While we will discuss Internal Audit requirement for certain size of companies however mere looking at it from compliance point of view will not justify the discussion, hence we will throw light in a broader aspect even for the businesses for whom it is not mandatory requirement.
What is Internal Audit?
Internal Audit is independent and objective examination of company’s internal controls, compliances & governance process with an aim to improve overall performance of company’s operations and compliance environment.
Mandatory requirement of Internal Audit
As per the Companies Act 2013, internal audit is mandatory for the following types of companies:
- Listed Companies
- Private and Public Companies whose turnover is more than INR 200 crores or having a borrowing of more than INR 100 crores
While Internal audit is recommended for every business, it may not be feasible for very small businesses.
Let’s discuss some businesses for whom Internal Audit is recommended.
In addition to the businesses covered under mandatory requirement, following businesses should also consider internal audit:
Large Corporations
Large corporations have multiple businesses and multiple departments. Hence they should consider such audits done to improve operational efficiency and compliance environment so they can avoid hassles while growing.
Multinational Companies (MNCs)
If multinational companies do not standardize their policies and operations and do not review their implementation timely, they have a high possibility of governance gaps. Therefore, we recommended independent audit in such companies.
Financial Institutions
Due to large number of stakeholders and huge money involvement, Finance sector it is highly regulated by government. It is very important to review the risk & compliances, to address the deviations in timely manner.
Non-Profit organisations
Non-profit organisations receive donations and grants from donors to spend the same for specified purposes hence trust and transparency is core for such organization. Independent audit helps establish and sustain that level of trust among different stakeholders.
Startups
Startups usually starts with great ideas with high potential growth, at the same time because these are new businesses that ability to identify & mitigate risks is not at par with that of experienced entrepreneurs and businesses. Hence, the audit can be immensely help them identify potential risks early and mitigate them. This also helps them build confidence among angel investor, venture capitalists and other financial institutions.
Key benefits of Internal Audit
- Improved internal controls
- Stringent compliance environment
- Early detection and mitigation of potential risks
- Better and timely handling of threats to the businesses
- Improved operational efficiency & profitability
Common areas covered in Internal Audit
Internal Audit can cover any business area in the audit. However, following are some common areas which management and/or auditor generally covers:
- Regulatory Compliance (compliance to internal policies & external rules/regulation/laws)
- Operational efficiency (Design, Production, Production planning, Inventory management etc.)
- Financial Controls (Revenue, purchases, expenses, reporting controls etc.)
- IT security (General IT controls, specific IT controls etc.)
We at Onlinecorpserv.com have a team of expert who are skilled and experienced in conducting Internal Audits in different industries i.e. Cement manufacturing, Hospitality, IT services, Training, Steel, Retail industry etc. You can contact us for any guidance and consultation. We are happy to help you.
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