Page 68 - Quick Insights Book 2022

Chap. 17 – Internal Audit

In terms of sub section 5 of the said Section, the internal auditors into matters where there is a suspected fraud or
auditor is required to attend and participate at the meetings of irregularity or a failure of internal control systems of a material
such Audit Committees. The regulators are introducing onerous nature and reporting the matter to the Board.
and demanding requirements to protect the interest of the
investors. The focus of latest regulations are ethical conduct Insurance Regulatory and Development Authority
of business and enhanced corporate governance and financial (IRDA)
reporting requirements, etc.
IRDA (Investment) (Fourth Amendment) Regulations, 2008 has
Requirements under Companies Act, 2013 introduced requirements of quarterly internal audit for insurers.
The Companies Act, 2013, was enacted on August 30, Others
2013 which provides for a major overhaul in the corporate
governance norms for all the companies in the country. The Companies going in for tapping the international capital market,
Act consolidates and amends the law relating to companies. especially, those seeking listing in US stock exchanges,
The requirements under the Companies Act, 2013, and the NASDAQ, NYSE, etc., also need a strong internal audit function
rules notified there under are applicable for every company to meet the stringent corporate governance and internal control
or a class of companies (both listed and unlisted) as may be requirements of those stock exchanges. In this context, the US
provided therein. Apart from mandatory requirement for internal companies, having US public as investor also needs to comply
audit function for certain classes of companies, the Companies with the requirements of Sections 302 and 404 of the Sarbanes
Act, 2013, also specifically requires Audit Committee or Board Oxley Act of 2002.
to formulate the scope, functioning, periodicity and methodology
for conducting the internal audit. OTHER PROFESSIONAL OPPORTUNITIES
Section 138 of the Companies Act, 2013 stipulates that certain  Audit of Internal Control Framework
class or classes of companies as may be prescribed shall be  Risk Based Internal Audit (RBIA) in Banks under RBI
required to appoint an internal auditor, who shall either be a Guidance
Chartered Accountant or a Cost Accountant, or such other
professional as may be decided by the Board to conduct  Compliance of Internal Audit requirements under
internal audit of the functions and activities of the company. The Companies (Auditor’s Report) Order, 2020
Central Government may, by rules, prescribe the manner and  Internal audit of Operations of Depositary Participants
the intervals in which the internal audit shall be conducted and
reported to the Board. With respect to internal audit, Companies  Internal Audit requirements mandated by SEBI on a
(Accounts) Rules, 2014, which comes into effect from April 1, half yearly basis for stock brokers / trading members/
2014, lays down companies required to appoint internal auditor. clearing members

Securities and Exchange Board of India (SEBI)  System Audit of Investment functions of Insurance
Companies
The Securities and Exchange Board of India has also mandated
complete internal audit on a half-yearly basis for stock brokers/  Concurrent audit in Banks
trading members/ clearing members.  Internal audit to be undertaken in respect of Credit
Rating Companies Operations
Clause 49 of the Listing Agreement
 Internal audit of Mutual Funds
The Securities and Exchange Board of India (SEBI)
has introduced certain mandatory as well as certain  Internal Audit of Custodians
recommendatory corporate governance provisions in Clause  Internal audit of Registrar & Share Transfer Agents
49 of the Listing Agreement applicable to listed entities. As
per requirements of Clause 49 pertaining to internal audit, the  Internal audit mandatory for multiple banking or
Audit Committee is required to review the adequacy of the consortium RBI
internal audit function, if any, including the structure of internal  Internal Audit requirement every quarterly required for
audit department, staffing and seniority of the official heading insurers under IRDA (Investment) (Fourth Amendment)
the department, reporting structure coverage and frequency Regulations, 2008
of internal audit, including appointment, removal and terms of
remuneration of the chief internal auditor.  Internal Audit of Management Functions
Internal audit reports relating to internal control weaknesses.  Internal Audit of Compliance with Commercial Laws
The findings of any internal investigations by the internal

Quick Insights on Professional Opportunities for Chartered Accountants 55