Internal Auditor: Why are they important?

Section 138 of the Companies Act, 2013 states the appointment of an internal auditor and read as “such companies as may be prescribed shall be required to appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other professional as may be decided by the Board to conduct internal audit of the functions and activities of the company.

The Central Government may by rules prescribe the manner and the intervals in which the inernal audit shall be conducted and reported to the Board.”

Why is an Internal Auditor important?

Role of an internal auditor is important as it keeps the company’s compliance in line with the rules and guidelines set forth. The importance of an internal auditor can be explained by dividing them into the following categories:

  • Provides objective view

While being a part of the management or the Board of Directors or an employee, one cannot audit its own work with a critical eye for which an independent team is required that can objectively view the internal audit process of the company. Thus, the internal auditor provides an independent and unbiased view in the interest of the company.

  • Improves efficiency 

Better efficiency begins from objective review of the policies and guidelines of the company and constant assurance that they are being executed and are adequate for eliminating risks. It constantly monitors the process for immediate control of misconduct and inefficiency, which also allows the company to be dependent on the internal auditor. 

  • Evaluates risks 

By scrutinizing the company’s risk management processes, it helps to identify the risks which further helps the management to recognise the shortcomings and form a set of remedies to meet such challenges. This process assists in tracking the deficiencies and risks that might affect the status of the company.

  • Assesses controls

The role of internal auditor examines the existing policies and guidelines, and also evaluates the upcoming policies in order to ensure proper compliance and control environment of the company. Thus, promoting effectiveness and efficiency. 

  • Ensures compliance

It is necessary for the company that all the activities performed on its part are in compliance with the laws, rules and regulations applicable. Another important role of the internal auditor is to safeguard from any losses and inefficiencies arising due to non-compliance. 

  • Detect fraud

While evaluating account books, reports, data and flowcharts if the internal auditor comes across a fraud or theft based on the findings, the same can be investigated upon. The internal auditor can also assist the government in case of formal inquiries in the interest of the employees, stakeholders of the company. Internal auditor can further suggest preventive measures and remedies to overcome any setback and also to safeguard the company from future offences.


The role of an internal auditor is an essential and strategic one. Apart from the points noted above, this role can win over the trust of the clients, attract investors, hence expanding the business of the company. 

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