Internal audit evaluates whether processes and controls work as intended. Section 138 of the Companies Act, 2013 requires specified companies to appoint an internal auditor, who may be a Cost Accountant.
Scope of service
- Risk assessment and annual audit plan
- Procure-to-pay, order-to-cash and inventory cycles
- Payroll and statutory dues
- Internal financial controls testing
- Quarterly reports to the audit committee or management
Regulatory framework
- Companies Act, 2013 — section 138
- Companies (Accounts) Rules, 2014 — Rule 13 (applicability)
- Standards on Internal Audit, where adopted by the client
Typical professional activities
- Process walkthroughs
- Sample testing
- Draft observations with management responses
- Follow-up on agreed actions
Applicable industries
- Manufacturing
- Automobile & Auto Components
- Engineering
- IT & Software
- Pharmaceuticals
- Infrastructure
- Sugar & Agro Industries
- Trading & Distribution
- Service Industries
- Startups & Growing Businesses
Relevant articles and resources
Frequently asked questions
Which companies must appoint an internal auditor?
Every listed company; unlisted public companies with paid-up capital of ₹50 crore or more, turnover of ₹200 crore or more, borrowings above ₹100 crore or deposits of ₹25 crore or more; and private companies with turnover of ₹200 crore or more or borrowings above ₹100 crore (Rule 13, Companies (Accounts) Rules, 2014).
Can a Cost Accountant be the internal auditor?
Yes. Section 138 of the Companies Act, 2013 permits a Chartered Accountant, a Cost Accountant or another professional decided by the Board to be appointed as internal auditor.
The information on this page describes the nature of the service. It is not advice on any specific matter. See the disclaimer.