Quick summary
Most Bangalore SME founders are confused about whether they need an internal audit, a statutory audit, or both. Here's the practical answer based on your company's size.
Two different purposes
Statutory audit is a legal requirement. An independent CA verifies your financial statements for regulatory compliance. It is mandatory for all companies and certain other entities.
Internal audit is an operational tool. It reviews your business processes, controls, and risk management to help you run better. It is not primarily about compliance; it is about finding problems before regulators or fraudsters do.
When is internal audit mandatory in India?
Under the Companies Act, Rule 13 of the Companies (Accounts) Rules, 2014, the following companies must appoint an internal auditor:
- Listed companies: mandatory
- Unlisted public companies: if turnover ≥ ₹200 crore, or paid-up capital ≥ ₹50 crore, or outstanding deposits ≥ ₹25 crore, or outstanding loans ≥ ₹100 crore
- Private limited companies: if turnover ≥ ₹200 crore, or outstanding loans/deposits ≥ ₹100 crore
- Most early-stage Bangalore Pvt Ltd companies fall below these thresholds. Internal audit is not mandatory for them
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Find a verified auditor in BengaluruWhen Bangalore SMEs should voluntarily do internal audit
Even when not mandatory, internal audit delivers real value once a business crosses certain complexity thresholds:
- You have 20+ employees and multiple departments handling cash or procurement
- You are processing vendor payments > ₹50 lakh/month without formal purchase approval processes
- You are raising external funding or preparing for due diligence
- You have franchisees or branch offices in multiple cities
- You have had a fraud incident or suspect process integrity issues
- You are going through rapid growth (50%+ YoY). Controls that worked at ₹2 crore often break at ₹10 crore
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