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The section 138 of Companies Act, 2013 provides for the compilation of internal audits. This section requires the business corporations to hire internal auditors and go ahead with the internal audits of the company. Internal audits are done by a certain class of businesses who hire chartered accountant (generally) or cost accountant or other professional for the internal audits. The internal audit is mandatory for this section of companies.
The main function and objective of internal audit is to provide assurance on company's risk management, internal environment, governance and framework. These are done through the review of:
The broad areas of coverage of internal audits are-
The periodic reports regarding the audit will be issued to the management on the basis of- impact of issue, audit management, audit finding, recommendation, target date and management comment.
Whenever internal audits are discussed then the two major components are fees and confidentiality.
Fees- The fee is usually payable on a quarterly basis once the draft reports are submitted with the organization. The fee is based on the assessment of the work and the time involved in it.
Confidentiality- confidentiality plays an important role in internal audit. The data that is received, assessed and managed is kept strictly confidential. The auditors ensure that they keep the data as safe as their own so no complaints could arise against them. If there is no confidentiality then a serious damage could be done to the company with the internal data by the company's competitors.
Internal audit's main aim is to make sure that all the accounts and tabs are working properly and there is no malfunctioning. It works best to ensure that all the debits and credits are in compliance with the working of the company.