Is internal audit mandatory for companies?

Internal audit is mandatory for companies with turnover of ₹200 crore or more, or outstanding loans/borrowings of ₹100 crore or more. Listed companies and certain regulated entities also require internal audit. However, it's recommended for all businesses to improve controls and prevent fraud.

Internal Audit Services India | Risk Assessment & Control Evaluation from ₹25,000

What is Internal Audit?

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve your organization's operations

🎯 Purpose of Internal Audit

Internal audit helps organizations accomplish their objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of:

Risk Management: Identify and assess business risks
Internal Controls: Evaluate control effectiveness
Governance Processes: Ensure compliance with policies
Operational Efficiency: Improve business processes
Fraud Prevention: Detect and prevent irregularities

📊 Key Benefits

✅ Identifies operational inefficiencies and cost savings
✅ Prevents fraud and financial irregularities
✅ Ensures compliance with laws and regulations
✅ Improves internal controls and processes
✅ Provides independent assurance to management
✅ Enhances corporate governance
✅ Protects organizational assets
✅ Supports strategic decision-making

🔍 Internal Audit vs Statutory Audit

Aspect	Internal Audit	Statutory Audit
Purpose	Improve operations & controls	Express opinion on financial statements
Conducted For	Management	Shareholders & stakeholders
Mandatory	Only for large companies (₹200 Cr+ turnover)	All companies
Frequency	Continuous/periodic throughout year	Annual
Scope	Operations, processes, risks, controls	Financial statements
Independence	Reports to management/audit committee	Appointed by shareholders
Focus	Future-oriented, preventive	Historical, verification

📌 Legal Requirement: As per Section 138 of the Companies Act, 2013, internal audit is mandatory for:

Companies with turnover of ₹200 crore or more during the preceding financial year
Companies with outstanding loans or borrowings from banks/financial institutions exceeding ₹100 crore
Listed companies and their subsidiaries
Unlisted public companies with paid-up share capital of ₹50 crore or more

Source: Ministry of Corporate Affairs

Types of Internal Audit We Conduct

💼

Operational Audit

Evaluate efficiency and effectiveness of business operations, identify process bottlenecks, and recommend improvements.

Process efficiency review
Resource utilization analysis
Performance metrics evaluation
Workflow optimization
Cost reduction opportunities

💰

Financial Audit

Review financial records, transactions, and controls to ensure accuracy, compliance, and prevention of financial irregularities.

Transaction verification
Financial controls testing
Revenue & expense analysis
Asset verification
Bank reconciliation review

📋

Compliance Audit

Ensure adherence to laws, regulations, policies, and procedures applicable to your industry and business operations.

Statutory compliance check
Policy adherence review
Regulatory requirement audit
Internal policy compliance
License & registration verification

⚠️

Risk Assessment Audit

Identify, assess, and prioritize risks that could impact your business objectives and recommend risk mitigation strategies.

Risk identification & mapping
Control effectiveness assessment
Risk mitigation strategies
Business continuity review
Crisis management evaluation

🔍

Fraud Detection Audit

Investigate potential fraud, examine red flags, and implement preventive controls to protect organizational assets.

Fraud risk assessment
Forensic investigation
Internal fraud prevention
Whistleblower complaint review
Anti-fraud controls implementation

💻

IT & Systems Audit

Evaluate IT infrastructure, data security, system controls, and technology governance for cybersecurity and efficiency.

IT controls assessment
Data security review
Access control evaluation
Backup & recovery testing
Software license compliance

📦

Inventory Audit

Physical verification of inventory, stock management review, and assessment of inventory controls and valuation methods.

Physical stock verification
Stock register reconciliation
Obsolete stock identification
Inventory valuation review
Warehouse management audit

🏢

Branch/Unit Audit

Comprehensive audit of branch operations, compliance with head office policies, and local regulatory requirements.

Branch operations review
Policy compliance check
Cash & asset verification
Local compliance audit
Performance evaluation

👥

HR & Payroll Audit

Review HR policies, payroll processing, employee benefits, statutory compliance, and labor law adherence.

Payroll processing review
Statutory deductions verification
Employee benefits audit
Leave & attendance audit
Labor law compliance

Why Choose Our Internal Audit Services?

Expert internal auditors with deep industry knowledge and proven track record

🎓

Qualified Professionals

Team of Chartered Accountants, MBAs, and certified internal auditors with 10+ years of experience across industries.

🔬

Risk-Based Approach

Focus on high-risk areas first using systematic risk assessment methodology to maximize audit value and impact.

📊

Detailed Reporting

Comprehensive audit reports with actionable recommendations, risk ratings, and management response tracking.

🤝

Independent & Objective

Completely independent assessment with no conflict of interest, ensuring unbiased evaluation and recommendations.

⚡

Timely Delivery

Strict adherence to audit timelines with regular progress updates and prompt report submission.

💡

Value Addition

Beyond compliance - we provide strategic insights, best practices, and process improvement recommendations.

Internal Audit Pricing

Flexible pricing based on business size, complexity, and audit scope

Small Business

₹25,000

One-time audit

Basic operational audit
Financial controls review
Compliance checklist
Up to 2 days on-site
Executive summary report
Email support for 15 days

Get Started

Medium Business

₹75,000

Quarterly audit package

Comprehensive operational audit
Financial & compliance audit
Risk assessment included
4 quarterly visits (2 days each)
Detailed audit reports
Implementation support
Priority phone support

Choose Plan

Large Enterprise

₹2,00,000+

Annual comprehensive audit

Full-scope internal audit
All audit types included
Monthly/quarterly visits
Multi-location coverage
Dedicated audit team
Real-time reporting dashboard
24/7 support & consultation

Specialized Audits

Custom

Based on scope

Fraud investigation: ₹50,000+
IT systems audit: ₹60,000+
Inventory audit: ₹30,000+
Branch audit: ₹40,000+
HR & payroll audit: ₹35,000+
Forensic audit: ₹1,00,000+

Get Quote

💰 Pricing Factors

Internal audit costs vary based on:

Business Size:

Annual turnover
Number of employees
Transaction volume

Audit Scope:

Departments covered
Audit objectives
Testing depth required

Complexity:

Industry regulations
Number of locations
IT systems complexity

Our Internal Audit Process

Systematic 7-step audit methodology ensuring comprehensive coverage and actionable insights

Planning

Understand business, identify risks, define audit scope and objectives

Risk Assessment

Evaluate inherent risks, prioritize high-risk areas for detailed testing

Fieldwork

On-site data collection, interviews, document review, and control testing

Testing

Perform detailed testing of controls, transactions, and compliance requirements

Analysis

Analyze findings, identify root causes, assess impact and likelihood

Reporting

Prepare comprehensive report with observations, recommendations, and risk ratings

Follow-up

Track implementation of recommendations and verify corrective actions

📋 What Our Audit Report Includes

Executive Summary

Overall audit opinion
Key findings summary
Critical issues highlighted
Overall risk assessment

Detailed Findings

Observation description
Risk & impact analysis
Root cause identification
Evidence & documentation

Recommendations

Actionable suggestions
Implementation timeline
Responsibility assignment
Best practice guidance

Key Areas We Audit

🏦 Cash & Bank

What We Review:

Cash handling procedures
Bank reconciliation accuracy
Petty cash management
Cheque issuance controls
Online payment security
Segregation of duties

💳 Revenue & Receivables

What We Review:

Sales process controls
Billing accuracy
Credit approval process
Collection procedures
Aging analysis
Bad debt provisions

🛒 Procurement & Payables

What We Review:

Purchase authorization
Vendor selection process
Three-way matching
Payment controls
Vendor master data
Duplicate payment checks

📦 Inventory Management

What We Review:

Stock receipt procedures
Storage & security
Stock issuance controls
Physical verification
Obsolete stock handling
Valuation methods

🏭 Fixed Assets

What We Review:

Asset register accuracy
Capitalization policy
Physical verification
Depreciation calculation
Asset disposal process
Insurance coverage

💼 Payroll & HR

What We Review:

Salary processing
Attendance tracking
Statutory compliance (PF, ESI)
Leave management
Bonus & incentive calculation
Employee master data

📄 Compliance

What We Review:

GST compliance & returns
TDS deduction & filing
ROC compliance (MCA)
Labor law compliance
Environmental regulations
Industry-specific licenses

💻 IT Systems

What We Review:

Access controls & passwords
Data backup procedures
Disaster recovery plan
Software licenses
Cybersecurity measures
System change management

📊 Financial Reporting

What We Review:

Accounting policies
Journal entry controls
Period-end closing process
Financial statement preparation
Reconciliation procedures
Management reporting

Common Issues We Identify

Typical control weaknesses and risks discovered during internal audits

❌ Internal Control Weaknesses

Lack of segregation of duties
Inadequate authorization limits
Missing approval workflows
Poor documentation practices
Weak access controls
Inadequate physical security
No backup/recovery procedures
Absence of reconciliation

❌ Compliance Violations

Late GST return filing
TDS payment delays
Missing statutory registers
Expired licenses/registrations
Labor law non-compliance
Incomplete ROC filings
Environmental violations
Data privacy breaches

❌ Operational Inefficiencies

Duplicate data entry
Manual processes vs automation
Excessive inventory holding
Delayed collection from debtors
Vendor payment delays
Underutilized resources
Process bottlenecks
Lack of performance metrics

❌ Fraud Red Flags

Duplicate vendor payments
Fictitious employees on payroll
Ghost vendors
Unexplained inventory shortages
Inflated expense claims
Revenue recognition manipulation
Asset misappropriation
Kickbacks & bribery

⚠️ Cost of Not Having Internal Audit:

Financial Loss: Fraud and errors can result in losses of 5-10% of annual revenue
Compliance Penalties: Non-compliance can attract hefty fines and legal action
Reputational Damage: Financial irregularities can damage brand reputation and stakeholder trust
Operational Inefficiency: Process gaps lead to higher costs and lower productivity
Missed Opportunities: Lack of insights prevents strategic improvements and cost savings

Studies show that organizations with strong internal audit functions experience 50% fewer financial statement restatements (Institute of Internal Auditors)

Related Services

Comprehensive audit and compliance solutions for your business

📊

Statutory Audit

Annual financial statement audit as per Companies Act requirements. Expert opinion on true and fair view.

Learn More →

🔍

Tax Audit

Section 44AB tax audit for businesses exceeding turnover limits. Ensure income tax compliance.

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📝

GST Compliance

Complete GST return filing, compliance, and advisory services to avoid penalties.

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📚

Bookkeeping Services

Professional accounting and bookkeeping services for accurate financial records maintenance.

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Business Advisory

Strategic business consulting, financial planning, and management advisory services.

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🏢

Company Incorporation

Complete company registration services including private limited, OPC, and LLP incorporation.

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GST Return Filing

Monthly, quarterly and annual GST return filing services with ITC reconciliation.

Learn More →

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TDS Return Filing

Quarterly TDS return filing, form 16/16A issuance and TDS compliance services.

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Frequently Asked Questions

What is internal audit and why is it important?

Internal audit is an independent, objective evaluation of your organization's risk management, internal controls, and governance processes. It's important because it helps identify operational inefficiencies, prevents fraud, ensures compliance with laws and regulations, improves processes, and strengthens internal controls to protect business assets. Regular internal audits provide management with assurance that business operations are effective and risks are being properly managed.

How much does internal audit cost in India?

Internal audit costs vary based on business size and complexity. Small businesses can expect to pay ₹25,000-50,000 for a basic one-time audit. Mid-sized companies typically pay ₹75,000-1,50,000 for quarterly comprehensive audits. Large enterprises with multiple locations and complex operations may pay ₹2,00,000-5,00,000 or more annually. Specialized audits like fraud investigation or IT audit are priced separately based on scope. Factors affecting cost include annual turnover, number of transactions, locations, and audit depth required.

What is the difference between internal audit and statutory audit?

Internal audit is conducted for management to improve operations, controls, and risk management. It's voluntary (except for large companies) and performed throughout the year focusing on processes, compliance, and efficiency. Statutory audit is legally mandated for all companies, conducted annually by external auditors for shareholders, and focuses on expressing an opinion on financial statements' accuracy. Internal audit is future-oriented and preventive, while statutory audit is historical and verification-focused. Both serve different but complementary purposes.

Is internal audit mandatory for private limited companies?

Internal audit is mandatory only for certain companies under Section 138 of Companies Act, 2013: companies with turnover of ₹200 crore or more, companies with outstanding loans/borrowings of ₹100 crore or more, listed companies, and unlisted public companies with paid-up capital of ₹50 crore or more. For other private limited companies, it's not mandatory but highly recommended to ensure proper controls, prevent fraud, and improve operations. Many banks and investors also require internal audit reports.

How long does an internal audit take?

Internal audit duration depends on scope and business size. A basic operational audit for small business takes 2-5 days. Comprehensive audits for mid-sized companies typically require 5-10 days of fieldwork plus 3-5 days for analysis and reporting. Large enterprise audits can take 15-30 days or more. The process includes planning (1-2 days), fieldwork (2-20 days based on size), analysis (2-5 days), and reporting (2-3 days). We provide a detailed timeline during the planning phase.

What documents are required for internal audit?

Required documents include: organization structure and policies, previous audit reports, financial statements and trial balances, bank statements and reconciliations, sales and purchase registers, inventory records, fixed asset register, payroll records, statutory compliance documents (GST, TDS, PF, ESI returns), vendor and customer master lists, board minutes and resolutions, IT system documentation, and any relevant contracts or agreements. We'll provide a detailed checklist specific to your audit scope during planning.

Can internal audit detect fraud in my company?

Yes, fraud detection is a key objective of internal audit. We use various techniques including data analytics, transaction testing, surprise checks, and control evaluation to identify red flags and irregularities. Common frauds detected include duplicate payments, ghost employees, fictitious vendors, inventory theft, expense manipulation, and revenue recognition issues. However, internal audit provides reasonable assurance, not absolute guarantee. Sophisticated frauds involving collusion may require specialized forensic audit investigation.

How often should internal audit be conducted?

Audit frequency depends on business size, risk profile, and regulatory requirements. High-risk areas should be audited quarterly or semi-annually. Most medium-sized businesses benefit from quarterly internal audits. Large enterprises often have continuous audit programs with monthly cycles for different areas. Statutory requirements for mandatory internal audit typically specify quarterly or more frequent audits. Even if not mandatory, we recommend at least annual internal audit for all businesses to maintain effective controls.

What happens after the internal audit is completed?

After fieldwork, we prepare a comprehensive audit report detailing findings, risk ratings, and recommendations. This is presented to management/audit committee with an executive summary. Management provides responses and action plans for each finding. We track implementation of recommendations through follow-up reviews. The report helps in: improving controls, addressing compliance gaps, preventing fraud, optimizing processes, and supporting management decision-making. We remain available for clarifications and implementation support.

Can you conduct internal audit for multiple branch locations?

Yes, we conduct multi-location internal audits for businesses with branches across India. We use risk-based sampling to select branches for physical visit while remote audit can be performed for others. Our approach includes standardized checklists for consistency, concurrent audits to save time, centralized reporting for consolidated view, and local compliance verification. We have teams in major cities and can deploy auditors to any location. Multi-location audits help identify control variations and share best practices across branches.

Industries We Serve

Specialized internal audit services across diverse industries

🏭 Manufacturing

Production process audit, inventory management, quality control, vendor management, and supply chain audit.

🛒 Retail & E-commerce

Point-of-sale controls, inventory shrinkage, cash management, online payment gateway audit, and logistics.

🏗️ Construction & Real Estate

Project cost audit, material procurement, contractor payments, site inventory, and compliance verification.

🏥 Healthcare

Patient billing audit, pharmacy inventory, insurance claims, medical equipment, and regulatory compliance.

🎓 Education

Fee collection, expense management, scholarship audit, examination systems, and infrastructure utilization.

🏨 Hospitality

Revenue audit, F&B controls, housekeeping audit, booking systems, and guest service quality.

💻 IT & Software

Project billing, resource utilization, IP protection, data security, and client contract compliance.

🚚 Logistics & Transportation

Fleet management, fuel audit, route optimization, driver compliance, and cargo security.

🏦 Financial Services

Loan processing, KYC compliance, cash handling, interest calculation, and regulatory adherence.

Internal Audit Best Practices

Recommendations for maximizing internal audit effectiveness

✅ For Management

Establish independent audit committee
Provide unrestricted access to auditors
Ensure timely document availability
Take audit findings seriously
Implement recommendations promptly
Support auditor independence
Foster open communication culture
Allocate adequate audit budget

✅ For Audit Effectiveness

Use risk-based audit planning
Maintain audit documentation
Follow up on previous findings
Use data analytics tools
Conduct surprise checks periodically
Benchmark against industry standards
Continuous monitoring of key risks
Regular audit team training

✅ For Process Improvement

Document all business processes
Implement strong segregation of duties
Automate manual controls where possible
Establish clear authorization limits
Create audit trails for all transactions
Regular reconciliation procedures
Periodic policy review and updates
Employee training on controls

✅ For Fraud Prevention

Implement whistleblower mechanism
Conduct background verification
Regular rotation of key personnel
Mandatory leave policy enforcement
Periodic vendor verification
Surveillance in high-risk areas
Code of conduct and ethics policy
Anonymous fraud reporting system

📖 Resources & References

Learn more about internal audit standards and best practices:

Institute of Internal Auditors (IIA) - International standards for professional practice
Institute of Chartered Accountants of India (ICAI) - Audit and assurance standards
Ministry of Corporate Affairs - Companies Act provisions on internal audit
Securities and Exchange Board of India (SEBI) - Corporate governance requirements