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Accounting System and Auditing TABLE OF CONTENTS INTRODUCTION 1 TASK 11

   

Added on  2020-06-06

15 Pages4544 Words116 Views
Financial system andAuditing

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Use and purpose of various accounting records...............................................................11.2 Meaning and importance of financial concepts................................................................21.3 Factors by which nature of company get affected............................................................3TASK 2............................................................................................................................................42.1 Various business risk concepts.........................................................................................42.2 Control system analysis....................................................................................................52.3 Risk evaluation and detection...........................................................................................6TASK 3............................................................................................................................................73.1 Audit plan report...............................................................................................................73.2 Using appropriate audit test..............................................................................................83.3 Process of audit.................................................................................................................8TASK 4............................................................................................................................................94.1 Draft of audit report..........................................................................................................94.2 A letter to the management.............................................................................................10CONCLUSION..............................................................................................................................11REFERENCES..............................................................................................................................12

INTRODUCTIONIn business, it is necessary that effective accounting system should be established by anorganisation through which sharing of funds among investors and borrowers can be carried out inan appropriate manner. It is done in order to manage and control its financial statement. All thetransactions by which profitability can be affected will have to be verified, recorded and reportedto the management. All the aspects which are related to accounting and auditing are discussedunder this report in context of Minty Cola (Allen and et. al., 2012). Factors by which accountingsystems get affected are explained together with various risks that are faced by it. In order toanalyse the risk, a plan is drawn. It also be formulated with the help of effective auditing system.TASK 11.1 Use and purpose of various accounting recordsIt is said to be that accounts in which complete information about system is provided. Bythe use of this, analysation of financial statements is easily carried out. Various documentsrequired to be prepared. Under this different records are analysed which including journal, ledgeraccounts, invoices and other records in which details with respect to assets and liabilities ismentioned.There are various aim for which records are made such as performance and position ofcompany would be identified along with other financial information. like cash flow of anorganization are managed. By the help of proper accounting, effective decision would be taken.so that further improvement can be carried out. Majorly used records are provided as below:Ledger: In this, all the transactions whose entries are made in journal are posted inrelevant accounts. Here, various accounts are made that consists of assets, expenses,incomes and others. It is used in the preparation of financial statements and for this,firstly, trial balance is made by which it can ascertained that whether proper recording isdone or not and if the balance is accurate. Journal book: This will also be known as book of prime entry, because all thetransactions are firstly recorded in it. Before any entry is made, it is recorded in journal.The components which are covered in this process are: purchase or sales book, cash bookand many more (Afshar, 2013). In the business, there are some crucial situations existand having positive and negative impacts on both company as well as individual. All of1

them would be identified with the help of this. Thus, through the same, such practiceswill be determined that provide correct results and help in future decisions. Severaltransactions will not be required to be evaluated.1.2 Meaning and importance of financial conceptsInvestment is to be made in all businesses and this is covered in financial aspect which ismost important for any organisation (Čihák and et. al., 2013). There are many risks anduncertainties which are present and the aspects of assets and liabilities. For the purpose ofmanagement of funds there are many such concepts which are available and can be used. Someof them are mentioned below: Going concern concept: Under this assumption is made that Minty Cola shouldcontinued its operations for a long period of time. In this it is considered while preparingaccounts that operations need to carried out for long and maintained its assets andliabilities accordingly.Accrual concept: This is considered to be fundamental concept. In this all the incomesand expenses are recorded on accrual basis which means that that when they are earnedor incurred. Noting is recorded on cash basis. Historical concept: It is considered that all the assets will have to be entered on theirnominal or real value which was identified when they were purchased. The variousliabilities that are incurred in during purchase of all the assets and resources areconsidered in it. By this balance among different department would established. In orderto create its usefulness and reliability of their property.Business entity: According to this concept, it is considered that business is a separateentity which is having its own position and recognised with its own name. The identity ofthe owner or investor will not be used for its identification. Minty Cola need to record alltheir operations which are performed in separate manner and not on combined basis withother concerns (Healy and Palepu, 2012). All the transactions or assets of others are mustbe excluded from it. Prudence concept: The main point which is to be taken into consideration under this isthat gains shall not be over valued and expenses should not be understated. Proper careshall be taken while recording all the assets as liabilities which are related to them shallnot be under valued.2

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