Accounting regulator ICAI has asked the government to make outsourcing of internal audit functions mandatory for companies to prevent a Satyam-like fraud from happening again.

The suggestion is part of the recommendations by a high- powered committee of the Institute of Chartered Accountants of India (ICAI) to the Corporate Affairs Ministry in the aftermath of a Rs 10,000-crore scam in Satyam Computer and is intended to strengthen the internal audit system of companies.

"We have recommended that internal audit should be outsourced rather than in-house because internal audit in-house is always dependent on the management of the company. Internal audit from outside will always be better, and then it should be given to chartered accountants," ICAI President Amarjit Chopra told.

The role of internal auditors came under scanner after Satyam Computer founder B Ramalinga Raju confessed to having cooked the books of the company for years. The IT firm's internal audit head S Prabhakar Gupta was arrested for his alleged role in the multi-crore fraud.

Interestingly, Satyam's internal audit team was given recognition of commitment award by the US-based Institute of Internal Auditors in 2006.

Chopra further said that since internal audit is the first check-post for any accounting fraud, due care should be taken to ensure it is conducted by the right people and independently.

"We already have 17 internal audit standards and we have asked the Government to make these standards mandatory for internal audits, whether through SEBI or through company law, so that there is standardisation of internal audit procedures," Chopra said.

The standards are benchmarks for internal auditors and are aimed at ensuring standardisation, independence and more consistency in the functioning.

They also differentiate auditor's responsibilities when it comes to complying with the law and regulations that have direct impact on financial statements as well as significant effect on the functioning of the company.