INTERNAL AUDIT

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Your INTERNAL AUDIT

Why Should I Use Auriga Accounting For INTERNAL AUDIT?

Auriga Accounting has a team of registration experts who can provide complete guidance to register your INTERNAL AUDIT.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for registration

Complete your registration

Your INTERNAL AUDIT

OVERVIEW

Internal audit is an independent and objective assurance and consulting activity within an organization. It is conducted by an internal audit function or department to evaluate and improve the effectiveness of risk management, control, and governance processes. The primary purpose of internal audit is to provide assurance to management and the board of directors that risks are identified and appropriately managed, internal controls are effective, and operations are conducted in compliance with applicable laws, regulations, and policies.

An internal audit is performed by an internal audit department or an independent internal audit firm within an organization. It evaluates the internal controls, risk management processes, and operational efficiency of the organization. The goal is to identify areas for improvement and ensure compliance with policies and procedures.

Person responsible for conducting internal audits

"Chief Internal Auditor" or "Internal Audit Manager."

Chief Internal Auditor – The Chief Internal Auditor is a senior-level position within the organization and often reports directly to the audit committee of the board of directors or to the highest levels of management, such as the Chief Executive Officer (CEO) or Chief Financial Officer (CFO).

Qualification of external auditor

Certified Public Accountant (CPA) or Equivalent: External auditors are often required to hold a CPA designation or an equivalent professional accounting qualification. This qualification demonstrates a strong understanding of accounting principles, financial reporting, auditing standards, and relevant regulations.

Professional Membership: External auditors are usually members of professional accounting bodies or regulatory organizations, such as the American Institute of Certified Public Accountants (AICPA) in the United States, the Institute of Chartered Accountants (ICA) in the United Kingdom, or the Chartered Professional Accountants (CPA) in Canada. These memberships ensure adherence to professional standards and codes of ethics.

Education and Experience: External auditors typically hold a bachelor’s or master’s degree in accounting, finance, or a related field. They also gain practical experience through working in public accounting firms or audit departments of organizations. The level of experience required may vary depending on the complexity and size of the audits they undertake.

Continuing Professional Education: External auditors are required to engage in ongoing professional development to stay updated with changes in accounting standards, auditing practices, and regulations. They are expected to participate in training programs, seminars, and courses to enhance their knowledge and skills.

Independence and Objectivity: External auditors must demonstrate independence and objectivity in their work. They should be free from any conflicts of interest that could compromise their ability to provide an unbiased assessment of the financial statements and internal controls. Independence is crucial to maintain the integrity and credibility of the audit process.

Knowledge of Auditing Standards: External auditors need to be well-versed in auditing standards and guidelines established by professional accounting bodies or regulatory authorities. These standards, such as the International Standards on Auditing (ISA), provide a framework for conducting audits and ensuring the quality and consistency of audit work.

PENALTY

SECTION 447

Definition of Fraud: Section 447 defines fraud as any act, omission, concealment of facts, or abuse of position, committed with an intention to deceive, gain undue advantage, or injure the interests of the company or its shareholders or creditors or any other person, whether directly or indirectly.

Punishment for Fraud: If a person is found guilty of fraud under Section 447, they can be punished with imprisonment for a term not less than six months, which may extend to ten years. In addition to imprisonment, the person may also be liable to pay a fine that is not less than the amount involved in the fraud but may extend to three times the amount of fraud.

SECTION 448

False Statement: Section 448 deals with situations where any person makes a false statement in any return, report, certificate, financial statement, prospectus, or other document filed, submitted, or published under the Companies Act, with knowledge that the statement is false in any material respect.

Punishment: If a person is found guilty of making a false statement under Section 448, they can be punished with imprisonment for a term not exceeding two years and/or with a fine that is not less than the amount involved in the statement but may extend to five times the amount of fraud.

Eligibility Criteria for Appointment of Internal Auditor

• Any listed companies

• Any unlisted Public Company having

- Paid-up share capital of Rs.50 crore or above during the preceding financial year.
- Annual turnover of income of Rs.200 crores or above during the preceding financial year.
- Outstanding loans or borrowings from either banks or public financial institutions that are exceeding Rs.100 crores or above during the preceding financial year.
- Outstanding deposits of Rs.25 crores or above during the preceding financial year.

• In case of any Private Company having-

- Annual turnover of income of Rs.200 crores or above during the preceding financial year.
- Outstanding loans or borrowings from either banks or public financial institutions that are exceeding Rs.100 crores or above during the preceding financial year.

characteristics

Independence: Internal auditors are independent of the operations and processes they audit. They provide an unbiased and objective assessment of controls, risks, and processes within the organization.

Risk Management: Internal audit evaluates and assesses the organization’s risk management processes. This includes identifying potential risks, assessing their likelihood and impact, and determining whether adequate controls are in place to mitigate those risks.

Control Evaluation: Internal audit examines the effectiveness of internal controls in mitigating risks and ensuring compliance with policies, laws, and regulations. They assess the design and implementation of controls, test their operating effectiveness, and make recommendations for improvement.

Compliance: Internal audit verifies compliance with applicable laws, regulations, and internal policies. They review whether the organization is adhering to legal and regulatory requirements and following internal guidelines and procedures.

Efficiency and Effectiveness: Internal audit evaluates the efficiency and effectiveness of operations, processes, and systems within the organization. They assess whether resources are being used efficiently, objectives are being achieved, and desired outcomes are realized.

Consulting and Advisory: In addition to assurance activities, internal audit provides consulting and advisory services to management. They offer recommendations for improving processes, enhancing controls, and addressing identified issues or weaknesses.

benefit's

DOCUMENTS

Financial Statements: The company’s financial statements, including the balance sheet, income statement, cash flow statement, and statement of changes in equity for the audit period.

General Ledger: The general ledger provides a summary of all the company’s transactions and account balances. It includes details of revenues, expenses, assets, liabilities, and equity.

Bank Statements: Bank statements and related documents for all company bank accounts, including reconciliations and supporting documents for transactions.

Supporting Documentation: Invoices, receipts, purchase orders, sales contracts, agreements, and other supporting documentation related to revenue, expenses, assets, and liabilities.

Fixed Assets Register: A register or schedule detailing the company’s fixed assets, including descriptions, acquisition costs, depreciation methods, and accumulated depreciation.

Payroll Records: Payroll registers, employee records, payroll tax filings, and related documentation for verifying employee compensation, benefits, and payroll tax compliance.

Inventory Records: Detailed records of inventory levels, valuation, purchases, sales, and cost of goods sold. This may include physical inventory count reports, inventory valuation methods, and inventory reconciliation records.

Debt and Equity Instruments: Details of debt instruments, such as loan agreements, debentures, bonds, and equity instruments like share certificates, share registers, and share issuance documents.

Contracts and Agreements: Copies of significant contracts, leases, joint venture agreements, licensing agreements, and other legal agreements relevant to the company’s operations.

Tax Records and Filings: Tax returns, tax-related schedules, tax payments, tax assessments, and any correspondence with tax authorities.

Internal Control Documentation: Policies, procedures, and internal control documentation related to financial reporting, including segregation of duties, authorization levels, and control frameworks.

Previous Audit Reports: Previous years’ audit reports and management letters, along with any follow-up actions taken by the company.

Corporate Governance Documents: Board meeting minutes, shareholders’ meeting minutes, board committee meeting minutes, and other corporate governance-related documents.

Legal and Regulatory Compliance: Documentation related to compliance with applicable laws, regulations, and industry-specific requirements.

Any Other Requested Information: Auditors may request additional information, reports, or documentation based on the specific requirements of the audit engagement and applicable auditing standards.

PROCESS OF APPOINT INTERNAL APPOINT

An Internal Auditor could be appointed by passing a Board Resolution for this purpose. Before such an appointment, the Board members of the company must endorse the terms and conditions of the appointment, and the Company Secretary of the company must issue a Written Consent for the role as per the companies Act 2013. If appointed, the details of the appointed Internal Auditor must be furnished in the register of companies and submitted to the Registrar of Companies (ROC). These details are to be furnished and submitted within thirty days of such appointment in Form MGT-14 should be filed within thirty days (30 Days) of the passing of Board Resolution with the Consent Letter.

Duties and Responsibility of internal audit

Examining Books of Accounts and Financial Statements: The internal auditor is responsible for examining the books of accounts, financial statements, and other financial records of the company. They ensure that the financial records are accurate, complete, and in compliance with applicable accounting standards and regulatory requirements.

Assessing Internal Controls: The internal auditor evaluates the effectiveness of the company’s internal controls, risk management systems, and governance processes. They identify control weaknesses, assess risks, and recommend improvements to enhance the control environment.

Ensuring Compliance: The internal auditor ensures compliance with the provisions of the Companies Act 2013 and other applicable laws, rules, and regulations. They review whether the company is adhering to legal requirements and fulfilling its statutory obligations.

Reporting to the Audit Committee: The internal auditor reports to the audit committee of the company’s board of directors. They provide periodic reports on the findings of internal audits, the status of compliance, and the effectiveness of internal controls. The internal auditor may also attend audit committee meetings to present their findings and provide necessary explanations.

Conducting Risk Assessment: The internal auditor performs risk assessment activities to identify and evaluate risks faced by the company. They assess the impact and likelihood of risks, and recommend measures to mitigate and manage those risks effectively.

Reviewing Systems and Processes: The internal auditor reviews the company’s systems, processes, and operations to identify areas of improvement and efficiency. They assess the adequacy and effectiveness of processes, and make recommendations for streamlining operations and enhancing performance.

Investigating Fraud and Irregularities: The internal auditor investigates suspected fraudulent activities, irregularities, or misconduct within the company. They may conduct special audits or forensic examinations to gather evidence and provide recommendations for appropriate action.

Coordinating with External Auditors: The internal auditor collaborates with the external auditors during the annual statutory audit. They provide assistance, share relevant information, and address any queries or concerns raised by the external auditors.

VALIDITY

FORM NO	COMPLIANCE
FORM ADT-1	Selection of Auditor
FORM AOC-4	Annual filing of financial statements
FORM MGT-7	Filing of annual return with shareholder and debentures list.
FORM MGT-14	Filing of resolution and agreement to ROC.
FORM CAR-1	Maintenance cost and record.
FORM CAR-2	Assignment of cost auditor.
FORM CAR-3	Submission of the cost audit records to the board.
FORM CAR-4	Filing cost audit report, wherever applicable.
FORM ITR-6	Filing income tax return of the company.
GSTR-3B With GSTR-1. AND GSTR. 2A	Cross verification.
FORM GSTR-9C	Filing GST Audit Form.

PENALTY

If a company or any other officer of the company, contravenes the provisions of this section, then the company or any officer of the company who is in default is liable for punishment with a penalty of up to Rs.10,000. In case of continuation of default in complying with the above section further fine of Rs.1,000 per day will be imposed.

WHY AURIGA?

Designing Internal Audit Framework: Auriga Accounting can assist businesses in designing an effective internal audit framework tailored to their specific needs. They can help establish internal audit policies, procedures, and methodologies that align with industry best practices and regulatory requirements.

Internal Control Assessment: Auriga Accounting can conduct a comprehensive assessment of the company’s internal control systems. They review and evaluate the design and effectiveness of internal controls, identifying any gaps, weaknesses, or areas of improvement. This assessment ensures that internal controls adequately mitigate risks and safeguard the company’s assets.

Internal Audit Planning: Auriga Accounting can help in planning internal audit engagements. They assist in identifying the scope, objectives, and priorities of internal audits based on the company’s risk profile. They collaborate with management to align internal audit activities with organizational goals and priorities.

Execution of Internal Audit Engagements: Auriga Accounting professionals can conduct internal audit engagements on behalf of the company. They perform audit procedures, gather evidence, and assess the effectiveness of internal controls. They identify control deficiencies, operational inefficiencies, and non-compliance with policies and procedures.

Risk Assessment and Mitigation: Auriga Accounting can assist in identifying and assessing risks faced by the company. They analyze the impact and likelihood of risks and provide recommendations to mitigate and manage those risks effectively. This helps in strengthening the company’s risk management framework.

Reporting and Communication: Auriga Accounting prepares comprehensive internal audit reports that highlight audit findings, recommendations, and action plans. They communicate the results of internal audits to management, the audit committee, and other relevant stakeholders. They provide clear and concise reports that assist in decision-making and continuous improvement.

Continuous Monitoring and Follow-up: Auriga Accounting can support the company in implementing a system for ongoing monitoring and follow-up on internal audit recommendations. They help track the progress of action plans, ensure timely implementation, and provide periodic updates to management and the audit committee.

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INTERNAL AUDIT

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Why Should I Use Auriga Accounting For INTERNAL AUDIT?

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Resolve all your queries

Complete your registration

Why Should I Use Auriga Accounting For INTERNAL AUDIT?

book appointment

Resolve all your queries

Complete your registration

OVERVIEW

Person responsible for conducting internal audits

"Chief Internal Auditor" or "Internal Audit Manager."

Qualification of external auditor

PENALTY

Eligibility Criteria for Appointment of Internal Auditor

• Any listed companies

• Any unlisted Public Company having

• In case of any Private Company having-

characteristics

benefit's

DOCUMENTS

PROCESS OF APPOINT INTERNAL APPOINT

Duties and Responsibility of internal audit

VALIDITY

PENALTY

WHY AURIGA?

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