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INVESTMENT CYCLE, FINANCE CYCLE AND EFT PAYMENT CONTROLS. - Coggle Diagram
INVESTMENT CYCLE, FINANCE CYCLE AND EFT PAYMENT CONTROLS.
5. EFT PAYMENTS
1. ACTIVITIES IN INVESTMENT CYCLE
Acquisitions, disposal and management of assets.
The 3 components
: Additions of fixed assets, Disposals of fixed assets, repair and maintenance of assets.
E.g when assets are acquired a formal proposal by a Capex Committee must be completed and the proposal must be supported by quotes and the required source of finance.
2. ACTIVITIES IN FINANCE CYCLE
Funding is obtained from two main external sources, namely owners’ equity and
borrowings. e.g issue of shares, buy back of shares,cash inflow from long-term/short-term borrowings received etc
Documents used: Minutes of shareholders/directors, share certificate, loan contract etc
This cycle has relatively few transactions that occur.
Transactions are usually material and are frequently governed by legal and regulatory requirements.
Examples of fraud in the cycle: omitting loans from financial statements, overstating assets not in the company, understating depreciation allowance etc
3. SUBSTANTIVE PROCEDURES
Validity, Authorisation, Completeness, Accuracy, Recording, Classification, Cut off and General controls.
Different financial statement assertions
: existence, completeness, rights and obligations, accuracy, valuation, presentation, disclosure, validity and occurrence.
4. WEAKNESSES AND RECOMMENDATIONS
Weaknesses
are the internal controls that the organisations has not implemented or not implemented properly e.g Staff never take leave in the organisation.
A
recommendation
for this example stated above is that personnel should take leave on a regular basis.
Must have multilevel passwords that is used by 2 senior employees.
Access to EFT payments should be limited to one computer.
Proper access controls over the terminal to make payment must be enforced. e.g terminal should close after 3 unsuccessful attempts to login in
Completeness test should be performed regularly