What we do
Our work in this practice group is structured around the records, deadlines, and decisions involved:
- Independent evaluation of Internal Financial Controls (IFC) and operating effectiveness.
- Early detection and prevention of revenue leakages, process redundancies, and fraud risks.
- Structured compliance with Section 138 of the Companies Act, 2013 where applicable.
- Comprehensive review of critical cycles: P2P (Procure-to-Pay), O2C (Order-to-Cash), and Payroll.
- Actionable recommendations to enhance operational productivity and cost optimization.
- Strengthened corporate governance, risk assessment, and board oversight mechanisms.
- Readiness support and reduced surprises during annual statutory and tax audits.
How the engagement works
Under Section 138 of the Companies Act, 2013 read with Rule 13 of the Companies (Accounts) Rules, 2014, internal audit is mandatory for all listed companies and prescribed unlisted public and private companies based on paid-up share capital, turnover, outstanding loans, or public deposits. Beyond statutory mandates, the Standards on Internal Audit (SIA) issued by the Institute of Chartered Accountants of India (ICAI) provide the framework for risk assessment, control testing, and reporting to the Audit Committee or Board of Directors.
Scenario 1: A growing private limited company in Pune exceeds statutory thresholds under Section 138 and requires the mandatory appointment of an independent Chartered Accountant as Internal Auditor.
Scenario 2: Business management suspects discrepancies or operational leakages in procurement, vendor billing, or inventory management and seeks an in-depth process audit.
Scenario 3: An enterprise preparing for external equity funding, bank financing, or due diligence needs to validate and document its Internal Financial Controls (IFC).
Scenario 4: A manufacturing company in Chakan or Bhosari requires periodic cycle testing of job-work registers, scrap disposal, and dispatch verification.
Scenario 5: The Board of Directors or Audit Committee seeks an independent review of statutory compliance across GST, TDS, PF, ESIC, and labor laws to prevent departmental penal notices.
Risk Assessment & Audit Charter Planning
We collaborate with executive management and the audit committee to define audit universe, identify key business risks, and design a customized, risk-based annual internal audit plan.
Internal Financial Controls (IFC) Testing
We evaluate the design and operating effectiveness of internal controls over financial reporting, identifying control gaps, segregation of duties conflicts, and authorization overrides.
Operational & Process Audits
We conduct rigorous deep-dives into core operating cycles including Procure-to-Pay (P2P), Order-to-Cash (O2C), Hire-to-Retire (HR/Payroll), Fixed Assets tracking, and Inventory management.
Statutory Compliance Health Checks
We verify periodic adherence to Indirect Taxes (GST), Direct Taxes (TDS/TCS/Advance Tax), ROC secretarial requirements, and labor laws (PF, ESIC, Professional Tax).
Fraud Risk Assessment & Revenue Leakage Detection
We analyze transaction trends, ledger anomalies, credit note authorizations, and scrap sale realizations to uncover potential leakages or unrecorded liabilities.
Audit Committee Reporting & Action Tracker
We submit clear, executive-level internal audit reports featuring root-cause analysis, risk ratings (High/Medium/Low), practical remediation recommendations, and an implementation tracking matrix.
Step-by-step process
Step 1: Scoping & Risk Profiling
Initial consultation to understand business operations, organizational hierarchy, IT ERP systems, and management pain points, followed by audit charter sign-off.
Step 2: Walkthroughs & Process Mapping
Detailed interviews with process owners and review of standard operating procedures (SOPs), transaction flowcharts, and delegation of authority matrices.
Step 3: Sample Testing & Fieldwork
Substantive testing of transaction samples, corroborative voucher scrutiny, automated data analytics, and verification of documentary evidence.
Step 4: Draft Observation Discussions
Preliminary meeting with functional department heads to validate audit findings, review factual context, and agree on practical remediation timelines.
Step 5: Final Reporting & Governance Presentation
Formal presentation of the final Internal Audit Report to the Board of Directors, Managing Director, or Audit Committee with assigned responsibility trackers.
Key deliverables & outputs
General questions
01What is the difference between an internal audit and a statutory audit?
A statutory audit is an annual review mandated by law to provide reasonable assurance to external stakeholders and shareholders that financial statements reflect a true and fair view. An internal audit, in contrast, is an ongoing, management-oriented advisory review that evaluates internal controls, operational efficiency, fraud prevention, and compliance to add value and protect the organization from within.
02Is internal audit mandatory for Private Limited companies in India?
Under Section 138 of the Companies Act, 2013, internal audit is mandatory for a Private Limited company if, during the preceding financial year, its turnover was ₹200 crore or more, or its outstanding loans/borrowings from banks or public financial institutions exceeded ₹100 crore.
03Can our statutory auditor also act as our internal auditor?
No. Section 144 of the Companies Act, 2013 strictly prohibits a statutory auditor from providing internal audit services to the same company or its holding/subsidiary entities to preserve audit independence and objectivity.
04How frequently are internal audits conducted?
Depending on the scale, complexity, and risk profile of the business, internal audits are typically conducted on a monthly, quarterly, or half-yearly basis, culminating in an annual consolidated internal audit summary.
05What business processes are typically covered in an internal audit?
Core areas typically reviewed include procurement and vendor management, sales billing and credit control, inventory and physical warehouse security, cash and bank management, fixed assets verification, human resources and payroll, IT system controls, and statutory tax compliances.
06How does Rahul B. Kavale & Co. help mid-sized businesses with internal audits?
We bring seasoned Chartered Accountants with deep domain experience across Maharashtra’s industrial and corporate ecosystem. We offer both fully outsourced internal audit functions and co-sourced specialist reviews, delivering actionable, commercial insights rather than mere tick-and-check reporting.