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 Internal Audit

Independent Reporting, Opinion and recommendations on the quality

and functioning of Internal Control Systems.

What is Internal Audit?

Internal audit is an audit to provide independent assurance to the Management of the Company, that in the Company organisation’s risk management, governance and internal control processes are operating effectively. It is an audit of Internal Control System of the Company for ensuring the quality and functioning of such system and update the relevant authorities of the company about the possible improvement in the system

When Internal Audit is Mandatory?

The requirment of Internal audit is as per the Statute, every listed and unlisted is required to appoint an internal auditor based on the following requirements.

For Listed Company : Internal Audit is must for all the listed Companies without any specific criteria or threshold.

For Unlisted Company : Unlisted Company are required to appoint an internal auditor if

  • Turnover are equal to or exceeds Rs. 200 Crores
  • Outstanding Loans Or Borrowings From Bank Or Public Financial Institutions are equal to or exceeds Rs. 100 Crores
  • Paid up Capital is equal to or exceeds Rs. 50 Crores
  • Outstanding Deposits are equal to or exceeds Rs. 25 Crores

For Private Limited Company are required to appoint an internal auditor if

  • Turnover are equal to or exceeds Rs. 200 Crores
  • Outstanding Loans Or Borrowings From Bank Or Public Financial Institutions are equal to or exceeds Rs. 100 Crores

Apart from the above, if any Company does not fall under the mandatory requirement and it still wilsh to conduct internal audit for batter management and control, that Company can also appoint internal auditor

Advantage of Internal Audit

There is a misconception that internal audits are only necessary for larger, more complex organisations and the cost of an internal audit is higher than its benefits for a smaller entity. As the internal audit’s purpose is to evaluate and improve the effectiveness of an organisation’s risk management, control and governance, an internal audit is beneficial to all entities irrespective of the size of the business. Internal Audit is necessary for all type of well organised businesses.

Advantages of Internal Audits are:

  • Staff remains alert because their work shall be checked by the internal auditor. So, accounting remains correct.
  • Internal audit helps to detect errors and frauds and provide suggestions to improve them which helps  management to take corrective action.
  • Internal audit detects misuse of resources in time which helps to reduce unnecessary expenses.
  • Internal audit checks efficiency of staff which helps to increase efficiency.
  • Internal audit checks books of accounts, detects errors and frauds and helps in its correction which makes act of final auditor easier.
  • Internal audit increases the morale of honest staff because evaluation of performance of any staffs will be made at any time.