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AUDITING UNIT 1 : :fountain_pen: - Coggle Diagram
AUDITING UNIT 1 : :fountain_pen:
LESSON 1: INTRO TO FINANCE & INVESTMENT CYCLE
THIS CYCLE DEALS WITH:
Obligations which arise out of finance raised
Application of funds raised for asset requisition
Raising funds & repayments
This cycle presents directors with amle opportunuty to report fraudulently, many accounst can be manipulated.
Understanding value of long term liabilities.
Overstating assets
Omitting long term liabilities from F.S
Understating depreciation or impaiment
Company can raise funds by: 1. SHARE 2. DEBENTURE ISSUE 3. OBTAINING LOAN CAPITAL
LESSON 2: INVESTMENT ACTIVITIES
FINANCE ACTIVITIES
owners equity
borrowings
INVESTMENT ACTIVITIES
ACQUISITIONS, DISPOSALS and management of tangible and intangible assets
LESSON 3: INTERNAL CONTROLS, CONTROL OBJECTIVES & TEST OF CONTROL IN CYCLE
CONTROL OBJ + objectives org wants to achieve with regards to every transaction
INTERNAL CONTROLS: Control of activities to to ensure objectives.
TEST OF CONTROLS: The way we test if internal controls are working as desired.
Types of internal controls:
AUTHORISATION
COMPLETENESS
OCCURRENCE/ VALIDITY
ACCURACY
RECORDING
CLASSIFICATION
CUT-OFF
GENERAL CONTROLS
LESSON 4: SUBSTANTIVE TESTING
SUBSTANTIVE ANALYTICAL PROCEDURES
DETAIL SUBSTANTIVE PROCEDURES
rights and obligations
accuracy and valuation
completeness
presentation and disclosures
existence
LESSON 5: WEAKNESS AND RECOMMENDATIONS
WEAKNESS VS RISK. KNOW THE DIFFERENCE