Purpose: The purpose of Section 138 is to mandate the appointment of an Internal Auditor by certain companies to strengthen their internal control systems and improve their operational efficiency.
Applicability: Section 138 applies to every listed company and unlisted public company having paid-up share capital of Rs. 50 crores or more or turnover of Rs. 200 crores or more in the immediately preceding financial year.
Timeline: The internal auditor should be appointed before the end of the first financial year after the commencement of the Companies Act, 2013, and every financial year thereafter.
Exemption: The Central Government may exempt any class of companies from the provisions of this section.
Penalty: In case of non-compliance, the company and every officer in default shall be punishable with a fine of Rs. 25,000 and with a further fine of Rs. 5000 for every day during which such default continues.
Due date: The due date for the appointment of the internal auditor is before the end of the first financial year after the commencement of the Companies Act, 2013, and every financial year thereafter.
Forms: No specific form has been prescribed for the appointment of the internal auditor.
Reporting authority: The internal auditor shall report to the audit committee, and the audit committee shall present its report to the Board of Directors. The Board of Directors shall disclose the details about the appointment of the internal auditor in its report.
