Internal audit.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 September 2011 I am working in manufacturing company. What is the criteria for internal audit?
( Turnover wise)

CS Bijoy

CS Bijoy (Expert)
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15 September 2011 Any condition if fulfilled than internal Audit is required

Paid up capital 50lac,
Average Annual Turnover 5 crore
Listed company irrespective of above condition .

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Querist : Anonymous

Querist : Anonymous (Querist)

15 September 2011 Is it mandatory to have internal audit after fulfulling below condition?

Paid up capital 50lac,
Average Annual Turnover 5 crore
Listed company irrespective of above condition .

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Yes, it is mandatory for certain types of companies to have an internal audit, including those that meet specific conditions. Here’s a detailed breakdown:

### **1. Companies Requiring Internal Audit:**

**1. **Listed Companies:**
- **Mandatory Requirement:** All listed companies are required to have an internal audit regardless of their paid-up capital or turnover. This requirement ensures proper internal controls and compliance with regulatory standards.

**2. **Unlisted Public Companies and Private Companies:**
- **Paid-Up Capital and Turnover Criteria:** As per the Companies Act, 2013, internal audit is mandatory for:
- **Public Companies:**
- Paid-up capital of ₹50 lakh or more
- Turnover of ₹5 crore or more
- **Private Companies:**
- Paid-up capital of ₹50 lakh or more
- Turnover of ₹200 crore or more

### **2. Provisions Under the Companies Act, 2013:**

**1. **Section 138: Internal Audit:**
- **Requirements:** Section 138 of the Companies Act, 2013, mandates an internal audit for companies meeting the specified criteria or any other company as prescribed by the rules.
- **Internal Audit Standards:** The internal audit function must be conducted by an independent internal auditor or an external auditor as required by the company's management or the Board of Directors.

**2. **Rule 13 of the Companies (Accounts) Rules, 2014:**
- **Criteria for Internal Audit:**
- The internal audit function is to be established based on criteria set forth in the Act and Rules, such as paid-up capital and turnover.

### **3. Impact of Not Having an Internal Audit:**

**1. **Non-Compliance Penalties:**
- **Legal Consequences:** Failure to comply with the internal audit requirement can result in penalties and legal consequences for the company and its officers.
- **Regulatory Actions:** Regulatory authorities may take action against non-compliant companies, including fines or other penalties.

**2. **Operational Risks:**
- **Increased Risk:** Not having an internal audit can lead to increased operational risks, financial mismanagement, and lack of compliance with statutory requirements.

**3. **Investor Confidence:**
- **Impact on Stakeholders:** An effective internal audit function enhances investor confidence and ensures proper governance and accountability.

### **Summary:**

**It is mandatory for listed companies to have an internal audit regardless of their paid-up capital or turnover.** For unlisted public companies and private companies, internal audit is mandatory if they meet the criteria of paid-up capital or turnover specified in the Companies Act, 2013. Fulfilling these conditions is crucial for compliance, effective internal control, and minimizing operational risks.