maYur Internal auditing is an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization. The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities. The audit objective includes promoting control at a reasonable cost. Every company to which Section 138 is applicable shall appoint an internal auditor. The internal auditor shall conduct the internal audit of the functions and activities of the company. Internal Auditor may be an Individual or a Firm. Internal Auditor, shall either be a Chartered Accountant (whether engaged in practice or not) or a Cost Accountant, or such other Professional as may be decided by the Board to conduct internal audit of the functions and activities of the Company. Neither the rules nor the Act has specified the duties and responsibilities so, even if the rules and act made the appointment of Internal Auditor mandatory, the same rules and Act provides option to companies to appoint any person as internal auditors and also anyone who has the knowledge can became an Internal Auditor, because the rules did not define the word “any other professional” The internal auditor may or may not be an employee of the company. 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. Manner and Intervals of Internal Audit shall be prescribed by the Central Government. APPLICABILITY OF INTERNAL AUDIT PROVISIONS IN SECTION 138 OF COMPANIES ACT 2013 READ WITH RULE 13 OF THE COMPANIES (ACCOUNTS) RULES 2014: 1. Every Listed Company 2. Every Unlisted Public Company, during the preceding Financial year having – (a) Paid up Share Capital of Rs 50 Crores or more. Or (b) Turnover of Rs 200 Crores or more. Or (c) Outstanding Loans or Borrowings from Banks or Public Financial Institutions exceeding Rs100 Crores or more at any point of time during the preceding financial year. Or (d) Outstanding Deposits of Rs 25 Crores or more at any point of time during the preceding financial year. 3. Every Private Company having – (a) Turnover of Rs 200 Crores or more during the preceding financial year. Or (b) Outstanding Loans or Borrowings from Banks or Public Financial Institutions exceeding Rs 100 Crores or more at any point of time during the preceding financial year. If an existing company satisfies any of the criteria laid down under Rule 13 i.e. it falls under the prescribed classes of companies for the purpose of section 138, it shall within 6 months comply with the requirements of such provisions. Y CONCLUSION: Internal audit works in the areas of compliance, fraud detections, internal financial controls, corporate social responsibility etc. Many new companies, including mid-sized listed companies are now required to comply with Section 138. Internal auditors are now covered under class action suits. maYur
Posted on: Thu, 18 Dec 2014 06:49:05 +0000
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