Internal Financial Controls (IFC) framework is an integral part of overall internal financial controls program of a company. Internal financial control refers to the policies and procedures adopted by the company for ensuring:
Internal control is a process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.
Internal Financial Control is not solely a policy or procedure that is performed at a certain point in time, but rather a continuous process operating at all levels within the Company.
Legal Requirements of IFC In India
Schedule IV (II) (4):
Independent director shall satisfy themselves on the integrity of financial information and that of financial controls.
Section 134(5)(e) of the Companies Act 2013:
The report by Board of Directors (BoD) shall include a statement ensuring implementation of adequate internal financial control and adherence of policy and procedures adopted by the company with an objective of orderly and efficient conduct of business, safeguarding company’s assets, prevention and detection of frauds for accuracy and completeness of the accounting records and timely preparation of reliable financial information.
Section 143 (3) (i) of the Companies Act, 2013:
Auditor’s report should state the adequacy and operating effectiveness of the Company’s internal financial controls
Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014:
The Board of Directors’ report of all companies to state the details in respect of adequacy of internal financial controls with reference to the “financial statements”.
Internal Control over Financial Reporting (‘ICFR’)
ICFR may be defined as a process designed by, or under the supervision of, the company’s principal executive (CEO) and principal financial officers (CFO), or persons performing similar functions and effected by the company’s Board of Directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the generally accepted accounting principles and includes those policies and procedures that:
The above definition of ICFR includes the controls that ensure ‘effectiveness and efficiency’ of a company’s operations and ‘compliance with applicable laws and regulations’ to the extent that those directly relate to the preparation of financial statements.
Our Company provides a one stop solution for all your IFCR needs starting with devising Business Process Narratives (BPN), Risk Control Matrix (RCM) & establishing Test of Controls (TOC) for each business process. We also evaluate the existing BPN, RCM & TOC, as per the requirement.