Section 138 of Companies Act, 2013 – Internal Audit

  • Updated Till : June 15, 2024

SECTION 138. INTERNAL AUDIT

[Effective from 1st April, 2014]

EXEMPTION

In case of a Specified Public Company Section 138 shall apply if the articles of the company provides for the same, vide Notification No. 8(E) dated 04th January, 2017.

In case of a Specified private Company Section 138 shall apply if the articles of the company provides for the same, vide Notification No. 9(E) dated 04th January, 2017.

(1) Such class or classes of companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.

(2) The Central Government may, by rules, prescribe the manner and the intervals in which the internal audit shall be conducted and reported to the Board.

Applicable Rules

Companies (Accounts) Rules, 2014

[Effective from 1st April, 2014]

Rule 13. Companies required to appoint internal auditor.—(1) The following class of companies shall be required to appoint an internal auditor [which may be either an individual or a partnership firm or a body corporate][1] namely:—

(a) every listed company;

(b) every unlisted public company having—

(i) paid up share capital of fifty crore rupees or more during the preceding financial year; or

(ii) turnover of two hundred crore rupees or more during the preceding financial year; or

(iii) outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year; or

(iv) outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and

(c) every private company having—

(i) turnover of two hundred crore rupees or more during the preceding financial year; or

(ii) outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:

Provided that an existing company covered under any of the above criteria shall comply with the requirements of section 138 and this rule within six months of commencement of such section.

Explanation.—For the purposes of this rule—

(i) the internal auditor may or may not be an employee of the company;

(ii) [the term “Chartered Accountant” or “Cost Accountant'”shall mean a “Chartered Accountant” or a “Cost Accountant”, as the case may be, whether engaged in practice or not.][2]

(2) The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit.

[1] Substituted for the words “or a firm of internal auditors” by the Companies (Accounts) Amendment Rules, 2016 vide Notification No. 742(E) dated 27th July, 2016.

[2] Substituted by the Companies (Accounts) Amendment Rules, 2016 vide Notification No.  742(E) dated 27th July, 2016. Prior to the substitution it read as under:

” the term “Chartered Accountant” shall mean a Chartered Accountant whether engaged in practice or not.”

15 responses to “Section 138 of Companies Act, 2013 – Internal Audit”

  1. Elba Kahle says:

    Dear corporatelawreporter.com owner, Good work!

  2. corp sect says:

    Hmm is anyone else experiencing problems with the pictures on this blog loading?

    I’m trying to find out if its a problem on my end or if it’s the blog.
    Any feedback would be greatly appreciated.

  3. top cleaning says:

    Hi, i believe that i saw you visited my blog thus i got here to go back the choose?.I am attempting to in finding issues
    to enhance my site!I assume its good enough to use some of your ideas!!

  4. Its not my first time to go to see this website,
    i am visiting this web page dailly and get fastidious data from here daily.

  5. I’ve been exploring for a little bit for any high quality
    articles or weblog posts in this kind of space
    . Exploring in Yahoo I eventually stumbled upon this web site.
    Reading this info So i’m satisfied to exhibit that I have a very good uncanny feeling
    I discovered just what I needed. I so much surely will make certain to don?t put out of your mind this website and give
    it a look on a continuing basis.

  6. Marykate says:

    Thank you for sharing your thoughts. I really appreciate your efforts and I will be waiting
    for your next post thanks once again.

  7. Edric says:

    It’s nearly impossible to find knowledgeable people about this
    subject, but you seem like you know what you’re talking about!
    Thanks

  8. Cherese says:

    I was extremely pleased to find this web site. I want to to thank you for your time for this particularly wonderful read!! I definitely appreciated every little bit of it and I have you saved as a favorite to check out new information in your blog.

  9. Aiysha says:

    I was wondering if you ever thought of changing the structure of
    your website? Its very well written; I love what youve
    got to say. But maybe you could a little more in the way of content so people could connect
    with it better. Youve got an awful lot of text for only having one or
    2 pictures. Maybe you could space it out better?

  10. Katharyn says:

    I could not refrain from commenting. Perfectly written!

  11. Katima says:

    Hello my family member! I want to say that this post is awesome, nice written and include approximately all significant infos.
    I’d like to look extra posts like this .

  12. Patrina says:

    Greetings, I do think your blog may be having browser compatibility problems. When I take a look at your site in Safari, it looks fine however when opening in Internet Explorer, it’s got some overlapping issues. I simply wanted to give you a quick heads up! Other than that, great website!

  13. Marquelle says:

    Having read this I believed it was very informative. I appreciate you spending some time and energy to put this content together. I once again find myself personally spending a significant amount of time both reading and commenting. But so what, it was still worthwhile!

  14. Hey are using WordPress for your site platform?
    I’m new to the blog world but I’m trying to get started and set up my own. Do you require any html coding expertise to make your own blog?
    Any help would be greatly appreciated!

  15. Hey there! Do you know if they make any plugins to help with SEO?
    I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good results.
    If you know of any please share. Thank you!

Leave a Reply

Your email address will not be published. Required fields are marked *

Corporate Law Referencer

Corporate Law Referencer

Corporate Law Referencer

India’s Leading Compliance Software

India’s Leading Compliance Software

Get A Demo Today !

Recent Articles

Recent Legal updates

Recent Gst Updates