1. INTERNAL FINANCIAL CONTROLS
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INTERNAL FINANCIAL CONTROLS

2. Policies & Procedures adopted by the company to ensure :-
WHAT IS IFC
Policies & Procedures adopted by the company to ensure :-
Orderly and Efficient Conduct of business
Adherence to Company Policies
Safeguarding of Assets
Prevention and Detection of Frauds and Errors
Accuracy and completeness of Accounting Records
Timely Preparation of Reliable Information

3. Process Level Controls
COMPONENTS OF IFC
Entity Level Controls
Shareholders
Board & COMMITTEE
Periodic reviews
Process Level Controls
Finance & accounts
Marketing & logistics
Inventory management
others

4. NEED FOR IFC
ENRON
Jeffrey Skilling (CEO) used Accounting Loopholes to hide Debt worth Billions of Dollars from failed Deals & Projects
Shareholders lost $74 billion
Employees lost their jobs & their retirement accounts.
Jeffrey Skilling got 24 years of Prison

5. NEED FOR IFC
2002 – WORLD COM
Bernie Ebbers (CEO) inflated Assets as much as $11 billion
Investors lost $ 180 billion
30,000 Employees lost their jobs
Bernie Ebbers got 25 years of Prison
CFO & Controller were fired & sentenced to Prison.

6. Company Law Board barred the then Board & appointed 10 new directors
NEED FOR IFC
2009 – SATYAM
Ramalinga Raju(Chairman) confessed that he had manipulated the accounts by $1.5 Billion.
Company Law Board barred the then Board & appointed 10 new directors
Share Price fell from Rs 544 in 2008 to Rs in Jan 2009
Raju & his brother were fined Rs.55 million each & sentenced to 7 years imprisonment along with others.

7. RESPONSIBILITY ASSIGNED
Board of Directors
(Section 134)
State in Director’s Responsibility Statement that they have:-
Laid down the IFC
Such IFC were adequate & operating effectively
Board of Directors
(Companies Accounts Rules 2014)
Include the details in respect of adequacy of Internal Financial controls with reference to the Financial Statements
No Reporting Responsibility existed in Companies Act 1956
Audit Committee
(Section 177)
Evaluation of Internal Financial Controls & Risk Management Systems
Independent Directors
(Schedule IV)
Satisfy themselves on the integrity of financial information & ensure that financial controls & systems of Risk Management are robust & defensible

8. RESPONSIBILITY ASSIGNED
STATUTORY AUDITORS
Restricted to Purchase of Inventory and Fixed Assets and for Sale of Goods & Services
OLD
Report on Adequacy & Operating Effectiveness of Internal Financial Controls
NEW

9. APPLICABILITY OF IFC Statutory Requirements Listed Companies
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Statutory Requirements
Listed Companies
Specific Class of Companies
Other Companies
Directors Responsibility Statement
Rule 8 of Companies (Accounts) Rules,2014
Audit Committee
Independent Directors
Statutory Audit Report

10. SPECIFIC CLASS OF COMPANIES
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Public Unlisted Companies Having:- 1
Paid Up Capital of Rs. 10 Crores or more 2
Turnover of Rs. 100 Crores or more
Aggregate outstanding Loans/Borrowings/Debentures/Deposits exceeding Rs. 50 Crores or more 3
As existing on the last Audited Financial Statements

11. IMPACT OF INADEQUATE IFC - PENALTIES
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COMPANY
 Fine upto Rs. 25 Lakhs
EVERY OFFICER OF COMPANY
 Fine Upto Rs. 5 Lakhs
 Imprisonment upto 3 years

12. MANAGEMENT’S RESPONSIBILITY
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Review existing process and map them with risks & controls and ensure that they are adequate.
Improve the process and controls wherever it is observed that process is slack.
Assess Fraud Risk and built processes around the same so that risk is minimised.
Test Internal controls so formed on regular basis and ensure that processes are working effectively.
In-house team may be assigned this task or a consultant may also be appointed in the first year of implementation

13. IMPACT OF INADEQUATE IFC
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Qualified Opinion in Auditor’s report that can have an adverse effect on the functioning of the company. 2
Non existence of IFC imply that Frauds cannot be monitored effectively thereby affecting the credibility of the Financial Statements.
Lack of proper IFC would also damage the credit rating of the company & affect the negotiation power of the entity with borrowers. 3

14. Purchase and Procurement Marketing and Logistics
IFC - GHCL
Process Level Controls
Existing Company policies with respect to each activity
Authority & Responsibility Structure
System Controls in Place to prevent Fraud & Errors
Purchase and Procurement
Marketing and Logistics
Finance and Accounts

15. IFC - GHCL CUSTOMER SELECTION PRICE FINALISATION REBATES AND DISCOUNTS
MARKETING
CUSTOMER SELECTION
PRICE FINALISATION
REBATES AND DISCOUNTS

16. IFC - GHCL Entity Level Controls SHAREHOLDERS LEVEL CONTROLS BOARD
COMMITTEE
LEVEL CONTROLS MD
LEVEL CONTROLS

17. THANK YOU