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Finance and Investment Cycle Overview: - Coggle Diagram
Finance and Investment Cycle Overview:
Scope
Involves acquiring, managing, and utilizing funds within an organization.
Includes activities like raising capital, managing financial obligations, and investing in assets.
Characteristics
Fewer but highly material transactions.
Substantial funding requirements.
Need for compliance with legal and regulatory frameworks.
Investment Activities:
Asset Management:
Procedures for adding, disposing, and maintaining assets.
Internal controls ensure accurate recording and accountability.
Substantive Procedures:
Verify existence, rights, and valuation of assets.
Include physical inspections and documentation reviews.
Substantive Procedures:
Purpose:
Ensure accuracy and reliability of financial information.
Test validity of account balances, transactions, and disclosures.
Activities:
Confirm rights and obligations associated with transactions.
Assess accuracy and appropriateness of asset valuations.
Verify asset existence and condition.
Financing Activities:
Fund Acquisition:
Internal controls govern fund acquisition and management processes.
Obtaining funds through equity financing or borrowing.
Substantive Procedures:
Verify completeness and accuracy of financial transactions.
Review loan agreements and verify interest payments.
Weaknesses vs. Risks:
Weaknesses:
Represent deficiencies or gaps in control procedures.
Could lead to errors, fraud, or non-compliance.
Risks:
Arise from weaknesses and represent potential adverse events.
Include risks of unauthorized transactions or misappropriation.
Electronic Fund Transfer (EFT) Controls:
Completeness Tests:
Ensure accurate recording of all EFT transactions.
Verify transactions against bank statements.
Recommendations:
Strengthening Controls:
Implement access controls and regular audits.
Conduct regular training on EFT procedures.
Enhance password security measures.
Control Measures:
Regular reconciliation of bank accounts.
Limited access to EFT systems.
Multilevel password authentication.