Financial System and Auditing Report - Minty Cola Co
Added on 2020-01-23
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Financial system and auditing 1
Table of ContentsINTRODUCTION................................................................................................................................3TASK 1.................................................................................................................................................3A. Explaining the purpose and use of different accounting records for Minty Cola Co. ...............3B. Assessing the importance and meaning of different fundamental accounting concept ..............5C. Evaluating the factors that have influence on the nature and structure of accounting system forMinty Cola Co.................................................................................................................................5TASK 2.................................................................................................................................................6A. Identifying the different components of business risk which affect the operations of Minty Cola Co............................................................................................................................................6B. Analyzing the control system that takes place in Minty Cola Co...............................................7C. Evaluating the risk of fraud and methods which are used by Minty Cola Co. to detect it .........7TASK 3.................................................................................................................................................8A. Planning an audit for Minty Cola Co. by taking into account the scope, materiality and risk...8B. Identifying the appropriate audit test process which can be used by Minty Cola Co.................8C. Stating the steps of audit process which is undertaken by Minty Cola Co. ...............................8TASK 4.................................................................................................................................................9A. Preparing a draft audit report for Minty Cola Co. .....................................................................9B. Drafting a suitable statutory audit report for the business organization ..................................10CONCLUSION...................................................................................................................................11REFERENCES...................................................................................................................................122
INTRODUCTIONFinancial system is the process which is exercised by the management of organization toexert control and accountability on the monetary aspects. In the present era, each businessorganization places high level of emphasis on recording, verifying and reporting the transactions.Through this, business unit has become able to assess their financial health and performance to thelarge extent. Along with this, auditing is also one of the most effectual technique through which thecompany and its stakeholders can assess quality and accuracy of the information recorded in thefinancial statements. The present report is based on the case scenario of Minty Cola Co. which isfacing the problem in relation to cash and inventory aspect. In this regard, report will discuss theaccounting concepts which are followed by the firm for recording the transactions. Further, it willshed light on various factors and types of business risk that closely influence accounting system ofthe business organization. Besides this, it will also develop understanding about the audit test andprocess which can be used by the organization. TASK 1A. Explaining the purpose and use of different accounting records for Minty Cola Co. Accounting records imply for all the books or documentations which are undertaken by thefirm for preparing final accounts. Such documents include journal, ledger, trial balance andfinancial statements. By taking into consideration all such record, Minty cola Co. can conduct andreview its financial performance in the best possible way. Moreover, accounting records can beserved as a proof which helps both the internal and external auditors in assessing the fraud whichprevails in the financial statements (Deegan, 2016). Use of various accounting records for MintyCola Co. is enumerated below:Accounting records Purpose and use Prime entry book andJournalIt is the book which contains information regarding all the day to daytransaction made by the firm in accordance with the double entry system.Through this, the firm can get information about its daily financialactivities (Lafond, McAleer and Wentzel, 2016). Further, journal providesassistance to the accounting personnel of Minty Cola in preparing theledger account. LedgerThis account records, classify and summarize financial information ofthe journal. The main purpose behind the preparation of ledger account isto assess the accounting errors which are prevailed in the journal. Besides3
this, by using the ledger account, Minty Cola can draft appropriate trialbalance. Trial balanceTrial balance presents all the closing of ledger account in their respectiveside. By preparing such statement, accounting personnel of Minty Cola canidentify the errors which take place in journal and ledger (Chan and et.al.,2016). This statement is used by the accounting personnel for preparingfinal accounts in an appropriate manner. Financial statements Income statementIt furnishes information about the revenue generated by the firm during theyear in comparison to the expenses incurred. By preparing the incomestatement, Minty Cola Co. can evaluate its profit level in against to theprevious years. Income statement also provides assistance to the firm inbuilding strategic and competent framework. Cash flow statement This statement serves information about the inflow and outflow of the firmwhich is associated with the various kinds of business activities such asoperating, investing and financing (Barron, Chung and Yong, 2016). Inthis, by making use of cash flow statement, business unit can assess thearea of the expenses which requires high control. Balance sheet It is the statements which render information about the assets, liabilitiesand capital. Minty Cola Co prepares such statement to satisfy informationneed of decision makers. Business unit has also become able to makemodifications in the policy framework by evaluating their liquidity andsolvency position. B. Assessing the importance and meaning of different fundamental accounting concept Accrual concept: In accordance with this concept, all the revenue and expenses must berecorded in the same year in which they occur. It is not necessary that income receives in cash in thesimilar year and the same is also applied in the case of expenses. In this way, accrual concept helpsMinty Cola Co. in reflecting the reliable picture of financial statements in relation to the income andexpenses which are related to the reported period. Going concern concept: Such concept states that the business will be continued by theentity for the unlimited time (Sadgrove, 2016). In this, success and failure aspect can be evaluatedby Minty Cola Co. by comparing the cost and output. Business entity: This concept entails that business is separate from its real owner. In this,owner and personnel of Minty Cola Co. has right to make transaction on behalf of the company.4
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