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Guidance Note on Audit of Internal Financial Controls Over Financial Reporting

Written By Admin on Monday, 1 December 2014 | Monday, December 01, 2014

The Companies Act, 1956 has been replaced by the Companies Act,   2013.   The   new   Act   has   cast   many   new   reporting requirements on the statutory auditors of companies. One of these requirements  relate to  ‘Reporting  on  Internal  Financial  Controls’ under   Section   143(3)(i)   of   the   Companies   Act,   2013   which requires the auditor to state in his report whether the company has adequate  internal  financial  controls system  in  place  and  the operating effectiveness of such controls. 

The  section  has  cast  onerous  responsibilities  on  the  statutory auditors because various audit principles and audit procedures for  audit of financial statements as per the auditing standards issued by  the  Institute  of  Chartered  Accountants  of  India  (ICAI)  do  not cover   situations   where   the auditors   are   required   to   express opinion of effectiveness of internal controls. ICAI therefore needed to come out with appropriate guidance on this section in the form of  a  publication  that would  include  guidance  on  various  aspects relating to such reporting on Internal Financial Controls.  




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