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Finance and Investment Cycle, CONTROL OBJECTIVES
Certain objectives org…
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Deals with
- Raising finance and repayment thereof
- Obligations due to this finance
- Application of funds for acquisitions
Characteristics
Few transactions; usually material; substantial amounts; transactions freq governed by legal and regulatory requirements
INVESTMENT ACTIVITIES
- ADDITIONS OF FIXED ASSETS
- DISPOSAL OF FIXED ASSETS
- REPAIR AND MAINTENANCE OF ASSETS
FINANCING ACTIVITIES
- OWNER'S EQUITY
- BORROWINGS
Fraud examples
- omitting long term liabilities
- understating value of long term liabilities
- overstating assets - fictitious
- overstating assets - depreciation
Refer to Annexure A: Accounts; Transactions and Documents affected by Investment and Financing Activities
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Refer to Annexure B: INTERNAL CONTROLS, TEST OF CONTROLS AND CONTROL OBJECTIVES IN THE CYCLE
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- comparisons of current info to prior yr info or budgets & ratio analysis
- comparison of financial & non-fin info
- substantive testing is audit procedure
- examines fin statements & supporting docs for errors
- needed as evidence to support assertion that fin records are complete, valid, accurate
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EXISTENCE
- Additions
- Disposal
- Repairs & Improvements
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VALUATION
- Revaluation of assets
- Depreciation
- Amortisation of intangible assets
- Impairment
- Accounting estimates
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CONTROL OBJECTIVES
- Occurrence/Validity: All recorded assets are valid (really exist) and are supported by proper documentation.
- Authorisation: All purchases and sales are authorised according to company’s policy
- Completeness: All valid fixed assets are recorded and nothing is left out.
- Accuracy: All fixed assets are recorded at the correct amount and totals are arithmetically correct.
- Recording: All transactions w.r.t. fixed assets and depreciation are correctly recorded.
- Classification: All transactions w.r.t. fixed assets are correctly classified according to its nature.
- Cut off: All purchases and sales of fixed assets are recorded in the period to which it relates
- General Controls: Assets are properly safeguarded against theft and physical elements.