Internal Audit Services in Delhi | Section 138 Risk-Based Internal Audit

In a Nutshell: Internal Audit That Finds Leaks Before the Auditor Does

Startup Advisory runs risk-based internal audits for companies, LLPs and family businesses — mandatory ones under Section 138 of the Companies Act, 2013 and voluntary ones for owners who want an independent check on how money, stock and approvals actually move. We test processes, not just ledgers, and report findings with a named owner and a fix date.

Mandatory for: listed companies; unlisted public companies with paid-up capital ≥ ₹50 crore, turnover ≥ ₹200 crore, bank/PFI borrowings > ₹100 crore or deposits ≥ ₹25 crore; private companies with turnover ≥ ₹200 crore or bank/PFI borrowings > ₹100 crore (Rule 13, Companies (Accounts) Rules, 2014).
Approach: risk assessment → annual audit plan approved by the board/audit committee → quarterly fieldwork and reporting.
Areas: procure-to-pay, order-to-cash, inventory, payroll, fixed assets, treasury, statutory compliance, IT access.
Deliverables: audit plan, quarterly reports graded by risk, management action tracker, follow-up review.
Independence: we do not act as internal auditor where we are your statutory auditor — Section 144 prohibits it.
Provider: Startup Advisory, CA firm in Saket, New Delhi 110030. Call 9311972982.

Reviewed by CA Neeraj Rohilla, FCA — Chartered Accountant, Startup Advisory, Saket, New Delhi.

An Internal Audit Should Change How the Business Runs, Not Just Fill a File

Most internal audit reports get read once and filed. The ones worth paying for change something: a vendor master that no longer lets one clerk create and pay a supplier, a stock reconciliation that closes monthly instead of yearly, a payroll run that cannot add an employee without HR approval. Our internal audits are built around that outcome — a small number of findings that matter, each with an owner, a deadline and a follow-up review.

When internal audit is mandatory

Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014 requires the following classes to appoint an internal auditor, who may be a chartered accountant, a cost accountant or another professional decided by the board:

Every listed company.
Unlisted public companies with, in the preceding financial year, paid-up share capital of ₹50 crore or more, turnover of ₹200 crore or more, outstanding loans or borrowings from banks or public financial institutions exceeding ₹100 crore at any point, or outstanding deposits of ₹25 crore or more at any point.
Private companies with turnover of ₹200 crore or more in the preceding financial year, or outstanding loans or borrowings from banks or public financial institutions exceeding ₹100 crore at any point during that year.

The board (or audit committee, where one exists) formulates the scope, functioning, periodicity and methodology of the internal audit in consultation with the internal auditor. Separately, under CARO 2020 the statutory auditor reports whether the company has an internal audit system commensurate with its size and nature of business — so even companies below the Section 138 limits find the question asked every year.

What we audit

Procure-to-pay: vendor onboarding, purchase approvals, three-way match (PO, GRN, invoice), duplicate payments, TDS and GST input credit on purchases, MSME vendor payment timelines.
Order-to-cash: pricing and discount approvals, credit limits, invoicing completeness, collections, receivable ageing and write-offs.
Inventory: receipts, issues, physical counts, valuation, slow-moving and obsolete stock — see also our store audit.
Payroll and HR: joiners and leavers, salary changes, attendance-to-pay link, PF/ESI/PT deductions and deposits.
Fixed assets and capex: capitalisation, physical existence, tagging and disposals — see fixed assets audit.
Treasury and banking: bank reconciliations, signatory limits, cash handling, petty cash, investments.
Statutory compliance: GST, TDS, PF/ESI, ROC and labour-law filings — on time, correctly reconciled.
IT general controls: user access in Tally, Zoho or your ERP, segregation of duties, edit logs and backups.

How the engagement runs

Step 1 — Risk assessment: walkthroughs with process owners and a review of last year’s audit observations to rank where the real exposure sits.
Step 2 — Annual audit plan: areas, quarter-wise coverage and sample sizes, approved by the board or audit committee.
Step 3 — Fieldwork: transaction testing, control walkthroughs and data analytics on full ledgers rather than tiny samples where the data allows.
Step 4 — Quarterly report: findings graded high/medium/low, root cause, quantified impact, agreed management action and target date.
Step 5 — Follow-up: each later quarter opens by testing whether last quarter’s actions actually happened.

Internal audit vs statutory audit

A statutory audit gives an opinion on whether the financial statements are true and fair, and is owed to shareholders. An internal audit is a management tool: it looks forward, at processes and controls, and reports to the board. The two are complementary, but Section 144 of the Companies Act bars a company’s statutory auditor from providing internal audit services to it — so you need two different firms.

For businesses that are not yet at internal-audit scale, a lighter monthly control review often sits inside a Virtual CFO engagement instead.

Related Audit & Assurance Services

Statutory Audit →Annual statutory audit of companies under the Companies Act, 2013 and of LLPs above the audit limits — with CARO 2020 reporting.

Concurrent Audit →Real-time audit of transactions for banks under RBI’s concurrent audit guidelines, and for businesses with high-volume payments.

Store Audit →Stores and inventory controls — receipts, issues, consumption, min-max levels, slow-moving stock and leakage.

Investigation Audit →Forensic and investigation audits into suspected fraud, misappropriation and disputes — evidence-grade, confidential.

See all audit & assurance services

Frequently Asked Questions

Only above the thresholds in Rule 13 of the Companies (Accounts) Rules, 2014: turnover of ₹200 crore or more in the preceding financial year, or outstanding loans or borrowings from banks or public financial institutions exceeding ₹100 crore at any point during that year. Below those limits it is voluntary, though many owners commission one for control and fraud-prevention reasons.

Section 138 allows a chartered accountant, a cost accountant, or such other professional as the board decides. The internal auditor may or may not be an employee of the company. The company’s statutory auditor cannot be its internal auditor, because Section 144 prohibits it.

The board or audit committee decides the periodicity. Most of our clients run quarterly cycles, with high-risk areas such as purchases and inventory covered every quarter and lower-risk areas on rotation through the year.

Each finding sets out the observation, the risk, the root cause, the quantified impact where possible, the agreed management action, a responsible person and a target date. The report opens with an executive summary for the board and closes with the status of previous findings.

It is designed to test whether controls work, and weak controls are where fraud usually happens, so it frequently surfaces red flags. Where a specific fraud is suspected, a separate investigation audit with evidence-grade procedures is the right tool.

It depends on the number of locations, transaction volumes and the areas in scope. We scope it on a call and quote a fixed annual or quarterly fee before starting. Call 9311972982.

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