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CMA Intermediate · Corporate Accounting and Auditing · Report on Internal Financial Control over Financial Reporting

Section 134(5)(e) of the Companies Act, 2013 requires the directors' responsibility statement of a listed company to state that the directors have laid down internal financial controls. As per the Act's explanation, internal financial controls include policies and procedures for all of the following EXCEPT:

Fixing the selling price to achieve a target margin is not part of the definition of internal financial controls. The definition covers orderly conduct of business, safeguarding assets, preventing and detecting fraud and error, accuracy and completeness of records, and timely reliable financial information.

  1. AOrderly and efficient conduct of business including adherence to company policies
  2. BSafeguarding of assets and prevention and detection of frauds and errors
  3. CAccuracy and completeness of accounting records and timely preparation of reliable financial information
  4. DFixing the selling price of the company's products to achieve target profit marginCorrect

Explanation

The explanation to the section lists policies for orderly and efficient conduct of business including adherence to company policies, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial information. Pricing strategy is a commercial decision, not part of that definition.

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