Eligibility for appointment of Internal Auditors According to the Section 138 of Act, the internal auditor shall be either Chartered Accountant or Cost Accountant or such other professional as may be decided by the board. Thus, the board of company has been given freedom to appoint any professional and competent person to be its internal auditor.
Such internal auditor may or may not be an employee of the company (Explanation to Rule 13 of Companies (Accounts) Rules, 2014) Thus, an employee of company may also be appointed by Board as internal auditor. The members of The Institute of Chartered Accountants of India who are in service can take this opportunity to be appointed as Internal Auditor of their own employer company. The rules also specifically provide that the term ‘Chartered Accountant’ shall mean a Chartered Accountant, whether engaged in practice or not (Explanation to Rule 13 of Companies (Accounts) Rules, 2014). Therefore, every registered member of the Institute of Chartered Accountants of India is eligible for appointment as Internal Auditor of company. Besides, those persons who are member of The Institute of Cost Accountants of India or The Institute of Company Secretaries of India and other professionals which are employees of the company are also eligible to appoint. The firm of Chartered Accountants or Cost Accountants or Company Secretaries are also hitherto eligible for appointment as Internal Auditors of Company.
It should be noted that the statutory auditor appointed under section 139 of Act is not eligible to provide the service of Internal Audit whether rendered directly or indirectly to the company or its holding company or subsidiary company – provided in Section 144 of the Companies Act, 2013. For this purpose, the term ‘’directly or indirectly” shall include rendering of services by the auditor, -
(i) in case of auditor being an individual, either himself or through his relative or any other person connected or associated with such individual or through any other entity, whatsoever, in which such individual has significant influence or control, or whose name or trade mark or brand is used by such individual;
(ii) in case of auditor being a firm, either itself or through any of its partners or through its parent, subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partner of the firm has significant influence or control, or whose name or trade mark or brand is used by the firm or any of its partners.
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