Report And Statements Regarding The Internal Control Over: Fill & Download for Free

Objective of both SOX and ICFR are same with different testing procedure.SOX focus on effectiveness of Internal Financial Control only.SOX controls are focused very much on creating clear accountability over every step of financial statements preparation (origin of SOX were several financial statement frauds).SOX audits focus heavily on this (e.g. checking for signatures, signoffs, authorities and it access configurations).ICFR focus on both Internal Control effectiveness and effeciency.ICFR means the controls over reliable reporting of financial statements.The Companies Act, 2013 has imposed specific responsibilities on the Board of Directors towards the company’s internal financial controls and, inter alia, requires the Board to state that they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.

It is important to understand that the financial statements are the responsibility of the company’s management. The audit firm’s responsibility is to express an opinion based on audits in accordance with the standards of the Public Company Accounting Oversight Board. The procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. The audit firm believes that their audits provide a reasonable basis for their opinion.The auditor report actually has two parts: an opinion on the financial statements, and an opinion on internal control over financial reporting.Let’s start with the opinion on the financial statements. It starts with the audit firm stating that it has audited the financial statements and related notes and schedules. In case of a “positive outcome” of the audit, the audit firm will state that in its opinion the financial statements present the company’s financial position and results fairly, in all material aspects, in conformity with US GAAP. Let this sink in for a bit: the opinion that it is a fair representation, in all material aspects. It doesn’t say “we have checked each and every dollar, and we guarantee that everything’s right”. No, it says “in our opinion it is a fair representation, in all material aspects”. So what is this concept called materiality? Materiality means that only those transactions, important facts and items are shown which are useful and material for the business. In my own words: material means big enough to matter in the grand scheme of things. In the words of the US Supreme Court a fact is material if there is “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”The second part of the auditor report is the opinion on internal control over financial reporting. This has a similar format as the opinion on the financial statements themselves (what is the opinion, and what is the basis for the opinion), followed by a section called “definition and limitation of internal control over financial reporting”. This defines internal control as a process to provide reasonable assurance regarding the reliability, and provides a disclaimer that because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements.

IFCFR means the controls over reliable reporting of financial statements.The Companies Act, 2013 has imposed specific responsibilities on the Board of Directors towards the company’s internal financial controls and, inter alia, requires the Board to state that they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles.Companies Act, 2013: Section 134(5)(e) explains internal financial controls(IFC) as the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business , including 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.P.S.1 The scope of Internal Financial Controls is much wider than the reporting on internal controls in CAROP.S.2 Statutory auditors are required to report on the adequacy and operating effectiveness of the company’s IFCFR. The reporting by the auditors is voluntary for the year ending 31 March 2015 and mandatory for financial years beginning on or after 1 April, 2015