Financial System and Analysis : Assignment
Added on 2019-12-03
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Financial System and Analysis
Table of ContentsINTRODUCTION ..........................................................................................................................1TASK 1............................................................................................................................................11.1 Stating the purpose and use of different accounting records...............................................11.2 Assessing the meaning and importance of the fundamental accounting concepts................21.3 Evaluating the factors which influence the nature and structure of accounting systems ofan organization............................................................................................................................3TASK 2............................................................................................................................................42.1 Components of the business risk which are highly associated with the strategic action ofan organization............................................................................................................................42.2 Analysis of the control system which required to identify the fraudulent activities whichtake place within the business organization................................................................................42.3 Evaluating the risk of fraud and methods to detect the fraud...............................................5TASK 3............................................................................................................................................63.1 Planning of an audit by taking into consideration the scope, materiality and risk................63.2 Stating the use of appropriate audit tests...............................................................................63.3 Analysis of the stages of the audit process............................................................................7TASK 4............................................................................................................................................84.1 Preparation of the draft audit report......................................................................................84.2 Drafting the suitable management letters in relation to the statutory audit report................8CONCLUSION................................................................................................................................9REFERENCES..............................................................................................................................10
INTRODUCTION Financial system can be defined as a system which facilitates exchange of funds betweenthe borrowers and lenders at global level. It also entails the procedure which is undertaken by themanagement of an organization in order to make control upon the financial activities (Philippon,2014). In addition to this, financial analysis is highly concerned with the assessment of theviability, suitability and profitability aspects of the project. The present report will discuss thepurpose and use of the purpose and use of different accounting records. Besides this, it states thefactors which highly influence the nature and structure of accounting systems of an organization.Further, it also develops understanding about the way through which organization can control thefraudulent activities at workplace. Besides this, it will provide information regarding the audittest and process which helps organization in detecting the fraud or mistakes. TASK 11.1 Stating the purpose and use of different accounting recordsAccounting records refers to the documentation of all the business transactions whichprovides assistance in the preparation of the financial statements. Accounting records includesjournals, ledgers, invoices, vouchers, bank statements and transportation receipts etc. Theserecords provides deeper insight about the business transactions which are made by anorganization during the accounting or financial year. Purpose and use of accounting records are enumerated below:Journals and prime entry book: It consists of the books in which primarily records thefinancial activities which are performed by the organization. Prime entry books includesales and purchase book, cask book and journals. The major purpose behind thepreparation of the books of journals is that it provides information to an organizationabout the daily transactions (Qi and Hu, 2014). It helps in preparing the ledgers andfurther financial accounts such as income and cash flow statements and balance sheet.Ledgers: It contains information regarding all the monetary transactions which are madean organization during the financial year. One of the main purposes of ledgers account isto evaluate the accuracy or appropriateness of the accounting books. Ledgers are usuallyused for the preparation of trail balance. Each and every organization makes ledgers1
accounts which provide assistance in preparing the financial statements of anorganization. Bank statements: They provide information to an organization about their deposits oroverdraft aspects. It enables organization to frame competent strategies and policieswhich helps them in achieving success in the near future (Burton and Brown, 2014).Besides this, it also helps organization making effective decision in relation to theinvesting and financing decisions. 1.2 Assessing the meaning and importance of the fundamental accounting conceptsAccounting concepts consists of the accounting rules which are followed by anorganization while preparing the financial statements of an organization. There are mainly fouraccounting concepts which includes accruals concept, accounting cost concept, going concernand dual aspect concepts which helps organization in framing the financial accounts. Meaningand importance of the accounting concepts are enumerated below:Accrual concept: On the basis of this concept income and expenses are recorded in thebooks accounts in their respective years whether they received in cash or not. Forinstance interest earned by an organization during the financial year of 2014 but receivedin 2015. In this situation this item is recorded in the books of accounts of 2014 rather than2015.Going concern concept: This concept is based on the assumption that business will carryout their activities and function for the long period of time. It assumed organization willnot dissolved in the near future and provides their services for the indefinite time period(Caccioli and et.al, 2014). On the basis of this assumption organization shows the valueof the asset in the balance sheet of an organization. For instance: if organization purchasemachinery worth of 120000 whose life in 12 years then organization records depreciationas an expenses and the balance amount an asset after the deduction of the depreciation.This concept plays a vital role in assuring the investors that they get appropriate incomeby investing their money in the firms operations. Accounting cost concept: On the basis of this concept assets of an organization arerecorded at their purchase price rather than market price. It includes all the cost such asacquisition, transpiration and installation cost etc (Vogel, 2014). For instance: Cost of themachinery is 200000 and installation cost is 20000. In this situation machinery are2
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