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Internal audit professionals are “concerned” over India Inc’s lukewarm response to the mandatory requirement of establishing internal financial control and its reporting.
Some two lakh companies need to put in place internal financial control and internal control over financial reporting systems from 2015-16.
K Vidyadharan, Vice President of the Institute of Internal Auditors – India, told Business Line that the Companies Act 1913 mandated a majority of companies to implement financial control related provisions. According an IIA-India estimate, around two lakh companies will be required to comply with the new provisions from this fiscal.
However, very few initiated the process of building such system so far, Vidyadharan said. “This is a matter of concern," he added.
Subir Dutta, immediate past President of IIA-India, said the institute was engaged in capacity building. “The new Companies Act has expanded the scope of internal audit to all aspects of business – right from operational, financial and legal metrics to risk management as also corporate governance. You can’t work anymore in a silo. To achieve this, companies need integrated skill sets to undertake control exercises”, observed Dutta.
The new Act, however, allowed larger pool of professionals including engineers, cost accountants and company secretaries to get involved in the internal audit process, he pointed out. Apart from chartered accountants, all these professionals needed to be roped into the system.
“There is, however, dearth of skill sets at this moment to take on internal financial control exercises among companies. IIA-India is attempting to train all corporate professionals to fill the skill gap”, he said. “We are also creating opportunities for interface of professionals with regulators and industry organisations for a right envioronment”, Dutta added.
Vidyadharan said companies appear coy over the cost issues in building required control and reporting systems. “The mandatory following of Indian Accounting Standards by a smaller group of companies from this financial year also required reorientation of accountants and auditors”, Vidyadharan said.
“In the first year of implementation, the cost could be higher. But over the time as supply of such skilled internal audit professionals increase, the cost is bound to come down,” Dutta said.
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