TMI BlogINTERNAL AUDIT UNDER NEW COMPANY LAWX X X X Extracts X X X X X X X X Extracts X X X X ..... INTERNAL AUDIT UNDER NEW COMPANY LAW - By: - Dr. Sanjiv Agarwal - Corporate Laws / IBC / SEBI - Dated:- 19-12-2013 - - Statutory Provision (Section 138) (1) Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uct internal audit of the functions and activities of the company. (2) The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board. This is a new section and seeks to provide that prescribed Companies shall be required to conduct internal audit of functions and activities of the company by internal audito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r appointed by the company. Manner of conducting internal audit shall be prescribed by the Central Government. There is no corresponding provision available in Companies Act, 1956 and this provision has been introduced for the first time. Classes of companies requiring Internal Audit Certain class or classes of Companies, as may be prescribed, shall be required to appoint an Internal Audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, who shall either be a Chartered Accountant or a Cost Accountant or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the Company. For this sub-section, Chartered Accountant means a Chartered Accountant, who is a member of The Institute of Chartered Accountant of India and has a valid certificate of practice and Cost Accountan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t means a member of The Institute of Cost Accountants of India. Other professionals, as may be decided by the company's board, may also be appointed as an internal auditor. Internal audit is not compulsory for all companies but Central Government will notify the class or classes of companies for whom internal audit will be mandated. Once such classes are prescribed, no internal audit will be req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired under the law. Companies may have internal audit conducted on their own will voluntarily. Once the class or classes of companies is prescribed, all such companies will be required to appoint the internal auditor and get the internal audit conducted in relation to its functions and activities. This may involve financial and non-financial matters, management functions and other transactions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The company board shall be free to appoint any practicing Chartered Accountant or a Cost Accountant or any other person whom it deems fit to be appointed as its internal auditor. For this purpose, company board may consider the nature and volume of business of company; qualifications, experience and capabilities of such person being appointed as auditor and scope of internal audit. The manner in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which audit will be conducted and its periodicity / intervals with which internal audit should be conducted shall also be prescribed by the Central Government. For carrying out internal audit smoothly and effectively, it would be desirable on the part of internal auditor to a) Obtain knowledge of legal and regulatory framework within which the auditee entity operates. b) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Obtain knowledge of the entity's accounting, internal control systems and procedure alongwith accounting policies. c) Determine the effectiveness of internal control and check procedures adopted by the entity. d) Understand the business and other technical details of the auditee entity. e) Determine nature, timing and extent of procedures to be carried out or perf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed. Central Government to prescribe rules The Central Government shall, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board. Rules being Prescribed Rules are being prescribed separately under Companies Act, 2013 in relation to the following: (a) prescribing class or classes of Companies, who shall be required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appoint an internal Auditor, (b) prescribing rules for the manner and the intervals in which the internal audit shall be conducted. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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