Internal Audit is performed to assess and improve the effectiveness of governance, risk management, and control over critical processes. Also, it provides the board and management with information and assurance related to their duties.
Following Companies are required to appoint Internal Auditor to conduct Internal Audit of books of account of the Company: –
- Listed Company
- In case of Unlisted Public Company having:-
a. Paid Up Capital of Rs. 50 Cr. or more during preceding F.Y. or;
b. Outstanding Deposits of Rs. 25 Cr. or more at any time during preceding Financial Year.
- In case of Public or Private Company having:-
a. Turnover of Rs. 200 Cr. or more during preceding F.Y. or;
b. Outstanding loans or borrowing from Bank or Public Financial Institutions exceeding Rs. 100 Cr. or more at any time during preceding Financial Year.
Who can Act as Internal Auditor?
- Internal Auditor shall be Chartered Accountant or a Cost Accountant or such other professional as many be decided by Board;
- Statutory Auditor cannot act as Internal Auditor;
- Internal Auditor may or may not be employee of Company;
- Internal Auditor may be either an individual or firm or body corporate.
Who shall appoint Internal Auditor?
- Internal Auditor is appointed by Board of Directors at Board Meeting;
- Appointment of Internal Auditor cannot be made by means of circular resolution
To whom Internal Audit report shall be issued?
- The Internal Auditor is required to report to Board and he shall issue Internal Audit report to Board.
What shall be the scope, functioning, periodicity and methodology for conducting Internal Audit?
- Audit Committee of the Company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting Internal audit.
Can a Company Secretary (CS) conduct Internal Audit of the Company?
- If a CS in employment of a Company, then he /she can conduct Internal Audit of that Company only, if his/her appointment is approved by Board;
- A Practicing Company Secretary (PCS) can conduct Internal Audit of a Company, if his/her appointment is approved by Board.
What is/are the intimation required to me made to ROC for Appointment of Internal Auditor?
- For Private Limited Company
There is no mandatory intimation made to ROC for appointment of Internal Auditor;
- For Public Limited Company
The Company has to file MGT 14 with respected ROC within 30 Days of appointment of Internal Auditor.