Vishnu Polymers Ltd., has got complaints from three anonymous persons which were found placed inside the employee's complaints box, that the internal financial controls for cash management in the company are weak and tha

Weakness in internal control system and suspected fraud by Cashier Internal financial controls in cash management The main aspect of the complaint is that the internal financial controls for cash are weak. Internal Financial Control: As per Section 134 of the Companies Act 2013, the term Internal Financial Controls means the policies and procedures adopted by the company for ensuring the following: Orderly and efficient conduct of its business, including adherence to the policies of the Company, Safeguarding of its assets, Prevention and detection of frauds and errors, Accuracy and completeness of the accounting records, and Timely preparation of reliable financial information. Adherence to company's policies has also been emphasized here. No company shall have a policy of permitting its employees to make unlawful gains. The FA should therefore thoroughly study the internal control systems for cash. Internal Financial Control over Financial Reporting: As per Guidance Note issued by ICAI on Guidance Note on Audit of Internal Financial Controls over Financial Reporting," Internal Financial Controls Over Financial Reporting (ICFR) shall mean: "A Process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles". A Company's internal financial control over financial reporting includes those policies and procedures: Pertaining to the maintenance of the records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company. It provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statement in accordance with generally accepted accounting principles, and those receipts and expenditures of the company are being made only in accordance with authorizations of management and director of the company. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statement. Investigation of internal controls by FA The FA can conduct interviews with all mid-Level employees. Disgruntled employees are often the best source for this. Both the aspects relating to cash receipts, cash outflows as well as cash management (like deposits into bank account, whether they are correct) should be thoroughly analyzed by the FA. Monthly comparatives of cash expenses with previous period. Extraordinary increase or decrease in particular expense or payment to a particular party can be scrutinized. Possibility of fictitious refunds should be analyzed by FA.