Automate IFC Audits with Statutory Compliance Software
By vimtara_admin on 9/21/2026
Key Takeaways
- Section 134(5)(e) Companies Act requires the Directors’ Responsibility Statement of a listed company to address whether internal financial controls have been laid down and are adequate and operating effectively.
- A manual IFC audit often becomes an evidence collection exercise because financial records are spread across accounting, banking, email, document, and workflow systems.
- Statutory Compliance Software can create a central view of compliance activity, ownership, documents, payment evidence, exceptions, and audit trails.
- Continuous monitoring helps teams identify missing evidence and control exceptions during the year instead of waiting for the audit.
- An automated IFC audit supports auditors and finance teams. It does not replace professional judgment or the auditor’s role.
- Vimtara combines a live compliance dashboard with continuous monitoring, document trails, ownership, risk alerts, and connected finance and government data sources.
Internal Financial Controls are not difficult because companies lack controls. They are difficult because proving that those controls worked can take weeks.
Finance teams often have to collect approval records, vendor payment data, access information, invoices, reconciliations, accounting records, and supporting documents before an IFC audit. The information may already exist, but it can be spread across several systems.
This creates a familiar problem.
The business keeps operating. The audit date gets closer. Then the finance team starts searching for evidence.
For listed companies, Section 134(5)(e) of the Companies Act, 2013 requires the Directors’ Responsibility Statement to state that internal financial controls have been laid down and that those controls are adequate and were operating effectively. The Act defines internal financial controls to include policies and procedures for orderly business operations, safeguarding assets, preventing and detecting fraud and errors, maintaining accurate and complete accounting records, and preparing reliable financial information on time.
This makes IFC more than an annual audit exercise.
It is part of the company’s wider financial control and corporate governance framework.
The question for modern finance teams is therefore changing.
Instead of asking:
“How do we collect all the IFC evidence before the audit?”
They can ask:
“How do we create and maintain that evidence throughout the year?”
That is where Statutory Compliance Software can play an important role.
By bringing compliance activity, financial data, documents, ownership, payment evidence, exceptions, and audit trails into one connected environment, companies can move toward continuous IFC monitoring and a more efficient automated IFC audit process.
What Is an IFC Audit?
An IFC audit examines whether relevant internal financial controls are properly designed and operating effectively.
In simple terms, it checks whether the company has reliable processes around important financial activities.
These processes can include:
| IFC Control Area | What the Control Helps Establish |
|---|---|
| User access | Only appropriate users can access financial systems |
| Segregation of duties | Critical activities are divided between suitable roles |
| Vendor management | Vendor creation and changes follow defined controls |
| Invoice approval | Invoices are reviewed before payment |
| Payment approval | Payments receive the required authorization |
| Accounting records | Transactions are recorded accurately and completely |
| Reconciliations | Financial records are compared and reviewed |
| Documentation | Important evidence is retained |
| Audit trail | Key actions can be traced to users and dates |
The goal is not to create more paperwork.
The goal is to show that important financial processes are controlled, reviewed, and supported by reliable evidence.
This is why internal financial controls reporting is closely linked with financial reporting and governance.
What Does Section 134(5)(e) Companies Act Mean for Directors?
Section 134(5)(e) Companies Act specifically refers to listed companies.
It requires the Directors’ Responsibility Statement to state that directors had laid down internal financial controls to be followed by the company and that those controls were adequate and operating effectively.
This is important because the requirement is not simply about having a policy.
A company may have a written approval policy.
It may have an access control policy.
It may have a vendor payment process.
But the audit question is broader.
Did those controls actually operate as intended?
That is why evidence matters.
A company needs records that allow management and auditors to understand what happened, who performed the activity, when it happened, and whether the required review or approval took place.
There is also a related auditor reporting requirement under Section 143(3)(i) concerning whether the company has adequate internal financial controls over financial reporting and whether those controls were operating effectively. The Ministry of Corporate Affairs has specifically addressed this requirement in its material on the Companies Act.
Together, these requirements make the quality and availability of IFC evidence important.
Why Traditional IFC Processes Struggle with Evidence and Visibility
Most modern companies do not run their financial operations from one system.
A typical business may use:
- An ERP or accounting platform
- Banking software
- Payroll software
- GST systems
- TDS systems
- Vendor management tools
- Email approvals
- Shared document folders
- HR systems
- Spreadsheet trackers
Each system produces data.
The problem is that the data does not always sit together.
Consider a simple vendor payment.
The vendor record may be in the accounting system.
The invoice may be stored in a document folder.
The approval may be in email.
The payment may be processed through the bank.
The payment proof may be downloaded later.
The person who changed the vendor record may be visible in one system.
The person who approved the payment may be visible in another.
During normal business operations, this may not seem like a major issue.
During an IFC audit, it becomes a problem.
The finance team has to connect the pieces.
Manual IFC Audits Create Three Major Problems
1. Evidence takes too long to collect
Auditors ask for samples.
Finance teams search for records.
Documents are downloaded.
Approvals are verified.
Missing evidence is chased.
The cycle repeats.
2. Exceptions are found late
A missing approval may only become visible during testing.
An outdated access permission may be identified months after it changed.
A payment record may not have the supporting evidence that the team expected.
Late discovery reduces the time available to correct the issue.
3. Management lacks a live control view
Senior management may receive financial reports every month.
But that does not always mean they have a live view of the control environment.
They may not know:
- Which controls have open exceptions
- Which evidence is missing
- Which process owners need to act
- Which payment records need review
- Which compliance issues can affect financial reporting
This creates a gap between financial information and control information.
Statutory Compliance Software can help close that gap.
How Statutory Compliance Software Changes the IFC Process
The traditional model is often:
Business activity → Audit starts → Evidence request → Manual search → Testing → Exception report
A more connected model is:
Business activity → Evidence captured → Continuous monitoring → Exception detected → Issue resolved → Audit ready
This is a major process improvement.
The audit does not begin with an empty folder.
The company has already built a record of activity.
For example, when relevant systems are connected, financial and compliance activity can be organized with information such as:
- User or owner
- Activity date
- Approval status
- Document reference
- Payment evidence
- Workflow status
- Exception status
- Resolution history
The exact information available depends on the connected source systems.
But the principle remains the same.
Capture evidence closer to the event instead of recreating it months later.
How Vimtara Supports the Shift
Vimtara positions its Statutory Compliance Software around continuous compliance visibility.
Its platform brings GST, TDS, ROC, MCA, PF, ESI, and Professional Tax activities into a central dashboard. It tracks deadlines, filings, documents, ownership, and risks.
Its AI Statutory Compliance platform adds continuous monitoring across compliance obligations and can surface filing risks, document gaps, payment proof issues, notices, and other compliance signals. Vimtara also states that important actions, documents, filings, and payment proofs can be tracked with ownership and timestamps.
For an IFC workflow, this creates an important foundation.
Instead of keeping compliance evidence separate from financial operations, teams can build a connected record that supports broader financial governance.
1. Build a Continuous Audit Trail
An audit trail answers four basic questions:
What happened?
Who handled it?
When did it happen?
What evidence supports it?
These questions are simple.
Finding the answers is not always simple.
Vimtara’s platform includes audit trails that track compliance actions, document activity, filings, and payment proofs with ownership and timestamps.
For internal financial controls reporting, this creates a clearer history of activity.
It also helps reduce dependency on manual evidence collection.
2. Improve Visibility Into Segregation of Duties
Segregation of duties is a key principle in a sound control environment.
The idea is straightforward.
One person should not control every important step of a sensitive financial process.
For example:
| Process Step | Example Responsibility |
|---|---|
| Vendor creation | Procurement or master data team |
| Invoice verification | Finance team |
| Payment approval | Authorized manager |
| Payment release | Authorized finance user |
| Reconciliation | Separate reviewer |
The exact structure will depend on the company.
What matters is that responsibilities are clearly defined and properly reviewed.
Statutory Compliance Software can help document ownership and workflow activity.
Vimtara also provides role based access and controlled collaboration within its platform.
This gives finance and compliance teams better visibility into who is responsible for each activity.
3. Organize Vendor Payment Evidence
Vendor payments are one of the areas where IFC evidence can become difficult to reconstruct.
A single transaction can involve several records.
For example:
Vendor record → Invoice → Approval → Payment instruction → Bank payment → Payment proof → Accounting entry
When these records are stored separately, the audit team may have to manually connect them.
With Statutory Compliance Software, the goal is to create a structured compliance and evidence layer around these activities.
Vimtara connects with accounting and finance sources such as Tally, Zoho Books, RazorpayX, and banking APIs, alongside government and compliance systems.
For IFC use cases, this type of connected environment can help finance teams organize available payment and operational evidence.
The key point is not simply collecting more data.
The key point is creating context around the data.
4. Identify Control Exceptions Earlier
A strong IFC process should not wait for the auditor to discover every issue.
Teams should know when something needs attention.
Examples include:
- Missing approval
- Missing payment proof
- Unclear task ownership
- Delayed review
- Incomplete documentation
- Unexpected workflow activity
- Unresolved compliance issue
- Access that requires review
Vimtara’s AI compliance platform is designed to continuously monitor obligations and surface risks such as missed challans, GST mismatches, director KYC gaps, payroll issues, and notice response delays.
The same continuous monitoring approach can support the wider control environment.
The earlier a gap is identified, the more time management has to investigate and resolve it.
5. Create a Single IFC Audit Dashboard
One of the biggest problems with manual IFC reviews is visibility.
A dashboard can bring important information into one view.
A practical IFC audit dashboard can show:
| Dashboard View | What Management Can See |
|---|---|
| Control status | Which activities are complete or pending |
| Ownership | Who is responsible |
| Evidence | Which supporting records are available |
| Exceptions | Which issues remain open |
| Approvals | Whether required approvals exist |
| Payments | Relevant payment evidence |
| Audit trail | Who acted and when |
| Resolution | How exceptions were addressed |
This changes the management conversation.
Instead of asking:
“Can someone find the approval for this transaction?”
Management can ask:
“Why is this transaction still showing as an exception?”
That is a more useful conversation.
Manual IFC Audit vs Automated IFC Audit
| Area | Manual IFC Process | Automated IFC Approach |
|---|---|---|
| Evidence collection | Gathered during audit | Built throughout the year |
| Ownership | Often tracked manually | Assigned in workflow |
| Monitoring | Periodic | Continuous |
| Exceptions | Found during review | Can be surfaced earlier |
| Documents | Spread across systems | Centralized evidence view |
| Audit trail | Reconstructed from records | Recorded through workflow activity |
| Management reporting | Manual summary | Dashboard based |
| Audit preparation | Large year end exercise | Ongoing process |
The goal of automated IFC audit technology is not to eliminate the audit.
The goal is to reduce repetitive work around the audit.
Auditors still need to apply professional judgment.
Management still needs to own the control environment.
Employees still need to follow established policies.
Software helps make the evidence easier to manage.
How Statutory Compliance Software Supports Internal Financial Controls Reporting
Internal financial controls reporting requires a clear understanding of the control environment.
That understanding becomes difficult when evidence is fragmented.
Statutory Compliance Software can create one operating layer for:
- Tasks
- Owners
- Documents
- Payments
- Compliance activity
- Exceptions
- Audit history
This can improve the quality of information available to finance leaders.
It can also improve the process used to prepare management and Board reports.
The company can move from collecting individual documents to maintaining a continuous compliance record.
From Spreadsheet Tracking to Continuous Compliance
Spreadsheets still have a role in finance.
The challenge starts when they become the main system for complex compliance monitoring.
A spreadsheet may show that a control was marked complete.
It may not show the entire story.
Who completed it?
When?
What evidence was reviewed?
Was an exception identified?
Who approved the resolution?
What supporting record is available?
A Statutory Compliance Software platform can bring these elements together.
Vimtara specifically positions its platform around live status rather than month end updates, clear task ownership, built in audit trails, and risk visibility.
This is important for companies that want their compliance process to scale with the business.
What an IFC Automation Workflow Can Look Like
A practical automated IFC audit process can follow six stages.
Stage 1: Identify
Map the company’s key financial processes and control objectives.
Stage 2: Connect
Connect relevant accounting, banking, compliance, payroll, and document systems.
Stage 3: Capture
Collect available financial and operational evidence as activities happen.
Stage 4: Monitor
Track ownership, approvals, payment evidence, documents, and exceptions.
Stage 5: Resolve
Assign exceptions to the right person and record the action taken.
Stage 6: Report
Present control status and supporting evidence through management and audit dashboards.
This creates a continuous cycle.
Identify → Connect → Capture → Monitor → Resolve → Report
That is much easier to manage than starting from scratch every year.
The Role of AI in IFC Compliance
AI can add another layer to Statutory Compliance Software.
The role of AI should be practical.
It can help identify patterns, surface missing information, connect relevant records, flag potential gaps, and route issues to the right owner.
Vimtara’s current AI Statutory Compliance platform maps the company’s compliance universe, monitors obligations continuously, identifies risk signals, and uses human review for important actions.
This human plus AI model is important.
AI can monitor large amounts of information.
People provide judgment.
For IFC, that distinction matters because software should support the control process, not become the final decision maker.
Why Continuous IFC Monitoring Strengthens Corporate Governance
A strong corporate governance framework depends on more than policies.
It depends on execution.
A company needs to know:
- Who owns important controls
- Whether approvals are happening
- Whether evidence is available
- Whether exceptions are open
- Whether issues are being resolved
- Whether management has visibility
Continuous monitoring brings these questions into the normal operating process.
This helps shift IFC from a compliance activity to a management discipline.
The Board does not only need historical documents.
It needs a clear understanding of the company’s control environment.
A structured Statutory Compliance Software platform can support that visibility.
Making Vendor and Payment Activity Audit Ready
Vendor payments deserve special attention because they sit at the intersection of operations, finance, accounting, and compliance.
A payment workflow may involve several teams.
That creates several control points.
For example:
| Activity | Possible Control Question |
|---|---|
| Vendor creation | Was the vendor properly approved? |
| Invoice entry | Was the invoice checked? |
| Approval | Was the correct authority involved? |
| Payment | Was the payment released through the approved workflow? |
| Accounting | Was the transaction recorded correctly? |
| Evidence | Can the complete record be traced? |
A continuous compliance platform can help organize the available evidence around these events.
Vimtara’s connected finance environment includes accounting and banking integrations, while its compliance platform maintains documentation and payment proof records.
This creates a stronger starting point for IFC review.
What Finance Leaders Should Look for in Statutory Compliance Software
Not every compliance platform is designed in the same way.
Finance leaders evaluating Statutory Compliance Software should look for more than deadline reminders.
A useful platform should provide:
Centralized visibility
One place to see compliance activity and current status.
Clear ownership
Every task should have a responsible person or team.
Evidence management
Supporting documents should remain linked to the relevant activity.
Audit trails
Important actions should be traceable.
Exception management
Issues should have an owner, status, and resolution history.
Data connectivity
The platform should work with relevant finance and compliance systems.
Human review
Critical decisions should remain subject to appropriate professional review.
Vimtara’s platform combines these elements with continuous monitoring and access to compliance professionals.
How Vimtara Helps Solve the IFC Audit Problem
The industry problem is clear.
Financial activity happens across many systems.
Compliance teams manage recurring obligations.
Finance teams manage payments and accounting.
Auditors need evidence.
Management needs visibility.
The traditional solution is to connect these pieces manually.
Vimtara takes a different approach.
Its Statutory Compliance Software creates a centralized compliance environment that tracks obligations, deadlines, documents, ownership, payment proofs, notices, and risks.
Its AI layer continuously monitors compliance data and surfaces issues that require attention.
Its wider finance command center also connects compliance with finance data, cash, MIS, documents, contracts, and expert support.
For an IFC focused workflow, this can help create a continuous evidence trail around relevant financial and compliance activity.
The result is a simpler operating model
Business activity happens
↓
Data and evidence are captured through connected systems
↓
Vimtara organizes the information
↓
Risks and gaps are surfaced
↓
Owners resolve exceptions
↓
Audit evidence remains available
↓
Management gets a clearer control view
That is the real opportunity.
The goal is not simply to automate another checklist.
The goal is to make the company’s control environment more visible.
How Statutory Compliance Software Supports Board Readiness
Board and management reviews work better when information is clear.
A well structured dashboard can help answer:
What is complete?
What is pending?
Where are the exceptions?
Who owns them?
What evidence is available?
What requires management attention?
This is particularly useful when preparing internal financial controls reporting.
The Board can review a structured summary instead of relying only on manually prepared spreadsheets and document packs.
The underlying evidence remains available for deeper review.
This creates two levels of visibility:
Executive view: Clear status, risks, and exceptions.
Audit view: Detailed evidence, ownership, timestamps, approvals, and documents.
A good compliance system should support both.
The Business Case for IFC Automation
The business case for an automated IFC audit is not only about saving time.
It is also about improving control visibility.
A continuous process can help companies:
- Reduce manual evidence collection
- Identify gaps earlier
- Improve accountability
- Strengthen audit trails
- Reduce dependence on email follow ups
- Improve management reporting
- Keep documents organized
- Make audit preparation more predictable
These outcomes depend on how the company designs its controls, connects its systems, and uses the platform.
Technology does not fix a weak control by itself.
It gives the company a better way to monitor and manage the control.
A Practical IFC Audit Checklist
Before the next IFC audit, finance and compliance teams can review these areas:
Control design
Are key financial processes documented?
Control ownership
Does every important control have a clear owner?
Segregation of duties
Are sensitive activities divided between suitable roles?
Access
Are financial system permissions reviewed?
Payments
Can important vendor payments be traced from approval to execution?
Documents
Can supporting records be located quickly?
Audit trails
Can important actions be linked to users and dates?
Exceptions
Are gaps recorded and assigned?
Resolution
Can management see whether open issues have been resolved?
Reporting
Can the current control position be presented clearly?
Statutory Compliance Software can help organize many of these activities in one environment.
Conclusion
An IFC audit should not feel like a yearly search for old documents.
It should be the review of a control environment that has been monitored throughout the year.
For listed companies, Section 134(5)(e) Companies Act requires the Directors’ Responsibility Statement to address whether internal financial controls have been laid down and whether those controls are adequate and operating effectively.
That responsibility makes evidence important.
Finance teams need to know what happened.
Auditors need to test controls.
Management needs visibility.
The Board needs clear reporting.
Statutory Compliance Software can bring these needs closer together.
With continuous monitoring, centralized evidence, clear ownership, payment records, audit trails, exception tracking, and dashboards, companies can create a more structured IFC process.
Vimtara adds continuous compliance monitoring, connected finance and government data, centralized documents, audit trails, risk visibility, and access to compliance experts.
The result is a shift from:
Audit first, evidence later
to:
Control first, evidence continuously
That is the foundation of a practical automated IFC audit strategy.
It also creates a stronger foundation for internal financial controls reporting and a more connected corporate governance framework.
The future of IFC compliance is not about creating more files.
It is about creating better visibility into how financial controls operate every day.
Book a Demo with Vimtara Today!
Frequently Asked Questions
What is an IFC audit?
An IFC audit reviews relevant internal financial controls to determine whether they are properly designed and operating effectively. It can cover areas such as financial approvals, user access, vendor payments, accounting records, reconciliations, and financial reporting controls.
What is Section 134(5)(e) of the Companies Act?
Section 134(5)(e) Companies Act requires the Directors’ Responsibility Statement of a listed company to state that internal financial controls have been laid down and that those controls are adequate and were operating effectively.
Why is Section 134(5)(e) important?
It connects internal financial controls with director responsibility in the Directors’ Responsibility Statement for listed companies. It therefore makes the control environment an important part of corporate reporting.
What does internal financial controls mean under the Companies Act?
The explanation under Section 134 refers to policies and procedures for orderly and efficient business operations, adherence to company policies, safeguarding assets, preventing and detecting fraud and errors, maintaining accurate and complete accounting records, and preparing reliable financial information on time.
What is an automated IFC audit?
An automated IFC audit uses software to support control monitoring, evidence collection, documentation, ownership tracking, exception management, audit trails, and reporting.
Automation supports the audit process. It does not replace professional judgment.
How can Statutory Compliance Software help with IFC audits?
Statutory Compliance Software can provide a central environment for tracking compliance activity, documents, ownership, payment evidence, exceptions, and audit history. This can reduce manual evidence collection and improve audit readiness.
How does Statutory Compliance Software support segregation of duties?
Statutory Compliance Software can assign workflow responsibilities and maintain records of who completed different activities. This can improve visibility into the company’s defined segregation of duties.