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Internal financial controls
The document provides an overview of Internal Controls over Financial Reporting (ICFR), emphasizing its purpose to ensure reliable financial statements according to GAAP. It describes various aspects of internal control systems including risk identification, control objectives, and required criteria for drafting controls across different operational fields. Additionally, it outlines applicable regulations for companies and the importance of testing and evaluating internal controls to mitigate financial risks.
Internal financial controls
- 1. www.mbgcorp.com/in | communications@mbgcorp.com| +91-8860190008 I F C / I C F R C o n s u l t i n g S e r v i c e s I F C / I C F R C o n s u l t i n g S e r v i c e s
- 2. INTRODUCTION TO INTERNALCONTROLS FINANCIAL REPORTING (ICFR) ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Maintenance of Financial Records (Detail/Accuracy) ICFR Authorizations of Transactions (in accordance with GAAP) Operational Controls Safeguarding of Assets Fraud Prevention ICFR IFC + + = + + = Ex. Weigh bridge are calibrated to ensure correct recording Ex. All receipts are accurately accounted for at month end Ex. Can we record a receipt without physical receipt? (access controls)
- 3. APPLICABILITY Requirement Paid up Share Capital Turnover Outstanding Deposits PublicUnlisted Companies & Listed Companies Applicable without any terms & conditions Applicable without any terms & conditions Applicable without any terms & conditions Applicable without any terms & conditions Private Companies Not applicable Rs. 50 Crores or more during the preceding financial year Exceeding Rs. 25 Crores or more at any point of time during the preceding financial year Not applicable Outstanding Loan & Borrowings from Banks or Public Financial Institutions
- 4. INTERNAL CONTROL SYSTEM Risk Description Includes identification ofrisk applicable on the respective control Control Objective Description of result achieved through implementa tion of respective controls Control Activity Control activity means defining detailed control to mitigate respective risk Type/Nature/ Frequency Type (i.e. Manual/System) /Nature (Preventive/ Detective), /Frequency (Daily/ Monthly/ Yearly) Internal Control System(s) are the method to evaluate potential risks/losses and take measures to reduce/eliminate such possibilities. Criteria required to be considered while drafting controls:
- 5. Logistics & Distributions Order to Cash Procure toPay Inventory Management Human Resources & Payroll Finance & Accounts Capital Expenditure Information Technology OUTCOMES AREAS Control Weakness 1 2 3 4 5 Operational Inefficiencies Cost Control Opportunities Deviation from best Practices Procedural & Regulatory Non- compliances
- 6. REVIEW STRATEGY E V A L U A T E T E S T I N G DEFINE Understanding the existing processes, policiesand other aspects of control environment & challenges they represent Defining internal control systems/risk control matrix and process flows to ensure compliance Testing of internal control systems/risk control matrix to ensure compliance with drafted control matrix DELIVERABLES Process Flows Risk Control Matrix Testing Results/ Report
- 7. CONNECT WITH US COO– Risk, Assurance, Transaction Advisory Services & Business Development - Non-Foreign Enterprise +91-98108-08653 a1.sharma@mayurbatra.com Abhijeet Sharma Senior Manager – Business Development +91-99998-77683 p.jaidev@mbgcorp.com Pulkit Jaidev Website: www.mbgcorp.com/in Email: communications@mbgcorp.com Phone: +91-8860190008 India | Japan | UAE | China | Singapore | European Union