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

Under section 138 of the Companies Act, 2013, Kaveri Power Ltd., a company of a prescribed class, wants to appoint its internal auditor. Which person is eligible as per the section's wording?

The eligible choices are a chartered accountant, a cost accountant, or another professional decided by the Board. Section 138(1) expressly gives the Board this flexibility for prescribed classes of companies, so restricting eligibility to CAs alone or relying on the statutory auditor's nominee is incorrect.

  1. AOnly a chartered accountant in practice
  2. BOnly a chartered accountant or a cost accountant
  3. CA chartered accountant, a cost accountant or such other professional as the Board may decideCorrect
  4. DAny person nominated by the statutory auditor

Explanation

Section 138(1) says the internal auditor shall be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board. Limiting to CAs or CAs and cost accountants ignores the Board's power to choose another professional. Nomination by the statutory auditor has no basis and would also compromise independence.

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