Effective Internal Audit
An effective internal audit is concerned with evaluating and improving the effectiveness of risk management, control, and governance processes in an organization. Organizations are increasingly leveraging internal audit as a strategic resource, recognizing that internal auditors' broad perspective of operations helps inform business decision-making.
With increased regulatory focus and widespread negative impact of frauds, the managements and senior executives are increasingly concerned about the vulnerability of their businesses to frauds and whether they are adequately protected.
Mandatory Requirements
Section 138 of the Companies Act, 2013 was enforced with effect from 1st April 2014. As per this section, such class or classes of companies as may be prescribed shall be required to appoint an internal auditor to conduct internal audit functions and activities of the company.
Applicability
Listed companies: Appointment of an internal auditor is mandatory.
Unlisted public company and private companies: Appointment of an internal auditor is mandatory if either of the criteria listed in the tab section below are met for the preceding financial year.
However, a company can also on sole discretion opt for internal audit even if it does not qualify for the mandatory requirements due to several benefits derived.
Criteria to be checked for the preceding financial year:
| Criteria* | Unlisted Public Companies | Private Companies |
|---|---|---|
| Paid-up share capital | INR 500 million (50 crore) or more | Not a determining factor |
| Turnover | INR 2 billion (200 crore) or more | INR 1 billion (100 crore) or more |
| Outstanding loans or borrowings | INR 1 billion (100 crore) or more | INR 2 billion (200 crore) or more |
| Outstanding deposits | INR 250 million (25 crore) or more | Not a determining factor |
Working in the capacity of an internal auditor, we provide the following services:
- Risk Assessment and development of risk based audit plan.
- Evaluating the adequacy of the system of internal controls.
- Recommend improvements in controls.
- Assess compliance with policies and procedures and sound business practices.
- Assess and ensure compliance with legal and contractual obligations.
- Review operations/programs to ascertain whether results are consistent with established objectives.
Our audit methodology includes making recommendations for improvement, not just to express numbers and ensure compliances. The recommendations are realistic because we want you to implement them.
We also ensure our clients are updated all around the year of accounting, financial and regulatory developments that may impact their business. Internal auditors' broad and deep perspective of operations helps inform business decision-making.
With increased regulatory focus, section 138 of the Companies Act, 2013 ensures that companies maintain robust internal control systems.
Accordingly, companies prescribed in Companies (Accounts) Rules, 2014 by Ministry of Corporate Affairs are required to appoint an internal auditor. Proper compliance protects management from vulnerability to fraud and ensures business longevity.