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CMA Final · Cost and Management Audit · Internal Control and Internal Audit

Under Section 177 of the Companies Act, 2013, which of the following is a matter that the terms of reference of the Audit Committee must include?

The Audit Committee's terms of reference must include evaluation of internal financial controls and risk management systems, along with items like auditor recommendation, review of financial statements, related party approval, scrutiny of inter-corporate loans and investments. Dividend decisions and KMP appointments are not in the listed items.

  1. AEvaluation of internal financial controls and risk management systemsCorrect
  2. BFixing the dividend payable to equity shareholders
  3. CAppointment of the company's key managerial personnel
  4. DDetermining the cost auditor's scope of work

Explanation

Section 177(4)(vii) includes evaluation of internal financial controls and risk management systems in the terms of reference. Dividend fixing, appointment of KMP and defining cost auditor scope are not listed there.

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