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

Which of the following is one of the matters that the terms of reference of an Audit Committee must include under Section 177(4) of the Companies Act, 2013?

Evaluation of internal financial controls and risk management systems is a mandatory item in the Audit Committee's terms of reference under Section 177(4). The list also covers auditor appointment, related party approvals, loan scrutiny and end use of funds, but not dividends or budgets.

  1. AEvaluation of internal financial controls and risk management systemsCorrect
  2. BAppointment of the internal auditor's staff and fixing their salaries
  3. CDeclaration of interim dividend to shareholders
  4. DApproval of the company's annual marketing budget

Explanation

Section 177(4)(vii) lists evaluation of internal financial controls and risk management systems among the terms of reference. Dividend declaration and marketing budgets are not listed there, and staffing of the internal audit team is not a listed item.

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