25 April 2011
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.
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.
CAclubindia
