Module: | SEBI LODR & Corporate Governance Frameworks
Q13: Consider the following statements regarding the mandatory appointment of an Internal Auditor for private companies under Section 138 of the Companies Act for 2025:
1. A private company must appoint an internal auditor if its turnover is Rupees 200 Crore or more during the preceding financial year.
2. A private company is required to appoint an internal auditor if its outstanding loans from banks exceed Rupees 100 Crore at any point in time during the preceding financial year.
3. The internal auditor appointed by the company must mandatorily be a practicing Chartered Accountant and cannot be an employee of the company.
Which of the above statements is/are correct?
2. A private company is required to appoint an internal auditor if its outstanding loans from banks exceed Rupees 100 Crore at any point in time during the preceding financial year.
3. The internal auditor appointed by the company must mandatorily be a practicing Chartered Accountant and cannot be an employee of the company.
Which of the above statements is/are correct?
✅ Correct Answer: A
🎯 Quick Answer:
A. Only 1 and 2 are correct.Structural Breakdown: Statement 1 is correct.
Statement 2 is correct.
Statement 3 is incorrect; the law allows the internal auditor to be an employee and they can be a Cost Accountant or other professional.
Historical/Related Context: Section 138 brought private companies with large economic footprints under mandatory internal scrutiny.
Causal Reasoning: Internal audits focus on operational efficiency and fraud prevention from within, hence the flexibility to hire internal employees.