Who can be internal auditor?

abc (Student CA Final ) (132 Points)

22 December 2012

FRIENDS IT IS A UINQUE QUERY - PLEASE HELP & SOLVE ASAP.....

I WANT TO KNOW....WHETHER PRIVATE COS CAN OUTSOURCE THEIR INTERNAL AUDIT FUNCTION TO ANY OUTSIDE PERSON WHICH IS NOT A CA FIRM (AS THERE IS NO SUCH REQUIRING PROVISION TO APPOINT ONLY A CA FIRM)

CASE

A PRIVATE COMPANY DOES NOT EMPLOY ACCOUNTING STAFF DUE TO LACK OF SPACE & OFFICE

IT OUTSOURCES ITS ACCOUNTS FUNCTION TO SOME OUTSIDE ACCOUNTANT WHO IS NOT A CA BUT RUNS HIS OWN ACCOUNT WRITING FIRM FOR VARIOUS PEOPLE....

1) CAN THIS ACCOUNTANT / ACCOUNT WRITING FIRM ALSO UNDERTAKE INTERNAL AUDIT OF SUCH PRIVATE CO.

2) IF NOT CAN THIS ACCOUNT WRITING FIRM UNDERTAKE INTERNAL AUDIT OF SOME OTHER PVT CO. FOR WHICH IT IS NOT WRITING ACCOUNTS

IS IT TRUE THAT FOR BEING AN INTERNAL AUDITOR OF A PRIVATE LTD CO. IT IS NOT NECESSARY FOR ONE TO BE A QUALIFIED CA....AND ONLY KNOWELDGE & EXPERIENCE OF AUDIT & ACCOUNTING FUNCTIONS & BUSINESS OF CLIENT IS MORETHAN ENOUGH IF BOARD DEEMS FIT?

THIS QUEST IS SPECIFICALLY FOR PRIVATE COS...& NOT PUBLIC COS (WHERE CA FIRM IS APPOINTED AS INTERNAL AUDITOR).... THANKS & REGARDS

REPLY AWAITED..

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Who can be internal auditor?

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Originally posted by : PSJ90
	There are no specific provisions in Companies Act for appointment of internal auditors. They are considered as part of the management .yes,they need not be Chartered Accountanat but practically all companies prefer CA to conduct Internal audit. However if company is obliged to follow CARO, then Appointment of Internal auditor becomes mandatory as it is specific requirement.

Originally posted by : PSJ90
	the controversy in the case is appointment of internal auditors who are also writing books of accounts. from my point of view ,auditors who write books of accounts cannot conduct statutory audit,that is fore sure. but it may be possible for them to conduct internal auditing as internal auditing is simply a appraisal activity which has no corelation with statutory audit.Practically, statutory auditors irrespective of whether internal auditing done or not completely do from their set of standards and norms.

Originally posted by : Karan Teli
	One point i would like to add on is that a person who is qualified from Institue of Internal Auditor is also eligible to take up I.A Provisions of CARO is as follows (a) Internal Audit The Auditor has to comment on Internal Audit System that the Paid-up Capital is more than Rs.25 Lakhs; or Average annual turnover is more than Rs.2 Cr. for three consecutive financial years * CARO 2003 revised the limits to Rs.50 Lakhs and Rs.5 Crores respectively. * All listed Companies are now covered under this clause * CARO 2003 requires the Auditor to comment upon the Internal Audit System in the case of all Listed Companies, even if they do not meet the threshold limits. * However, it may be noted that the Companies Act does not contain a provision making the internal audit compulsory for any Company. It doesnt require that IA should be qualified person. But it also doesnt say that he can be a non qualified one. In my opinion on above issues it should be a QUALIFIED one.

Originally posted by : PSJ90
	I do agree with karan, but still it is very ambigious and a matter of doubt?. Practically companies resorting to internal auditing do prefer qualified ones,but again it is completely managements decretion.No Statue has given any clarification on the same.

Originally posted by : PSJ90
	And i would like to add one thing ...Qualified doesnt stand for only CA. Qualification is not subjective and not confined to only professionals. The Designation offered depicts the qualification required and if he or she qualifies for that, there are no issues regarding the eligibility.

Originally posted by : Karan Teli
	About the staff issue i have mentioned it in a single line coment so please refer the same. I do agree there is no remark of appointing a CA as IA but this would be prefered. Even the certifcation part is important and valued.