The concept of Internal Auditing in India has been placed uniquely as a catalyst for making improvements in a business organization. Giving access to the board of the company and the senior management makes the internal audit work in order to provide a meaningful difference in risk management and performance of the processes. In spite of the many benefits and advantages of the functions of internal auditing in India, the most competent business firm fails to deliver any kind of changes in the company and its functional and management work.
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Definition of Internal Audit:
While discussing about the internal auditing in India and the various functions associated with the same, it is very important for the firms in Considering Laws and Regulation in Internal Audit function. Section 138 of the Companies Act, 2013 and Rule 13 of Companies (Accounts) Rules, 2014 provides with certain classes of companies that require appointing the internal auditors to perform internal auditing in India. The Rule 13 of the Companies (Accounts) Rules, 2014 states the following-
13. Companies Required to Appoint Internal Auditor
- The following class of companies shall be required to appoint an internal auditor [which may be either an individual or a partnership firm or a body corporate], namely:-
- every listed company;
- 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
- 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:
Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138 and this rule within six months of commencement of such section.
Explanation- For the purposes of this rule –
- for the appointment of internal auditor under Companies Act, he or she may or may not be an employee of the company;
- the term “Chartered Accountant” or “Cost Accountant” shall mean a “Chartered Accountant” or a “Cost Accountant”, as the case may be, whether engaged in practice or not’.
- 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 auditing in India.
