1. Provisions relating to Internal Audit in The Companies Act, 2013
Presentation By
CA Anil Sharma

2. Internal Audit Chapter IX - Accounts
Section 138 (applicable w.e.f )
The Companies (Accounts) Rules, 2014
( applicable w.e.f )
Friday, November 16, 2018

3. Internal Audit
Sec 138-Such class of companies as may be prescribed shall be required to appoint an internal auditor to conduct internal audit of the functions and activities of the company.
The Central Govt. to prescribe by Rules, the manner and intervals in which the internal audit shall be conducted and reported to the Board.
Friday, November 16, 2018

4. Internal auditor Section 138: Internal auditor shall either be:
A chartered accountant or
A cost accountant or
Such other professional as may be decided by the Board.

5. Definitions of CAs
Section 2 (17) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 who holds a valid certificate of practice under sub-section (1) of section 6 of that Act.
Section 2(28) “cost accountant” means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959.

6. Internal auditor
Rule 13 of the Companies (Accounts) Rules, 2014 provided that
Internal auditor can be employee of the company,
Chartered Accountant may be the one not engaged in practice.

7. Internal Audit
Such class or classes of companies as may be prescribed:
Rule 13 of the Companies (Accounts) Rules, 2014
(a) every listed company
(b) every unlisted public company , during the preceding year:
having paid up share capital of Rs. 50 Crores or more or
Having turnover of Rs. 200 crores or more or
any outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 Crore at any point of time or
which has outstanding deposits of Rs. 25 Crores rupees or more at any point of time .
(c) every private company , during the preceding year:
turnover of Rs. 200 Crores or more or
any outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 Crore at any point of time
Existing companies to comply with the requirements within 6 months from
Friday, November 16, 2018

8. Internal audit under CA, 1956
No specific requirement in the Act.
The only reference in the Act was in Section 292A- Audit Committee which required the internal auditor to attend the meetings of the Audit Committee.
The other reference was in CARO, Under Para 4(vii) the company auditor was required to report whether  in the case of listed companies and/or other companies having a paid-up capital and reserves exceeding Rs.50 lakhs as at the commencement of the financial year concerned, or having an average annual turnover exceeding five crore rupees for a period of three consecutive financial years immediately preceding the financial year concerned, whether the company has an internal audit system commensurate with its size and nature of its business.

9. Internal Audit Plan
The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board:
Rule 13 (2):
The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the:
scope,
functioning,
periodicity and
methodology for conducting the internal audit.
Friday, November 16, 2018