Internal Audit:-
The Internal Audit helps the organization to accomplish its objectives by bringing a systematic, discipline approach to evaluate and improve the effectiveness of risk management, control and governance processes. Internal Audit will help to identify the areas of concern and present them to the management in a balanced way and give the information as needed.
Section 138 of the Companies Act, 2013 provides for the appointment of Internal Auditor if any of the following conditions as mentioned in the Clause 1 below is applicable to that particular class of Companies.
The Internal Auditor shall be a Chartered Accountant or a Cost Accountant or such other professional as may be decided by the Board. The Internal Auditor can be a person within or outside the organization or a Chartered Accountant or Cost Accountant in Practice.
1. Applicability for Appointment Internal Auditor
a) Every Listed Company
b) Every Unlisted Public Company –
i) Having paid up share capital of 50 crore or more during the preceding financial year; or
ii) Turnover of 250 crores or more during the preceding financial year; or
iii) Outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore rupees or more at any point of time during the preceding financial year or
iv) *Outstanding deposits of 25 crore rupees or more at any point of time during the preceding financial year; or
c) Every private Company having;
i. Turnover of Rs. 200 crore or more during the preceding financial year; or
ii. Outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore or more at any point of time during the preceding financial year;
The paid up capital or turnover or outstanding loans or borrowings or debentures or deposits, will be taken into consideration as existing on the date of last audited financial statements for this purpose.
*Here deposit means Deposits under Rule 2(1) ( c ) of the Companies (Acceptance of Deposits ) Rules, 2014 of the Companies Act, 2013
2. Applicability of CARO, 2020
As per the Companies (Auditors Report) Order, 2020, the statutory Auditor shall report in its report
a) whether the Company has an internal Audit system in place according to the size and nature of business of the Company,
b) whether the reports of the Internal Auditors for the period under audit were considered by the Statutory Auditors.
Hence Internal Auditors not only have to report to the Board, but also the statutory Auditors to ensure that the company has in place proper management and system in place.
Author Bio
The limits mentioned for Section 138 are not updated.
Please find the revised limits:
(a) every listed company;
(b) every unlisted public company having-
(i) paid up share capital of fifty crore rupees or more during the preceding financial year; or
(ii) turnover of two hundred crore rupees or more during the preceding financial year; or
(iii) 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
(iv) 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-
(i) turnover of two hundred crore rupees or more during the preceding financial year; or
(ii) 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: