CA Final · Advanced Auditing, Assurance and Professional Ethics · Internal Audit
The Board of Sagar Pharma Ltd, a listed public company, has an Audit Committee. The Head of Internal Audit reports that the Managing Director's relative's firm received a large contract, and the Committee wishes to look into it as part of its scrutiny of related party transactions. Which statement about the Committee's powers under Section 177 is correct?
The Audit Committee may investigate any matter within its listed items, including related party transactions, or referred by the Board. It can obtain external professional advice and has full access to information in the company's records, so management cannot restrict it or require per-matter permission.
- AIt may investigate matters within its specified items and obtain professional advice from external sources, with full access to company recordsCorrect
- BIt must first obtain the Board's written permission for each investigation and cannot seek external advice
- CIt can access only the records the management chooses to provide
- DIt may investigate only matters referred by the statutory auditor
Explanation
Section 177(6) gives the Audit Committee authority to investigate any matter relating to the items in sub-section (4), such as related party approvals, or referred to it by the Board. It may obtain professional advice from external sources and has full access to information in company records. Neither prior Board permission for each matter nor management-controlled access is required.
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