Introduction to the finance and investment cycle
Mainly deals with:
Obligations which arise out of finance raised
The application of funds raised for acquisition of assets
Raising of funds
Important Characteristics
Transactions within cycle are usually material
frequently governed by legal and regulatory requirements
Examples of fraud in this cycle consist of the following
Understating the value of long term liabilities
Overstating assets by including fictitous assets
Omitting long term liabilities
Overstating assets by understating depreciation allowances or impairment
Investment cycle
Internal Controls and control objectives in the cycle
Disposal of fixed assets
Repair and maintenance of assets
Additions of fixed assets
Internal controls refers to the control activities that the organisation should implement to ensure thay achieve the desired objectives
Control objectives refer to certain objectives that the organization wants to achieve with regards to every transaction
Internal controls can be divided into two categories
how the objective will be achieved
the objective to be achieved by the control that is implemented
Electronic funds transfers (EFT)
Reconciliation should be done by a person who is independent
Reconciliation should be reviewed by senior independent official
When making EFT Payment
terminal should shut down after 3 unsuccesful attempts
to effect payment, 2 passwords of 2 senior employees should be entered
Proper access controls should be in place
After payments there should be 1. Audit trial, 2. Payment should reflect on the bank statement. 3. Bank reconciliation should be performed.
Access limited to one computer
The reconciliation should be done by person who is independent of EFT transactions that were made.
Multilevel passwords should be used from two senior employees
Internal Controls