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Investment & Finance Cyle and EFT Payment Controls - Coggle Diagram
Investment & Finance Cyle and EFT Payment Controls
Finance and Investment Cycle
Raising of funds
Interest and dividends
Acquire assets with funds
Transactions usually material
Transactions usually governed by legal requirements
Fraud in cycle:
omitting loans from FS
understating loans
overstating assets
Investment activities
Acquisitions, disposal, management of assets
Transactions in this cycle:
Purchase of assets
Capitalisation of assets
Disposal of assets
Purchase/develop of intangible assets
Revaluation
Depreciation
Documents in the cycle:
Capital budgets
Fixed Asset requisition with quotes
Minutes of BOD (authorising sales & purchases)
Invoices
FAR
GL accounts; FA, Depreciation, P/L on disposal of asset, Acc Dep
Steps to be taken before purchasing asset:
A formal written proposal by Capex Committee must be completed
Quotes submitted with proposal
Proposal submitted to BOD
Decision minuted
Levels of authorisation must be adhered to
Any personal interest in purchase must be disclosed
Finance Activities
Funding is from 2 main sources:
Owners Equity
Issue of shares
Share buy backs
Statutory requirements
Authorisation of issue of shares
Declaration of dividents
Borrowings
Cash inflow from borrowings received
Repayment of capital sum
Interest charged on borrowings
Authorisation required to borrow
Documents and records used in investment cycle:
Minutes of shareholder/director meetings
Debenture trust deed
Prospectus
Share Certificate
Loan/lease contract
Mortgage bond
Journal voucher
Internal Controls: control activities to ensure control objectives achieved with every transaction
Control Objectives: objectives wanting to be achieved e.g. authorisation
Test of Controls: how we test if the internal controls work
Substantive Testing:
Substantive analytical procedures include comparisons of current yr vs prior yr
Detail substantive procedures , substantive testing - a procedure that examines the FS and supporting docs to check for errors
Detail substantive testing: assertions of existence, completeness, rights & obligations, accuracy and valuation, and presentation and disclosure
Weakness vs Risk
A risk occurs when an org has a weak internal control environment
Electronic Fund Transfers (EFT)
Bank recon done monthly by different person who does the cashbook
Recon should be viewed by independent senior official
EFT should have multilevel passwords from 2 snr employees
EFT access should be limited to 1 pc
Terminal should shut down after 3 unsuccessful logins
Should be an audit trail of payments