Financial System and Auditing Report for Minty Cola Company

This report provides a comprehensive overview of financial systems and auditing practices within the context of Minty Cola. It begins by exploring the use and purpose of various accounting records, including ledgers and journals, and delves into key financial concepts such as the going concern, accrual, and prudence concepts. The report then examines factors affecting a company's accounting system, such as perception, compatibility, and the role of computerized systems. Task 2 focuses on business risks, categorizing them into product, finance, market, and execution risks, alongside an analysis of control systems. The report further outlines the process of risk evaluation and detection, highlighting the importance of minimizing fraud. Task 3 presents an audit plan report, detailing the use of appropriate audit tests and the overall audit process. Finally, Task 4 includes a draft audit report and a letter to management, summarizing key findings and recommendations. The report concludes with a synthesis of the discussed concepts and their practical implications for financial management and auditing.

Financial system and
Auditing

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Use and purpose of various accounting records...............................................................1
1.2 Meaning and importance of financial concepts................................................................2
1.3 Factors by which nature of company get affected............................................................3
TASK 2............................................................................................................................................4
2.1 Various business risk concepts.........................................................................................4
2.2 Control system analysis....................................................................................................5
2.3 Risk evaluation and detection...........................................................................................6
TASK 3............................................................................................................................................7
3.1 Audit plan report...............................................................................................................7
3.2 Using appropriate audit test..............................................................................................8
3.3 Process of audit.................................................................................................................8
TASK 4............................................................................................................................................9
4.1 Draft of audit report..........................................................................................................9
4.2 A letter to the management.............................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
In business, it is necessary that effective accounting system should be established by an
organisation through which sharing of funds among investors and borrowers can be carried out in
an appropriate manner. It is done in order to manage and control its financial statement. All the
transactions by which profitability can be affected will have to be verified, recorded and reported
to the management. All the aspects which are related to accounting and auditing are discussed
under this report in context of Minty Cola (Allen and et. al., 2012). Factors by which accounting
systems get affected are explained together with various risks that are faced by it. In order to
analyse the risk, a plan is drawn. It also be formulated with the help of effective auditing system.
TASK 1
1.1 Use and purpose of various accounting records
It is said to be that accounts in which complete information about system is provided. By
the use of this, analysation of financial statements is easily carried out. Various documents
required to be prepared. Under this different records are analysed which including journal, ledger
accounts, invoices and other records in which details with respect to assets and liabilities is
mentioned.
There are various aim for which records are made such as performance and position of
company would be identified along with other financial information. like cash flow of an
organization 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 in
relevant 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 is
done or not and if the balance is accurate.
 Journal book: This will also be known as book of prime entry, because all the
transactions 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 book
and many more (Afshar, 2013). In the business, there are some crucial situations exist
and having positive and negative impacts on both company as well as individual. All of
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them would be identified with the help of this. Thus, through the same, such practices
will be determined that provide correct results and help in future decisions. Several
transactions will not be required to be evaluated.
1.2 Meaning and importance of financial concepts
Investment is to be made in all businesses and this is covered in financial aspect which is
most important for any organisation (Čihák and et. al., 2013). There are many risks and
uncertainties which are present and the aspects of assets and liabilities. For the purpose of
management of funds there are many such concepts which are available and can be used. Some
of them are mentioned below:
 Going concern concept: Under this assumption is made that Minty Cola should
continued its operations for a long period of time. In this it is considered while preparing
accounts that operations need to carried out for long and maintained its assets and
liabilities accordingly.
 Accrual concept: This is considered to be fundamental concept. In this all the incomes
and expenses are recorded on accrual basis which means that that when they are earned
or incurred. Noting is recorded on cash basis.
 Historical concept: It is considered that all the assets will have to be entered on their
nominal or real value which was identified when they were purchased. The various
liabilities that are incurred in during purchase of all the assets and resources are
considered in it. By this balance among different department would established. In order
to create its usefulness and reliability of their property.
 Business entity: According to this concept, it is considered that business is a separate
entity which is having its own position and recognised with its own name. The identity of
the owner or investor will not be used for its identification. Minty Cola need to record all
their operations which are performed in separate manner and not on combined basis with
other concerns (Healy and Palepu, 2012). All the transactions or assets of others are must
be excluded from it.
 Prudence concept: The main point which is to be taken into consideration under this is
that gains shall not be over valued and expenses should not be understated. Proper care
shall be taken while recording all the assets as liabilities which are related to them shall
not be under valued.
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 Consistency concept: It is said that the policies and practices which are followed by
company shall be consistent. This can be used for a longer period of time. Proper balance
shall be established so that the required results can be attained and as regular changes will
affect the efficiency so it should be avoided.
 Materiality: According to it all the important information will have to be disclosed. It is
provided that all those practices and transaction which will not have much effect can be
ignored (Park, 2010).
1.3 Factors by which nature of company get affected
In order to make the best decisions it would required that evaluation shall be conducted
of all the factors which are related to accounting systems. The performance and growth of
business should be analysed with the help of planning system and other accounting systems
which are present with Minty Cola. All the transactions would be recorded on regular basis and
for this computerised system is used for reporting. Some of the important factors that will have
to be analysed are as follows:
 Perception: In this it is considered that how well the effectiveness of business be affected
by accounting systems which are used by management and employees in the company. If
the system is more complex then it create more difficult for employees to use it. Also
proper management support would be required so that proper decisions can be made.
 Compatibility: Nature and operations of business are the one on which accounting
functions are dependent. In some businesses such systems are used which are having
variant features by which extra benefits a cited company could attain. The manner in
which working is done are identified by its functions that are performed on regular basis.
 Computerised accounting system: In order to maintain all the accounting records in
proper manner company should require a computerised system that shall be established.
As the business is huge, So many transactions are performed by the cited company's
which are difficult to record manually (Prasad, 2010). So to deal with this problem, a
perfect auditing system should be used by the company.
 Level of training: It has been identified that proper training is need to be provided to all
the employees as then objectives of Minty Cola would be achieved. This is because, all
staff members are able to perform their functions in effective and efficient manner. If
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training will not be provided then it will not be possible to use systems in accurate
manner.
 Manual accounting system: There is certain difference which exist between reports and
accounting data (Barajas and et. al., 2013). It required to be understood before choosing
this system. In maintaining records this is considered to be traditional method.
TASK 2
2.1 Various business risk concepts
In case of Minty Cola it can be seen that in place of making profits it has either lost the
expected earnings or has faced some losses. This can be affected by different factors those are
based on price of a product, sales, and rules and regulations framed by government. There are
various risks which are faced by business and it is required that understanding of it shall be
gained so that measures can be taken to eliminate them and avoid them in future period. Some of
the risk which are present are as follows:
Illustration 1: Various types of Business risk
(Sources: Shruti Agarwal, 2016)
 Product risk: The product and services which are provided to customers are carrying
highest amount of risk. If the products which are provided are not accepted by them and
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Illustration 2: Types of risks

are not up to their satisfaction then image of company would be affected in negative
manner by this. So this will lead to risk development in respect of that product.
 Finance risk: The another aspect in which risks are present is finance which is very
important to carry out any business in profitable manner. The forecasts are made in
respect of sales on the basis of previous years sales. As the estimates are made on basis of
predictions. so there are chances that it may be wrong which can be said to be risk
affecting the companies position.
 Market risk: The market in which operations are performed having some or the other
limitations. If the factors such as demand, supply are not examined in respect of that
place then, it is the reason for occurrence of losses. In order to increase the share in
market it is needed that proper evaluation shall be made in respect of various competitors
which are present in that market.
 Execution risk: If the plan which is made has the capacity to provide satisfaction to the
customers then it provides various opportunities to the company. If it will nit be executed
in proper manner then there are losses for business. So in order to protect any kind of
misconduct it is required that risk of execution shall be eliminated.
2.2 Control system analysis
In order to manage, direct and regulate all the systems, it is required that proper control
system shall be established. For the management of financial transactions company need to
follow a proper internal control system. The process which are involved in this is presented
below:
 Cooperation must ensured with the practices of accounting system: All the factors
whether they may be internal and external will have to be considered. so that policies
which are related to system are controlled.
 Assets protection: For the achievement of growth it would needed that proper control
shall be made for assets so that they can be used for future period.
 Timely preparation of financial reports: After the financial data is been analysed it will
have to be reported for further use (Knechel and Salterio, 2016).
In the organisation there are so many objectives which will have to be achieved and for
that framework will have to be made that are provided to all managers. So that they can use it for
benefit of business. New strategies are implemented by which profit for the company should be
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maximised and also the performance of company will improved. All the objectives are already
planned and these policies are used so that stability can be maintained. There are various
deviations which are present by which success is hampered so they need to identified by
company. So all the information which are needed in planning and controlling are collected.
2.3 Risk evaluation and detection
In Minty Cola it has been identified that due to fraud there is loss of cash which is faced
by it. It has been identified that stock and cash theft is reported by employees. So such
environment shall be made in which the chances of fraud in company can be minimised. If there
is a lack of proper plan the more frauds will be taking place. To reduce and eliminate the frauds
there are various techniques which can be used by Minty Cola and by that more amount of
profits is made. Frauds are associated with various factors which are:
State of affairs: In this the cost of the products is more then the size of them so that will
not be risky. And methods are made to protect the company. Some methods which are use to
control risks in a company:
Separation of duties: The most effective methods use by the company to overcome risks
and fraud. Because of regular transaction in an organisation they need a skilled people those are
going to handled company financial transaction (Hsiao and et. al., 2010). Alteration of
employees duties will help the company to regulate all of them so that they perform there role in
effective manner.
Safety and security: The company need to protect its assets so that they can not get
stolen. It can be through applying various technical system that are used in data protection.
Documentation: It is important for the company to maintain company records and
documents that contains information of employees. So regular recording and data protections of
employees should need to be secure.
TASK 3
3.1 Audit plan report
Audit is an important aspect of an organisation, that is primarily conducted at the
beginning of audit procedures. It ensure that appropriate attention is devoted to an vital areas,
possible issues which are identified with effective coordination. An financial audit plan is a
statement of scheduled audits through process or areas that is established in each based results
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that are generated by the company. It is done to control the risk which are associated with
financial data of Minty Cola. It is a list of auditable process which each organisation need to
consider in order to analysis and control its financial risk (Sharma and Panigrahi, 2013). In the
process of conducting a audit plan Minty Cola need to follow some steps which are associated
with scope, risk and materiality.
Scope of Audit: Under this process auditor need to identify various risks those are
related with error of omission which are done in financial records. These are basically arises with
complex transaction perform by Minty Cola.
Determining level of material: It an important responsibility of an auditor to make sure
that a perfect benchmarking is to be set by them. So that positive results can be drawn. The
decision are made on the basis of report prepared by the auditor after analysing financial aspects
of the company.
Knowledge of internal control: A professional auditor should have experiences and
effective skills which they can utilised in controlling internal department.
Materiality: Most of the common aspect in audit planning is materiality which is related
with the nature, timing and auditing process. It is range of an omission or misstatements of
accounting data that, in the light of surrounding situations the judgement is rely on the
information gathered by the company (Bac, 2013). Under this auditor need to set a fixed
standards that are associated with solving various issues related with errors and omission of
statements.
Risk management: In current situation, most of the uncertain factors are arises before
making a audit plan. The auditors need to determine risks which are related with financial data.
There are various situations and statements which are need to analyse by an auditors. They
categories risks into two parts:
 Inherent risks: These are those risk which are associated by an error and omission in a
financial statements because of factors other than a failure of control (Inherent Risk,
Control Risk & Detection Risk, 2010).
 Control risks: Under this various risks those are identified by the auditors are control
and manage by the Minty Cola. It is use to reduce fraud and errors those are related under
this process.
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3.2 Using appropriate audit test
The accuracy of financial statements is required to be tested and for that a process is
followed by audit which is known as audit test and it is carried out in respect of fixed period of
time. In this evidence data collected so that it can be ensured that all the statements are free from
any kind of error or misstatements. The same is followed by the Minty Cola in which there are
some mistakes which are performed by the managers and all of them are determined by checking
internal and external system so that accuracy can be ensured. In the conduction of this process
two tests are need to be carried out which are testing internal system and substantive test
(Chandra, 2011). With the help of those information company must obtain that is used in making
decisions so that audit objectives can be attained and checklist would be made to identify
whether results are proper or not. By this the transactions which are similar are tested in simple
manner.
 Substantive Test: In this all the documents which are made are tested and for that
reformulation and confirmation will be required to be done. In this physical test will have
to be carried out for which they will have to visit the storage location at which inventory
is kept. From available stock sample which are taken and verified. Internal control are
evaluated so that performance can be checked (Pickett, 2010).
 Test of details: All the information which are present should be treated. so that if any
misstatements are present then they are identified. Control systems which are integral
part of any business as the one on which reliance are placed by auditors.
3.3 Process of audit
In the process which are undertaken for audit there are need to follow all the political and
legal requirements. All the aims which are set to be achieved in effective manner. Various
documents are there which are used by business so that statistics can be controlled in appropriate
manner.
Audit planning: In this a plan should be made. so that it can be determine that which
activities are to be performed and in what manner. By this all the frauds that are involved shall
be identified and eliminated. All the records would be protected for longer duration.
Planning process: All the transactions and other information are examined so that it can
be used to formulate the best plan (Vasarhelyi and et. al., 2012). All the system which will have
to be followed is set so that it can be used in coming period to analyse various aspects.
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Performance: All the activities which are performed will have to be verified so that it can
be identified that whether they are carried out in proper way or not. In this duties are there that
are to be undertaken in Minty Cola. Various factors which are required to be verified and done
by carrying out interview in which employees should asked question. Also for this observation
are used. so that performance can be evaluated and improved.
TASK 4
4.1 Draft of audit report
MINTY COLA COMPANY
ABC
Crossword street, new south Wales
251/456-02560
AUDIT REPORT
To Stockholder
Minty Cola company
All the financial document are properly evaluated at the time of auditing in this organisation.
Various statements like cash flow are prepared and all the necessary procedure relating to its
formation is also followed in the mean time. Balance sheet and income statements are checked
properly on 31st December 2014.
Objectives of audit administration's
Management of Minty Cola company is responsible for forming and analysing using financial
accounts system relating to GAAP principles which are present in UK.
Roles and responsibility
Auditor of the organisation is responsible for evaluating financial statement. They need
to check whether accounts department of Minty Cola company has followed the rules which are
mentioned in GAAP or not. They must check whether the errors in accounting procedure is
followed and so they can stop any correspond (Kanellou and Spathis, 2011). Various details and
amounts are analysed in order to make a clean balance sheet and income statement. They need
to check reliability of information because management of cited company make different kind
of decision based on their reports. Auditor has to verify the correct method of auditing that so
they avoid crucial mistake.
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View point
Auditors firmly believe that all the financial records and statement of cited organisation
are clean and there is no mistake in their accounting procedures. There were some limitations
relating to use of various tools and techniques but they must not be giving much importance as
they are making no major impact on the fairness of records made by Minty Cola.
Ford and Peter
Lord, London
March, 12, 2015
4.2 A letter to the management
To the board of directors
Minty Cola company
All the rules and regulations of accounting are followed by Minty Cola. They have
complied all the legal norms and various laws which are present in UK. Auditing standards
need to be followed in an impressive manner. In order to stop the fraud that has happen in
organisation, top level management has to check various records in short period of time and
make strict rules regarding this issue.
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CONCLUSION
From the above project report, it has been articulated that financial auditing system is an
important system which is used by Minty Cola in order to overcome financial risks. With the use
of auditing, a company can analyse its financial transactions and control misconduct and fraud.
Different auditing methods are used under this project to analyse the financial risk. On the basis
of above analysis, an audit report is prepared to Minty Cola company regarding its performance.
Hence, from the given report it is summarised that how accounting system can be done to avoid
wrong practices and effective control can be kept over various risk that may take place while
auditing.
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REFERENCES
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Inherent Risk, Control Risk & Detection Risk. 2010. [Online]. Available through:
<http://accounting-simplified.com/audit/risk-assessment/audit-risk.html>. [Accessed on
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