In a recent announcement, the Finance Minister of India, Nirmala Sitharaman slashed corporat...
Internal Audit is an Independent function carried out by the Internal auditor which involves the risk management, continuous monitoring, accounting, Corporate Governance depending upon the functionality of the Company. The Audit itself suggests improvement to be carried out or to add value to strengthen the functionality of the Company.
It ensures that the Company has done proper Compliance with respect to laws, regulations and to maintain the transparency in the Company.
The following class of Companies required appointing the Internal Auditor of the Company:
Applicability of Internal Audit
|Every Listed Company||Private Company||Every Unlisted Public Company|
|It does not have any specific criteria applies to all listed Companies.||Turnover of Rs. 200 crore or more during the preceding financial year or||Paid up share Capital of Rs 50 crore or more during the preceding financial year or|
|Outstanding loans or borrowings from banks or public financial institutions exceeding Rs 100 crore or more at any point of time during the preceding Financial year.||Outstanding loans or borrowings from banks or public financial institutions exceeding Rs 100 crore or more at any point of time during the preceding Financial year or|
|Turnover of Rs. 200 crore or more during the preceding financial year or|
|Outstanding deposits of Rs 25 crore or more at any point of time during the preceding financial year|
If the existing Company covered under any of the above criteria shall be required to appoint the Internal Auditor of the Company.
Internal Auditor can be Individual, Body corporate or partnership firm.
Under section 138(2) of the Companies Act, 2013 gives power to the central Government to make rules and prescribed the manner and the intervals in which the internal audit shall be conducted and reported to the Board.
In rule 13 of Companies (Account) Rules, 2014 the scope of internal audit is not defined. However 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.
It is advisable to carry out the Internal Audit on quarterly basis so that the Company can monitored its compliance properly and to analyze there is no fraud or deviation in the Company.
The Internal Auditor prepare the report mentioning the compliances and deviations if it found any deviations the method should be mention to rectify. The report should be carry out in fair and transparent manner.Internal Auditor analyses that compliance are timely done. The Audit should carry out in fair and transparent manner.
It ensure the compliance with laws and regulations timely financial reporting and data collection to maintain operational efficiency and correcting lapses before they are discovered in external audit.
To ensure that the Compliance has been done within the stipulated period of time. If there is any delay the valid reason should be mentioned.
It analyze the risk involved in the Company
It helps to reduce the risk of loss and reputational damage to the bank.
Firstly it is necessary to take the consent from the board of directors. In Board Meeting resolution to be passed for the appointment of Internal Auditor. After appointment the resolution is required to be filed with ROC within 30 days from the date of appointment.
There are no specific penal provisions provided in this section 138. Therefore the penal provisions under section 450 would apply in case of any non-compliance of this section. Accordingly, for contravention, the company and every officer of the company who is in default shall be punishable with a fine up to Rs.10,000, in case the contravention is a continuing one then the further fine shall be Rs.1,000 everyday.
Internal Audit should be mandatorily carried out by the internal auditor in every company who is fulfilling the criteria for carrying out the assessment of the Company internal functionality, system, accountability, transparency, Fraud Detection, Statutory Compliance to make the functionality of the Company easier, transparent and visible.