Which section of the Companies Act 2013 says, as a statutory requirement, the Audit committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit?

Solution

As per the Companies Act 2013, the requirement regarding the formulation of the scope, functioning, periodicity, and methodology for conducting the internal audit is mentioned in Section 138. Section 138(1) of the Companies Act 2013 states: "The Board of Directors of every company and, where applicable, its Audit Committee shall, in respect of a financial year, appoint an internal auditor or a firm of internal auditors, to conduct internal audit of the functions and activities of the company." This section mandates the appointment of an internal auditor for conducting an internal audit of the company's functions and activities. The Audit Committee, in consultation with the Internal Auditor, is responsible for formulating the scope, functioning, periodicity, and methodology of the internal audit process. This ensures that the internal audit is conducted effectively and efficiently to assess the company's internal control systems and financial reporting processes.