Internal Financial Controls

IFC Framework

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:

  • Orderly and efficient conduct of its business.
  • Including adherence to company’s policies.
  • Safeguarding of its assets.
  • Prevention and detection of frauds and errors.
  • Accuracy and completeness of the accounting records.
90%
OPERATIONS
85%
REPORTING
100%
COMPLIANCE

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.

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.

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 to provide reasonable assurance regarding the reliability of financial reporting.

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.

ICFR includes those policies and procedures that:
1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company.
2. Provide reasonable assurance that transactions are recorded as necessary, to permit preparation of financial statements in accordance with generally accepted accounting principles.
3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets.

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.

AKGVG 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.