Internal Controls
and process effectiveness
Internal Audit
Quick Reference for Your Business
Section 138 Companies Act — Who Must Appoint · What It Covers · Penalties
01
Who Must Appoint An Internal Auditor
| Company type | Trigger (preceding FY) |
|---|---|
| Listed company | Always mandatory |
| Unlisted public | Any one: turnover ≥ ₹200 cr · paid-up capital ≥ ₹50 cr · borrowings > ₹100 cr · deposits ≥ ₹25 cr |
| Private company | Turnover ≥ ₹200 cr OR borrowings > ₹100 cr |
| LLP / proprietorship / firm | Not covered by Section 138 |
02
What Internal Audit Covers
Risk Management
and fraud-prevention checks
Compliance
with laws and internal policies
Operational Efficiency
and cost leakages
Reports to the Board / Audit Committee
03
Penalty for Default
Section 450 (general penalty)
₹10,000
plus ₹1,000 per day of continuing default, on the company and officers in default.
Note:The internal auditor can be a CA, Cost Accountant or other professional approved by the Board — but thestatutory auditor cannot also be the internal auditor(Section 144). Even where not mandatory, internal audit strengthens controls and boosts lender and investor confidence.
04
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