When is Internal audit requirement mandatory in case of a Private Limited Company as per Companies Act 1956?
Thank you
10 Replies
Prejith
(Pursuing CA)
(92 Points)
Replied 11 May 2010
Internal audit is mandatory for closely held companies when:
a) the paid up capital and reserves exceed more than Rs 50L at the commencement of the concerned financial year.
b) the average turnover exceeds Rs 5Cr for 3consecutive years, preceding the concerned financial year.
If any of the above conditions are satisfied by a pvt limited company then internal audit is mandatory.
(Guest)
| Originally posted by : Prejith | ||
 |
Internal audit is mandatory for closely held companies when: a) the paid up capital and reserves exceed more than Rs 50L at the commencement of the concerned financial year. b) the average turnover exceeds Rs 5Cr for 3consecutive years, preceding the concerned financial year. If any of the above conditions are satisfied by a pvt limited company then internal audit is mandatory. |
 |
agree with prejith.......
CS Mayur Buha
(Company Secretary)
(238 Points)
Replied 11 May 2010
Can you tell me the section under which the internal audit is compulsory?
Prejith
(Pursuing CA)
(92 Points)
Replied 11 May 2010
It's one of the clauses of CARO 2003 which is defined under section 227 (4A).
I'am not sure whether it has been defined at any other place or not.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 11 May 2010
| Originally posted by : CS Mayur Buha | ||
|
|
Can you tell me the section under which the internal audit is compulsory? |
|
No direct section in Companies Act, 1956 except an indirect reference through section 227(4A).
Kalpesh Chauhan,
(Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com))
(8311 Points)
Replied 11 May 2010
If a Private Company commits any fault in any of the 3 above mentioned conditions regarding exemption from applicability of Companies (Auditor's Report) Order, 2003(section 227(4A), the particular Private company has to report on the matter regarding
Clause 4(vii)
which states that
"in 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 Rs.5 Crores for a period of three consecutive financial years immediatel preceeding the financial concerned, whether the company has an INTERNAL AUDIT SYSTEM commensurate with its size and nature of its business "
(Guest)
| Appointment of internal auditor. | |||||||||
| The appointment of the internal auditor is prerogative of the management as it is entirely | |||||||||
| depends on the wishes of the managements of corporate or non-corporate organisation | |||||||||
| whether to have its own internal auditor or not. | |||||||||
| However, | |||||||||
| after the enactment of the CARO,2003 it is obligatory on the part of the companies | |||||||||
| to have internal auditing in terms of paragraph 4(vii) of the said order | |||||||||
| which is reproduced below : | |||||||||
| 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 crores 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. | |||||||||
| Sec.227(4A) - Duty under CARO,2003 | |||||||||
| The central govt has the power to direct by a general or special order that, in the case of | |||||||||
| specified companies, the statutory auditor's report shall include a statement of such matters | |||||||||
| as may be specified in its order. | |||||||||
| CARO,2003 | |||||||||
| Issued by the Central govt. of india in terms of sub sec.(4A) of sec.227 | |||||||||
| of the companies act,1956. | |||||||||
| So, sec.227(4A) says | |||||||||
| it is mandatory for all companies to appoint internal auditor, IF CARO,2003 IS APPLICABLE. | |||||||||
| Regards | |||||||||
| K.Ilayaraja | |||||||||
DALIP KUMAR
(ARTICLESHIP TRAINING)
(25 Points)
Replied 17 May 2010
What are the conditions for the applicability of CARO 2003 in case of CLOSELY HELD COMPANY
Prejith
(Pursuing CA)
(92 Points)
Replied 18 May 2010
CARO is applicable to closely held companies if:
A) The paid up capital and reserves of the company exceeds Rs. 50Lakhs,
B) The company has an oustanding loan from any bank or financial institution exceeding Rs. 25Lakhs, and
C) The total turnover exceeds Rs. 5Crore,
At any time during the financial year.
If any of the above condition is not satisfied then CARO is not applicable.
Saumya Kothari
(STUDENT)
(32 Points)
Replied 13 September 2010
What is the penalty on company on not getting their internal audit done???
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