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

Kaveri Textiles Ltd., a company required to appoint an internal auditor, proposes to appoint Mr. Rao, a cost accountant, as its internal auditor. A director asks whether this is permitted. Which conclusion is correct under Section 138 of the Companies Act, 2013?

The appointment is permitted. Section 138(1) allows the internal auditor to be a chartered accountant, a cost accountant, or another professional the Board decides. Mr. Rao, as a cost accountant, qualifies, and no special resolution or additional CA qualification is required by that provision.

  1. ANot permitted; only a chartered accountant can be internal auditor
  2. BPermitted; the internal auditor may be a chartered accountant, a cost accountant or another professional decided by the BoardCorrect
  3. CPermitted only if Mr. Rao is also a chartered accountant
  4. DPermitted only if the shareholders approve him by special resolution

Explanation

Section 138(1) says the internal auditor shall either be a chartered accountant or a cost accountant, or such other professional as the Board may decide. A cost accountant therefore qualifies without any additional qualification. The 'only CA' view is Producer Company-specific and does not apply here.

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