Companies may need more guidance on internal financial control reporting

NEW DELHI: The apex body of chartered accountants ICAI today said companies, too, would be looking up to the Corporate Affairs Ministry for guidance on the rule that statutory auditors should disclose details about a company's internal financial controls.

Under the new companies law -- being implemented by the Ministry -- auditors would have to provide information about a company's internal financial controls and their operating effectiveness in the annual statements.

It would be mandatory for auditors from next financial year starting from April 1, 2015 and voluntary for this fiscal.

The Institute of Chartered Accountants of India (ICAI) has already approved the guidance note on reporting on internal financial controls by statutory auditors of companies.

"As the name suggests, this guidance note is for the statutory auditors. Post final issuance of guidance note, ICAI would also hold country-wide training programmes for the statutory auditors on the same," ICAI President K Raghu said in a statement today.

According to Raghu, the deferment of reporting on internal financial controls by statutory auditors is perhaps more of a breather for the companies since presently in India we do not have any commonly accepted framework for internal financial controls to suit the country's business environment.

"In fact, whatever internal control frameworks have been developed and are in use abroad... are a result of considerable research over long periods of time.

"In this scenario, the Indian companies too would look up to the Ministry of Corporate Affairs to provide necessary guidance in this regard," he noted.

For the financial years commencing on or after April 1, 2015, the report of the auditor shall state about existence of adequate internal financial controls system and its operating effectiveness, the Ministry had said last week.