SECTION 4 MAKING IT EASY – READY-TO-USE DRAFTS ......signed-off by employees at the time of...

| 64 |

SECTION 4

MAKING IT EASY – READY-TO-USE DRAFTS

AND FORMATS

4.1 Entity Level Controls – Specimen (refer paragraph 2.5.5)

ABC Private Limited ICFR for the year ending 31st March, 2016

Entity Level Controls (ELC)

LIST OF CONTROL GROUPS

Control Ref Control Group

C01 Roles and responsibilities of Board of Directors

C02 Formal SOPs for various crucial processes

C03 Admin Manual covers various policies

C04 Risk Management policy

C05 Background Verification process in place

C06 Manpower planning and recruitment policy/process to ensure right crew for the right job

C07 Board Review of business plans, budgets, budget vs. actual, periodic performance and Internal Audit reports

C08 Monthly MIS reporting

C09 Staff hired through a management approved placement agency

C10 Promotions based on well-defined Performance Evaluation system.

C11 Talent growth through need-based and compliance related training

C12 Attrition management

| 65 |

Control Ref Control Group

C13 Independent Review and periodic updates by External Professional Consultant

C14 Access rights restrictions

C15 Independent Review by Internal Auditor

C16 Validation controls - confirmation, verifications of assets/bank balances, valuations

C17 Compliance framework, tracker and reporting - controls on compliances and regulatory reporting

C18 Sexual Harassment Policy

C19 Appointment letter covers ethical standards and other required terms and conditions which is signed-off by employees at the time of joining

C20 Board/Management Approval

C21 Formal roll out of ICFR policy and testing

C22 Data Back-up strategy

C23 Defined BCP/DRP process

C24 Periodic department reviews

C25 Defined Financial Closure Policy

C26 Compliance with related-party transactions and disclosures

C27 Periodic updation and communication of ISO manual

C28 Formal KRA definition and communication of the same

C29 Information and Communication

| Section 4 : Making it easy – Ready-to-use drafts and formats |

| 66 |

| ICFR – A Handbook for Private Companies and their Auditors |

AB

C P

riva

te L

imit

ed

ICFR

for

th

e ye

ar e

nd

ing

31st

Mar

ch,

2016

En

tity

Lev

el C

ontr

ols

(EL

C)

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

1Co

ntro

l En

viro

nmen

tM

anag

emen

t es

tabl

ish

es

stru

ctu

re,

auth

ority

an

d re

spon

sibi

lity

in

pu

rsui

t of

ob

jectiv

es

Bo

ar

d Ov

ersig

htBo

ard

does

not

cle

arly

def

ine

auth

ority

to b

e ex

erci

sed

at

Boar

d le

vel

and

auth

ority

de

legate

d to

oth

er D

irecto

rs

C01

Boar

d po

wers

are

clear

ly d

efine

d 1.

Co

nfir

m

the

docu

men

tatio

n of

Boa

rd

pow

ers

and

dele

gatio

n of

au

thor

ity d

one b

y th

e Boa

rd.

2. Ve

rify

Boar

d m

inut

es a

nd

mee

ting

frequ

ency

. Ver

ify

atten

danc

e rec

ords

to en

sure

pa

rticip

ation

and

insig

hts.

2Co

ntro

l En

viro

nmen

tBo

ard

of

Dir

ec

tors

e

xe

rc

ise

s ov

ersig

ht o

f the

de

velo

pmen

t an

d pe

rform

ance

of

in

tern

al

cont

rols

Bo

ar

d Ov

ersig

htBo

ard

does

not

ack

now

ledg

e its

re

spon

sibi

lity

tow

ards

ov

ersi

ght

for

esta

blis

hing

an

d pe

rform

ance

of i

nter

nal

cont

rols

Boar

d do

es

not

form

ally

de

lega

te t

he r

espo

nsib

ility

fo

r est

ablis

hmen

t of i

nter

nal

finan

cial

con

trol

s an

d fo

r en

surin

g eff

ectiv

e pe

rform

ance

th

ereo

f.

C02

1.

Boar

d m

inut

es

incl

udes

a

stat

emen

t ac

know

ledg

ing

its

resp

onsib

ility

for I

CFR

2. B

oard

pro

vide

s bro

ad g

uide

lines

fo

r in

tern

al c

ontro

ls a

nd r

ecor

ds

form

al d

eleg

atio

n of

aut

horit

y fo

r es

tablis

hmen

t of c

ontro

ls.

1.

Veri

fy

that

fo

rmal

gu

idel

ines

ha

ve

been

pr

ovid

ed b

y th

e Bo

ard.

2.

Veri

fy

that

sp

ecifi

c re

spon

sibi

lity

has

been

al

loca

ted

for

esta

blis

hing

in

terna

l fin

ancia

l con

trols

| 67 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

3C

on

tr

ol

Envi

ronm

ent

Boar

d of

D

ire

cto

rs

ex

er

cis

es

over

sight

of t

he

deve

lopm

ent

and

perfo

rman

ce

of

inte

rnal

co

ntro

ls

Bo

ar

d Ov

ersig

htBo

ard

does

no

t ha

ve

a m

echa

nism

to

revi

ew I

CFR

adeq

uacy

and

per

form

ance

C07,

C08

Boar

d of

Dir

ecto

rs r

evie

w t

he

perfo

rman

ce o

f the

com

pany

and

ad

equa

cy

of

inte

rnal

co

ntro

ls th

roug

h re

gula

r int

erac

tions

with

th

e Fi

nanc

e M

anag

er

Budg

ets

are

esta

blish

ed o

n ye

arly

ba

sis

Mon

thly

rep

ortin

g is

don

e by

Fi

nanc

e M

anag

er to

the

Grou

p CF

O wh

o in

turn

repo

rts to

BOD

.

1. V

erify

Boa

rd m

eetin

g m

inut

es w

here

ade

quac

y an

d ef

fect

iven

ess

of

inte

rnal

con

trols

have

bee

n re

view

ed.

2. C

onfir

m th

at th

ere

are

regu

lar in

terac

tions

betw

een

Boar

d m

embe

rs an

d Fi

nanc

e M

anag

er th

roug

h CF

O, a

nd

othe

r ke

y m

anag

emen

t pe

rson

nel t

o as

sess

qua

lity

of c

ontr

ols

and

revi

ew

busin

ess p

erfo

rman

ce.

3. R

eview

bud

get v

arian

ces,

exce

ptio

nal i

tem

s to

ass

ess

inter

nal c

ontro

l gap

s, if

any.

4C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

inte

grity

an

d eth

ical v

alues

Bo

ar

d Ov

ersig

htBo

ard

of D

irect

or d

oes n

ot se

t th

e ri

ght

tone

at

the

top

to

enco

urag

e eth

ics a

nd in

tegrit

y.

C03

Polic

ies

are

fram

ed b

y th

e Bo

ard

w.r.t

. eth

ical

con

duct

, ant

i-brib

ery

and

corru

ptio

n, a

nti-f

raud

.

1. V

erify

min

utes

of B

oard

m

eetin

g and

Adm

in M

anua

l/ di

rect

ions

iss

ued

by t

he

Boar

d of

Dire

ctors

from

tim

e to

tim

e.

2. R

evie

w A

ppoi

ntm

ent

letter

of a

n em

ploy

ee.


| 68 |


Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

5C

on

tr

ol

Envi

ronm

ent

Hold

s ind

ivid

ual

acco

unta

ble

for

the

inte

rnal

c

on

tr

ol

resp

onsib

ilitie

s

Bo

ar

d Ov

ersig

htBo

ard

of D

irect

ors

does

not

se

t the

rig

ht to

ne a

t the

top

to e

ncou

rage

ins

titut

ion

of

cont

rols

and

sys

tem

s an

d en

sure

acc

ount

abili

ty fo

r lap

se

of c

ontro

ls

C02

Dire

ction

s are

giv

en b

y th

e Bo

ard

to

enco

urag

e pr

oces

s-driv

en c

ondu

ct,

auto

mati

on a

nd e

ffecti

ve m

onito

ring

acro

ss th

e or

gani

zatio

n.

Veri

fy m

inut

es o

f Bo

ard

mee

ting

and

polic

ies/

dire

ctio

ns i

ssue

d by

the

Bo

ard

of D

irecto

rs fro

m ti

me

to ti

me.

6C

on

tr

ol

Envi

ronm

ent

Man

agem

ent

esta

blis

hes

st

ruc

ture

, au

thor

ity

and

resp

onsi

bili

ty

in

purs

uit

of

objec

tives

Deleg

atio

n of

Au

thor

ityAm

bigu

ity

in

dele

gatio

n of

fina

ncia

l pow

ers

redu

ces

the

cont

rol

over

fin

anci

al

trans

actio

ns a

nd in

crea

se th

e ris

k of

fina

ncial

loss

es

C01

1. F

inan

cial

pow

ers

in t

erm

s of

si

gnin

g /e

ffect

ing

bank

ing

trans

actio

ns is

with

the

Dire

ctor.

2. A

lso,

all

the

maj

or c

ontr

acts

, ag

reem

ents

, Pur

chas

e Or

ders

are

sig

ned/

appr

oved

by

the

Dire

ctors.

3. A

ll th

e m

ajor

dec

isio

ns a

re

clos

ely

revi

ewed

by

the

resp

ectiv

e HO

Ds at

Gro

up le

vel b

efore

appr

oval

by th

e Di

recto

r.

Conf

irm th

at a

utho

rizat

ion/

appr

oval

s of

Di

rect

ors

is in

pla

ce, r

evie

w B

oard

re

solu

tion

to d

efin

e po

wers

of

Dire

ctor

7C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

inte

grity

an

d eth

ical v

alues

Ethi

cs

& In

tegrit

yFl

awed

per

form

ance

ince

ntiv

e/ co

mpe

nsat

ion

polic

y no

t in

line

with

eth

ical

ton

e an

d st

anda

rds

may

incr

ease

the

risk

of

com

prom

ise

/ no

n-co

mpl

iance

to et

hica

l stan

dard

s of

con

duct

C03,

C19

1. A

dmin

Man

ual g

ives

a re

fere

nce

to e

thic

al s

tand

ards

exp

ecte

d fro

m

empl

oyee

s.

2. A

ppoi

ntm

ent

Lette

r in

clud

es

relev

ant c

lause

s

1. V

erify

Adm

in M

anua

l to

ens

ure

all u

pdat

ions

are

in

clude

d.

2. Ve

rify

Appo

intm

ent L

etter

of

em

ploy

ee

| 69 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

8C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

inte

grity

an

d eth

ical v

alues

Ethi

cs

& In

tegrit

yIf

man

agem

ent

does

no

t ta

ke ti

mel

y an

d ap

prop

riate

di

scip

linar

y ac

tion,

it w

ould

en

cour

age

non-

adhe

renc

e to

est

ablis

hed

polic

ies

and

proc

edur

es

C03

Man

agem

ent

take

s di

scip

linar

y ac

tion

for v

iolat

ions

/ non

-adhe

renc

e, in

a ti

mely

and

app

ropr

iate

man

ner.

1. V

erify

the

mec

hani

sm fo

r re

cord

ing

non-

adhe

renc

es/

viol

ation

s.

2. V

erify

the

evi

denc

e of

ac

tion

bein

g tak

en.

9C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

inte

grity

an

d eth

ical v

alues

Ethi

cs

& In

tegrit

yAp

plica

nt sc

reen

ing p

roce

dure

s do

not

ade

quat

ely

cons

ider

in

tegrit

y an

d eth

ical v

alues

C05,

C09

1. Ad

equa

te ba

ckgr

ound

ver

ifica

tion

is d

one

for

empl

oyee

s (P

olic

e Cl

eara

nce,

Expe

rienc

e let

ter, e

tc.)

2. M

ajor

ity o

f offi

ce s

taff

is hi

red

thro

ugh

a pl

acem

ent a

genc

y wh

ich

is se

lect

ed b

y th

e m

anag

emen

t to

ensu

re ri

ght p

erso

n fo

r the

righ

t job

3. D

ecla

ratio

ns a

re o

btai

ned

from

em

ploy

ees

for n

on-d

isclo

sure

and

co

de o

f con

duct

adhe

renc

e as

a p

art

of jo

inin

g fo

rmali

ties

10C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

attr

act,

reta

in

and

deve

lop

co

mp

ete

nt

indi

vidu

als

Recr

uitm

ent

& Se

lectio

nLa

ck o

f ad

equa

te t

alen

t or

m

ism

atch

es in

req

uire

men

ts an

d sk

ill s

ets

may

sev

erel

y im

pact

ac

hiev

emen

t of

ob

jectiv

es

C05,

C06,

C09

1. A

rig

orou

s re

crui

tmen

t an

d se

lect

ion

proc

ess

is a

dopt

ed t

o en

sure

selec

tion

of ri

ght e

mpl

oyee

s fo

r the

righ

t job

.

2. M

ajor

ity o

f offi

ce s

taff

is hi

red

thro

ugh

a pl

acem

ent a

genc

y wh

ich

is se

lected

by

the

man

agem

ent

1. C

onfir

m th

e no

. of e

xits

and

the p

rincip

al un

derly

ing

reas

on/s.

2.

Conf

irm

th

at

key

posit

ions

are

not

left

vaca

nt

for a

long

tim

e.


| 70 |


Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

11C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

attr

act,

reta

in

and

deve

lop

co

mp

ete

nt

indi

vidu

als

Ince

ntiv

eIn

abs

ence

of a

pro

per

wor

k en

viro

nmen

t the

com

pany

may

ha

ve to

dea

l with

high

attr

ition

lev

els

C10,

C12

1. P

rom

otio

ns a

re b

ased

on

wel

l-de

fined

Per

form

ance

Eva

luat

ion

syste

m.

2. M

anag

emen

t ens

ures

a v

ery

low

attrit

ion

rate.

1. R

evie

w t

he a

ppra

isal

pr

oces

s for

app

ropr

iate

ness

an

d co

nfirm

that

ther

e is

due

proc

ess f

or re

dres

sal o

f ap

prais

al re

lated

grie

vanc

es.

2. R

evie

w at

tritio

n ra

te a

nd

relat

ed a

naly

sis

12C

on

tr

ol

Envi

ronm

ent

Boar

d of

D

ire

cto

rs

ex

er

cis

es

over

sight

of t

he

deve

lopm

ent

and

perfo

rman

ce

of

inte

rnal

co

ntro

ls

Inte

rna

l Au

dit

A ro

bust

syste

m o

f mon

itorin

g th

roug

h pe

riod

ic

inte

rnal

au

dits

or

co

ntro

l Se

lf As

sess

men

ts h

as n

ot b

een

estab

lishe

d

C07,

C15

1. In

terna

l aud

its a

re d

one

quar

terly

as

per

pre

-def

ined

sco

pe w

hich

is

appr

oved

by

the

man

agem

ent.

2. B

oard

mee

tings

disc

uss

inte

rnal

au

dit r

epor

ts - k

ey fi

ndin

gs.

1.Ver

ify In

terna

l aud

it sc

ope

and

repo

rts

2. Re

view

Boa

rd M

inut

es

13C

on

tr

ol

Envi

ronm

ent

Dem

onst

rate

s co

mm

itmen

t to

attr

act,

reta

in

and

deve

lop

co

mp

ete

nt

indi

vidu

als

Train

ing

Inad

equa

te

atte

ntio

n to

tra

inin

g m

ay re

sult

into

ski

ll di

lutio

n, l

ack

of a

war

enes

s ab

out p

olic

ies

and

regu

lato

ry

requ

irem

ents

and

ina

bilit

y to

di

scha

rge

assi

gned

re

spon

sibili

ties.

C11

1. T

rain

ing

for

regu

lato

ry a

nd

proc

ess

chan

ges

is

impa

rted

on

a t

imel

y ba

sis

as p

er e

ither

cl

ient

’s re

quire

men

t or r

egul

ator

y re

quire

men

t

2.

Trai

ning

is

id

entif

ied

and

impa

rted

as n

eede

d

Verif

y tra

inin

g pr

oces

s

14R

is

k As

sess

men

tS

pe

cif

ies

ob

jec

tiv

es

with

cla

rity

to

iden

tify

and

asse

ss th

e ris

ks

Ri

sk

Man

agem

ent

Fram

ewor

k

Abse

nce

of e

nter

pris

e-w

ide

risk

asse

ssm

ent a

nd a

bsen

ce o

f do

cum

ente

d ris

k m

anag

emen

t po

licy

C04

Form

al ri

sk m

anag

emen

t pol

icy

is pr

esen

ted to

the B

oard

and

appr

oved

by

the

Boar

d of

Dire

ctors.

Revi

ew th

e risk

man

agem

ent

polic

y ad

opte

d by

th

e Co

mpa

ny

| 71 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

15R

is

k As

sess

men

tId

en

tifi

es

and

anal

yzes

si

gnif

ican

t ch

ange

s th

at

coul

d im

pact

in

terna

l con

trols

Bu

sin

ess

Cont

inui

ty

Plan

, Disa

ster

Rec

over

y Pl

an

Abse

nce

of B

CP/D

RP m

ay

lead

to b

usin

ess i

nter

rupt

ions

an

d m

ay je

opar

dize

bus

ines

s co

ntin

uity

C22,

C23

1. B

usin

ess

Cont

inui

ty P

lan

(BCP

) an

d Di

sast

er R

ecov

ery

Plan

(DRP

) ar

e in

plac

e.

2. D

ata

reco

very

plan

is e

stabl

ished

an

d op

erati

onal.

1. Re

view

the

BCP

and

DRP.

2. R

eview

the

data

reco

very

pl

an.

16R

is

k As

sess

men

tId

en

tifi

es

and

anal

yzes

si

gnif

ican

t ch

ange

s th

at

coul

d im

pact

in

terna

l con

trols

Fin

anci

al

repo

rting

Regu

lato

ry c

hang

es im

pact

ing

busi

ness

, fin

anci

al c

ondu

ct

or re

porti

ng re

quire

men

ts ar

e no

t und

erst

ood,

ana

lyze

d or

in

terna

lized

.

C17

1.

Regu

lato

ry

chan

ges

are

unde

rsto

od a

nd a

sses

sed

for t

heir

impa

ct on

bus

ines

s.

2. C

ompl

ianc

e tra

cker

is fi

lled

in

at d

efin

ed fr

eque

ncy

and

upda

ted

perio

dica

lly fo

r am

endm

ents.

Verif

y fo

rmal

ass

essm

ent o

f ke

y re

gulat

ory

chan

ges.

17R

is

k As

sess

men

tId

en

tifi

es

and

anal

yzes

si

gnif

ican

t ch

ange

s th

at

coul

d im

pact

in

terna

l con

trols

Fin

anci

al

repo

rting

Impr

oper

ch

anne

ls

to

com

mun

icat

e th

e ch

ange

s in

bus

ines

s pr

actic

es to

the

acco

untin

g de

part

men

t may

af

fect

the

met

hod

or t

he

proc

ess

of

reco

rdin

g th

e tr

ansa

ctio

ns

in

finan

cial

sta

temen

ts

C24

Perio

dic

depa

rtmen

tal r

evie

ws

are

done

whe

rein

Fin

ance

team

is a

lso

pres

ent;

revi

ew c

over

s di

scus

sions

on

cha

nges

in b

usin

ess

prac

tices

aff

ectin

g fin

ancia

l stat

emen

ts.

Revi

ew

mod

ifica

tion

in

proc

esse

s, i

f an

y, b

y th

e ac

coun

ts tea

m

18R

is

k As

sess

men

tId

en

tifi

es

and

anal

yzes

si

gnif

ican

t ch

ange

s th

at

coul

d im

pact

in

terna

l con

trols

Fin

anci

al

repo

rting

Risk

of

re

gula

tory

no

n-co

mpl

ianc

e an

d fin

anci

al

mis

stat

emen

ts

if su

itabl

e ac

coun

ting

prin

ciples

, pol

icies

or

rules

not

follo

wed

C13,

C15,

C25

1.M

anag

emen

t spe

cifie

s fin

anci

al

repo

rting

rules

and

stan

dard

s whi

ch

are

cons

iste

nt w

ith a

ccou

ntin

g pr

inci

ples

suita

ble

and

appr

opria

te

for t

he e

ntity

.

1. Ve

rify

finan

cial s

tatem

ents

with

ade

quate

disc

losu

res

2. V

erify

stat

utor

y au

dito

r’s

repo

rt


| 72 |


Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

2. R

evie

ws

by/c

onsu

ltatio

ns w

ith

the

Stat

utor

y Au

dito

rs a

s re

quire

d by

the

regu

latio

n (a

nnua

l rev

iew

) or

as

cons

ider

ed n

eces

sary

by

the

man

agem

ent,

are

done

.

3. In

tern

al a

udit

cove

rage

ext

ends

to

com

plian

ce re

view

and

fina

ncial

re

porti

ng re

view

.

3. V

erify

int

erna

l au

dit

repo

rts

19R

is

k As

sess

men

tId

en

tifi

es

and

anal

yzes

si

gnif

ican

t ch

ange

s th

at

coul

d im

pact

in

terna

l con

trols

Fin

anci

al

repo

rting

Non

iden

tific

atio

n of

cha

nges

in

ac

coun

ting

prin

cipl

es

or

finan

cial

re

port

ing

requ

irem

ents

may

lead

to n

on-

com

plia

nce

and

the

finan

cial

sta

tem

ents

will

not s

how

true

and

fair

fig

ures

or

may

not

in

clude

disc

losur

es as

requ

ired.

C13,

C25

1.

Defin

ed

and

docu

men

ted

Fina

ncial

Stat

emen

t Clo

sure

Pro

cess

is

in p

lace.

2. P

erio

dic

upda

tes

are

rece

ived

fro

m p

rofes

siona

l con

sulta

nts.

Revi

ew fi

nanc

ial st

atem

ents

and

all

othe

r re

leva

nt

info

rmati

on.

20R

is

k As

sess

men

tId

en

tifi

es

risk

s to

th

e ac

hiev

emen

t of

obje

ctiv

es a

nd

analy

zes r

isks t

o m

anag

e th

em

Fin

anci

al

repo

rting

Abse

nce

of a

n ap

prop

riat

e m

echa

nism

of r

elat

ed p

arty

tr

ansa

ctio

ns

iden

tific

atio

n ca

n le

ad to

reg

ulat

ory

non-

com

plia

nce

and/

or f

inan

cial

m

isstat

emen

ts

C20,

C26

1. V

ario

us c

ompl

ianc

es u

nder

di

ffere

nt s

tatu

tes

in r

elat

ion

to

tran

sact

ions

with

rel

ated

par

ty

(tran

sfer p

ricin

g re

lated

com

plian

ce

and

retu

rn fi

ling)

are

verif

ied.

2. B

oard

app

rova

l is

tak

en f

or

relat

ed p

arty

tran

sacti

on

Veri

fy B

oard

not

ing

and

appr

oval

of r

elat

ed p

arty

tra

nsac

tions

.

| 73 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

21R

is

k As

sess

men

tAs

sess

es f

raud

ri

sk

to

the

achi

evem

ent o

f ob

jectiv

es

IT S

ecur

ityCo

mpa

ny in

frast

ruct

ure

and

IT s

yste

ms

bein

g us

ed f

or

fraud

ulen

t act

iviti

es th

ereb

y af

fect

ing

the

repu

tatio

n an

d in

crea

sing

the

leg

al r

isks

att

ache

d

C14

1. A

cces

s is r

estri

cted

to u

sers

who

ar

e ei

ther

em

ploy

ees o

r aut

horiz

ed

perso

nnel.

2. P

assw

ord

and

user

id p

rote

cted

sy

stem

s exi

st.

3. D

eact

ivat

ion

of e

xter

nal s

tora

ge

devi

ces o

n co

mpa

ny P

C’s h

as b

een

done

.

4. A

cces

s to

all

publ

ic s

ites

and

dom

ains i

s res

tricte

d.

1. R

evie

w li

st o

f use

r-ids

wi

th a

cces

s righ

ts

2. V

erify

pro

toco

l for

acc

ess

to

syst

ems

and

polic

y hi

ghlig

htin

g se

curit

y of

use

r id

and

pas

swor

ds

22R

is

k As

sess

men

tId

en

tifi

es

risk

s to

th

e ac

hiev

emen

t of

obje

ctiv

es a

nd

analy

zes r

isks t

o m

anag

e th

em

Train

ing

Chan

ges

in t

he p

roce

dure

m

anua

l of

a

part

icul

ar

depa

rtm

ent

with

out

the

know

ledg

e of

its

empl

oyee

s lea

ds to

dilu

tion

of th

e im

pact

of th

e ch

ange

s im

plem

ented

C27

Perio

dic r

eview

of p

roce

ss m

anua

l is

done

and

upda

tes ar

e com

mun

icated

to

all

empl

oyee

s con

cern

ed.

1. V

erify

that

the

man

uals

are

perio

dica

lly re

view

ed.

2.

Veri

fy

evid

ence

of

co

mm

unic

atio

n of

cha

nges

to

em

ploy

ees.

23C

on

tr

ol

Activ

ities

Sele

cts

and

deve

lops

con

trol

activ

ities

to

m

itiga

te ris

ks

Evalu

ation

Risk

of r

ecur

renc

e of

issu

es

if no

t eva

luat

ed a

nd p

olic

ies/

proc

edur

es

not

mod

ified

ac

cord

ingly

C15

Perio

dic i

nter

nal a

udit

is do

ne b

y an

ex

tern

al a

genc

y an

d ch

ange

s mad

e ba

sis a

gree

d ac

tions

.

Verif

y in

tern

al au

dit r

epor

ts av

aila

ble,

and

rec

ord

of

reso

lutio

n of

agr

eed

actio

ns.


| 74 |


Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

24C

on

tr

ol

Activ

ities

Sele

cts

and

deve

lops

con

trol

activ

ities

to

m

itiga

te ris

ks

Fin

anci

al

repo

rting

Risk

of

finan

cial

los

s an

d/

or fi

nanc

ial m

isst

atem

ent i

n th

e ab

senc

e of

an

esta

blish

ed

phys

ical

ver

ifica

tion

of a

sset

s m

echa

nism

C16,

C20

1. P

hysi

cal v

erifi

catio

n of

fixe

d as

sets,

cas

h is

done

.

2. T

hird

par

ty a

nd b

ank

bala

nce

conf

irmati

ons s

tatem

ents

are

taken

.

3. B

oard

dis

cuss

es f

indi

ngs

of

phys

ical

ver

ifica

tion

of a

sset

s/ di

scre

panc

y re

solu

tion

1.

Veri

fy

fixed

as

set

verif

icatio

n re

port

and

chec

k fo

r per

iodi

city

(CAR

O, 2

015)

2.

Veri

fy

thir

d pa

rty

conf

irmati

ons.

3. V

erify

rec

ords

sho

win

g fu

ll pa

rticu

lars -

qua

ntita

tive

detai

ls an

d sit

uatio

n of

fixe

d as

sets

(CAR

O, 2

015)

4. V

erify

Boa

rd m

eetin

g m

inut

es

25C

on

tr

ol

Activ

ities

Depl

oys

cont

rol

ac

tiv

itie

s th

roug

h po

licie

s an

d pr

oced

ures

Paym

ents

and

reim

burse

-m

ents

Abse

nce

of p

olic

ies

will

lead

to

reim

burs

emen

t/ al

low

ance

of

non

agr

eed

expe

nses

to th

e em

ploy

ees

or re

imbu

rsem

ent

of ex

pens

es o

ver a

nd a

bove

the

set l

imit

to th

e em

ploy

ees.

C03

All f

inan

cial

pol

icie

s re

latin

g to

em

ploy

ees

are

in p

lace

alo

ng w

ith

defin

ed le

vel o

f app

rova

ls.

Veri

fy

rem

uner

atio

n st

ruct

ure

for

finan

cial

po

licie

s re

latin

g to

em

ploy

ees.

26In

form

atio

n &

Com

mun

i-ca

tion

Com

mun

icat

es

exte

rna

lly

reg

ard

ing

matt

ers a

ffecti

ng

inter

nal c

ontro

ls

Ex

tern

al

Com

mun

i-ca

tion

May

res

ult

in r

eput

atio

nal/

finan

cial

/repo

rtin

g ris

k du

e to

erro

neou

s co

mm

unic

atio

ns

to e

xter

nal p

artie

s/ e

xter

nal

repo

rting

C03

1. C

lear

iden

tific

atio

n of

per

sons

au

thor

ized

to c

omm

unic

ate

with

ex

terna

l par

ties o

n re

levan

t com

pany

m

atter

s.

2. A

form

al s

ocia

l med

ia p

olic

y is

in p

lace.

Verif

y th

e Ad

min

Man

ual

for

com

mun

icat

ing

with

ex

terna

l par

ties

| 75 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

27In

form

atio

n &

Com

mun

i-ca

tion

Com

mun

icat

es

exte

rna

lly

reg

ard

ing

matt

ers a

ffecti

ng

inter

nal c

ontro

ls

Ex

tern

al

Com

mun

i-ca

tion

In

the

abse

nce

of

clea

r co

mm

unic

atin

g ch

anne

ls fo

r ex

tern

al p

artie

s, e

mpl

oyee

/ m

anag

emen

t malp

racti

ces m

ay

not c

ome

to li

ght,

may

hav

e a

repu

tatio

n ris

k wi

th re

spec

t to

third

par

ties

C03,

C18

Ther

e ar

e pr

oper

ly

iden

tifie

d co

mm

unic

atio

n ch

anne

ls (e

mai

l id

s) fo

r thi

rd p

artie

s und

er gr

ievan

ce

mec

hani

sm,

sexu

al h

aras

smen

t po

licy

Revi

ew

grie

vanc

e m

echa

nism

an

d se

xual

ha

rass

men

t pol

icy

28In

form

atio

n &

Com

mun

i-ca

tion

Com

mun

icat

es

inte

rnal

ly,

info

rmat

ion

inc

lud

ing

obje

ctiv

es a

nd

resp

onsi

bilit

ies

of

inte

rnal

co

ntro

l

Inte

rna

l C

omm

uni-

catio

n

Abse

nce

of

clea

r co

mm

unica

tion

on p

erfo

rman

ce

mea

sure

s m

ay

lead

to

am

bigu

ities

and

incr

ease

in

attrit

ion

levels

C28

Clea

r co

mm

unic

atio

n of

the

Key

Resu

lt Ar

eas

in t

he e

valu

atio

n pr

oces

s

Verif

y th

e co

mm

unic

atio

n fo

r the

KRA

s

29In

form

atio

n &

Com

mun

i-ca

tion

Com

mun

icat

es

inte

rnal

ly,

info

rmat

ion

inc

lud

ing

obje

ctiv

es a

nd

resp

onsi

bilit

ies

of

inte

rnal

co

ntro

l

Man

agem

ent

Over

sight

Risk

ev

ents

, ex

cept

iona

l an

d un

usua

l ev

ents

rem

ain

unre

porte

d to

the

man

agem

ent

and

henc

e th

e ri

sk

man

agem

ent f

ram

ewor

k is

not

duly

enh

ance

d.

C07,

C08,

C29

1. F

orm

al c

omm

unic

atio

n pr

oces

s es

tablis

hed

for e

scala

ting

disru

ptio

n to

ope

ratio

ns, o

ccur

renc

e of

ris

k ev

ents

and

any

mate

rial e

xcep

tiona

l ev

ent.

2.

Peri

odic

M

IS/

dash

boar

ds,

high

light

ing

of a

ll ex

cept

ions

.

3. B

oard

mee

ting,

man

agem

ent

revi

ew m

eetin

g di

scus

s un

usua

l ev

ents.

1. V

erify

per

iodi

c M

IS o

n sa

mpl

e ba

sis

2. V

erify

man

agem

ent a

nd

Boar

d m

eetin

g m

inut

es


| 76 |


Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

30M

onito

ring

Eval

uate

s an

d co

mm

unic

ates

de

ficie

ncie

s, to

en

able

corre

ctive

ac

tions

be

ing

taken

Fin

anci

al

repo

rting

Inad

equa

te

proc

ess

for

obta

inin

g th

ird

part

y co

nfir

mat

ions

to

va

lidat

e fin

anci

al fi

gure

s and

to d

etec

t fin

ancia

l fra

uds.

C16

1.

Thir

d pa

rty

conf

irm

atio

ns

obta

ined

fro

m b

anks

, de

btor

s, re

lated

par

ties

2. W

eb b

ased

revi

ew d

one

to a

sses

s ta

x st

atus

, TDS

sta

tus,

regu

lato

ry

com

plian

ce re

lated

num

bers.

Veri

fy

conf

irm

atio

ns

obta

ined

fr

om

coun

ter

part

ies

and

Gove

rnm

ent

web

site

(su

ch a

s In

com

e Ta

x) fo

r rec

oncil

ing s

tatut

ory

figur

es a

nd o

ther

bala

nces

.

31M

onito

ring

Co

nd

uc

ts

on

go

in

g/

se

pa

ra

te

eval

uatio

ns t

o co

nfir

m

that

in

terna

l con

trols

are

func

tioni

ng

Fin

anci

al

repo

rting

Abse

nce

of r

evie

w o

f th

e fin

ancia

ls by

man

agem

ent

C07,

C08

Mon

thly

MIS

con

sistin

g of

fina

ncial

st

atem

ents

and

oth

er o

pera

tions

, re

conc

iliati

ons p

repa

red

by F

inan

ce

Man

ager

are

revi

ewed

and

ana

lyze

d by

Gro

up C

FO

Verif

y fin

anci

al st

atem

ents/

re

ports

, per

iodi

c M

IS a

nd

reco

ncili

ation

s

32M

onito

ring

Eval

uate

s an

d co

mm

unic

ates

de

ficie

ncie

s, to

en

able

corre

ctive

ac

tions

be

ing

taken

Gri

evan

ce

and

disp

ute

reso

luti

on

mec

hani

sm

Inap

prop

riat

e gr

ieva

nce

proc

esse

s m

ay le

ad to

del

ay

in

dete

ctio

n of

fr

auds

, m

isre

port

ing

of

finan

cial

fig

ures

, nee

d fo

r pro

visio

ning

du

e to

disp

utes

C03

Empl

oyee

gri

evan

ce p

olic

y (to

re

solv

e co

mpl

aint

s and

grie

vanc

es)

form

s par

t of A

dmin

Man

ual

Veri

fy p

olic

y to

res

olve

co

mpl

aint

s an

d gr

ieva

nces

, as

state

d in

Adm

in M

anua

l

33M

onito

ring

Co

nd

uc

ts

on

go

in

g/

se

pa

ra

te

eval

uatio

ns t

o co

nfir

m

that

in

terna

l con

trols

are

func

tioni

ng

Man

agem

ent

Over

sight

Proc

ess

gaps

, er

rors

an

d m

isst

atem

ents

may

not

be

iden

tifie

d by

the

man

agem

ent

whi

ch m

ay a

lso le

ad to

frau

d or

non

-com

plia

nce

due

to

abse

nce

of w

ell-e

stab

lishe

d ris

k an

d in

tern

al a

udit

revi

ew

syste

m

C03,

C07,

C15

1. In

tern

al a

udit

func

tion

repo

rts

to B

oard

of D

irect

or a

nd h

ighl

ight

s de

ficien

cies o

bser

ved.

2.

Polic

es

and

proc

esse

s ar

e in

trodu

ced

and

revi

sed

from

tim

e to

tim

e to

plu

g id

entif

ied

gaps

and

co

ntro

ls lap

ses.

1. V

erify

Int

erna

l Au

dit

repo

rts

2. Ve

rify

mee

ting

min

utes

3. Ve

rify

sam

ple p

olicie

s and

pr

oces

s not

es

| 77 |

Sr

NoAt

tribu

tePr

incip

lePr

oces

s Ac

tivity

Risk

Cont

rol

Ref N

o.Co

ntro

l Des

crip

tion

Audi

t Step

34M

onito

ring

Co

nd

uc

ts

on

go

in

g/

se

pa

ra

te

eval

uatio

ns t

o co

nfir

m

that

in

terna

l con

trols

are

func

tioni

ng

Man

agem

ent

Over

sight

Abse

nce

of c

omm

unic

atio

n of

de

ficie

ncie

s an

d m

onito

ring

corre

ctiv

e ac

tion

may

lead

to

un-re

med

iated

defi

cienc

ies a

nd

resu

ltant

con

trol

gap

s w.

r.t.

ICFR

C21

Form

al ro

ll ou

t of I

CFR

polic

y an

d te

stin

g pr

oces

s fo

r con

trol d

esig

n an

d eff

ectiv

enes

s

1. C

heck

ICFR

fram

ewor

k an

d do

cum

ented

RCM

s

2.

Chec

k th

e pr

oces

s ad

opte

d fo

r tes

ting

cont

rol

desi

gn

and

oper

atio

nal

effec

tiven

ess

Not

e:

Th

e ab

ove

wor

k-s

hee

t ca

n b

e en

han

ced

wit

h c

olu

mn

s su

ch a

s d

epar

tmen

t, d

etai

ls w

ith

res

pec

t to

co

ntr

ols

(wh

eth

er k

ey o

r n

on-k

ey,

wh

eth

er c

ontr

ol e

xist

s –

yes

or n

o, t

ype

of c

ontr

ol –

man

ual

or

auto

mat

ed,

nat

ure

of

con

trol

– p

reve

nti

ve,

det

ecti

ve o

r bo

th p

reve

nti

ve a

nd

det

ecti

ve,

con

trol

fre

quen

cy

– d

aily

, w

eek

ly,

fort

nig

htl

y, m

onth

ly,

hal

f-ye

arly

, an

nu

ally

, ev

ent-

bas

ed,

as a

nd

wh

en),

doc

um

ent/

ev

iden

ce,

def

icie

nci

es,

rem

edia

l p

lan

, re

fere

nce

to

doc

um

ent

and

rem

ark

s


| 78 |


4.2 IT General Controls – Specimen (refer paragraph 2.5.6)

ABC Private LimitedICFR for the year ending 31st March, 2016

RCM - IT General Controls

LIST OF CONTROL GROUPS

Control Ref Control Group/ Attribute

ITGC 01 Comprehensive IT Policy

ITGC 02 Access Rights Restrictions

ITGC 03 User account management - User id and password security

ITGC 04 Data management - back up and restoration of data and system

ITGC 05 Connectivity management - LAN, internet, firewall, anti-virus,

ITGC 06 Sign-off of stakeholders/management for changes made to key applications relevant to financial reporting

ITGC 07 Restriction to share data

ITGC 08 Controls or authorization for acquisition / development of new system / migration / subsequent changes

ITGC 09 Incident handling – In-house IT Personnel

ITGC 10 Approval/periodic review of user access rights

| 79 |

AB

C P

riva

te L

imit

ed

ICFR

for

th

e ye

ar e

nd

ing

31st

Mar

ch,

2016

IT G

ener

al

Con

trol

s (I

TG

C)

Sr.

No.

Attri

bute

Activ

ity D

escr

iptio

nId

entif

icatio

n of

Risk

of M

ater

ial M

issta

temen

t (“W

hat C

ould

Go

Wro

ng”)

Ri

sk D

escr

iptio

n

Cont

rol R

ef Nu

mbe

rCo

ntro

l Tha

t Add

ress

es R

isk o

f Mat

eria

l M

issta

temen

t — C

ontro

l Nam

e

1Ri

sk

Asse

ssm

ent

IT P

olicy

Inte

nded

IT re

late

d pr

oces

ses n

ot fo

llowe

d du

e to

abs

ence

of d

efin

ed c

ompr

ehen

sive

IT p

olic

y do

cum

ent

ITGC

01

A de

fined

com

preh

ensi

ve IT

pol

icy

docu

men

t to

pro

vide

var

ious

gui

delin

es to

wor

k in

the

IT

envi

ronm

ent,

is in

plac

e

2Co

ntro

l En

viro

nmen

tAc

cess

Righ

tsEd

itabl

e ac

cess

of F

inan

cial S

ystem

(Acc

ount

ing

Softw

are)

pro

vide

d to

per

sons

oth

er t

han

Com

pany

em

ploy

ees

(Inte

rnal

and

Sta

tuto

ry

Audi

tors,

Con

sulta

nts,

etc.)

ITGC

02

View

-onl

y ac

cess

of A

ccou

ntin

g So

ftwar

e pr

ovid

ed

to p

erso

ns o

ther

than

Com

pany

empl

oyee

s (In

terna

l an

d St

atuto

ry A

udito

rs, C

onsu

ltant

s, etc

.) wh

o ar

e no

t req

uire

d to

mod

ify th

e fin

ancia

l tra

nsac

tions

3Co

ntro

l En

viro

nmen

tCl

osin

g of

Acc

ount

ing

peri

od/y

ear

in

the

Acco

untin

g So

ftwar

e

Erro

neou

s/int

entio

nal p

ostin

g of

Acc

ount

ing

entry

in th

e ea

rlier

clo

sed

perio

d/ye

arIT

GC 0

2Cl

osin

g of

pre

viou

s pe

riod/

year

to re

stric

t bac

k-da

ting

of tr

ansa

ction

s

4Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

31.

For

CM

S Sy

stem

- al

l new

use

rs a

re g

iven

pre

-ex

pire

d pa

sswo

rd a

nd th

e sy

stem

pro

mpt

s the

use

r to

set n

ew p

assw

ord

at th

e tim

e of

first

login

2. F

or T

ally

- al

l new

use

rs a

re g

iven

pre

-exp

ired

pass

word

and

the

syste

m p

rom

pts t

he u

ser t

o se

t ne

w pa

sswo

rd a

t the

tim

e of

first

login

5Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

21.

For

CM

S - U

sers

acc

ess

right

s ar

e gr

ante

d by

IT

onl

y up

on sp

ecifi

c ap

prov

al b

y th

e co

ncer

ned

func

tiona

l hea

d


| 80 |


Sr.

No.

Attri

bute

Activ

ity D

escr

iptio

nId

entif

icatio

n of

Risk

of M

ater

ial M

issta

temen

t (“W

hat C

ould

Go

Wro

ng”)

Ri

sk D

escr

iptio

n

Cont

rol R

ef Nu

mbe

rCo

ntro

l Tha

t Add

ress

es R

isk o

f Mat

eria

l M

issta

temen

t — C

ontro

l Nam

e

2. F

or T

ally

- Us

ers

acce

ss ri

ghts

are

gran

ted

by

IT o

nly

upon

spec

ific

appr

oval

by

the

conc

erne

d fu

nctio

nal h

ead

6Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

3Sy

stem

pro

mpt

s the

use

r to

chan

ge th

e pa

sswo

rd

after

the

expi

ratio

n of

30

days

.

7Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

3Pa

ssw

ord

mus

t con

tain

at l

east

7 c

hara

cter

s, al

pha

num

eric

(alp

habe

ts, n

umbe

rs a

nd s

peci

al

char

acter

s).

8Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

3If

the

pass

word

is w

rong

ly e

nter

ed c

ontin

uous

ly

for 5

tim

es w

ithin

30

min

utes

, the

resp

ectiv

e lo

gin

id g

ets lo

cked

.

9Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

3If

a us

er is

not

acc

essi

ng th

e sy

stem

for

mor

e th

an sp

ecifi

ed ti

me,

the

syste

m g

ets a

utom

atica

lly

lock

ed.

10Co

ntro

l En

viro

nmen

tId

entif

ies

and

anal

yses

sig

nific

ant c

hang

es th

at

coul

d im

pact

int

erna

l co

ntro

ls

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 1

0Th

ere

exist

s a p

erio

dic

revi

ew o

f the

use

r pro

files

fo

r sys

tems a

cces

s, to

con

firm

app

ropr

iaten

ess.

11In

form

ation

&

Com

mun

icatio

nSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

3Re

ques

ts fo

r cre

atio

n of

new

use

r ids

are

rece

ived

by

the

IT E

xecu

tive

on s

tand

ardi

zed

form

, dul

y sig

ned

by th

e re

spec

tive

HOD.

| 81 |

Sr.

No.

Attri

bute

Activ

ity D

escr

iptio

nId

entif

icatio

n of

Risk

of M

ater

ial M

issta

temen

t (“W

hat C

ould

Go

Wro

ng”)

Ri

sk D

escr

iptio

n

Cont

rol R

ef Nu

mbe

rCo

ntro

l Tha

t Add

ress

es R

isk o

f Mat

eria

l M

issta

temen

t — C

ontro

l Nam

e

12In

form

ation

&

Com

mun

icatio

nSe

lect

s an

d de

velo

ps

cont

rol

activ

ities

to

m

itiga

te ris

ks

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

31.

Use

r ter

min

atio

n, re

signa

tion

is in

form

ed to

IT

Exec

utiv

e th

roug

h em

ail b

y HR

.

2. U

ser

acco

unt i

s di

sabl

ed im

med

iate

ly a

fter

rece

ivin

g an

em

ail re

ques

t. Be

fore

pro

cess

ing

this

requ

est,

IT a

rchi

ves t

he m

ail b

ox o

f the

use

r.

3. Fu

ll &

Fina

l Sett

lemen

t For

m is

sign

ed b

y th

e IT

Ex

ecut

ive

only

whe

n th

e ne

cess

ary

acce

ss ri

ghts

have

bee

n di

sabl

ed in

the

syste

m.

13Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Abse

nce

of re

gula

r bac

k-up

whi

ch m

ay le

ad to

lo

ss o

f cru

cial d

ataIT

GC 0

41.

Reg

ular

bac

k-up

stra

tegy

defin

ed fo

r ser

ver a

nd

auto

-bac

k up

is ta

ken

at de

fined

freq

uenc

y.

2. Re

triev

al is

tested

at r

easo

nabl

e fre

quen

cy

14Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Abse

nce

of re

gula

r bac

k-up

whi

ch m

ay le

ad to

lo

ss o

f cru

cial d

ataIT

GC 0

4Of

f-site

stor

age o

f bac

k-up

to ta

ckle

any

unfo

rese

en

even

t at t

he o

ffice

pre

mise

s.

15Co

ntro

l En

viro

nmen

tId

entif

ies

risk

s to

the

ac

hiev

emen

t of o

bjecti

ves

and

anal

yses

ris

ks t

o m

anag

e th

em

Serv

ers

and

end

user

s PC

s ar

e in

fect

ed w

ith

viru

sIT

GC 0

51.

Desk

tops

:

All t

he u

ser d

eskt

ops a

re in

stalle

d wi

th a

nti v

irus

scan

ner,

which

scan

s the

new

files

on

an o

ngoi

ng

basis

2. Se

rver

s:

All s

erve

rs ar

e in

stalle

d wi

th a

nti v

irus s

cann

er.


| 82 |


Sr.

No.

Attri

bute

Activ

ity D

escr

iptio

nId

entif

icatio

n of

Risk

of M

ater

ial M

issta

temen

t (“W

hat C

ould

Go

Wro

ng”)

Ri

sk D

escr

iptio

n

Cont

rol R

ef Nu

mbe

rCo

ntro

l Tha

t Add

ress

es R

isk o

f Mat

eria

l M

issta

temen

t — C

ontro

l Nam

e

3. Ga

teway

:

Mai

l ser

ver

is m

anag

ed a

nd a

ll th

e Em

ails

are

sc

anne

d by

thre

at m

anag

emen

t gate

way.

4. T

he a

nti v

irus g

ets a

utom

atica

lly u

pdat

ed w

ith

the

lates

t ver

sion

thro

ugh

proc

ess o

f aut

o up

dates

16Co

ntro

l En

viro

nmen

tAs

sess

es fr

aud

risk

to th

e ac

hiev

emen

t of o

bjecti

ves

Una

utho

rize

d ac

cess

to

the

IT s

yste

ms,

appl

icatio

ns a

nd d

ata b

y ex

terna

l par

ties

ITGC

05

1. Fi

rewa

lls h

ave

been

insta

lled.

2. Th

e lo

gs a

re re

gular

ly re

view

ed b

y IT

Exe

cutiv

e

17Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

cont

rol

activ

ities

to

m

itiga

te ris

ks

Unau

thor

ized

acce

ss to

IT sy

stem

s, ap

plica

tions

an

d da

ta re

sults

in e

rrors

in fi

nanc

ial re

porti

ngIT

GC 0

6Ch

ange

s in

prog

ram

s can

be

mad

e on

ly w

ith p

rior

appr

oval

of t

he B

oard

of D

irect

ors

or th

e HO

D co

ncer

ned,

with

the s

imul

taneo

us in

volv

emen

t and

ap

prov

al of

the

IT p

erso

nnel.

18Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

cont

rol

activ

ities

to

m

itiga

te ris

ks

Sign

ifica

nt d

evel

opm

ents

and

cha

nges

to

info

rmat

ion

syst

ems

rele

vant

to

finan

cial

re

port

ing

are

mad

e, r

esul

ting

in e

rror

s in

fin

ancia

l rep

ortin

g.

ITGC

06

Deci

sions

aro

und

signi

fican

t dev

elop

men

ts a

nd

chan

ges

to i

nfor

mat

ion

syst

ems

rele

vant

to

finan

cial

repo

rting

are

mad

e in

con

junc

tion

with

Fi

nanc

e M

anag

er a

nd a

fter a

ppro

val o

f BOD

19Co

ntro

l En

viro

nmen

tId

entif

ies

and

anal

yses

sig

nific

ant c

hang

es th

at

coul

d im

pact

int

erna

l co

ntro

ls

Erro

rs in

cha

nges

mad

e to

key

app

licat

ions

re

levan

t to

finan

cial r

epor

ting.

ITGC

06

Spec

ific

chan

ges

are

mad

e to

key

app

licat

ions

re

leva

nt to

fina

ncia

l rep

ortin

g on

ly a

fter s

ign

off

from

the

relev

ant s

takeh

olde

rs

20Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Prob

lem

s an

d in

cide

nts

are

not

effe

ctiv

ely

man

aged

. IT

GC 0

9An

in-h

ouse

IT p

erso

nnel

reso

lves

issu

es fa

ced

by

user

s as r

equi

red

| 83 |

Sr.

No.

Attri

bute

Activ

ity D

escr

iptio

nId

entif

icatio

n of

Risk

of M

ater

ial M

issta

temen

t (“W

hat C

ould

Go

Wro

ng”)

Ri

sk D

escr

iptio

n

Cont

rol R

ef Nu

mbe

rCo

ntro

l Tha

t Add

ress

es R

isk o

f Mat

eria

l M

issta

temen

t — C

ontro

l Nam

e

21Co

ntro

l En

viro

nmen

tSe

lect

s an

d de

velo

ps

gene

ral

cont

rols

ove

r tec

hnol

ogy

Inte

ntio

nal s

harin

g of

cru

cial

and

con

fiden

tial

data

of t

he c

ompa

ny b

y sta

ff to

out

sider

s (e

.g.

com

petit

ors)

ITGC

07

1. D

eact

ivat

ion

of e

xter

nal s

tora

ge d

evic

es o

n co

mpa

ny P

Cs.

2. Re

strict

ing

acce

ss to

all

publ

ic sit

es a

nd d

omain

Not

e:

Th

e ab

ove

wor

k-s

hee

t ca

n b

e en

han

ced

wit

h c

olu

mn

s su

ch a

s d

epar

tmen

t, d

etai

ls w

ith

res

pec

t to

co

ntr

ols

(wh

eth

er k

ey o

r n

on-k

ey,

wh

eth

er c

ontr

ol e

xist

s –

yes

or n

o, t

ype

of c

ontr

ol –

man

ual

or

auto

mat

ed,

nat

ure

of

con

trol

– p

reve

nti

ve,

dete

ctiv

e or

bot

h p

reve

nti

ve a

nd

dete

ctiv

e, c

ontr

ol f

requ

ency

–

dai

ly,

wee

kly

, fo

rtn

igh

tly,

mon

thly

, h

alf-

year

ly,

ann

ual

ly,

even

t-ba

sed

, as

an

d w

hen

),d

ocu

men

t/ e

vid

ence

, d

efic

ien

cies

, re

med

ial

pla

n,

refe

ren

ce t

o d

ocu

men

t an

d r

emar

ks


| 84 |


4.3 Specimen – Financial Statement Closure Policy and sample checklists (refer paragraph 2.7.3)

ABC Pvt. Ltd. Financial Statements Closure Policy (FSCP)

1. OBJECTIVES:

This policy is prepared to achieve the following broad objectives:

• Provide guidance for the financial closure process leading to preparation of financial statements.

• Ensure adherence to applicable laws, regulations and disclosure requirements relevant to the financial reporting.

• Ensure completion of the financial closure efficiently and in a timely manner.

• Ensure adherence to the approval matrix laid out for the closure process.

• Retain and protect related documents, evidences and approval trails.

2. SCOPE: This policy covers the following:

• Financial reporting framework applicable to the entity.

• IT application (system), if any, used for financial closure

• Checklist to be used to ensure completeness of financial statements

• Approval matrix related to financial closure activities.

• Document Management Policy, including retention policy for documents related to financial closure.

| 85 |

3.

STA

GE

S O

F FI

NA

NC

IAL

CLO

SU

RE

:

No.

Part

icul

ars

Revi

ew

Resp

onsi

bilit

yAp

prov

al/

Auth

oriz

atio

nSu

gges

ted

Tim

elin

e

1.Fi

nanc

ial R

epor

ting

Fram

ewor

k

3

The

finan

cial

clo

sure

pro

cess

sha

ll be

car

ried

out i

n ad

here

nce

to th

e fo

llow

ing

• Th

e Co

mpa

nies

Act

, 201

3 an

d al

lied

Rule

s

• A

pplic

able

acc

ount

ing

stan

dard

s

•

Pron

ounc

emen

ts o

f th

e IC

AI

appl

icab

le t

o pr

epar

atio

n of

fin

anci

al

stat

emen

ts a

nd fi

nanc

ial r

epor

ting

3

Ade

quat

e ca

re s

hall

be ta

ken

to in

corp

orat

e th

e ef

fect

s of

mod

ifica

tions

to

exis

ting

regu

latio

ns a

nd p

rono

unce

men

ts.

3

Any

new

pro

noun

cem

ents

im

pact

ing

the

fina

ncia

l ac

coun

ting

, clo

sure

pr

oces

s or

rep

ortin

g re

quir

emen

ts w

ill b

e re

view

ed in

tern

ally

, app

rove

d as

pe

r Au

thor

ity m

atrix

and

inco

rpor

ated

in th

e ap

prop

riate

che

cklis

t, SO

P or

te

mpl

ates

.

3

Know

ledg

e up

date

pro

vide

d by

the

stat

utor

y au

dito

rs o

r ot

her

acco

untin

g/la

w fi

rms

from

tim

e to

tim

e m

ay b

e re

view

ed a

nd w

here

app

ropr

iate

, to

be

cons

ider

ed fo

r up

datin

g re

spec

tive

chec

klis

t.

3

The

CFO

is r

equi

red

to h

old

a fo

rmal

mee

ting

with

the

stat

utor

y au

dito

rs to

co

nfirm

that

all

addi

tiona

l rep

ortin

g re

quire

men

ts fo

r th

e fin

anci

al y

ear

have

be

en d

uly

iden

tifie

d by

the

com

pany

– if

ther

e ha

s be

en a

mis

s ou

t, th

e sa

me

may

be

inco

rpor

ated

afte

r re

view

.

Seni

or P

erso

n of

A

& F

Dep

tC

FO

or

eq

uiv

ale

nt

posi

tion

By e

nd D

ecem

ber/

Ja

nuar

y


| 86 |


No.

Part

icul

ars

Revi

ew

Resp

onsi

bilit

yAp

prov

al/

Auth

oriz

atio

nSu

gges

ted

Tim

elin

e

2.Sy

stem

Env

iron

men

t

3

List

all

the

syst

ems

from

whi

ch d

ata

will

flow

into

fina

ncia

l sta

tem

ents

eith

er

dire

ctly

or

indi

rect

ly.

3

Prop

osed

cha

nges

/ enh

ance

men

ts to

the

IT a

pplic

atio

ns w

hich

hav

e a

bear

ing

on th

e fin

anci

al c

losu

re p

roce

ss o

r th

e fin

anci

al s

tate

men

ts n

eed

to b

e pr

e-ap

prov

ed b

y th

e Fi

nanc

e De

partm

ent a

s pe

r au

thor

ity m

atrix

.

3

For

any

chan

ges

in th

e fin

anci

al r

epor

ting

requ

irem

ents

, Fin

ance

Dep

artm

ent

to r

evie

w if

the

requ

ired

info

rmat

ion

is a

vaila

ble

from

the

IT s

yste

m a

nd if

no

t, in

itiat

e a

requ

est f

or c

onfig

urin

g th

e IT

sys

tem

to e

nsur

e th

e av

aila

bilit

y of

the

requ

isite

info

rmat

ion.

Seni

or P

erso

n of

A

& F

Dep

t.C

FO

or

eq

uiv

ale

nt

posi

tion

By e

nd D

ecem

ber/

Ja

nuar

y

3.Pr

e-pl

anni

ng fo

r Cl

osur

e &

Clos

ure

Activ

ity fo

r O

pera

tiona

l Are

as

Act

ivity

wis

e pr

e-pl

anni

ng c

heck

list

to b

e pr

epar

ed a

s pe

r Co

mpa

ny’s

defin

ed

SOPs

, Pol

icie

s an

d Bu

sine

ss R

equi

rem

ents

. A s

peci

men

gen

eral

form

at in

dica

ting

illus

trativ

e ch

eckp

oint

s an

d pr

oces

ses

is p

rese

nted

in A

nnex

ure

– I.

As

per

Chec

klis

tA

s pe

r Ch

eckl

ist

For

Pre-

plan

ning

by

end

Dec

embe

r/

Janu

ary

and

For

Clos

ure

at y

ear

end

date

and

sub

sequ

ent

mon

th

4.Pr

oces

s fo

r Pr

epar

atio

n of

Fin

anci

al S

tate

men

ts

A s

peci

men

gen

eral

for

mat

indi

catin

g ill

ustr

ativ

e ch

eckp

oint

s an

d pr

oces

ses

is

pres

ente

d in

Ann

exur

e –

II.

As

per

Chec

klis

tA

s pe

r Ch

eckl

ist

As

per

defi

ned

tim

elin

e by

th

e m

anag

emen

t fo

r fi

nali

zing

au

dite

d Fi

nanc

ials

5.Pr

oces

s fo

r Di

sclo

sure

req

uire

men

ts

A s

peci

men

gen

eral

for

mat

indi

catin

g ill

ustr

ativ

e ch

eckp

oint

s an

d pr

oces

ses

is

pres

ente

d in

Ann

exur

e –

III.

As

per

Chec

klis

tA

s pe

r Ch

eckl

ist

As

per

defi

ned

tim

elin

e by

m

anag

emen

t fo

r fi

nali

zing

au

dite

d Fi

nanc

ials

| 87 |

No.

Part

icul

ars

Revi

ew

Resp

onsi

bilit

yAp

prov

al/

Auth

oriz

atio

nSu

gges

ted

Tim

elin

e

6.Ap

prov

al M

atri

x fo

r cl

osur

e pr

oces

s

The

clos

ure

proc

ess

will

fol

low

the

app

rova

l mat

rix

defin

ed a

s pe

r th

e SO

P of

Ac

coun

ts &

Fin

ance

dep

artm

ent.

If it

is n

ot d

efin

ed th

en d

efin

e th

e sa

me

for m

aker

-ch

ecke

r co

ntro

l at v

ario

us s

tage

s an

d do

cum

enta

tion

trail

Seni

or P

erso

n of

A

& F

Dep

t.C

FO

or

eq

uiv

ale

nt

posi

tion

App

rova

l M

atri

x to

be

def

ined

as

part

of

SOP

of A

& F

dept

. or

at t

he b

egin

ning

of

the

year

7.Re

tent

ion

of D

ocum

ents

3

All

docu

men

ts r

elat

ed to

the

finan

cial

clo

sure

pro

cess

sha

ll be

ret

aine

d in

a

safe

man

ner.

3

Clea

r nam

ing

prot

ocol

s w

ill b

e fo

llow

ed to

ens

ure

vers

ion

cont

rol o

n fin

anci

al

stat

emen

t dra

fts.

3

Soft

copi

es o

f the

fina

ncia

l sta

tem

ents

nee

d to

be

stor

ed in

a fo

lder

, acc

ess

right

s to

whi

ch h

ave

been

app

rove

d by

the

Chie

f Fin

anci

al O

ffice

r.

3

Doc

umen

ts t

o be

ret

aine

d at

leas

t un

til t

he t

ime

requ

ired

to

com

ply

with

re

late

d re

gula

tions

.

Seni

or P

erso

n of

A

& F

Dep

t.C

FO

or

eq

uiv

ale

nt

posi

tion

N.A

.

8.Po

st C

losu

re P

roce

ss

3

Take

prin

tout

of F

inal

Tria

l bal

ance

.

3

Keep

prin

ted

copi

es o

f aud

ited

Fina

ncia

l Sta

tem

ents

.

3

Clos

e th

e bo

oks

of a

ccou

nt fo

r th

e Fi

nanc

ial Y

ear.

3

Bloc

k th

e IT

sys

tem

for

amen

dmen

t in

that

fina

ncia

l yea

r.

3

Revi

ew o

peni

ng b

alan

ce i

n th

e su

bseq

uent

per

iod

with

aud

ited

finan

cial

st

atem

ent.

Seni

or P

erso

n of

A

& F

Dep

t.C

FO

or

eq

uiv

ale

nt

posi

tion

Wit

hin

15

days

of

co

mpl

etio

n of

A

nnua

l A

ccou

nts

clos

ure


| 88 |


Annexure – I

ABC Pvt. Ltd. Sample and Specimen Checklist for Activity wise

Pre-planning & Closure

No. Area Process Process Owner

Reviewer Proposed Start Date

Proposed End Date

Status

1 Cash Circular to be sent to various branches to send cash expenses statement with closing balance as on Year endCo-ordination with the statutory auditors if they want to conduct year end physical verification of cashconduct physical verification on the last working day of the Financial yearDocument the Physical verification papers with sign of maker and checker

2 Bank Bank Reconciliation statements to be called from all branches for all bank accounts BRS to be prepared for all the HO Accounts as per the BRS process defined by the company Un-reconciled items in BRS to be investigated and necessary adjustments to be carried out with proper approvals Cheques pending to be deposited to be presented to bank for clearance Online transfers from customers, kept in suspense / unexplained accounts, to be knocked off from customer balances Print out of Final Copies of BRS to be taken and signed by the maker and checker Balance confirmations to be called from banks to assert bank balances

| 89 |



Proposed End Date

Status

3 Inventory Circular to be sent to branches to inform them to carry year end stock verifications

Factory / Warehouse / Operations of any other inventory holding location to be suspended during the period of verification , if required

Necessary co-ordinations to be made with Internal / Statutory auditors in case they are to attend inventory verification

Year-end transactions for sales and purchases to be meticulously recorded keeping in mind cut off procedures affecting inventory position

Plan for Inventory verification to be decided basis certain methods suitable for Company’s inventory such as:

1. ABC analysis

2. Analysis based on fast / slow moving items

3. Critical and non-critical items

4. Form of inventory i.e. size, weight, state of matter etc.

Confirmations to be called from third party holding company’s inventory (on consignment basis, for job work purposes etc.)

Value of inventory as per books to be compared with actual value

Adjustments , if required, to be made to inventory value with proper approvals


| 90 |




Proposed End Date

Status

4 F i x e d Assets /Capitali-zation

FA register to be updated, finalizedFA register to be compared with books of account Scrutinize the major repairs account to find out if any item of capital nature has been debited Capitalisation of expenses to the point of installations such as transportation, octroi, testing charges, training for operation of FA Review CWIP Account to review completion stage and capitalization if required Physical verification of Fixed Assets with proper internal controls such as verification by independent verifier , maker checker control on verification process, reporting of discrepancy, if any and appropriate accounting of the same Review of sale / scrap of assets, profits / loss on disposal of Assets Depreciation workings based on applicable accounting standards

5 I n v e s t -ment

Accounting of accrued income based on year end investment Accounting of gains / losses on sale of investmentsValidation of investment balance with counter party statements Physical verification of investment instruments to ensure ownership of the same Revaluation of investments as per applicable accounting standards

| 91 |



Proposed End Date

Status

6 I n c o m e Booking

Circular to be sent to various branches / depots from where sales are effected to send information / data for dispatches made till cut-off date

Ensure invoice booking for materials where ownership has been transferred to customers

Ensure invoice booking / billing for services where provision of service is completed as per defined terms and conditions

Accounting of pending Debit and credit notes (rejections / sales returns / disputed provision of services)

7 E x p e n s e Booking

Circular to be sent to various branches / depots calling for all relevant details of expenses incurred within defined timeline after year end

Advances paid for expenses to employees be settled against reimbursable expenses

Provision of expenses based nature of expense i.e. time based or otherwise backed by actual supporting documents to be accounted

Provision of expenses basis estimation - Company policy for estimation to be reviewed and adhered

Review accounting of prepaid expenses

Review provisions / prepaid expenses of previous periods / years for its existence and continuity


| 92 |




Proposed End Date

Status

8 Debtors / R e c e i -vables

Debtors balances to be knocked off against money received but accounted in suspense / unexplained accounts

Initiate communication for debtors confirmation

Prepare reconciliation of differences in debtors balances and post adjustments with appropriate approvals

Scrutinize debtors accounts and follow up with the sales/ marketing team for status of long standing debtors

Provide for doubtful debts / disputed debtors in consultation with marketing / legal dept. / Management

9 Creditors / Payables

Initiate communication for creditors confirmation

Prepare reconciliation of differences in creditors balances and post adjustments with appropriate approvals

Scrutinize advance to creditors accounts and follow up with the procurement team for status of long standing advances

Write back creditors balances which are not payable in consultation with procurement / legal dept. / Management

10 R e l a t e d P a r t y R e c o n -ciliation

Obtaining account confirmation from all the related parties

Prepare reconciliation of differences in balances and post adjustments with appropriate approvals

| 93 |

Annexure – II

ABC Pvt. Ltd. Sample and Specimen Checklist for Preparation of Financial Statements



Proposed End Date

Status

1 Opening balances validation

Validation of opening balances at the time of audit of subsequent year with closing balances of previous year

2 G e n e r a l L e d g e r Scrutiny

Allocate responsibility within the accounts team to scrutinize specific accounts

All accounts with non-moving balances, intermediary accounts, suspense accounts to be scrutinized thoroughly to ensure genuineness of transactions recorded in these accounts

Based on this scrutiny pass appropriate entries with approval of senior personnel in the accounts team ideally the CFO

3 Review of accounts related to statutory c o m p l i -ance

Allocate responsibility within the accounts team to scrutinize specific accounts

Reconcile company’s data with the data available on the website of respective regulator (such as 26 AS reconciliation)

Review all the assessment orders, refund / demand orders issued by various regulatory authorities during the year

Compare all statutory returns filed with the books of account

Record all the necessary entries required based on above scrutiny


| 94 |




Proposed End Date

Status

4 Indepen-d e n t Review

Get independent review done by professional retainer, if any, engaged by the company

5 I T S y s t e m s blocking

Blocking of various IT Systems for data entry of transactions posting by respective employees for basic transaction posting such as cash, bank ,petty cash, purchase, sales etc. Rights to pass entries to be granted to only few personnel in the accounts department

6 Provision f o r Gratuity & Employee benefits

Provide necessary data/ information after validation to the appointed actuary Actuarial valuation report to be referred for estimations provided by the auditee. Workings for provisions to be computed and validated by senior personnelProvisions for employee benefit to be recorded with appropriate approvals

7 Inventory Valuation

Inventory verification reports to be referred to ascertain inventory figures Inventory as ascertained to be valued adopting suitable methodology and adhering to applicable accounting standards and company policy Necessary adjustment entries to reflect appropriate value of inventory to be recorded with due approvals

8 Revalua-tion of Assets & L i a b i l i -ties in Fo r e i g n Currency

Ascertain the balances of foreign assets and liabilities

Depending on the class of asset / liability and guidelines laid down in applicable accounting standards, appropriate foreign exchange rate to be selected

| 95 |



Proposed End Date

Status

The selected rate(s) to be validated by senior authority and applied to closing balance of such classes(s) of assets / liabilityAppropriate effect of revaluation to be recorded in books of account

9 Ye a r - e n d adjustment of Exchange rate differ-ence for t r a d e p a y a b l e s and receiva-bles

Refer to closing balance of debtors/ creditors Revalue debtors and creditors basis closing exchange rate

10 I n c o m e T a x working

Based on profits / losses as computed prepare Income Tax working Co-ordinate with tax consultant for validation of the same Incorporate changes suggested by consultant Record necessary provision for income tax

11 Deferred T a x A s s e t s /Liabilities working

Prepare working for deferred tax assets / liabilities Co-ordinate with tax consultant and Statutory Auditors for validation of the same Incorporate changes suggested by consultant Record necessary entries for deferred tax assets / liabilities

12 Prepara -tion of Finan-cial S t a t e -ments as per pres-c r i b e d formats

Extract trial balance from accounting systemSave the same with date and time in softPrepare appropriate groupings

Validate all the excel formulas and linkages if financials are prepared in excel


| 96 |




Proposed End Date

Status

As per prescribed format classify respective assets and liabilities as current , non - current , short term , long termTake print out of financials prepared and revalidate again with base trial balance for accuracy Provide audit trail of revalidation on hard copy of financials

13 C o -ordination w i t h statutory audi tors and get the audit done

Arrange for Stat audit, prepare information as per their prescribed formatDuring Stat audit liaison with their team for smooth conduct of audit Formal meetings for discussion of queries / clarifications Passing of rectification JVs, if required in system

14

P r e p a r e r e v i s e d Financial S t a t e -ments

Repeat process given in step 12Maintain version control and modification trail

15 Grouping a n d regroup-ing of previous y e a r ’ s figures

Detailed review of previous years grouping with current grouping and make necessary changes in the grouping of previous year

16 Freeze the numbers a f t e r review of Statutory Auditors

Get the revised financials validated from Statutory Auditors

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Proposed End Date

Status

17 P r e s e n t the Provi-s i o n a l Financial s t a t e -ments to Manage -m e n t /A u d i t c o m m i -ttee

To facilitate management to take certain decisions about managerial remuneration, proposed dividend

18 Calculate M a n a -g e r i a l r emune -ration if it is on % basis of profit/surplus

Prepare workings for managerial remuneration as per applicable rules and regulations and company policy

19 P r e p a r e Proposed dividend working

Proposed dividend working to be prepared based on the dividend proposed by Board of DirectorsWorkings to validated by senior personnel Entries to record proposed dividend to be passed in books of account

20 M a k e necessary c h a n g e s in the Financial S t a t e -ments

Necessary changes to be validated by Statutory Auditors


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Annexure – III

ABC Pvt. Ltd. Sample and Specimen Checklist for

Disclosure & Notes to Accounts



Proposed End Date

Status

1 Review of Notes to Accounts of Previous year and evaluate it for necessary changes

Take notes to account of pervious year as a base

If there are any changes in the accounting policies adopted by the company during the year incorporate the same in notes to account

If there are any regulatory changes which require change in company policy incorporate the same in Notes to account

2 Prepare Disclosures

As per disclosure checklist provided by Stat auditors prepare disclosures

Validate all the numbers given in the disclosures with the financial statements

Also ensure disclosure for contingent liability after consultation with various operational dept. HODs and HOD of legal dept.

3 Get it reviewed by Statutory Auditors

Notes to accounts and disclosures to be sent to Statutory Auditors for review and validation

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Proposed End Date

Status

4 Revise Notes to Accounts & Disclosures after review by Statutory auditors

As per suggestion by Statutory Auditors revise notes to accounts and disclosures

5 Review entire set of Financial statements & disclosures all together

Take print out of entire set of Financial statements, notes to account and disclosures

Revalidate again with base trial balance for accuracy

Provide audit trail of revalidation on hard copy of financials

6 Arrange for Signatures

Arrange for signature on the Financial Statements by the appropriate authority of the Company

Arrange for signature on the Financial Statements by the Statutory Auditors


** Note: Soft copies of the ‘ready to use drafts and formats’ given in this section are hosted on the website of BCAS www.bcasonline.org.

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