Page 321 - CA Final PARAM Digital Book.

preceding financial year:
Case 1
Part III – Case Discussion
➢ In the instant case, JKH Pvt. Ltd. is having turnover of 260 crores during the preceding financial
year which is more than two hundred crore rupees.
Part IV – Conclusion
➢ Hence, the company has the statutory liability to appoint an Internal Auditor and mandatorily
conduct internal audit
Case 2
Part III – Case Discussion
➢ In the instant case, PQR Ltd is a listed company and having an average annual turnover of more
than ` 5 crores.
As the company is a listed company, the provisions related to internal audit shall be applicable to
the company. The turnover limit given has no relevance here.
Part IV – Conclusion
➢ Therefore, the auditor will have to mention in his report the fact of not having such internal audit
system by the
Author’s Note

Only turnover of last year is important. Turnover of previous years other than that is of no use. Earlier
previous three turnover was important as average of last three year was calculated to for CARO
reporting on internal audit. Now there is no such requirement.

QNO Who can become internal auditor ? New Course – (SM23)
352.100 TITANIUM CNO -- IA.025

After an illustrious career in Indian Audit & Accounts Service for about 25 years, Parteek, a postgraduate
in law, has taken voluntary retirement from government service. Being in fine spirits, he wants to take
responsibilities in corporate sector as Chief internal auditor. On looking at attractive compensation
packages, he applied for such position in a leading listed company engaged in oil refining business. The
Board of company is keen on him due to his impressive credentials.

Can he be appointed in this leading position of said company?

Answer As per section 138 of Companies Act, 2013 the internal auditor shall either be a chartered accountant or a
cost accountant (whether engaged in the practice or not), or such other professional as may be decided by
the Board to conduct an internal audit of the functions and activities of the company.

The Board can appoint any professional as may be decided by it. The applicant in question is a law
postgraduate and he has spent 25 years of his career in Indian Audit & Accounts Service. Therefore, he has
got the necessary experience and skills required for the said vacancy. The Board would be in a position to
appoint such a competent and experienced person in the field of auditing as its Chief Internal auditor.

QNO Applicability of Internal Audit & Scope of Internal Audit New Course – (SM23)
352.500 TITANIUM CNO -- IA.025
AB Pvt. Ltd. company has outstanding loans or borrowings from banks exceeding one hundred crore
rupees wants to appoint an internal auditor. Please guide him for the applicability of the same and who
can be appointed as an internal auditor and what work would be reviewed by him
Answer Applicability of Internal Audit: Section 138 of the Companies Act, 2013 states that every private limited
company is required to conduct internal audit if its 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.

In view of above provisions, AB Pvt. Ltd. is under compulsion to conduct internal audit as its loans or
borrowings are falling under the prescribed limit.

Who can be appointed as Internal Auditor- The internal auditor shall either be a chartered accountant or a
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