlisted private company, is preparing its Board's report. Its CFO says the Directors' Responsibility Statement must include the clause on internal financial controls being adequate and operating effectively. What is the correct position under section 134(5)?

The internal financial controls clause applies only to a listed company. Section 134(5)(e) says the directors, in the case of a listed company, must state controls were laid down and are adequate and operating effectively, so an unlisted private company need not include it.

  1. AThe clause applies to every company, listed or unlisted
  2. BThe clause applies only to a listed company, so it is not required for Kaveri FoodsCorrect
  3. CThe clause applies only to companies with paid-up capital above a fixed limit, whether listed or not
  4. DThe clause applies only to public companies, listed or unlisted

Explanation

Section 134(5)(e) refers to 'the directors, in the case of a listed company'. An unlisted private company is therefore outside that clause, although the clause on adequate accounting records for safeguarding assets and preventing and detecting fraud applies generally.

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