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Internal Audit Q'ns

JKT Pvt. Ltd. is required to appoint an internal auditor due to its turnover exceeding Rs. 200 crores, as mandated by the Companies Act, 2013. AB Pvt. Ltd. can validly appoint Mr. X, a practicing cost accountant, as an internal auditor since the Act allows for cost accountants to fulfill this role. Both companies must comply with the statutory requirements for internal audits based on their financial standings.

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Nagaraj Vemulapalli
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7 views1 page

Internal Audit Q'ns

JKT Pvt. Ltd. is required to appoint an internal auditor due to its turnover exceeding Rs. 200 crores, as mandated by the Companies Act, 2013. AB Pvt. Ltd. can validly appoint Mr. X, a practicing cost accountant, as an internal auditor since the Act allows for cost accountants to fulfill this role. Both companies must comply with the statutory requirements for internal audits based on their financial standings.

Uploaded by

Nagaraj Vemulapalli
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1 JKT Pvt. Ltd. having Rs. 40 lacs paid-up capital, Rs. 9.

50 crores reserves and turnover of


last three consecutive financial years, immediately preceding the financial year under audit,
being Rs. 49 crores, Rs. 145 crores and Rs. 260 crores, but does not have any internal audit
system. In view of the management, the internal audit system is not mandatory. Comment.

ANSWER:
PROVISION:
As per section 138 of the Companies Act, 2013, following class of companies (prescribed in rule 13
of Companies (Accounts) Rules,2014) shall be required to appoint an internal auditor which may be
either an individual or a partnership firm or a body corporate, namely:
1. Every LISTED COMPANY
. Every unlisted public company having: Paid up share capital of 50 crore rupees or more
during the preceding financial year or
. Turnover of 200 crore rupees or more during the preceding financial year or
. Outstanding loans or borrowings from banks or public financial institutions exceeding 100
crore rupees or more at any point of time during the preceding financial year or
. Outstanding deposits of 25 crore rupees or more at any point of time during the preceding
financial year; and
.
. Every private company having: Turnover of 200 crore rupees or more during the preceding
financial year; or
. Outstanding loans or borrowings from banks or public financial institutions exceeding 100
crore rupees or more at any point of time during the preceding financial year.
.

ANALYSIS AND CONCLUSION:


In the instant case, JKT Pvt. Ltd. is having a turnover of Rs. 260 crores during the preceding financial
year which is more than two hundred crore rupees. Hence, the company has the statutory
requirement to appoint an Internal Auditor and mandatorily conduct an internal audit.

1 AB Pvt. Ltd. company, having outstanding loans and borrowings from banks exceeding
one hundred crore rupees, wants to appoint Mr. X, a practicing cost accountant, as an internal
auditor. Is the appointment of Mr. X valid?

ANSWER:
Provision & Conclusion: According to the provision given in section 138 of the 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 companies.

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