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

Which of the following is a function that Section 177(9) and (10) of the Companies Act, 2013 attach to a vigil mechanism?

A vigil mechanism must give adequate safeguards against victimisation of those who use it and provide direct access to the Audit Committee chairperson in appropriate or exceptional cases. It serves directors and employees reporting genuine concerns, as Section 177(9) and (10) provide.

  1. AIt must provide adequate safeguards against victimisation of users and allow direct access to the Audit Committee chairperson in appropriate or exceptional casesCorrect
  2. BIt must be operated solely by the statutory auditor
  3. CIt must report all complaints directly to the Registrar of Companies
  4. DIt must be confined to complaints from shareholders only

Explanation

Section 177(10) requires adequate safeguards against victimisation and direct access to the Audit Committee chairperson in appropriate or exceptional cases. The mechanism is meant for directors and employees to report genuine concerns, so limiting it to shareholders is wrong. No role for the statutory auditor or direct reporting to the Registrar is stated.

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