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ICFR/ IFC Compliances

ICFR/ IFC Compliances

INTERNAL FINANCIAL CONTROLS (IFC)

ICFR/IFC Compliances – IFC Internal Financial controls has been defined in the explanation to section 134(5) (e) of the companies Act, 2013 as “The policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence of company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.”

Internal Control over Financial Reporting (ICFR)

ICFR (Internal Control over Financial Reporting) Shall Mean:

“A process designed to provide reasonable assurance regarding the reliability of the financial reporting and preparation of financial statements in accordance with GAAP. A company’s ICFR Compliance includes those policies and procedures that:

  • Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
  • 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
  • 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.”

Difference between IFC vs. ICFR Compliance

Basis of difference IFC ICFR
Scope Scope is very Vast Scope is restricted to Financial Reporting only
Definition Defined Under Section 134 in The Companies Act,2013 Defined in Guidance note issued by ICAI in sept,2015

 

 

Applicability Mandatory for all Listed Companies

 

 

Mandatory for Unlisted Companies

 

 

Auditor’s Report No comments on IFC by Auditors Auditors comments on the adequacy and effectiveness of ICFR Compliance services

 

Relevant Provisions relating to ICFR Service:

Section/Rule Related to Description
Section 143 of The Companies Act, 2013 Statutory Audit Report on whether company has adequate Internal financial controls and Operating effectiveness of such controls
Section 134 of The Companies Act, 2013 Director Responsibility statement (DRS) DRS has to state that directors

 

–          Had Laid down Internal Financial Controls

–          That such Internal Financial Controls were Adequate and Operating Effectively

Rule 8(5)(viii) of Companies Accounts Rules,2014 Board Report Boards Report to include the details in respect of adequacy of IFC with reference to financial statements
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

Applicability of above provisions

Applicability of sections Listed companies Unlisted Public limited companies* Other Companies

 

(Eg. Private ,OPC)

Section 143 of The Companies Act, 2013

 

 

 

 

                  ?

 

 

                  ?

            

 

                ?

Section 134 of The Companies Act, 2013  

 

                  ?

 

   
Rule 8(5)(viii) of Companies Accounts Rules,2014  

 

                ?

                

 

                  ?

                 

 

                  ?

Schedule IV of the Companies Act,2013

 

 

 

 

                ?

 

 

                  ?

 

 

 Specified Class of companies *

  1. Public Companies with PUC of Rs. 10 Crore or more;
  2. Public Companies with Turnover of Rs. 100 Crore or more;
  3. Public Companies, having in aggregate, outstanding loans or borrowings or debentures or deposits exceeding Rs. 50 Crore or more

The above threshold shell be considered as on the Last audited Financial Statements shall be taken in account.

How ASC Can Help Business in ICFR/IFC Compliances

Our experienced team members will review IFC system to check the compliance with regulatory requirements.

Our Scope of work

  • Testing & operating effectiveness
  • Materiality concept coverage in relation to financial statement
  • Design assessment of existing IFC over financial reporting
  • GAP remediation

On this basis we provides Deliverable as mentioned below

  • Risk control matrix
  • Control design gap summary
  • Detailed process flow
  • Testing Methodology
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