The Ministry of Corporate Affairs (MCA) has reiterated that private limited companies must appoint internal auditors once they cross certain financial thresholds, as per the Companies (Accounts) Rules, 2014. This compliance requirement applies to companies with a turnover of ₹200 crore or more, or outstanding loans or borrowings exceeding ₹100 crore at any point during the preceding financial year. The directive is aimed at enhancing internal financial control and risk management, especially in high-growth private enterprises.

According to the rule, internal auditors may be appointed from within the organization or engaged externally as chartered accountants, cost accountants, or other qualified professionals. The internal audit function is expected to evaluate internal controls, operational efficiency, and financial reporting accuracy, with direct reporting to the company’s Board or Audit Committee. The MCA has clarified that failure to appoint an internal auditor, where required, will be treated as a non-compliance subject to penalties under Section 138 of the Companies Act, 2013.

Industry experts recommend that eligible companies review their financial statements annually, maintain documentation for thresholds, and include internal audit appointments in their annual board meeting agendas. The move is part of the government’s broader efforts to promote corporate transparency, governance, and early detection of financial irregularities in the private sector. Companies are encouraged to proactively establish internal audit functions to not only meet legal mandates but also improve operational efficiency and investor confidence.