The importance of internal audit has
been well acknowledged in Companies (Auditor Report) Order, 2003 (CARO 2003), pursuant to which auditor of a company is required to comment on the
fact that the internal audit system of the company is commensurate with
the nature and size of the company’s operations. However, CARO 2003 did not
mandate that an internal audit should be conducted by the internal auditor
of the company. CARO 2003 acknowledged that an internal audit can be conducted
by an individual who is not in appointment by the company.
The 2013 Act now moves a step forward
and mandates the appointment of an internal auditor who shall either be a
chartered accountant (CA) or a cost accountant (CMA), or such other professional as
may be decided by the Board to conduct internal audit of the functions and
activities of the company.
The class or classes of companies which
shall be required to mandatorily appoint an internal auditor as per the draft
rules are as follows: *
- Every listed company
- Every public company having paid-up share capital of more than Rs 10 crore
- Every other public company which has any outstanding loans or borrowings from banks or public financial institutions more than Rs 25 crore or which has accepted deposits of more than Rs 25 crore at any point of time during the last financial year
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