Appointment of internal auditor

Hi Ankit,

In my opinion, there are no restrictions imposed by the ICAI for appointment of an Internal Auditor. Internal Auditor can be any competent professional appointed by the board. He is required by the Companies Act and ICAI to observe indepence and objectivity in carrying out his job. However, there are no enforcable controls to ensure independence. 

This is because the Internal Auditor works in the capacity of an advisor/employee to the management. Deciding upon the framework of the internal audit function is the responsibility of the management, it also has to be tailor-made to the organisation structure and reporting needs. Moreover, Statutory Auditors are required to exercise skepticism and judgement while relying on the work of Internal Auditors. This reduces independence risks. 

Hence, married daughter of a Whole Time Director can be appointed as an Internal Auditor of the company, as long as she is technically competent for the role. 

Regards,

Nirukt Sharma | Article Intern | EY Advisory