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CMA Final · Cost and Management Audit · Operational Audit and Internal Audit under Companies Act, 2013

Regarding the vigil mechanism under Section 177 of the Companies Act, 2013, which statement is correct?

The vigil mechanism must provide adequate safeguards against victimisation of users and allow direct access to the Audit Committee chairperson in appropriate or exceptional cases. It is for directors and employees, and its details must be disclosed on the company's website, if any, and in the Board's report.

  1. AIt must give direct access to the chairperson of the Audit Committee in appropriate or exceptional cases, with safeguards against victimisationCorrect
  2. BIt must route every complaint only through the managing director, with no access to the Audit Committee
  3. CIt is meant only for reporting by statutory auditors, not employees
  4. DIt need not be disclosed on the company's website even if the company has one

Explanation

Section 177(10) requires adequate safeguards against victimisation and provision for direct access to the Audit Committee chairperson in appropriate or exceptional cases. It covers directors and employees. The details must be disclosed on the website, if any, and in the Board's report, so the other options are wrong.

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