Financial System and Auditing Issues
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Added on 2020-01-07
Financial System and Auditing Issues
Added on 2020-01-07
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FINANCIAL SYSTEM ANDAUDITING
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3TASK 1............................................................................................................................................31.1 Purpose and uses of different accounting records.................................................................31.2 Importance and meaning of the fundamental accounting concepts......................................41.3 Factors that influence nature and structure of accounting system........................................6TASK 2............................................................................................................................................72.1 Different components of business risk .................................................................................72.2 Analysis of control system....................................................................................................82.3 Evaluation of risk of fraud in the business and ways to detect them ...................................8TASK 3............................................................................................................................................9(1) Planning of audit for the FA Jet ltd and its scope, materialism and risk...............................9(2) Identification and uses of audit tests...................................................................................11(3) Type of record that will maintained in the audit process....................................................12(4) Draft audit report.................................................................................................................12(5) Management letter in relation to audit ................................................................................13CONCLUSION..............................................................................................................................14REFRENCES.................................................................................................................................15
INTRODUCTIONFinancial system and auditing are the important aspect of any organization. It is necessaryto improve this system because if same will not be in proper manner then organization will notcomes to know its true financial position. In this report issues related to financial system andauditing are addressed in proper manner. In respect to this, accounting records of the firm areexplained in detail in the report. After that various issues related to accounting system arediscussed in detail. Along with this some of the factor that make accounting system morecomplex are also discussed in detail in the report. After that in the middle part of thereport,different components of business risk are identified and their impact on the organizationare also explained. Addition to this, control systems are also analyzed in respect to the firms. Atthe end of the report, audit is done and process that can be follow for conducting audit aredescribe in detail. Along with this, documents that need to be prepared while conducting auditare discussed in detail in the report.TASK 11.1 Purpose and uses of different accounting recordsFollowing are the accounting records that have different purposes for an organization.Journal- It is a statement that is used by the business firms in order to record all theaccounting transactions. In this accounting statement, detail related to all businesstransactions is recorded whether they are related to any person or thing. In the journal,there are two sides; one is debit and other is credit. Apart from this, ledger folio and datecolumn is also available in the journal (Champlain, 2003). On the basis of journal, ledgeraccount is prepared. Through journal account, one comes to know about the transactionthat was done on specific day. In this statement, debit and credit amount are always same.This accounting record acts as foundation of preparing other accounting records. Hence,it is prepared in each and every type of business.Ledger – It is an account that is formed on the basis of entries that are made in thejournal. Ledger is an accounting record in which all the transactions related to specificaccounts are recorded at the single place (Moeller, R., 2016). For example: all the entriesrelated to cash are recorded into cash account. Same happens in case of other accounts. Inthe ledger account, value of debit and credit always remain same and if, same does not
happen then it means that some of the entry of journal is not recorded in the ledger.Hence, it can be said that this statement helps in identifying the accounting errors. Thisstatement also gives an entire overview of the specific account. Hence, this is a veryimportant accounting record for the firm. Bank statement- It is a statement that reflects company’s bank balance in different bankaccounts. It also reflects the transactions that are done by the firm from the specificaccount. Inversely, it indicates the amount that firm receives from their business clients inthe specific bank account. Bank statement can also be used for the bank reconciliation. Itis a technique that is used to make sure that all the accounting transactions are recorded inthe company books of accounts and everything is in a proper manner (Cannon and et.al.,2006). If, less amount or extra amount is recorded in the company books of accounts thenmanagers try to identify points where company accountant makes a mistake whilerecording of business transactions.Financial statements- There are three types of financial statements namely incomestatement, balance sheet and cash flow statement. Income statement is a statement thatrefers to income earned and expenses incurred by the firm. On the basis of analyzing this,financial manager identifies the areas where it makes extravagance. These managersmake a strategy in order to make sure that same mistake will not be committed again infuture. On the other hand, there is another financial statement which is known as balancesheet. It is a statement that reflects the financial position of company and status of assetsand liabilities (Usmani, 2004). On this basis, ratio analysis is done and companyperformance is measured from different angels. Hence, it can be said that this is thereason due to which balance sheet is widely used by the business firms. At last, cash flowstatement comes in which there is information about the cash flow from investing,operating and financing activities. On the basis of these information, managers get aninformation about the direction in which firmcash flow isgoing.1.2 Importance and meaning of the fundamental accounting conceptsAccounting concepts are those which are followed while making entry of the specifictransaction. These act as rules and regulations which are considered while recording businesstransactions (Chorafas, 2001). These concepts are the basis of doing entry in a different way.Some of the important accounting concepts are as follows.
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