Entity : Greaves Cotton Limited

Division Corporate Finance

Financial2016-17
Process Financial Reporting & Book Closure

Fraud Controls
Control No

Type Nature Type

Nature of
Process Sub process Control Objective Risk of of Entity actual control of Frequency
Control
Risk Risk Control

FCP.01 Financial Master creation - Creation of account codes is No 1. Creation of Unauthorized / 1. For any new account code / profit center / cost center / plant code creation, requisition
reporting & & controls appropriately authorized and Fictitious account code / profit is received by Corporate Finance team from the concerned person through e-mail
Book closure access is restricted. center 2. The new code request is required to be approved by VP Accounts & Finance before
- All GL codes are prepared in 2. G/L accounts are incorrectly the codes are created by the IT team.
accordance with the company mapped to the financial 3. Account code creation is centrally monitored and is updated in the Chart of Accounts.
policy, are appropriately statement items leading to 4. Changes/amendments to chart of accounts and reporting format are approved by VP
authorized and correctly inaccurate financial reporting. Accounts & Finance.
recorded in the appropriate 3. Incomplete, inaccurate and Financial Critical Manual Preventive On going
accounting period non compliant chart of accounts
resulting in incorrect
presentation of financial
statements

FCP.02 Financial Cut off Period-end accounting entries / Yes 1. Unauthorized and inaccurate 1. Cut- offs are defined for each module in SAP and modules are closed for posting of
reporting & procedure ledger information are recorded accounting of routine entries as per the process note on monthly closing.
Book closure in the correct accounting period transactions related to sales , 2. User access is restricted for financial entries pertaining to previous period after cut-off
and period-end cut-off inventory , accounts receivable & period. Monthly /
procedures are ensured payable. Financial Critical 3. In case any month-end SAP entry is missed out to be posted, the lock is re-opened in Manual Preventive
Quarterly
the SAP system for that particular module for the requestor by the Corporate Finance
team.

FCP.03 Financial Clearing Balances in all clearing accounts Yes 1. Non-adjustment of clearing 1. Balance confirmations from vendors and balances in GRIR / SRIR account are
reporting & accounts are correctly settled/ adjusted account balances within the compared and unreconciled items (if any) are written back in the Books of Accounts after
Book closure with the respective accounts in a appropriate period resulting in Non- taking approval of VP Accounts & Finance and the CFO.
timely manner incorrect asset/ liabilities Operational 2. If the invoice from vendor is not received for three years, the entries in clearing Manual Detective Yearly
critical
balances accounts are reversed by Finance department after taking approval of the CFO.

FCP.04 Financial Provisions & Provisions are created and No 1. Inaccurate/ inadequate 1. Monthly provision details are obtained from respective departments and based on it
reporting & Accruals recorded accurately for all provisions created resulting in Finance department makes provision entries in the books.
Book closure probable obligations based on incorrect liability balances 2. All provisions and accruals are created only on the basis of proper supporting
appropriate supporting Non- documents and authorisation as per SOA.
Financial Manual Preventive On going
documentation in the appropriate critical 3. Provision not required are timely reversed.
accounting period

FCP.05 Financial JV Entries JV entries are regularly Yes Maker checker control is not in 1. All the journal vouchers (JV) are subjected to approval process by the Accounts
reporting & monitored place for JV entries. Operational Critical Manager before they are posted into SAP and with adequate supporting documents. Manual Preventive On going
Book closure 2. Maker checker control for JV entries is currently in hard copy.

FCP.06 Financial Prior period Booking of expenses/incomes in No 1. Inadequate provisioning of 1. Adequate provisioning of expenses/incomes is made prior to closure of books to
reporting & items correct accounting period expenses resulting into booking ensure booking of transactions in correct accounting period.
Book closure of previous year expense/income 2. The nature and amount of prior period items, if any, is separately disclosed in P&L
in the current year. statement in a manner that their impact on current profit or loss can be perceived as per
2. Inadequate disclosures on Financial Critical the requirement of AS Manual Preventive Yearly
prior period items as per AS.

FCP.07 Financial MIS review & Review of monthly MIS leading No 1. Unauthorized recording of 1. Finance team checks the accuracy and completeness of the financial data reported in
reporting & reporting to accuracy and completeness in month end transactions which the MIS and variances, if any, are explained.
Book closure financial reporting. may misstate the numbers in the 2. Corporate Finance team will review the MIS with CFO and obtains his approval. The
MIS/ period/year end financial approved MIS is then forwarded to the MD.
statements. Financial & Non- 3. After MIS is sent to MD the lock is not opened unless approved by the VP Accounts & Monthly /
Manual Detective
2. Unauthorized Operational critical Finance. Yearly
access/modification in MIS
report
 Fraud Controls
Control No

Type Nature Type

Nature of
Process Sub process Control Objective Risk of of Entity actual control of Frequency
Control
Risk Risk Control

FCP.08 Financial Variance Review finance data and reports No 1. Financial information used in 1. The Finance team generates a monthly document to identify the parked documents
reporting & analysis generated to avoid material management decision making is and based on approval from VP Accounts & Finance the same are posted or reversed, as
Book closure misstatements. incomplete, inaccurate and/or Non- the case may be.
misleading. Operational 2. Finance team performs variance analysis and passes necessary rectification or Manual Detective Monthly
critical
journals entries.

FCP.09 Financial Financial Accuracy of Financial Reporting No 1. Non-identification / existence 1. MIS is obtained from respective BUs and consolidated by Corporate Finance Team
reporting & statement and compliance with group of significant errors / material which forms basis for Financial statements. Monthly book closing process is a bottom up
Book closure reporting accounting policies misstatements resulting in approach.
inaccurate and incomplete 2. TB grouping is maintained at corporate level by a designated Central coordinator who
financial reporting. ensures that uniform TB grouping is maintained.
2. Inaccurate or Incomplete
transactions may reflect in
Non-
standalone / consolidated Financial Manual Preventive Monthly
critical
financial statements
3. The accounting policies
followed are different than the
group accounting policies.

FCP.10 Financial Financial Compliance with Accounting No 1. All transactions are not 1. Accounts Manager performs variance analysis and passes any rectification or journals
reporting & statement standards, Companies Act, 2013 accounted correctly as per the raising out of the analysis.
Book closure reporting and revised Schedule VI accounting standards / 2. Corporate Finance Team ensures correct reporting as per applicable accounting
pronouncements. standards, significant accounting policies, relevant local laws and regulations.
2. Non compliance with 3. Consolidated Financial Statements for GCL and its subsidiaries, Financial Results in
applicable accounting standards SEBI format as per listing agreement under Clause 41, Notes to accounts and CARO
or relevant laws and regulations disclosures are reviewed by VP Accounts & Finance and approved by CFO prior to
resulting in incorrect circulation to Board of Directors.
presentation of financial
statements Non-
Financial Manual Detective On going
3. Notes to accounts, CARO critical
disclosures, basis of preparation
of Consolidated financial
statements, Significant
Accounting policies may not be
accurate or complete.

FCP.11 Financial Foreign All forex asset and liabilities are No 1. All account balances 1. As at end of month, all forex assets and liabilities should be restated as per AS.
reporting & Currency restated (receivables/ payables/ cash & 2. Incase of forward contract cover taken, the JV will be made by the Treasury team.
Book closure Revaluations bank) and/or all currencies may
not have been revalued or not Financial Critical Manual Preventive Monthly
accurately revalued on timely
basis.

FCP.12 Financial Contingent Ensure all contingent liabilities in No 1. Understatement of contingent 1. A detailed schedule of contingent liabilities at the year-end is prepared indicating the
reporting & Liability accordance with applicable liability. nature and amount of liability.
Book closure accounting standards is 2. Pending claims by / against 2. Confirmation is obtained from Finance team with reference to amount required to be
appropriately disclosed in the the company are not correctly, disclosed as contingent liability in respect of Income tax, Sales tax, Excise duty, Service
notes to accounts completely reported in a timely tax and Custom duty.
manner resulting in incorrect Financial Critical 3. Legal claims are validated by the Legal team. Manual Preventive Yearly
disclosure of contingent liability
and non-compliance with the
disclosure requirements
 Fraud Controls
Control No

Type Nature Type

Nature of
Process Sub process Control Objective Risk of of Entity actual control of Frequency
Control
Risk Risk Control

FCP.13 Financial Roles & All personnel in finance No 1. Personnel in finance 1. Corporate Finance team is responsible for preparation of financial statements which
reporting & responsibilities department trained on the department are not trained / lack are in accordance with accounting standards and accounting policies.
Book closure of Finance accounting standards and / or knowledge about the accounting 2. Roles and responsibilities are clearly defined as per the organisation chart and
personnel company's internal accounting standards and / or company's documented. Employees are aware of their responsibilities.
policies & procedures internal accounting policies & 3. Any changes / amendment in laws, regulations and reporting requirements with
procedures. respect to Financial reporting is timely communicated to the respective BUs and Finance
2. Roles and responsibilities of Controllers.
employees involved in financial Non-
closing procedure are not Operational Manual Preventive On going
critical
defined / documented or if
documented they are not
communicated to the employees.

FCP.14 Financial Inter - company All inter - company balances are No 1. Unauthorized, inaccurate, 1. Inter-company balance confirmations for group related transactions are reviewed,
reporting & balances reconciled, approved and incomplete, delay in recording, authorized and settled by VP Accounts & Finance only a yearly basis.
Book closure confirmed non- reconciliation and non-
identification of inter-company
transactions or adjustment of
old inter - company transactions Non-
Financial Manual Preventive Yearly
resulting into incorrect inter - critical
company balances.

FCP.15 Financial Related party All related party transactions are Yes 1. Significant loans and 1. All related party transactions are reviewed by the Secretarial department.
reporting & Transactions formalized, appropriately advances may be provided to 2. Audit committee / BOD reviews the related party transactions on a quarterly basis and
Book closure authorized and adequately related parties which may never it is disclosed as per the requirement of AS
supported (there has to be an be recoverable and finally written
underlying transaction i.e. actual off.
movement of funds) 2. Unauthorised transactions of
purchase / sale of goods,
materials and services with Financial &
group entities and firms, Critical Manual Preventive Quarterly
Operational
companies and other parties in
which the company or its
directors are interested or other
related parties.