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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 matter the Audit Committee's terms of reference must include under Section 177(4)?

The Audit Committee's terms of reference must include evaluation of internal financial controls and risk management systems. Section 177(4)(vii) lists this among the items. Fixing dividends, appointing KMPs or Registrar approval of reports are not among the listed matters.

  1. AFixing the dividend rate for equity shareholders
  2. BEvaluation of internal financial controls and risk management systemsCorrect
  3. CAppointment of the company's Key Managerial Personnel
  4. DApproval of the cost audit report by the Registrar

Explanation

Section 177(4)(vii) lists evaluation of internal financial controls and risk management systems in the minimum terms of reference. Dividend declaration, KMP appointment and Registrar approval of a cost audit report are not listed there. Dividend recommendation is a Board function, so that distractor is wrong.

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