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CMA Final · Cost and Management Audit · Operational Audit and Internal Audit under Companies Act, 2013

Under Section 177 of the Companies Act, 2013, which statement about the right of statutory auditors and key managerial personnel in Audit Committee meetings is correct?

Statutory auditors and key managerial personnel have a right to be heard in Audit Committee meetings when the auditor's report is considered, but they have no right to vote. This is stated in Section 177(7).

  1. AThey may vote on the auditor's report but cannot be heard
  2. BThey have a right to be heard when the committee considers the auditor's report but cannot voteCorrect
  3. CThey have neither a right to be heard nor a right to vote
  4. DThey may vote only if the committee has fewer than three members

Explanation

Section 177(7) gives the auditors and KMP a right to be heard in Audit Committee meetings when it considers the auditor's report, without any right to vote. Giving them a vote would undermine the independent directors' majority. No exception for small committees exists in the text.

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