Internal audit provides independent assurance on the effectiveness of internal controls and risk management processes to enhance governance and achieve organisational objectives. It help in evaluating the design and operating effectiveness of internal control and risk management process as designed and implemented by the management.
Requirement of Internal Audit
Section 138 of Companies Act 2013 read with Rule 13 of Companies (Accounts) Rules 2014 requires certain class of companies to appoint Internal Auditors. Following are the class of companies required to internal auditor:
Every listed public company
Every unlisted public company having
Paid up share capital of fifty crore rupees or more during the preceding financial year; or.
Turnover of Two hundred crore rupees or more during the preceding financial year; or
Outstanding loans or borrowings from bank or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or
Outstanding deposit of twenty five crore rupees or more at any point of time during the preceding financial year.
Every private company having
Turnover of two hundred case or more during the preceding financial year; or
Outstanding load or borrowings from banks or financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:
Benefits of Internal Audit
The benefits of internal audit are as:
Continuous assessment of company’s accounting practices
Risk control on ongoing basis
Ensure integrity of financial statement and accounting information and prevent fraud
Ensure regular compliance with laws and regulation
Can help in looking broader issues such as impact on goodwill , operational efficiency, growth
The Internal Audit function requires a number of activities to achieve its objective as outlined in the terms of engagement. Few are general steps that are followed while internal audit:
Define the overall plan, scope and methods to be followed during the process of the Internal Audit on a periodic basis.
Oversee and monitor various audit assignments, their proper planning, execution, reporting of
Findings and ensure subsequent closure of reported observations.
Plan and review the performance of professional staff and other resources to achieve its objectives.
Identify and manage external experts and technical solutions, if required.
Communicate and engage with all key stakeholders regarding progress and achievement of objectives.
Develop and maintain a quality evaluation and improvement program