Liability for internal audit is ultimately held by the Board of Directors and senior management (CEO/CFO), who are responsible for establishing, maintaining, and monitoring the internal control system, notes the Office of Internal Audit at the University of Florida. While the internal audit function provides objective assurance, management holds the responsibility to implement controls, and the audit committee oversees this process.
The internal audit team is led by the Chief Audit Executive (“head of audit”) who often reports administratively to management (usually the CFO) while retaining their independence by reporting directly to the organization's Audit Committee of the Board of Directors.
The statutory audit is a mandatory audit that every private limited company must conduct irrespective of its profit or turnover. A company incurring loss must also conduct a statutory audit.
A private company must conduct an internal audit if it meets any one of the following criteria: Turnover of INR200 crore or more in the preceding financial year. Outstanding loans or borrowings of ₹100 crore or more from banks or public financial institutions at any time during the preceding financial year.
All companies listed on stock exchanges in India must have an internal auditor. Turnover - 200 crores or more. Paid Up Share Capital - 50 crores or more. Outstanding loans/ Borrowing from banks or financial institutes - Exceeding limit of 100 crores or more.
In some regulated industries it is mandatory to have an internal audit department, but even where this is not the case there may be close scrutiny of the company by the regulatory authority, which can apply significant sanctions such as the removal of operating licences.
More Details on Small Company Concept for Audit Exemption
The first option companies have for conducting an internal audit is to rely on their own in-house personnel. If a company has sufficient internal resources to manage an audit in-house, this approach might seem like the most cost-effective option.
The Ministry of Corporate Affairs ( MCA ) has imposed a total penalty of ₹2.5 lakh on a private limited company and its director for failure to appoint an Internal Auditor.
d) A small company that is an authorised insurance, company, a banking company, an e-money issuer, a MiFID investment firm. If your company meets the requirements to be small itself, and the group it is part of is small and not ineligible, the company can take the audit exemption.
Auditors face potential liability from lawsuits under common law from clients and third parties for issues like negligence, fraud, and breach of contract. They can also face civil and criminal liability under statutes.
The “5 P's of Internal Audit” includes 5 video-clips presenting testimonials from audit managers on the topics of Plan, Perform, People, Profile and Product.
Too many deductions taken are the most common self-employed audit red flags. The IRS will examine whether you are running a legitimate business and making a profit or just making a bit of money from your hobby. Be sure to keep receipts and document all expenses as it can make things a bit ore awkward if you don't.
Any business where the total sales, turnover, or receipts exceed Rs. 1 crore in a year should have a tax audit in India. As a professional, receipts over Rs. 50 lakh makes you eligible for a tax audit.
The Global Internal Audit standards are organized into five domains including Purpose of Internal Auditing; Ethics and Professionalism; Governing the Internal Audit Function; Managing the Internal Audit Function; and Performing Internal Audit Services.
Internal audits are conducted by qualified internal auditors—professionals with specialized knowledge in auditing, risk management, and industry-specific operations. In 2025, internal audit teams play a more strategic role than ever, combining assurance with advisory services to support organizational goals.
The principles of independence, objectivity, competence, confidentiality, professionalism, due professional care, and continuous improvement are essential for the internal audit function to fulfill its role as a trusted advisor to the organization.
“The role of internal audit is to provide independent assurance that an organization's risk management, governance, and internal control processes are operating effectively.” Internal auditing objectively enhances an organization's business practices.
Most organizations consider critical thinking an indispensable skill for internal auditors. Critical thinking skills lead to improved decision-making and can result in better organizational performance.
“Clause 138. – This is a new clause and seeks to provide that prescribed Companies shall be required to conduct internal audit of functions and activities of the company by internal auditor appointed by the company. Manner of conducting internal audit shall be prescribed by the Central Government.”
The 2-year rule for audit is quite simple. If a company meets two or more of the above criteria for two years in a row, then it must have a statutory audit. Conversely, a firm that currently has to be audited can't qualify for an audit exemption until it fails to meet at least two over the criteria over two years.
Below are the most commonly audited business types, with reasons for IRS focus:
All Listed Companies: Every company listed on a stock exchange in India is required to have an internal audit function. Unlisted Public Companies: Unlisted public companies meeting any of these criteria during the previous financial year also need an internal audit: Turnover of ₹200 Crore or more.