INTERNAL AUDIT :
Section 138 under Chapter IX of the Companies Act, 2013 contains provisions regarding internal audit. The provisions regarding internal audit of the company according to section 138 of the Companies Act, 2013 and the Companies (Accounts) Rules, 2014 are discussed below-
Qualifications for the internal auditor: The internal auditor shall either be a chartered accountant whether engaged in practice or not or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.
Report of the internal audit: The report of internal audit shall be submitted to the Board of the company.
Companies required to appoint internal auditor: The following class of companies shall be required to appoint an internal auditor or a firm of internal auditors, namely:-
(a) every listed company;
(b) every unlisted public company having-
• paid up share capital of fifty crore rupees or more during the preceding financial year; or
• turnover of two hundred crore rupees or more during the preceding financial year; or
• outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or
• outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and
(c) every private company having-
• turnover of two hundred crore rupees or more during the preceding financial year; or
• outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:
Other Provisions:
• All the companies covered under any of the above criteria will have to comply with the requirements of section 138 and this rule within six months of commencement of such section.
• The internal auditor may or may not be an employee of the company.
• 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.