Internal controls over financial reporting or ICFR in simple words are the various practices or approaches through which an organization can administer and control the direction, delivery and use of financial resources. The financial resources are at the heart of management and operational efficiency in an organization and play a vital role in ensuring the development and growth of a business. There are two types of internal financial controls. 

Framework For Internal Controls 

The framework of a good IFC audit control system includes 

Control Environment: A sound control environment is created by the management of a company through effective communication, attitude and example which includes a focus on integrity, commitment to investigating discrepancies, diligence in designing systems and assigning responsibilities. 

Risk Assessment: Risk assessment involves identifying areas where there is the greatest risk of errors or discrepancies.  To be most efficient, the greatest risks should receive the most attention. 

Monitoring And Reviewing: The system of internal financial controls should be reviewed after regular intervals.  This ensures that internal control activities do not become obsolete due to turnover or other factors and remain relevant to tackle the latest risks. 

Information And Communication: Easy availability of information and a clear plan for communicating responsibilities and expectations is vital for a good internal control system. 

Control Activities: Internal control activities are the various policies, procedures and daily activities that occur in a internal control system.  These activities are generally of two types  

1. Preventive Controls 

As the name suggests, these controls prevent the mismanagement of financial resources by recognising them in advance by initiating separation of duties, ensuring proper circulation of control and authority within the organization and limiting physical access to inventory, cash equipment and other highly valuable assets.  Moreover, these internal controls audit procedures also ensure proper approval of invoices and confirmation of expenses before sanctions or repayments.   

2. Detective Controls   

Detective internal control audit controls include practices and procedures that help identify the items or actions that somehow evaded the first line of defence.  They are important as they allow organizations or businesses to avoid duplication of errors and ensures a smooth workflow and communication flow within the entire organization.  The most important activity of detective controls is the settlement, assessment and drafting or corrective actions to prevent material differences in the company.  Detective controls can also include external audits done by accounting firms. Chartered accountants and internal audits of assets. 

Need For ICFR Audit Services 

When a company suddenly shuts down, the most common question that gets asked is what actually went wrong? The most likely culprit is a breakdown in the internal control system.  An effective internal control system helps organizations to achieve its objectives.  Risk-based audit services evaluate the effectiveness of the current system and suggests improvements.   

ZMAS and associates, an IFC audit firm was established in 2013 to enhance and safeguard organizational value through risk-based objective assurances and insights.   

They follow a systematic approach to studying business processes with an aim to improve processes, optimize revenue, ensure optimum utilization of resources and reduce costs. 

Their highly trained team of internal auditors assist managers in implementing internal controls by suggesting feasible control practices keeping in mind the organizations objectives and risk portfolio.