Companies Act

Mandatory Internal Audit Guidelines under Companies Act

As per Section 138 of the Companies Act, 2013 the following set of companies are required to comply with the requirement of mandatory Internal Audit: –

(a) every listed company;

(b) every unlisted public company having-

  1. paid up share capital of Rs. 50 Crores or more during the preceding financial year; or
  2. turnover of Rs. 200 Crores or more during the preceding financial year; or
  3. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 Crore or more at any point of time during the preceding financial year; or
  4. outstanding deposits of Rs. 25 Crore or more at any point of time during the preceding financial year;

(c) every private company having-

  1. turnover of Rs. 200 Crore or more during the preceding financial year; or
  2. outstanding loans or borrowings from banks or public financial institutions exceeding Rs. 100 Crore or more at any point of time during the preceding financial year:

The above set of companies are required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company. The Internal Auditor may be either an individual or a partnership firm or a body corporate.

The Audit Committee of the company or the Board shall, in consultation with the Internal Auditor, formulate the scope, functioning, periodicity and methodology for conducting the internal audit.

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities

SCHEDULE VII

(See Section 135)

Activities which may be included by companies in their Corporate Social Responsibility Policies Activities relating to: —

(i) Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.

(ii) Promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects.

(iii) promoting gender equality, empowering women, setting up homes and hostels for women and orphans; setting up old age homes, day care centers and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

(iv) ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

(v) protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up public libraries; promotion and development of traditional art and handicrafts;

(vi) measures for the benefit of armed forces veterans, war widows and their dependents;

(vii) training to promote rural sports, nationally recognised sports, paralympic sports and olympic sports

(viii) contribution to the prime minister’s national relief fund or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund)] or any other fund set up by the central govt. for socio economic development and relief and welfare of the schedule caste, tribes, other backward classes, minorities and women;

(ix) Contribution to incubators funded by Central Government or State Government or any agency or Public Sector Undertaking of Central Government or State Government, and contributions to public funded Universities, Indian Institute of Technology (IITs), National Laboratories and Autonomous Bodies (established under the auspices of Indian Council of Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence Research and Development Organisation (DRDO), Department of Biotechnology (DBT), Department of Science and Technology (DST), Ministry of Electronics and Information Technology engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals (SDGs).

(x) rural development projects

(xi) slum area development. The term `slum area’ shall mean any area declared as such by the Central Government or any State Government or any other competent authority under any law for the time being in force.

(xii) disaster management, including relief, rehabilitation and reconstruction activities.

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