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

The internal auditor of Rudra Steels Ltd, a listed company, wants to discuss weaknesses in internal controls directly with the Audit Committee, without management present, because he fears management will suppress his findings. The company also has a vigil mechanism. Which statement is correct under the Companies Act, 2013?

The Audit Committee can discuss issues with the internal and statutory auditors and management, and under section 177 it has authority to investigate, take external professional advice and have full access to company records. It does not need Board permission, and auditors have no vote.

  1. AThe Audit Committee may discuss related issues with the internal and statutory auditors and management, and has power to obtain professional advice from external sources and full access to company recordsCorrect
  2. BThe Audit Committee may speak to the statutory auditor only, never the internal auditor
  3. CThe Audit Committee must first obtain Board permission before reviewing any record
  4. DThe internal auditor has a right to vote in Audit Committee meetings when it considers the auditor's report

Explanation

Section 177(5) allows the Audit Committee to discuss related issues with internal and statutory auditors and management. Section 177(6) gives it authority to investigate, obtain external professional advice and have full access to records. Section 177(7) gives voting rights to no auditor, and in any case the voting reference is to statutory auditors and KMP, who have only a right to be heard.

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