ICFR

The team has the expertise in implementation & advisory on INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING (ICFR) matters for large private companies.

Internal Financial Controls
Over Financial Reporting (ICFR)

A process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Companies’ internal financial control over financial reporting includes those policies and procedures that:

  • Pertain to the maintenance of the records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company
  • Provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statement in accordance with generally accepted accounting principles, and those receipts and expenditures of the company are being made only in accordance with authorizations of management and director of the company.
  • Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material impact on the financial statement.

Internal Financial Controls Testing — Objective And Scope

The objective of Internal Financial Control (IFC) testing is to assist the management in evaluating and testing the effectiveness of financial controls that are in place to mitigate the risks faced by the Company and thereby achieve its business objectives.

Responsibility Of Stakeholders

Company Management Auditors Audit committee/ Independent Director Board of Directors
  • Create & test the framework of internal controls
  • FC (including operational & compliance)
  • Controls documentation
  • Focus on internal controls, to the extent these relate to the financial reporting
  • Auditors responsibility limited to evaluation of ‘Financial reporting controls’
  • Would like to see a robust framework that is aligned to acceptable standards
  • Review & question the basis of your controls design & ongoing assessments
  • Would rely on the assessment & view of the audit committee
  • They may ask for additional information

LEGAL REQUIREMENTS
Applicability: All listed companies and Private Companies with Turnover more than Rs. 50 crores
Relevant clauses Requirements Applicability
Directors’ Responsibility Statement: Section 134(5)(e) Director’s responsibility statement should state that the directors have laid down internal financial controls to be followed by the company and such controls are adequate and were operating effectively Listed companies
Section 143(3)(i) – Auditor’s Report Auditor’s report should state the adequacy and operating effectiveness of the company’s internal financial controls. MCA vide its notification dated 13th June 2017 (G.S.R. 583(E)) amended the notification of the Government of India, In the Ministry of Corporate of Affair, vide No G.S.R. 464(E) dated 05th June 2015 providing exemption from Internal Financial Controls to certain private companies. All companies with turnover greater than ₹ 50 crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or body corporate at any point of time during the financial year more than ₹ 25 crores.
Section 177 – Audit Committee Audit Committee may call for auditor’s comments on internal control systems before their submission to the board and may also discuss any related issues with the internal & statutory auditors and the management of the company. Audit Committee is also required to evaluate internal financial controls and risk management systems; All companies having an Audit Committee
Schedule IV Independent Directors The independent directors should satisfy themselves on the integrity of financial information and ensure that financial controls & systems of risk management are robust and defensible. All companies
Board Report: Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014 Board of Directors to report on adequacy of internal financial controls with reference to financial statements. All companies except One Person Company or Small Company