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

Under section 138 of the Companies Act, 2013, Bluecrest Textiles Ltd, a company falling in the prescribed class, must appoint an internal auditor. Its Board wants to appoint a person who is neither a chartered accountant nor a cost accountant but is a qualified professional in risk management. Which statement is correct?

The Board may appoint the risk management professional. Section 138(1) allows the internal auditor to be a chartered accountant, a cost accountant, or any other professional the Board decides, and does not restrict the role to accountants or require the person to be an employee.

  1. AThe internal auditor must be a chartered accountant only
  2. BThe internal auditor can be only a chartered accountant or a cost accountant
  3. CThe internal auditor may be a chartered accountant, a cost accountant or such other professional as the Board decidesCorrect
  4. DThe internal auditor must be an employee of the company

Explanation

Section 138(1) says the internal auditor shall be a chartered accountant, a cost accountant, or such other professional as may be decided by the Board. So the Board may choose a risk professional. Restricting the choice to CAs or CMAs ignores the last limb of the section.

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