Who can be internal auditor?

There are no specific provisions in Companies Act for appointment of internal auditors. They are considered as part of the management .yes,they need not be Chartered Accountanat but practically all companies prefer CA to conduct Internal audit. However if company is obliged to follow CARO, then Appointment of Internal auditor becomes mandatory as it is specific requirement.

Originally posted by : PSJ90
	There are no specific provisions in Companies Act for appointment of internal auditors. They are considered as part of the management .yes,they need not be Chartered Accountanat but practically all companies prefer CA to conduct Internal audit. However if company is obliged to follow CARO, then Appointment of Internal auditor becomes mandatory as it is specific requirement.

YES THIS COMPANY -

1) IS A PRIVATE CO

AND ALSO

2) OBLIGED TO FOLLOW CARO..... 

THEY WANT TO APPOINT AN INTERNAL AUDITOR....

SO CAN THEY APPOINT NON CA FIRM i.e JUST A FIRM WHICH PRIMARILY WRITES ITS ACCOUNTS IN TALLY ? IF BOARD SO DECIDES?

the controversy in the case is appointment of internal auditors who are also writing books of accounts. from my point of view ,auditors who write books of accounts cannot conduct statutory audit,that is fore sure. but it may be possible for them to conduct internal auditing as internal auditing is simply a appraisal activity which has no corelation with statutory audit.Practically, statutory auditors irrespective of whether internal auditing done or not completely do from their set of standards and norms.

Originally posted by : PSJ90
	the controversy in the case is appointment of internal auditors who are also writing books of accounts. from my point of view ,auditors who write books of accounts cannot conduct statutory audit,that is fore sure. but it may be possible for them to conduct internal auditing as internal auditing is simply a appraisal activity which has no corelation with statutory audit.Practically, statutory auditors irrespective of whether internal auditing done or not completely do from their set of standards and norms.

yes exactly...... i meant that....

as far as STATUTORY OR TAX AUDIT is concerned the CA FIRM which AUDITS cant write the books...thats true.....

but since the word "internal " is not used in the LAW... even I felt that Internal auditor can WRITE as well as INTERNALLY AUDIT the books ........& theres no restriction...

& ANOTHER DOUBT I HAD WAS INTERNAL AUDITOR SHOULD NOT BE A CA...

AS IN MANY PRIVATE COS I HAVE AUDITED DURING ARTICLESHIP I SAW THAT....THEIR OWN ACCOUNTING STAFF (WHICH WAS JUST GRADUATE) THEY UNDERTOOK INTERNAL AUDIT & WE AS STATUTORY AUDITOR REPORTED UNDER CARO THAT YES INTERNAL AUDIT WAS DONE PROPERLY ETC....

THANKS A LOT FOR CLEARING THIS... HOPE EVERYONE AGREES WITH US :)

One point i would like to add on is that a person who is qualified from Institue of Internal Auditor is also eligible to take up I.A

Provisions of CARO is as follows

The fact that internal audit department which is not qualified holds true here.

I do agree with karan, but still it is very ambigious and a matter of doubt?. Practically companies resorting to internal auditing do prefer qualified ones,but again it is completely managements decretion.No Statue has given any clarification on the same.

Originally posted by : Karan Teli
	One point i would like to add on is that a person who is qualified from Institue of Internal Auditor is also eligible to take up I.A Provisions of CARO is as follows   (a) Internal Audit The Auditor has to comment on Internal Audit System that the Paid-up Capital is more than Rs.25 Lakhs; or Average annual turnover is more than Rs.2 Cr. for three consecutive financial years * CARO 2003 revised the limits to Rs.50 Lakhs and Rs.5 Crores respectively. * All listed Companies are now covered under this clause * CARO 2003 requires the Auditor to comment upon the Internal Audit System in the case of all Listed Companies, even if they do not meet the threshold limits.  * However, it may be noted that the Companies Act does not contain a provision making the internal audit compulsory for any Company.   It doesnt require that IA should be qualified person. But it also doesnt say that he can be a non qualified one. In my opinion on above issues it should be a QUALIFIED one.

DEAR KARAN,

Please clear this,

If a CA is only required then I dont find any mention in the LAW...and also if that is SO....then I have seen companies APPOINTING THEIR OWN ACCOUNTING STAFF / EMPLOYEES for internal audit function...

Because as per the information I have on my hand -

ICAI has recently recommended govt that OUTSOURCING INTERNAL AUDIT be made mandatory for all companies...BUT IT HAS NOT RECOMMENDED THAT OUTSOURCING BE MADE MANDATORY ONLY TO CA's.....

ALSO COMPANIES BILL 2011 Does mention the following specifically.....

companies must appoint internal auditor who is a CHARTERED ACCOUNTANT OR A COST ACCOUNTANT OR ANY OTHER PROFESSIONAL THE BOARD DEEMS FIT...

Also IF INTERNAL AUDIT IS MANDATORY TO BE DONE BY CHARTERED ACCOUNTANT ONLY then THE NO WHERE THERE IS A MENTION THAT IT BE SO....AS IN CASE OF TAX AUDIT & STATUTORY AUDIT....

I ASKED THIS IN EXPERT SECTION ALSO, AND EXPERTS SECTION ALSO SUPPORTS THE VIEW THAT CA QUALIFICATION IS NOT MANDATORY TO OUTSOURCE INTERNAL AUDIT TO A THIRD PARTY

please clear.... :) thank you

Originally posted by : PSJ90
	I do agree with karan, but still it is very ambigious and a matter of doubt?. Practically companies resorting to internal auditing do prefer qualified ones,but again it is completely managements decretion.No Statue has given any clarification on the same.

MANY OPINIONS I RECEIVED IN INBOX COMPLETELY AGREE WITH THIS....

YES IT IS PRACTICALLY PREFERABLE TO HIRE A CA FIRM TO OUTSOURCE INTERNAL AUDIT

BUT NOT MANDATORY TO HIRE A CA FIRM ONLY.... IT CAN BE ANY PERSON WHO HAS REQUIRED EXPERIENCE & KNOWLEDGE OF ACCOUNTS, AUDIT, TAX, & OTHER COMPLIANCE  & THE BUSINESS OF CLIENT...

HOPE OUR DISCUSSION CLEARS THE SILENT PART OF LAW.... :) 

WHAT SAY? :) :)

And i would like to add one thing ...Qualified doesnt stand for only CA. Qualification is not subjective and not confined to only professionals. The Designation offered depicts the qualification required and if he or she qualifies for that, there are no issues regarding the eligibility.

Originally posted by : PSJ90
	And i would like to add one thing ...Qualified doesnt stand for only CA. Qualification is not subjective and not confined to only professionals. The Designation offered depicts the qualification required and if he or she qualifies for that, there are no issues regarding the eligibility.

YES EVEN I HAD READ IT IN SOME WHERE FINAL CA BOOK OF LAW...THAT QUALIFICATION MEANS HAVING REQUIRED EXPERIENCE & KNOWLEDGE IN THAT PARTICULAR FIELD......& AND NOT NECESSARILY A DEGREE OF UNIVERSITY OR INSTITUTE... :)

About the staff issue i have mentioned it in a single line coment so please refer the same.

I do agree there is no remark of appointing a CA as IA but this would be prefered. Even the certifcation part  is important and valued.

Originally posted by : Karan Teli
	About the staff issue i have mentioned it in a single line coment so please refer the same. I do agree there is no remark of appointing a CA as IA but this would be prefered. Even the certifcation part  is important and valued.

yes I read that single line comment now :) 

thanx