Internal Auditor

There should be an Internal audit system in the company whether it is external or internal. The size and level of skills of the internal audit team should be commensurate with size of the company and its nature of business. You may also go through the CARO requirement.

since your company's turnover is above Rs. 50 lacs, As per CARO internal audit is mandatory for your company.... so you should engage internal auditor but you cant employ them bcos internal auditor will be only practising chartered accountant/ CAs/ audit firm they cant be employed...

I disagree with u karthika, bcoz u can employ an internal auditors if u have a separate internal audit team led by a CA in ur company.

I reiterate my stand that an internal auditor can either external or internal person. Moreover, there is no specified qualification prescribed by any body or law. It is the discretion of the management about scope and depth of the audit.

Normally, the purpose of internal audit is to ensure three things:

1)      Ensuring compliance with the existing internal controls in place;

2)      Appraising the adequacy of existing internal controls;

3)      Ensuring the promptness in recording the business and other transactions of the entity.

Internal audit is not an ancillary or subsidiary function of accounts or finance function. It itself is a separate and distinct domain. It has its own functions / discipline. The team of internal audit can consist of several backgrounds from finance, engineering, consultancy, sciences etc.

In most of the companies now a days they does not call it as internal audit. They name in several ways such systems audit, etc.

There is no issue in appointing external CAs or CA firms. However, even a non member or Cost Accountant or even engineer may also conduct internal audit depending on the area of specialization they may contribute. Now a days most of the companies are using composition of internal and external teams. For infrastructure, FMCG, Pharmaceutical companies where they will be having locations at several places / countries may not be possible to engage own teams, so they resort the help of local external teams.

Hope I clarified enough on this area. Further queries are appreciated in advance.