Internal audit.

This query is : Resolved

Share Report Follow Query Ask a Query

Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2011 I am working in manufacturing company. What is the criteria for internal audit?
( Turnover wise)

CS Bijoy

CS Bijoy (Expert)
Follow

15 September 2011 Any condition if fulfilled than internal Audit is required

Paid up capital 50lac,
Average Annual Turnover 5 crore
Listed company irrespective of above condition .

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2011 Is it mandatory to have internal audit after fulfulling below condition?

Paid up capital 50lac,
Average Annual Turnover 5 crore
Listed company irrespective of above condition .

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
Follow

01 August 2024 Yes, it is mandatory for certain types of companies to have an internal audit, including those that meet specific conditions. Here’s a detailed breakdown:

### **1. Companies Requiring Internal Audit:**

**1. **Listed Companies:**
- **Mandatory Requirement:** All listed companies are required to have an internal audit regardless of their paid-up capital or turnover. This requirement ensures proper internal controls and compliance with regulatory standards.

**2. **Unlisted Public Companies and Private Companies:**
- **Paid-Up Capital and Turnover Criteria:** As per the Companies Act, 2013, internal audit is mandatory for:
- **Public Companies:**
- Paid-up capital of ₹50 lakh or more
- Turnover of ₹5 crore or more
- **Private Companies:**
- Paid-up capital of ₹50 lakh or more
- Turnover of ₹200 crore or more

### **2. Provisions Under the Companies Act, 2013:**

**1. **Section 138: Internal Audit:**
- **Requirements:** Section 138 of the Companies Act, 2013, mandates an internal audit for companies meeting the specified criteria or any other company as prescribed by the rules.
- **Internal Audit Standards:** The internal audit function must be conducted by an independent internal auditor or an external auditor as required by the company's management or the Board of Directors.

**2. **Rule 13 of the Companies (Accounts) Rules, 2014:**
- **Criteria for Internal Audit:**
- The internal audit function is to be established based on criteria set forth in the Act and Rules, such as paid-up capital and turnover.

### **3. Impact of Not Having an Internal Audit:**

**1. **Non-Compliance Penalties:**
- **Legal Consequences:** Failure to comply with the internal audit requirement can result in penalties and legal consequences for the company and its officers.
- **Regulatory Actions:** Regulatory authorities may take action against non-compliant companies, including fines or other penalties.

**2. **Operational Risks:**
- **Increased Risk:** Not having an internal audit can lead to increased operational risks, financial mismanagement, and lack of compliance with statutory requirements.

**3. **Investor Confidence:**
- **Impact on Stakeholders:** An effective internal audit function enhances investor confidence and ensures proper governance and accountability.

### **Summary:**

**It is mandatory for listed companies to have an internal audit regardless of their paid-up capital or turnover.** For unlisted public companies and private companies, internal audit is mandatory if they meet the criteria of paid-up capital or turnover specified in the Companies Act, 2013. Fulfilling these conditions is crucial for compliance, effective internal control, and minimizing operational risks.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now