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Companies Act 2013 - Internal Audit

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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