INTERNAL FINANCIAL CONTROL
The Companies Act, 2013 came into effect on 30 August 2013 with significant changes in accountability & governance structure.
One of the key changes under the Act includes introduction of Internal Financial Control (‘IFC’). The Key provisions related to IFC are summarized below:
In case of certain class of companies, Directors’ Report to now include How the Company has implemented internal financial controls (IFCs) and whether they were adequate and operating effectively.
The new requirement not only covers the financials controls, however, detailed explanations also covers various levels of operating controls like:
- Orderly and efficient conduct of its business
- Adherence to 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
Indepent directors should satisfy themselves on the integrity of financial information and ensure that financial controls and systems of risk management are robust and defensible. This created an addiotnal duty on Independent Director among other various risks on them under the Companies Act 2013.
Every Audit Committee needs to review and evaluate internal financial controls system and risk management systems of Companies.
The above change is most significant change brought in by Companies Act 2013 which has shaken the entire corporate world in India.
The Implementation of Internal Financial Control is applicable for year ended March 31, 2015 for all companies for Management reporting. From April 01, 2015, the Auditor also required to report on the effectiveness of the Internal Financial Control in its report.
Few people in India has expertise on Internal Financial Control. Our experts has over 10 years of hands on experience in the field of Internal Financial Control.
Please contact us at IFC@TYA.CO.IN