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

Under Section 138 of the Companies Act, 2013, Surya Pharma Ltd, a company in a prescribed class, wants to appoint an internal auditor. Which person is eligible under the Act's wording?

Section 138(1) permits the internal auditor to be a chartered accountant, a cost accountant, or any other professional the Board decides. It does not confine the role to chartered accountants alone, nor does it require the person to be an employee or to be chosen by the audit committee.

  1. AOnly a chartered accountant in practice who is not the statutory auditor
  2. BOnly a chartered accountant or a cost accountant, with no other professional allowed
  3. CA chartered accountant, a cost accountant, or such other professional as the Board decides, who may conduct internal audit of the functions and activities of the companyCorrect
  4. DOnly an employee of the company designated by the audit committee

Explanation

Section 138(1) says the internal auditor shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board. Option B ignores the Board's discretion for other professionals. Option D is wrong because the section does not restrict the auditor to employees or require audit committee designation.

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