Purchasing/procurement:
Establishment of credit terms
Pricing
Payments
Data capture
Inventory management
Budgeting
Production:
Measuring, allocation of cost
Budgeting
Cost vs quality
inven mgnt
Marketing:
budgeting
advertising
pricing
market share
4 features of Services
VIIP
Variability
Intangibility
Inseparability
Perishability
Roles of treasury dept
1.Working Capital Management
2.Cash Management
3.Financing [Via Debt or Equity]
4.Maintaining multiple Foreign Currencies 5.Tax Minimization
Internal Audit:
- Performed by companies
- Internal goals: compliance, appropriate controls, consistency, quality.
- Also check to ensure appropriate authorization, purchases of assets
- Int aud rates the company’s overall effectiveness
- evaluating the effectiveness and efficiency of a company’s internal controls.
- Accountable to BODs
- Auditor most likely to be a employee
External audit
- Performed by an outsider auditor
- Examines the financial statement prepared by the entity’s mgmt.
- To ensure it is presented in a fair manner, relevance and accuracy of data presented.
- Tests whether the company s complying to professional standards and IAS/IFRS.
- Appointed by members
- Accountable to shareholders.
Integrated reporting
Instead of having a separate section or report to reflect the sustainability, the entire report should comprise of the strategic and operational management actions with a holistic approach to biz
1. Financial capital - traditional equitites, capital section of the balance sheet.
2. Manufactured capital: tangible material goods and fixed assets which the biz owns
3. Intellectual capital: employee knowledge and proprietary information.
4. Huma capital: knowledge skills and motivation
5. Social and relationship capital: refers to org working in partnership with the biz
6. Nature capital
IIRC?
International integrated reporting council
Budgets are used for the following:
CRUMPET
Coordination
Responsibility
Utilization
Motivation
Planning
Evaluations
Telling
Variance Reports:
Summary of total predicted and total actual costs with the difference calculated as variance.
Favorable: Predicted cost<actual cost; Predicted rev> actual rev
Unfavorable: Predicted cost > actual cost; pred rev <actual rev
Noteworthy Terminology
Working Capital: lifeblood of the business; this is the amount of money available for day-to-day operations of the business.
Tax Avoidance –this refers to the use of exploiting the loopholes in the tax system in order to reduce the tax liability for the year and this is done within the boundaries of law and is legal
Tax Evasion –As the term sounds it is evading tax which is illegal via the use of deception and misleading the tax authorities of the state of affairs; this is a criminal offense
Responsibility of maintaining financial records:
Leas with the BODs , FD, CFO
Terminology:
- System A series of independent but irrelated tasks which must be followed in order to achieve the desired objective
- Policy Guiding principle
- Procedure A set sequence of steps to be followed
- Guideline A recommended approach or path to follow which is made by the experts in the field
Payroll system
- Maintaining variable data [timesheets, leaves taken] and fixed data [pay rates, pay rise, details of employees]
- Net pay = gross pay - tax
- prepare payroll reports, employee payslips
Automated system features:
- Enhanced Management supervision
- Data vulnerable to corruption and hacking
- Over concentration of power in IT dept
- Stnd procedures and norms for transaction processing.
Data and its types:
Consists of raw facts and figures gathered and stored. No clear meaning until it is processed analyzed and sorted into info
- Quantitative
- Qualitative
- Primary
- Secondary
- Discrete
- Continuous
Information:
Data processed in such a way so that it is meaningful to the person who uses it.
Information should be ACCURATE
Accurate
Complete
Cost-effective
Understandable
Relevant
Accessible
Timely
Easy to use
Types of Information System
- TRansaction Processing System (TPS) - daily transactions
- Management information system (MIS) - converts data from TPS inot maingful for the mgnt
- Decision support system (DSS) - hepls take decisions using internal and external information
- Executive information system (EIS) - used by BODs to gather an overview of the performance
- Expert system - designed by specialists and professional
Internal control
- Represents the system policies and procedures implemented by an organisation
Internal control components:
- Control environment - awareness, attitudes and actions of TCWG in realtion to internal control
- Entity’s risk assessment process:
- Information system & communication
- control activities: these are policies and procedures which help ensure the management directives are carried out -> segregation of duties, info processing, authorization etc
Ensuring effectiveness of internal financial controls
A regular risk assessment protocol ●Systems in place to prevent and detect any frauds and errors
●Safeguard the company assets
●Preparation of company’s financial information in a timely manner
●Recording of accounting records
Alternative Internal controls
- Preventative controls - honest staff, authorisation controls, segregation of duties
- Detective controls - internal checks, supervision
- corrective control - necessary mngt actions
Responsibility if mngt for internal financial control
- the responsibilty lies with the senior managemetn officials and BODs
- BODs are leagally responsible
