Internal Control CFO Horizon
Internal Control Services by CFO Horizon
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What is Internal Control Services?
The framework for Internal Financial Controls (IFC) stands as a crucial component within a company’s overarching program for internal financial controls. Internal financial control encompasses the array of policies and procedures implemented by the company to ensure:
This internal control is a dynamic process orchestrated by the entity’s board of directors, management, and other personnel. It’s strategically designed to furnish reasonable assurance concerning the achievement of objectives related to operations, reporting, and compliance.
Crucially, Internal Financial Control transcends being a mere point-in-time policy or procedure. It’s an ongoing, pervasive process operating across all levels within the company. This continuous vigilance ensures that the company not only meets its financial goals but also navigates the complexities of business operations with precision and integrity.
Legal Requirements of Internal Control In India
Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014
As stipulated by Rule 8(5)(viii) of the Companies (Accounts) Rules, 2014, the Board of Directors’ report for all companies is required to detail the adequacy of internal financial controls, specifically concerning the “financial statements.” This ensures a comprehensive overview of the company’s commitment to robust financial control measures.
Section 134(5)(e) of the Companies Act 2013
The Board of Directors (BoD) report, as per Section 134(5)(e) of the Companies Act 2013, is mandated to include a statement affirming the implementation of robust internal financial controls. It emphasizes adherence to policies and procedures aimed at fostering the orderly and efficient conduct of business, safeguarding company assets, preventing and detecting frauds, ensuring accuracy and completeness of accounting records, and facilitating the timely preparation of reliable financial information.
Section 143 (3) (i) of the Companies Act, 2013
The auditor’s report, in accordance with Section 143 (3) (i) of the Companies Act 2013, must explicitly address the adequacy and operational effectiveness of the company’s internal financial controls.
Schedule IV (II) (4)
Independent directors are tasked with ensuring the integrity of financial information and financial controls.
Internal Control over Financial Reporting ('ICFR')
Internal Control over Financial Reporting (ICFR) can be delineated as a meticulously crafted process, overseen by the company’s principal executive (CEO) and principal financial officers (CFO), or individuals undertaking similar roles.
This process, endorsed by the company’s Board of Directors, management, and other personnel, is strategically devised to instill reasonable assurance regarding the dependability of financial reporting and the meticulous preparation of financial statements for external purposes, aligning with generally accepted accounting principles.
It encompasses a spectrum of policies and procedures that:
Maintain Accurate and Fair Records:
Relate to the meticulous upkeep of records that intricately, accurately, and fairly reflect the transactions and dispositions of the company’s assets.
Ensure Recording Compliance and Authorization:
Prevent Unauthorized Asset Actions:
Provide reasonable assurance concerning the prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets. This is paramount, particularly when such actions could wield a material effect on the financial statements.
This comprehensive definition of ICFR extends beyond financial reporting to encompass controls that assure the ‘effectiveness and efficiency’ of a company’s operations. It also delves into ensuring ‘compliance with applicable laws and regulations,’ specifically, those intricately linked to the preparation of financial statements. In essence, ICFR stands as a dynamic safeguard, not only ensuring financial precision but also safeguarding the company’s operational efficacy and legal adherence.
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