Page 320 - CA Final PARAM Digital Book.

Part 1- Internal Audit

QNO Sec 138--Applicability (Average Turnover of Past 3 Years) Old Course – (N08R, M15R, SM17, PM17,
352.000 TITANIUM CNO—IA.025 N17E, M18M, N22M, N23M)
JKH Pvt Ltd. who is into the business of imparting coaching to CA students did not appoint any internal
auditor for the year ended 31st March 2017. As on 31st March 2016, the company had paid up capital of
₹ 50 lakhs and reserves of ₹ 10 crores. Its turnover for the 3 years preceding the year ended 31st March
2017 was ₹ 75 crores, ₹ 145 crores and ₹ 260 crores respectively. As an auditor of the company for the
year ended 31st March 2017, how would you deal with the above?
OR
PQR Ltd., a listed company and having an average annual turnover of more than ₹ 5 crores has no
Internal Audit System. Give your views.
OR
ABC Pvt Ltd was involved in the business of manufacturing pipes and holdings. For financial year 2020-21

the company had the following turnover from its various segments and product: Segment Name
Turnover Profit Steel / Iron Pipe Manufacturing 140 Crore 10 Crore Holdings and Civil Structure
Accessories 25 Crore 50 Lakh PVC / Yellow Pipe Manufacturing 65 Crore 8 Crore During Financial Year
2021-22, the company’s performance was considerably lower compared to FY 2020-21 due to
competition and high prices. Turnover and Profit of the company for FY 2021-22 is given hereunder:
Segment Name Turnover Profit Steel / Iron Pipe Manufacturing 60 Crore 2 Crore Holdings and Civil
Structure Accessories 15 Crore 35 Lakh PVC / Yellow Pipe Manufacturing 35 Crore 3 Crore The company
was fully financed through its own capital during both years. Kindly assess whether the company was
required to appoint internal auditor as per section 138 read with Rule 13 of the Companies (Accounts)
Rules, 2014 for FY 2021-22.
Answer Part I -- Relevant Section & Laws
▪ As per section 138 of the Companies Act, 2013, read with Rule 13 of Companies (Audit and

Auditors) Rules, 2014
Part II -- Requirements of Relevant Section & Laws
➢ As per section 138 of the Companies Act, 2013, the following class of companies (prescribed in rule
13 of Companies (Accounts) Rules, 2014) shall be required to appoint an internal auditor or a firm
of internal auditors, namely-
a. every listed company;

b. every unlisted public company having
(i) paid up share capital of fifty crore rupees or more during the preceding financial
year; or
(ii) turnover of two hundred crore rupees or more during the preceding financial
year; or
(iii) outstanding loans or borrowings from banks or public financial institutions
exceeding one hundred crore rupees or more at any point of time during the
preceding financial year; or
(iv) outstanding deposits of twenty-five crore rupees or more at any point of time
during the preceding financial year; and

c. Every private company, having –
(i) turnover of two hundred crore rupees or more during the preceding financial
year; or
(ii) outstanding loans or borrowings from banks or public financial institutions
exceeding one hundred crore rupees or more at any point of time during the

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