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

Vrindavan Dairy Producer Company has asked its chartered accountant to carry out internal audit of its accounts. A board member asks how often and in what manner the audit must be done. What is the correct answer under Section 378ZF?

Under Section 378ZF, every Producer Company must have internal audit of its accounts carried out by a chartered accountant, at the interval and in the manner specified in its articles. It is mandatory, not optional, and the interval is not fixed by the Board or the Central Government.

  1. AInternal audit must be done quarterly by a cost accountant
  2. BInternal audit of accounts must be done by a chartered accountant at such interval and in such manner as may be specified in the articlesCorrect
  3. CInternal audit is optional for a Producer Company and is done only if members resolve so
  4. DInternal audit must be done by any professional chosen by the Board, at intervals set by the Central Government

Explanation

Section 378ZF requires every Producer Company to have internal audit of its accounts by a chartered accountant, at such interval and in such manner as specified in its articles. So it is mandatory, the auditor must be a chartered accountant, and the articles fix the interval and manner. Quarterly frequency and a cost accountant are not in the section.

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