Internal Audit

Question 1

Companies or class of companies required to appoint internal audit

Answer 1

Section 138 of the companies act
Every listed company
Every unlisted public company having
Paid up share capital of 50 crores or more (PFY)
Turnover of 200 crores or more (PFY)
Borrowings from banks and PFI’s at any point of time during the preceding financial year of 100 crores or more
Outstanding deposits of 25 crore or more during any time in PFY

Every private company having
Turnover of 200 crores or more
Borrowing of 100 crores or more during anytime in PFY

Question 2

Responsibility of the internal auditor

Answer 2

Perform work with independence
Work independent of accounting staff
Ensure adequate systems of internal control
Unusual facts and circumstances and report to the management
Appraise of policies and procedures existing in the company

Question 3

Scope of internal audit work

Answer 3

Internal control system and procedures ( consonance with organisational structure & cost benefit analysis)
Custodianship and safeguarding of assets
Compliance with policies, plans, procedures and regulations
Relevance and reliability of information
Organisational structure
Utilization of resources
Accomplishment. Of goals and objectives

Question 4

Appraisal of organizational structure by internal auditor

Answer 4

Grouping of activities of the enterprise to find whether responsibility and authority are in harmony with the grouping pattern

Structure is simple and economical and no undue dominance

Responsibilities of managerial staff at headquarters do not overlap those of chief executives at operating units

Examine reasonableness of span of control and unity of command

Question 5

Essential features of internal audit report

Answer 5

CCCAARRTWO

CLARITY
CONCISENESS 
CONSTRUCTIVENESS
AUDITEE's VIEW
ACCURACY
Readability
Recommendations 
Timeliness
Draft report
Objectivity