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Investment and Finance Cycle - Coggle Diagram
Investment and Finance Cycle
Raising of funds
Obtain Loans
Shares and Debentures Issuing
Reason for rising Funds:
Able to purchase Fixed Assets
Expansion of Business
Replacement of Assets
Cycle Deals with
Obligations that arise form Finance raised
Use of Funds for the acquisition of assets
Raising Finances, and repayment thereof
Charactersisitcs:
Relatively Few transactions during a reporting period
Transactions are material.
Presents numerous opportunities for possible Fraud Reporting
INVESTMENT ACTIVITIES
Disposal
Management (repair and Maintenance)
Acquisitions/Additions
Documentations Required
Minutes of Board Meeting providing authorisation
Invoices
Fixed Asset Requisition with Quote / Price Negotiations
Fixed Asset Register
Capital Budget
General Ledger Accounts:
Fixed Assets;
Depreciation;
P/L on Disposal;
Acc Depreciation
FINANCING ACTIVITIES
Borrowings
Subsequent repayment of capital sum
Interest charged on borrowings
Cash inflow from long-term/short-term borrowings received
Authorisation required for borrowings
Owners Equity
Statutory Requirements
Authorisation for Issue of Shares
Share Buy backs
Declaration of Dividends
issue of Shares
Documents Required
Prospectus:
Document prepared for public share offering containing all details regarding issue.
Share certificate:
Evidence of ownership given to shareholder, detail number & type of shar
e
Debenture trust deed:
Terms of debenture issue and rights & obligation of debenture holders
.
Loan/lease contract:
Terms of loan/lease, amount, repayment terms interest rate and security
Minutes of shareholders/directors:
Provide approval for share issue, debenture share buy-back, dividends declare
d
Mortgage bond:
Agreement signed over property to secure repayment of loan
Journal voucher:
Several entries made by journal –interest calculations, finance lease payments.
Control objectives
: refer to certain objectives that the organisation wants to achieve with regards to every transaction
Accuracy
Recording
Completenss
Classification
Authorisation
Cut-Off
Occurence/Validity
General Controls
Internal Controls
:he control activities that the organisation should implement to ensure they achieve the desired objectives
All fixed asset purchases are supported by a fixed asset requisition and capital budgets.
Recorded assets are periodically compared to physical assets by an independent senior official.
Purchases and sales of fixed assets:
• Authorised by senior management on a numerical capital requisition/sales document;
• Authorisation/decision recorded in minutes.
Capital requisitions are numerically accounted for;
The list of missing numbers is regularly followed up;
Fixed assets are recorded in a fixed asset register and are regularly compared with fixed assets
Fixed assets are recorded at the amount of the invoice.
Depreciation (if calculation is per hand, perform an independently reviewed on calculation).
All purchases and sales of fixed assets are recorded in the fixed asset ledger accounts (control account) and fixed asset register from the source documents.
The fixed asset register is reconciled with the control accounts in the ledger on a regular basis.
Fixed assets are classified into the respective categories according to company policy.
Improvements are capitalised as fixed assets and clearly distinguished from maintenance.
Fixed assets purchased are recorded at the date of receipt (per GRN) and when sold as from the date that the risks and rewards of ownership passes to the purchaser in substance
Fixed assets are, as far as possible, stored in permanent form (bolted).
Safe guard assets by:
Limiting access to authorised persons; Controls protecting assets against physical elements
Asset adequately insured
Weakness vs Risk
: Weakness in the company, can lead to risks
EFT
Controls
There should be proper access controls over the terminal that is used to make the payment
The terminal should shut down after 3 unsuccessful access attempts of logging in
Access to EFT payments should be limited to one computer;
To effect the payment 2 passwords of 2 different senior employees should be entered;
Multilevel passwords should be used, from two senior employees. These password must be simultaneously entered
After the payments are made there should be an:
1 - Audit Trail;
2 - Payments should reflect on Ban Statement
3 - Bank Recon performed
Recon should be done Independent person from the person that does the EFT
Recon should be reviewed by senior independent official
Recon should be done Independent person from the person that writes up the cashbook