Calculator Text

Internal Audit

It is an independent, objective assurance and consulting activity designed to add value and improve an organisation’s operations. It works as a catalyst for improving an organisation’s governance, risk management and management controls by providing insights and recommendations based on analyses and assessments of data and business processes.

Role of Internal Auditor is to advise management and the Board of Directors regarding how to better execute their responsibilities.
Findings of an audit may include 5 C’s

finding_audit

Sec. 138 of the Companies Act, 2013 requires following class of companies who are required to conduct internal audit:

A. Every listed company

B. Every unlisted public company having-

  • paid up share capital of 50 crores or more during the preceding financial year; or

  • turnover of 200 crore or more during the preceding financial year; or
  • outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore or more at any point of time during the preceding financial year; or
  • outstanding deposits of 25 crore or more at any point of time during the preceding financial year.

C. Every private company having-

  • turnover of 200 crore or more during the preceding financial year; or

  • outstanding loans or borrowings from banks or public financial institutions exceeding 100 crore or more at any point of time during the preceding financial year; or

Steps in Internal Audit Assignment:

  • Establish and communicate the scope and objectives for the audit to appropriate management.

  • Develop an understanding of the business area under review. This includes objectives, measurements, and key transaction types. This involves review of documents and interviews. Flowcharts and narratives may be created if necessary.
  • Describe the key risks facing the business activities within the scope of the audit.
  • Identify management practices in the five components of control used to ensure each key risk is properly controlled and monitored. Internal Audit Checklist can be a helpful tool to identify common risks and desired controls in the specific process or industry being audited.
  • Develop and execute a risk based sampling and testing approach to determine whether the most important management controls are operating as intended.
  • Report issues and challenges identified and negotiate action plans with management to address the problems.
  • Follow-up on reported findings at appropriate intervals. Internal Audit departments maintain a follow-up database for this purpose.
audit
Show Buttons
Hide Buttons