Unique Healthcare Ltd. is a radiological instruments manufacturing company in Northern India having its registered office and factories in New Delhi. Company deals in wide range of radiological instruments supplying its

CS Professional · Internal and Forensic Audit · PYQS · June 2026
Unique Healthcare Ltd. is a radiological instruments manufacturing company in Northern India having its registered office and factories in New Delhi. Company deals in wide range of radiological instruments supplying its products to private and public sector hospitals and healthcare centres. In recent past, due to increasing demand of the company's products, several new products have been added in its product line. Company's operations with new technology, sales turnover and customer base are increasing leaps and bounds. Company's Managing Director and CEO a Professional Entrepreneur, appreciates that an internal audit is an independent objective assurance and consulting activity to add-value and improve an organization's operations. It helps an organization in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. Considering potential of internal auditing, CEO Gupta has high expectations from internal audit activity. He believes that internal audit provides a value-added service to the management and to the board of directors by detecting and correcting weaknesses in a process before external audits discover them. This protects the organization from loss of reputation and regulatory fines. He believes that the objective of an Internal Audit is to evaluate compliance with procedures, applicable laws, regulations and international standards. Data and reports are reviewed to assure consistency and compliance. Currently, company has a small in-house team lead by an unqualified person for internal audit function guided by the company's statutory auditors. Now, company, realizing the benefits of sound internal control systems that ensure compliance with laws and regulations, enhancing efficiencies and minimizing losses, has decided to outsource the internal audit activity, instead of creating a new full-fledged internal audit department in the company. This would also help company avoid huge costs in managing and in-house internal audit department. You, a qualified Company Secretary practising mainly in internal auditing, have been approached by the MD. You have been offered the internal audit of the company for next three years. In your letter of appointment of internal auditor, in the scope of audit and in the terms of reference paragraphs, management has entrusted you to carry out a comprehensive review of all operations of the company and to evaluate and assess the existence, adequacy and effectiveness of internal controls therein, pointing out weaknesses if any in and suggesting measures to control them in an actionable manner. Apart from the above, company management has specifically mandated you to minimize non-compliance and penalties and also the adverse comments in statutory auditors' reports. With reference to the above, you as a Company Secretary are required to answer the following questions: What are the laws and regulations that govern internal audit activities in India ?

Answer & Explanation:

There are several laws and regulations that govern internal audit related activities in India. Some of the key laws applicable to internal audit in India are: Companies Act, 2013: Section 138 of the Companies Act, 2013 mandates that certain classes of companies shall appoint an internal auditor who shall conduct an internal audit of the functions and activities of the company. These requirements are defined in Rule 13 of the Companies (Accounts) Rules, 2014. Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015: These regulations define requirements for listed companies' audit committee and their interaction with internal audit activity. They cover amongst others, reporting of internal audit, specific items to be reviewed in relation to internal audit, and audit committee interactions with internal auditors. Reserve Bank of India (RBI) Guidelines: The RBI has issued guidance note on Risk Based Internal Audit for various entities such as banks, non-banking financial companies (NBFCs), and payment system providers. These guidelines were amended in January 2021 and their applicability was extended to NBFCs, and UCBs also in February 2021. Insurance Regulatory and Development Authority of India (IRDAI) has issued Guidelines for Corporate Governance for Insurers in India in 2009, which have been updated in 2016. These guidelines define the requirements for Board to lay down policy framework for control functions such as internal audit department, audit committee oversight on internal audit activity, and responsibilities of internal auditors. Further, specific provisions in Companies Act, 2013 and underlying Rules specify the requirements about stating whether the internal controls were adequate and effective during a financial reporting period by various corporate governance stakeholders such as Board, Audit Committee, Statutory Auditors etc., thus indirectly requiring an internal audit of internal controls on regular basis.

Topics: Internal Audit

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