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Internal Audit

What is Internal Audit


Section 138 of the Companies Act, read with Rule 13 of Companies (Accounts) Rules, 2014 contains the following provisions regarding Internal Audit.

Internal Audit

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The act has prescribed certain classes of companies who are required to get their internal audit done, the list is shown below:


  • 1. Every Listed company is required to get its Internal Audit done.
  • 2. Unlisted public limited company meeting the below mentioned criteria is required to get their interna audit done:

    i. Having share capital of Rs. 50 Crore or more during the preceding financial year.

    ii. Having Turnover of Rs. 2 crore of more during the preceding financial year.

    iii. Having Outstanding loans or borrowings from banks and/or public lending institutions exceeding Rs. 100 crore at any point of time during preceding financial year.

    iv. Having Outstanding deposits of Rs. 25 crore or more at any point of time during preceding financial year.

  • 3. Every private limited company which meets the following criteria :

    i. Having Turnover of Rs. 2 crore of more during the preceding financial year.

    ii. Having Outstanding loans or borrowings from banks and/or public lending institutions exceeding Rs. 100 crore at any point of time during preceding financial year.

Any existing company will have to comply with the provisions of section 138 within a period of six months of commencement of such section.

For the purpose of Rule 13 the internal auditor may of may not be an employee of the company, the Audit committee of company or board of members of the company in consultation with the internal auditor, may formulate the scope, functioning and periodicity and method of conduct of Internal Audit.

Internal auditor may be a Chartered Accountant/Cost and Management accountant or any other professional.

The act and the rules both has not speficied the duties and responsibilities of the internal auditor.

Also the rules does not define the word other professional hence, any one who has the knowledge can be appointed as the internal auditor of the company.

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