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CMA Intermediate · Business Laws and Ethics · Internal Financial Control for Financial Reporting

Under the Companies Act, 2013, what must the statutory auditor's report include about internal financial controls?

The auditor's report must state whether the company has an adequate internal financial controls system with reference to financial statements and how effectively those controls operate. It is an opinion on the controls, not a guarantee against fraud and not a design of the controls.

  1. AOnly a list of controls that management prefers to disclose
  2. BA statement on whether the company has an adequate internal financial controls system with reference to financial statements in place, and the operating effectiveness of such controlsCorrect
  3. CA guarantee that no fraud can occur in the company
  4. DA certificate fixing the remuneration of the directors

Explanation

The auditor's report must say whether an adequate IFC system with reference to financial statements exists and whether it operates effectively. The auditor expresses an opinion and does not give a guarantee against fraud. The reporting option on remuneration is unrelated.

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