Internal Financial Control
One of the significant implications of companies act 2013 is reporting responsibilities of directors and auditors with regard to internal financial controls. The directors are responsible for laying down the internal financial controls to be followed by the company and also to ensure that such controls are adequate and operating effectively. In addition, directors are required to specifically include a statement regarding this in their board report.
Applicability of Internal Financial Control
Internal Financial Control is applicable to all the companies, Related exemption from Internal Financial Control has been given by MCA by issuing notification dated 13th June 2017 to following companies i.e :
- Â One person Company (OPC) or a Small Company; or
- Â Company having turnover less than Rs. 50 Crores as per latest audited financial statement or which is having aggregate borrowings from banks or financial institutions or any body corporate at time during the financial year less than Rs. 25 Crore.
Features
Internal financial controls are defined as per companies act 2013 as policies and procedures adopted by the company and its management for ensuring:
- For orderly and efficiently conduct of the business according to the company policy.
- Ensuing safeguarding of company assets.
- To prevention and detection of frauds and errors Maintaining accuracy and completeness of accounting records and
- In time preparation of reliable financial information.
Vincyte approach to Internal Financial Control
Plan & scope the evaluation
- Â Defining materiality and scope
- Â Discuss and agreement with statutory auditors
Design the Internal Financial control framework
- Focus on key risksÂ
- Include all elements i.e process, it and fraud
- Develop documentation
Evaluate the design effectiveness
Identify and correct deficiencies
- Assess materiality and prioritize areas for improvement.
- Focus on compensating controls.
Evaluate operating effectiveness (including remediation and re-testing)
- Â Phase wise testing controls
Independent audit and reporting of Internal Financial controls
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