Internal Audit

Applicability

Internal Audit provisions in Companies (Accounts) Rules 2014 – Rule 13: Applicability (Rule 13(1)): 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.

For an existing company covered under any of the above criteria shall, comply with the requirements of section 138 and this rule within six months from 1st April, 2014.

Purpose:
As Companies grow risks and its impact increase, Statutory Auditors due to their limited review may not cover all the aspects. Internal Audit will help company in monitoring its activities having financial impact on the company by conducting timely review. The objectives of Internal Audit are

1. Revenue Audit – Income Leakage Audit
2. Compliance Audit – Taxation and other regulatory
3. Payroll Audit
4. Reimbursement Audit
5. Procurement Audit
6. Systems Audit – EDP Audit