IFC –Companies Act, 2013 Requirements
Integrity of financial statements to be validated by independent directors
Para II (4) of Schedule IV: Code for Independent Directors Independent Directors shall satisfy themselves on the integrity of financial information and that financial controls.
Board to ensure implementation of adequate internal financial controls
Section 134 (5)(e) –One of the requirements of Directors’ Responsibility Statement (S. 134 (3)( c) The report by the Board of Directors (BOD) shall include a statement ensuring implementation of adequate internal financial controland adherence of policy and procedures adopted by the company with an objective of orderly and efficient conduct of its 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.
Auditor’s report to state adequacy and effectiveness of internal financial controls
Section 143 (3)(i)
Auditor’s report for all companies (listed or not) to state the adequacy and operating effectiveness of the Company’s internal financial controls.
Section 177 (4)(vii)
Every Audit Committee shall act in accordance with the terms of reference specified in writing by the Board which shall inter alia include evaluation of internal financial controlsand risk management systems.
Internal Controls for Unlisted Companies
Rule 8 (5) (viii):
Ofthe Companies (Accounts) Rules, 2014 requires Board of Directors to report on adequacy of internal financial controls with reference to financial statement
Other Important Aspects point wise.
Audit of Internal Financial controls over financial reporting -Broad Steps
Identifying significant accounts and disclosures (SAD) and their relevant assertions
Identify and understand significant flows of transactions
Identify Applications, Associated IT Environment
Assess the Design of Controls
Perform operating effectiveness testing
Assess findings and conclude on operating effectiveness
Form opinion on Internal Financial controls over financial reporting
Internal Financial Controls
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