What is this resolution for?
The specimen of board resolution provided in this blog is for the appointment of an internal auditor in a company. An internal audit is a controlling tool in the hands of a company that measures and evaluates the effectiveness of its affairs primarily in accounting, operational, and financial matters. The job of an internal auditor is to make sure that the company is working in a smooth and efficient manner and that all governing rules & regulations are adhered to. He seeks to ensure that a proper internal control system is in place in the company to prevent fraud and misappropriations. Internal audit is addressed in Section 138 of Chapter IX of the Companies Act of 2013 and Rule 13 of the Companies (Accounts) Rules, 2014.
- There are certain specified classes of companies that are required to appoint an internal auditor under law. For others, it is a discretionary function. To know more about the applicability of internal audits, kindly go through this link – Applicability of Internal Audit under Companies Act 2013.
- Who appoints internal auditors? – Internal auditors are appointed by the company’s management or Board members.
- The appointment of an internal auditor can be made only by a resolution passed at the meeting of the Board, as provided for in Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014.
- The company is, therefore, also required to file Form MGT-14 with the Registrar within 30 days of the date of the Board’s resolution. However, such a requirement of filing resolutions with ROC does not apply to private limited companies.
- The internal auditor may be either a chartered accountant, whether or not in practice, or a cost accountant, or such other professional as the Board may determine to undertake an internal audit of the company’s functions and activities. In fact, it can be performed by the company’s in-house audit department or it may be outsourced.
- The person who is to be appointed as an internal auditor may or may not be the company’s employee.
- Before passing the resolution, a notice of at least 7 days has to be issued in writing to every director of the company to call for a Board Meeting for the appointment of the internal auditor.
Draft Board Resolution for Appointment of Internal Auditor
Given below is a draft board resolution for the appointment of an internal auditor:
On Company Letterhead
CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF (COMPANY’s NAME) HELD AT THE REGISTERED OFFICE OF THE COMPANY AT (ADDRS.) ON (DATE) AT (TIME)
“Resolved that on consideration of the qualification, experience, and merit of the following and in pursuance of Section 138 and other applicable provisions, if any, of the Companies Act, 2013 read with the Rule 13 of the Companies (Accounts) Rules, 2014, Mr./M/s._______________, Chartered Accountant(s)/ Cost Accountant(s)/other professional recommended by the Board, ______________, (Firm Reg. No._________) be and (is) are hereby appointed as the Internal Auditors of the Company for the financial year _____ and on a remuneration of Rupees _________ decided by the Board.
Resolved further that the Audit Committee of the company or the Board has, after consulting with the proposed auditor, designed the scope, functioning, periodicity, and methodology for conducting the internal audit. The powers and duties of the concerned auditor are to be governed by the terms & conditions of the engagement letter, which may be decided mutually between the company and the proposed internal auditor. In respect thereof, the draft engagement letter for appointment of Mr./M/s._______________ as the company’s internal auditor for the financial year _____, as placed before the Board be and is hereby approved.
Resolved further that the Board of Directors be and are hereby authorized severally to notify the said auditor(s) about his/their appointment and file the necessary e-forms with the Registrar of Companies (ROC), ______________ and to perform all such acts, deeds, and things that may be necessary to give effect to the above resolution.”
For (COMPANY’s NAME)
(Name of Director)
Note: The resolution given above is only for reference purposes and it should be used only after adhering to the provisions of the relevant Acts and rules (if any) that may be applicable for the time being in force.
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