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Financial System Analysis of Tesco : Report

   

Added on  2020-01-21

14 Pages4554 Words294 Views
Financial System Analysis1

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1Purpose and use of different accounting records....................................................................31.2 Assessing important and meaning of the fundamental accounting concepts.........................41.3 Evaluating factors influencing nature and structure of accounting system of Tesco plc.......5TASK 2............................................................................................................................................52.1 Identifying the different sources of business risk associated with diversified strategic move......................................................................................................................................................52.2 Analyzing control system for identification and detection of fraud......................................62.3 Evaluating risk of fraud in payroll system and explaining methods of detection of fraud....7TASK 3............................................................................................................................................83.1 Factors to be considered in audit plan and critically analyze the audit scope, materialityand audit risk................................................................................................................................83.2 Describing various types of audit tests within accounting system Tesco..............................93.3 Critically analyzing the stages of audit process and explaining the audit record system......9TASK 4..........................................................................................................................................104.1 Purpose and type of audit reports and preparing draft audit report.....................................104.2 Purpose of management representation letter and drafting representation letter in relationto statutory audit........................................................................................................................11CONCLUSION .............................................................................................................................12References......................................................................................................................................132

INTRODUCTIONFinancial system plays an imperative role in preparing report for management and carryout business activities in a right manner. It helps management to analyze the financial statementsand accordingly ensure ethical aspect of business. The present report is based on Tesco which isone of the biggest private sector employers in the UK. It operates in 12 countries outside the UK.In this regard, research has been done for accounting records and accounting system of Tescostores limited. Further, purpose and use of different accounting records are explained along withdefining the need of different records. In addition to this, risk of fraud in payroll system is alsoevaluated through using methods of detecting fraud.TASK 11.1Purpose and use of different accounting recordsPurpose of accounting records is to meet expectations of stakeholders and keep recordsrelated to all business activities. This is the only way to ascertain the position of company in themarketplace and formulate effective business strategies to compete. There are several accountingrecords which are explained as follows-Journals and ledgers- Journals are created to assess the date of transaction and it has twotypes such as nominal or personal. It helps to record specified amount of money withtransaction and its overall impact on other statements (Bierstaker,Hunton and Thibodeau,2012). Trail balance-This is another accounting record which aids to maintain balance betweenboth credit and debit side. It is used in preparing income statement of Tesco so as to carryout business activities effectively. Also, trial balance aids to adjust income and expensesincurred during particular time span (Coderre, 2009).Income statement-It is the main financial statement which is also known as profit andloss account. Here, accounting officer keeps all the records related to expenses as well asincome so as to derive profit or loss for the particular time span (Fernández-Laviada,2007). Ledgers –Ledgers are prepared to transfer all journals entries into individual account.Basically, three types of ledgers are created such as general, debtors and creditors.3

Sales ledger –Sales ledger consists of records related to items returned by customers ofTesco. It helps to record all related transaction of particular financial year. It aids to carryout business activities effectively and also have record related to profitability.Purchase –This includes accounting transaction related to purchase of products andservices of Tesco. It helps to keep record related to material or stock.Cash –This includes only those transaction whose payment has been madeDebtors –The ledge is made for debtors because when corporation borrow money fromother parties on the basis of credit. All these transaction are recorded in debtors.Balance sheet- Balance sheet is another important financial statement which is used toassess the profitability, liquidity and solvency of Tesco. It consists of asset and liabilitysides which must be matched to each other. This statement shows that what strategiescould be used by management to improve its performance in the marketplace. Forexample: in case of greater liability side, Tesco needs to put efforts to access costeffective sources of finance so that debt ratio can be reduced and profitability can beincreased (Helfert, 2004).1.2 Assessing important and meaning of the fundamental accounting conceptsFundamental accounting concepts are very important for organization to maintain all itsfinancial statements in an appropriate manner. These concepts are important to prepare financialstatement on right time in an effective manner. It has been explained as follows-Accrual concept- This concept depicts that it is very important for Tesco to record itsrevenues and expenses at the time of occurrence of transaction (Kutsch, 2008).Especially, for retail organization, transaction cannot be recorded after receiving andpurchasing of stock. This concept facilitates to keep detail record in order to deriveprofitability at the end of financial year.Going concern concept- This concept is applicable for Tesco as management iscontinuously planning to expand business in different geographical areas. It depicts thatcorporation is following the concept of going concern in order to survive in the marketfor longer time span (Moeller, 2009).Prudence concept- Under this concept, Tesco needs to show all its records in an ethicalmanner. For example: management should not misrepresent its assets and liabilities for4

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