Definition of Internal Financial Controls over financial reporting (ICFR)

As per Section 143 [as per ICAI Nov 2014 guidelines] of the Companies Act 2013 , ICFR means.

“A process designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles”. A companies internal financial control over financial reporting includes those polices and procedure:

For Private Limited Companies

Board of Directors: As per Rule 8(5)(viii) of The Companies (Accounts) Rules, 2014, the report of Board of Directors shall contain details in respect of adequacy of internal financial controls with reference to the Financial Statements.

Auditors: As per Section 143 of The Companies Act, 2013, the auditor’s report shall state whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls.

• Policies and Procedures to ensure orderly & efficient conduct of business.
• Controls over safeguarding of assets.
• Mechanism of prevention and detection of frauds.
• Controls to ensure accuracy and completeness of accounting records.
• Process for timely preparation of reliable financial information.

The objectives are to be achieved by adopting the recommended controls framework and demonstration of controls through control matrixes defined for material risks.