Internal Audit
What is Internal Audit?
Internal audit is like a quality checker for an organization. It evaluates a company’s internal controls including its corporate governance and accounting processes to make sure everything is working properly. It helps an organization reach its goals by finding ways to improve how it manages risks, controls and governs itself.
According to the Companies Act 2013, there is a rule that companies need to have an internal auditor. This internal auditor can either be a chartered accountant, a cost accountant, or another professional chosen by the company's board. The job of the internal auditor is to check and review the company's functions and activities.
The objectives of Internal Audit
- Revenue Audit – Income Leakage Audit
- Compliance Audit – Taxation and other regulatory
- Payroll Audit, Reimbursement Audit and Procurement Audit
- Systems Audit- EDP Audit
Why Internal Audit? Is it mandatory?
Internal audit is done to check if the company has followed all the applicable rules and laws that apply to it. After doing the check, the Internal Auditor writes a report about compliances and material deviations. This report shows if the company followed the rules or not. Chartered Accountants in Bangalore can play a crucial role in assisting with internal audits for organizations.
Companies Covered Under Internal Audit
As per Rule 13 of the Companies (Accounts) Rules, 2014, the specified types of companies mandated to engage an internal auditor or a firm of internal auditors include:
- All registered listed companies must comply with the requirement for internal audit.
- Unlisted public companies with an annual turnover of 200 crore rupees or more are required to have an internal audit.
- Unlisted public companies that have paid a share amount of 50 crore rupees or more must follow the applicability of an internal audit.
- Unlisted public companies with an outstanding deposit of 25 crore rupees or more at any time should adhere to the requirement for internal audit.
- Unlisted public companies that have received a loan of hundred crore
- Private companies with an annual turnover of 200 crore rupees or more should comply with the requirement for internal audit.
- Private companies that have received a loan of hundred crore rupees or more from multiple banks or public financial institutions at any point in time must follow the applicability of internal audit.
How is it Conducted?
1. Planning and Scoping: Internal auditors in Bangalore identify areas for review, assess risks, and define the scope of the audit. This involves understanding relevant policies, procedures, and regulations.
2. Information Gathering: Auditors or Chartered Accountants in Bangalore gather evidence through various methods like interviews with personnel, document review, observation of processes, and testing of controls. This helps assess adherence to procedures and identify potential weaknesses.
3. Analysis and Evaluation: The gathered evidence is analyzed to determine if controls are effective, risks are managed, and objectives are met. This involves identifying non-conformances, gaps, and opportunities for improvement.
4. Reporting: Auditors prepare a report summarizing findings, conclusions, and recommendations for improvement. This report is presented to management and the audit committee, who then monitor the implementation of corrective actions.
Internal Audits :
A Strategic Tool for Business Risk Management