Mon - Fri (9.30- 6.30)
bdm@blueconsulting.co.in

Internal Financial Control (IFC/ICFR)

Consulting Services

Internal Financial Control (IFC)

/
Date22 Jul 2016
/
Posted By
/
Comments71
/
Categories

ICFR Implementation services:

  1. Background of ICFR
  2. Relevant provisions of ICFR
  3. Applicability matrix
  4. IFC vs. ICFR
  5. Our services in ICFR
    1. Deliverables
    2. Scope of work
    3. Execution strategy

1

Background of ICFR

  1. To understand the background of Internal Financial Control over Financial Reporting (ICFR), let’s divide the period in two parts:
    Up to Financial Year 2014-15:
  2.  So far, companies were to satisfy their Statutory Auditors about the adequacy of Internal Controls related to purchase of inventory and fixed assets and sale of goods and services for Auditor’s reporting under CARO.
  3. However, in case of listed company, Clause 49 of the Equity Listing Agreement requires that CEO and CFO of listed companies to certify to the board of directors that they accept responsibility for establishing and maintaining internal controls for financial reporting and that they have evaluated the effectiveness of internal control systems of the company pertaining to financial reporting.

From Financial Year 2015-16 onwards:

  1. The Companies Act, 2013 has stated specific responsibilities on the board of companies towards the company’s internal controls and, inter alia, requires the board to state that they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
  2. Statutory auditor of company will be giving a separate report on the adequacy and effectiveness of Internal Financial Control over Financial Reporting with effective from Financial Year 2015-16.
  3. Compliance of Clause 49 of the Listing agreement will continue to be complied by the listed companies.

2

Relevant provisions of ICFR

Section/Rule Related to Description
Rule 8(5)(viii) of Companies Accounts Rules, 2014 Board Report Board’s report to include the details in respect of adequacy of internal financial controls with reference to the financial statements.
Section 143 of Companies Act, 2013 Statutory Audit Report  on whether the company has adequate internal financial controls system and operating effectiveness of such controls
Section 134 of Companies Act, 2013 Director Responsibility statement Director’s responsibility statement to state that directors
-had laid down internal financial controls to be followed by the Company
-and that such internal financial controls were adequate and operating effectively
Section 177 of Companies Act, 2013 Audit committee -Evaluation of internal financial controls and risk management systems
-Call for / discuss  the comments of the auditors about internal control systems, the scope of audit, including the observations of the auditors and review of financial statement before their submission to the Board and
-May also discuss any related issues with the internal and statutory auditors and the management of the company
Schedule IV of the Companies Act, 2013 Independent Directors Satisfy themselves on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible

3

Applicability matrix

Applicability > Requirements  of the Statutes / Acts Listed companies Unlisted Public Limited companies* Other companies
Rule 8 of the Companies (Accounts) Rules, 2014

✓

✓

✓
Statutory Auditor Report (Sec. 143)

✓

✓

✓
Director’s Responsibility Statement (Section 134)

✓
Audit Committee (Sec. 177)

✓

✓
Independent Directors (Schedule IV)

✓

✓

Specified class of companies:

  1. public companies with a paid up capital of Rs.10 Crores or more;
  2. public companies having turnover of Rs.100 Crores or more;
  3. public companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs.50 Crores or more

The above thresholds as existing on the date of last audited Financial Statements shall be taken into account

4

IFC vs. ICFR

Basis of difference IFC ICFR
Full form Internal Financial Control (IFC) Internal Financial Control over Financial Reporting (ICFR)
Scope It’s scope is very vast (refer the definition in the next slide) It’s scope is restricted to financial reporting only
Definition source It’s defined in the Companies Act, 2013 under Section 134 It’s defined in the Guidance Note issued by ICAI in Sep’2015
Applicability Mandatory for listed companies Mandatory for unlisted companies
Auditor’s report Will not comment on IFC Will comment on the adequacy and effectiveness of ICFR

Definition of IFC:

As per Section 134 of the Companies Act, 2013, the term “Internal Financial Control” means the policies and procedures adopted by the company for:

  1. Orderly and efficiently conduct of it’s business, including adherence to company policies,
  2. Safeguarding of it’s assets
  3. Prevention and detection of frauds and errors,
  4. Accuracy and completeness of accounting records, and
  5. Timely preparation of reliable financial information

Definition of 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 company’s internal financial control over financial reporting 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, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
  3. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements

Guidance note issued by ICAI in September’2015 has borrowed the definition of Internal Financial Control over Financial Reporting (ICFR) from Auditing Standard (AS) 5, An Audit of Internal Control Over Financial Reporting that Is Integrated with An Audit of Financial Statements issued by the Public Company Accounting Oversight Board (PCAOB), USA.

5

Our services for ICFR implementation:

a

Our deliverables  under ICFR

b

Scope of work

Our broad scope of work will be to review the IFC system related to Financial Reporting to comply with the regulatory requirement. Scope of work has been divided in the following sections:

  • Coverage of scope as per materiality concept
    • Identify significant accounts
    • Discuss the scope with statutory auditors, if required by client
    • Define materiality – Key/ non-key Risks
  • Design assessment of existing IFC system over Financial reporting
    • Perform & document walkthroughs to understand the design of existing IFC system
    • Document process maps with input, output, risk/ controls
    • Segregate controls into Entity level control, Process controls & IT general controls
    • Identity controls into Manual, Automated, Preventive & Detective
    • Perform segregation of duties analysis
    • Prepare a Risk Control Matrix for each significant accounts/process to be covered for review
    • Identify design gaps based on walkthroughs, interviews & discussion
  • Gap remediation
    • Prioritize control gaps into Material and non-material
    • Discuss the control gaps with process owners and co-develop the remedial plan
    • Periodic monitoring of remediation implementation plan
    • Enhance or optimize IT Controls to mitigate the control gaps, to the extent possible
    • Enhance SOP/ MIS/ DOA etc
    • Interim testing to confirm remediated gaps
  • Testing the operating effectiveness
    • Prepare testing plan & templates
    • Timing of testing
    • Document testing results
    • Prioritize testing gaps into Material and non-material
    • Identify mitigation/ compensating controls for material gaps
    • Co-develop remediation plans for testing gaps by engaging process owners.

c

Execution strategy

To see how Blue Consulting can help you in IFC compliance, get in touch with us at bdm@blueconsulting.co.in or call us at 0120-4113075 or Click here.
, , , , , , , ,

About Post Author

71 Responses

  1. ZycMync

    Hacer ejercicio y mantenerse en forma es importante. Al hacerlo, le ayuda a perder peso, mantener un peso saludable, aumentar su metabolismo, prevenir
    a veces
    Estimador de jubilaciГіn de la seguridad social de Uruguay. Obtenga una nueva tarjeta de seguridad social, nГєmero de telГ©fono de seguridad social, cambio de nombre de seguridad social, oficina de administraciГіn de seguridad social, oficinas de seguridad social

  7. Uhador

    Comedication Drugs. Please update your comedication drug selection below. Select Comedications Goserelin Granisetron Grapefruit juice Griseofulvin Halofantrine Haloperidol Heparin Hydralazine Hydrochlorothiazide Hydrocodone Hydrocortisone (topical) Hy
    Haldol alternatives

  8. Pozzivof

    The Lawrence has all that going for it as well as a great location. But it is one of the loudest interiors around, which is a drawback for many people. And the service was quite uneven. Im not sure if our primary server was having an off night, as he did say his brain wasnt working that night, but that lack of attention can add stress to your evening, especially when trying to relax with
    Reflexology for lower back pain

  10. SuttiCom

    Ear infection symptoms include head scratching, head tilting, loss of appetite, discharge, and pain. An ear infection can be very serious and should be treated by a vet. If infection causes yeast pustules (red raised bumps with a whitish head) you can clean your rabbit’s’ ears with the above methods. ]
    Yeast infection burning

  11. Phillis

    After reading your blog post, I browsed your website a bit and noticed you aren’t ranking nearly as well in Google as you could be. I possess a handful of blogs myself, and I think you should take a look at “seowebsitetrafficnettools”, just google it. You’ll find it’s a very lovely SEO tool that can bring you a lot more visitors and improve your ranking. They have more than 30+ tools only 20$. Very cheap right? Keep up the quality posts

  13. DENmync

    Somatic pain – Somatic pain is caused by injuries affecting the pain receptors in the skin, ligaments, muscles, bones, or joints. This pain may be chronic and is sometimes associated with cancer. This pain may be chronic and is sometimes associated with cancer.
    Urgent care dental clinic

  14. WINTig

    You can tell if you begin to notice white clumps in between brackets. Most of the time this is food built up that has not been cleaned. Also, if brackets become easier to break off it may mean that the plaque on your teeth is beginning to eat away at the glue holding your brackets on. To prevent this, just make sure you brush and floss after every meal.
    How long after wisdom teeth removal can i smoke

  16. EGGnorm

    My dentist quoted me $3700. to make a new upper cast metal partial. I think this is $1000. more than I should pay. I would like to know what is a fair fee for this procedure I think this is $1000. more than I should pay.
    Whats in egg rolls

  20. Julienne

    After reading your blog post, I have a special offer for you, build your successful business with our company. it’s helpful for any type of website and business. vary cheap then another else offer. so, what are you waiting for? Keep up the quality posts

  21. Dennis

    After reading your blog post, I have a special offer for you, build your successful business with our company. it’s helpful for any type of website and business. vary cheap then another else offer. so, what are you waiting for? Keep up the quality posts

  22. Eleanore

    After reading your blog post, I have a special offer for you, build your successful business with our company. it’s helpful for any type of website and business. vary cheap then another else offer. so, what are you waiting for? Keep up the quality posts

  24. Karly

    After reading your blog post, I have a special offer for you, build your successful business with our company. it’s helpful for any type of website and business. vary cheap then another else offer. so, what are you waiting for? Keep up the quality posts

  25. Georgine

    After reading your blog post, I have a special offer for you, build your successful business with our company. it’s helpful for any type of website and business. vary cheap then another else offer. so, what are you waiting for? Keep up the quality posts

  28. ETHRek

    “To get you the most bitcoin possible from your Bitcoin Lighting Node is about $400 if your time is worth $20/hour and it takes you 20 hours to research and build the hardware and software
    ethiopian food

  31. BotLike

    Status Liker, Photo Liker, ZFN Liker, auto liker, Working Auto Liker, Auto Like, Photo Auto Liker, Auto Liker, Autoliker, Increase Likes, autolike, Status Auto Liker, auto like, Autolike International, autoliker, Autolike, Autoliker

  36. MikoPymn

    The College of Medicine, the largest of six colleges at the University of Florida Academic Health Center, opened in 1956 with a mission to increase Floridas supply of highly qualified physicians, provide advanced health-care services to Florida residents and foster discovery in health research.
    Types of psoriasis in children

  48. Uhoodien

    It’s the cost of dental care. In all, 27 million people — nearly 2 out of 3 Medicare beneficiaries — have no dental coverage, according to the Kaiser Family Foundation. Medicare doesn’t cover crowns, dentures, fillings and cleanings.
    What are dentures

  70. Marlofaw

    Refer to the RH specifications for your next flooring project and save hours of provides totally free, very fast, accurate ASTM F2170 relative humidity (RH%) you can save time and money by knowing the acceptable RH levels in concrete Every aspect of a buildings design from the ground up reflects on your reputation.
    how to save money fast as a student

  71. KarenLep

    ID3 XHTPE2 ÿþ- E J / D 4 9 1 I TALB! To sign up for your FREE account INSTANTLY fill out the form below! least seven years have passed since Labor Day), and the walls of my room remain tragically, depressingly bare. . plants in the study plot to the ants-present versus ants-removed groups at random—instead of,
    how to get rid of black ants in my house

Contact us for more information



    Consulting Services profile

    Services

    Consulting Services

    F&A Outsourcing Services

    Compliances

    Internal Audit Services

    White Paper