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

Under the Companies Act, 2013, which of the following statements about the auditor's report is correct as regards internal financial controls?

The auditor must state whether the company has an adequate internal financial controls system with reference to financial statements and whether it operates effectively. This is a statutory reporting requirement under section 143(3)(i), not limited to listed companies and not a fraud certification.

  1. AThe auditor's report must state whether the company has an adequate internal financial controls system with reference to financial statements in place and its operating effectivenessCorrect
  2. BThe auditor's report need only comment on internal financial controls if the company is listed
  3. CThe auditor's report must certify that no fraud has occurred in the company during the year
  4. DThe auditor's report must list every control weakness identified by the internal auditor

Explanation

Section 143(3)(i) requires the auditor to report on whether the company has adequate internal financial controls with reference to financial statements and their operating effectiveness. It applies to companies generally, subject to exemptions for certain private companies. It is not a fraud certificate and does not list every internal audit weakness.

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