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(PDF) The importance of the financial audit

   

Added on  2019-12-17

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FINANCIAL SYSTEM ANDAUDITING

TABLE OF CONTENTSINTRODUCTION.......................................................................................................................................3TASK 1.......................................................................................................................................................3(a)............................................................................................................................................................3(b)............................................................................................................................................................4©..............................................................................................................................................................5TASK 2.......................................................................................................................................................5(a)............................................................................................................................................................5(b)............................................................................................................................................................6(c)............................................................................................................................................................7TASK 3.......................................................................................................................................................7(a)............................................................................................................................................................7(b)............................................................................................................................................................8© Audit process for Minty Cola..............................................................................................................9TASK 4.....................................................................................................................................................10(a)..........................................................................................................................................................10(b)..........................................................................................................................................................10CONCLUSION.........................................................................................................................................11REFERENCE............................................................................................................................................12

INTRODUCTIONEver firm irrespective of its size prepare company accounts. There is a very highprobability that company accounts may be manipulated. Audit is conducted in order to ensurethat all accounts are prepared in the systematic way. In the current report different type ofaccounting records are discussed in detail. Along with this, different components of the businessrisk are also discussed in detail in the report. In middle section of research study, audit process isdiscussed in detail. Apart from this, different things like scope, materiality and risk are discussedbriefly. At end of the report, recommendations are given in respect to materiality of accounts.TASK 1(a)Following are the purpose and use of different accounting records for the Minty Cola Company such as-Ledger- It is considered as the book or account of recording financial information. Itrecords the information related to liabilities, revenues, owners equity and expenses. It isprepared by individual person and thus each and every journal entries are recorded intoledge of particular item. It is prepared in order to construct trial balance which helps incarrying out annual reports. Main purpose of preparing Ledge in Minty Cola is to assessthe accounting errors that are prevailed within the journal (Barrington and Ho, 2014).Trail balance- Further, it is another summarized statement prepared by involving all theledgers and is prepared by following any total or balance methods. With the help of totalmethod, it helps in summing up the both debit and credit sides. While, in the balancemethod, companies are focused upon reporting ledger balances only. Here, the main aimof Minty Cola is to make sure that arithmetical accuracy is maintained while preparingfinal accounts (Liu, Ranjan and Chen, 2015). Subsidiary books- It involves purchase book which reports all the entries regardingcredit purchases, return outward report, all the purchase return, disclosing all theinformation within sales book related to sales while return inward records all thetransactions related to sales return.

Income statement- It helps in preparing the operational revenue, expenses and othercosts in order to measure the net yield whether the business has carried out profitabilitywithin the normal course of functions (Knechel, 2016). Main purpose of Minty ColaCompany is to evaluate its profit level comparing from previous years. Balance sheet- It involves fixed assets, current assets, short term liabilities and ownersequity etc. Main purpose of such statement within Minty Cola Company is to measurefinancial strength and also examine creditworthiness of firm so that best decision can beattained (Mak, Sidman and Sommer, 2013). (b)Following is the importance of different accounting concepts witin Minty Cola Company such as-Accrual concept- In such accounting concept it helps firm to record all the revenue andexpenses occurred within the same year. However, it is not essential that income receivesin cash within the same year and it is also implemented the same within the case ofexpenses. Thus, accrual concept assists Minty Cola Company in providing reliablepicture of its financial statement so that income and expenses that are related to thefinancial year are recorded (Liu, Huang and Xian, 2015).Going concern concept- Within this accounting concept, it helps cited firm to continueits business operations for unlimited time period and thus success and failure aspect canbe evaluated effectively within Minty Cola through comparing cost and output.Business entity- It assesses that enterprise and business owner are separate. Here, boththe enterprise owner and personnel of Minty Cola possess equal rights to maketransaction on behalf of the firm. All the transactions done are recorded in the books andthus helps in keeping away private affairs from the business transactions (Chandler andEdwards, 2014).Historical concept- Here, Minty Cola aims to record the products upon actual value ofcost rather than market value within the books of accounts. While, market price of theassets varies as the time passes.Consistency concept- In this, business aims to follow similar accounting policies inorder to record business transactions. Thus, such concept helps in maintaining theaccountability within the financial statements so that business is able to assess its

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