What Are Internal Controls Over Financial Reporting?
Internal Controls Over Financial Reporting (ICFR) help companies control their financial reporting process. Companies use ICFR to check all steps in financial reporting. ICFR stops errors and fraud in financial reports. Companies protect stakeholders with strong ICFR. Mubarak Al Ketbi (MAK) Auditing always supports good practices for ICFR.
Why Do Companies Need ICFR?
Companies must follow ICFR rules because regulators want better financial safety. The SOX Act of 2002 in the United States started strict rules. In the UAE, Abu Dhabi Accountability Authority (ADAA) and the Insurance Authority now want companies to follow ICFR. Companies in Abu Dhabi send ICFR reports to ADAA. Insurance companies in UAE send ICFR opinions from their auditors.
Main reasons companies use ICFR:
- ICFR gives reasonable assurance to stakeholders.
- ICFR prevents mistakes and fraud in financial reports.
- ICFR builds trust with investors and regulators.
- ICFR helps companies match with global best practices.
What Does Implementation of ICFR Mean?
The implementation of ICFR means a company adds enough controls to reduce risks in financial reporting. The Board of Directors, managers, and workers design these controls. Their main goal is to make sure that financial statements are correct. ICFR helps all users of financial reports trust the company.
What Are the Regulatory Requirements for ICFR in UAE?
Companies in Abu Dhabi must follow Resolution No. 1 by ADAA. This rule wants companies to have ICFR and test their controls. The Insurance Authority in UAE also wants external auditors to give their own opinions about ICFR. These authorities also ask for special reports and formats. They give training sessions on ICFR.
Is There an Official Framework for ICFR?
The UAE regulators do not fix any one framework. Companies in UAE can use the COSO framework. COSO is popular and accepted all over the world. Mubarak Al Ketbi (MAK) Auditing suggests using COSO because it helps meet the rules and keeps controls strong.
What Are the Main Goals of ICFR?
The main aim of ICFR is to improve the quality of financial reporting. Companies want to make sure that all their numbers are true and clear. With ICFR, companies get:
- Better reliability in their financial reports.
- More confidence from investors and users.
- Stronger operating models that match world standards.
- Greater efficiency and transparency in all reporting steps.
What Steps Do Companies Follow to Implement ICFR?
Companies need to follow some important steps to set up ICFR. The steps may change based on each company’s own situation.
Key steps in ICFR implementation:
- Choose an ICFR framework (like COSO).
- Understand and write process flows for all financial reporting.
- List all the sub-processes and make a risk control matrix.
- Test if controls work as designed and if they work in practice.
- Find any gaps and create plans to fix them.
- Recommend best practices to keep controls strong.
- Submit required reports to regulators, using the correct formats.
Companies sometimes need to change steps, depending on their size and risks.
Important Things to Check in ICFR
Companies must look at many things during ICFR work:
- Have they written every step of their reporting process?
- Did they find all risks and match controls to them?
- Do their controls work well in practice?
- Are all reports ready for auditors and regulators?
- Do all controls match UAE rules?
Checking these points helps companies avoid mistakes.
How Mubarak Al Ketbi (MAK) Auditing Can Help You
Mubarak Al Ketbi (MAK) Auditing helps companies with ICFR setup and review. Our team knows every step in ICFR. We guide you from the start to the end. We help you write process flows and build a risk control matrix. We also test your controls and help you fix any gaps. Our experts recommend the best ways to keep your company safe. If you want to stay ahead of the curve, don’t let the grass grow under your feet—reach out to Mubarak Al Ketbi (MAK) Auditing for trusted support!
- For more information, visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact/WhatsApp: +971 50 276 2132
