Intergold Fashion Jewellery Pvt. Ltd., Agra is one of the leading silver and gold ornaments manufacturing company having turnover of ₹250 crore and paid-up share capital ₹20 crores. Company has Cash Credit limit of ₹20 c

Intergold Fashion Jewellery Pvt. Ltd., Agra is one of the leading silver and gold ornaments manufacturing company having turnover of ₹250 crore and paid-up share capital ₹20 crores. Company has Cash Credit limit of ₹20 crore and Term Loan of ₹15 crores from a public sector bank. Company has significant outsourced activities of silver and gold ornaments manufacturing and has around more than two hundred job-work processors and sub-processors for different processes of Payal, chain and other ornaments manufacturing. Company purchases various types of raw materials and consumables including silver bullion from various suppliers and issues the same to the job-work processors. Company also allows its customers Goods on Approval. In the company, Manager (Accounts) has full responsibilities for all the operations. He issues receipts for all inward materials and authorizes all issues from godowns. Also, he is responsible for verifying the weights and payment slips and for verification of physical quantities of the finished goods stored. He possesses the keys of the godowns. Company's CEO hardly finds any time to verify all such transactions and physical quantities of inventories. Although, there are CCTVs, gatekeeper frisking all the entries into and exits from the premises. Yet on a day, it was observed that gatekeeper allowed a worker some gold articles in his bag. In a recently conducted stock audit by the bank, auditors have pointed out various non-compliance and control lapses including non-appointment of internal auditors. However, management is of the view that as it is a private limited company, hence, internal audit is not required. Further, management is of the view that internal audit is merely a routine checking which could be done by the external auditors avoiding additional costs to the company. In stock audit process, it has come across that some debtors have been squared up by way of discounts and rebates. These discounts and rebates have been allowed by the Manager (Accounts) alone who is authorizing and passing all accounting transactions. Lately, CEO of the company came to know about these discounts and rebates when a debtor told him in normal conversations. In stock audit report, instances of several missing articles of ornaments were observed. Auditors observed lack of adequate controls over receipts and issues of inventories and stock records are not reconciled with the financial records. In physical verification of stocks lying with the processors, it was found that quantities as reported by the company in stocks statements are not matched and also some parts of the inventories were not lying at the location addresses of job-work processors as reported in the stock statements. This poses a significant risk of non-coverage of such stocks in insurance policies. You as a Company Secretary are required to advise the management about the legal provisions of the Companies Act 2013 regarding applicability of internal audit to the company, explaining the differences of how it is different from the external audit?