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

Which of the following is specifically included in the terms of reference of an Audit Committee under Section 177(4) of the Companies Act, 2013?

Evaluation of internal financial controls and risk management systems is part of the Audit Committee's terms of reference under Section 177(4). The list also covers auditor recommendations, review of financial statements, related party approvals, scrutiny of inter-corporate loans and valuation of assets, but not dividends or production budgets.

  1. AEvaluation of internal financial controls and risk management systemsCorrect
  2. BAppointment of the cost auditor's staff
  3. CDeclaration of interim dividend
  4. DApproval of the company's annual production budget

Explanation

Section 177(4)(vii) lists evaluation of internal financial controls and risk management systems. Dividend declaration and production budgets are Board or management matters and are not in the list. Staffing of the cost auditor's team is the auditor's own concern.

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