What is Internal Financial Controls (IFC)?
The Companies Act, 2013 marks a major step towards raising the bar on corporate governance in India. The Companies Act has re-emphasised the importance of a robust internal controls environment by introducing the term “Internal Financial Controls”, and by casting specific responsibilities on the Board, Audit committee, Management as well as the Auditors.
IFC gained its importance after series of scam erupted in Indian economic environment in last decade. Internal financial controls are designed to provide reasonable assurance that a company’s financial statements are reliable and prepared in accordance with the law.
Effective implementation of IFC helps organization in…
- Ensures reliable financial reporting and improves overall confidence on reported numbers to various stakeholders.
- Helps in achievement of desired objectives on financial, operational and compliance side.
- Exhibits better governance standards of an organization.
- Help prevent errors and irregularities from occurring.
- Encourage adherence to prescribed policies and procedures.
- Brings in efficiencies in operations.
- Smoothens changeover of job responsibilities and / or transitional phase at all level of Management.
- Implementation of Maker – Checker control.
- Formalization of policies, standard operating procedures, workflows & authority matrix.
- Prevention and detection of frauds and errors
- Accuracy and completeness of the accounting records