Rabu, 15 Maret 2017

Common Size in Analytical procedures

Firstly analytical procedures are important part of the audit process and consist of evaluation in financial information that auditor make of plausible and expected relationship between financial & non-financial data. The auditor range from simple comparisons.
Analytical procedures can be used as substantive test to obtain the evidential natter about particular assertions that related to account balances on classes of transactions.

Analytical Procedures have categories:
  • ·       Comparisons of absolute numbers
  • ·       Comparisons of the results of mathematical computations which is:

a.      Ratio analysis
b.    Common-sizes financial statements
c.      Trend analysis
  • ·       Regression analysis


For now I only concern on point two in comparisons of the result of mathematical computations which is Common-sizes financial statements.
Common-sizes financial statement is an income statement in which account is expressed as percentage of value of sales. This can be used to make analysis between companies/between time periods of company much easier. From this financial statement, the analyst can determine how the various components of income statement can affect company’s profit.
From this financial statement also the investors have a chance to see how much expense can deduct from revenue to net income. Analyst can use this financial statements to understand how much expenses are changing as percentage of revenue.


Here are the example of Common-Size Financial Statements from Apple Inc



References:


Created by:
Lintang Maharani
C1L014028
International Accounting
Jenderal Soedirman University

Sabtu, 11 Maret 2017

Internal Control




Zara Resources Inc is a mineral’s company focusing its main effort on its forge lack gold project in Ontario, Canada.


Based on our group discussion, we think that Zara Resources Inc is quite good in implementing the internal control, it’s proved by the financial report which has no fraud detection and misstatement. Moreover,  the other evidence is this company use the accounting policy which is IFRS in making the estimation and assumption on reported their amounts of assets, liabilities, revenue, and expenses for the period. This company is established in 2012, and this audit report is produced in 2014, so it means that the company is basically good since its established.
All of Zara Resources data we get from Abraham chan LLP. The chartered accountants firm on Ontario Canada







This is group assignment.
My group consist of:
Lintang Maharani               C1L014028(Me)
Junika Pentarosa                C1L013025
Lalita Nadya Amalia           C1L014014
International Accounting
Jenderal Soedirman University

Rabu, 08 Maret 2017

COSO


Latest information about COSO


COSO

COSO or Committee of Sponsoring Organization of the Treadway Commission is a joint initiative in order to against the fraud that occur in company. COSO established in United States by five sector organization which are Institute of Management Accountants(IMA), American Accounting Association(AAA), American Institute of Certified Public Accountants(AICPA), Institute of Internal Auditor(IIA), Financial Executives International(FEI)
At first, those five sector organization establish ‘National Commission on Fraudulent Financial Reporting’ with purpose doing a research about fraudulent on financial reporting and giving recommendation to public company, internal auditor, SEC, and also education institution, should managing risk in order to avoid fraud, preserve & realizing value, etc.
Even COSO is sponsored by 5 professional associations, this committee is independent and peoples that include in there are come from different majoring such as Public Accountant/Investor/Industry/etc.
They declare their first report on 1987 about integrated guidance on internal control. This committee continuously develop their report from year to year.
Moving on to Internal Control, based on COSO explanation Internal Control is process that run by board, managements and staff to make reasonable assurance such as:
a.       Effectiveness & Efficiency of their performance
b.      The reliability of financial report
c.       Compliance with laws and regulations in affect

Here are the latest framework about Internal Control that
a.      Internal environment
b.      Objective setting
c.       Event Identifications
d.      Risk Assessment
e.      Risk response
f.        Control activities
g.      Information & communication
h.      Monitoring

In 2004 COSO have a right to control financial, because if its not changed & it can distract when complying Sarbanes Oxley Act . It only could helps in the future.
Soooo now let’s jump briefly about characteristics of framework that ERM Used:
a.      Internal Environment: society foundation for how risk is view by entity’s people.
b.      Objective setting: this should be exist before management can identify potential events that affecting their struggling in order to achieve goals.
c.       Event identification: events that presented by internal & also external that affecting the achievement of entity’s goals. It should be distinguish between risks and opportunities.
d.      Risk assessment: this is a basis for determining how they should be managed. The risks are assessed on residual basis and also inherent
e.      Risk response: the process is like this, the management selects the risk responses then avoiding-accepting-reducing and also develop a set of actions to align risks with entity’s risk tolerances and risk appetites
f.        Control activities: it adds more policies and procedure when implement to help ensure the risk response are effectively carried out
g.      Information and communication: relevant information make people easier to carry out the information, so that they can take their responsibilities. Effective communication also occurs in a broader sense, etc.
h.      Monitoring: from the beginning until the end of the process is monitored or we can say that the entire ERM process is monitored then the modifications is needed when something goes wrong. This kind of activity accomplished through ongoing management activities.

References:

Created by:
Lintang Maharani
C1L014028
International Accounting
Jenderal Soedirman University

Kamis, 02 Maret 2017

What is Internal Control? Why is it important in Auditing?





Ø Definitions of Internal Control
Actually as long as you live, I believe you already get involved in Internal Control even only once, like for example your university have a policy ‘students have to do fingerprint 15 minutes before the class start’.
Why that’s policy called Internal Control? Because it can help company to manage their employees in order to achieve company’s objectives and goals. And also it helps manager to protect company’s assets because internal control needs human resources & technology systems. In other words, Internal control are methods or process that put in a place by a company to ensure the integrity of financial and accounting informations, to meet operational and profitability targets and also to detect fraud so that when the fraud occur the company can minimize it.
  
Ø Purposes of Internal Control
(1) to protect company's resources against waste, fraud, and inefficiency
(2) to ensure accuracy and reliability in accounting and operating data
(3) securing compliance with the policies of the organization         
(4) to evaluate the level of performance in all organizational units of the organization

Ø Why is it important in auditing process and how to do it
In my opinion, as an auditor Internal Control is important because from that the auditor can get general information about company’s performance whether it’s already good or not, whether the financial report already accurate and reliable or not, whether it’s already followed by laws and regulations or not. If the result of entity internal control is good then the auditor can justify the company’s work and their financial statements. However if the result of entity internal control is not good, then the auditor should work more harder to find an evidence the reason why the internal control is not good whether it can be because of fraud, out of regulations or law, etc.
But first before an auditor doing audit, they should know clearly about the company’s background or company’s SOP(standard operating procedure), goals and purposes of the company also. Because sometimes company’s internal control related to their SOP and it is easier for auditor to audit the company. As an auditor, they should understand that they do testing internal control over financial statements, know clearly which internal control that should be in place in safeguard assess and justify company’s work as well as make a recommendation. 


created by:
Lintang Maharani
C1L014028
International Accounting
Jenderal Soedirman university

References:
- http://www.investopedia.com/terms/i/internalcontrols.asp
- https://www.forbes.com/sites/jeffthomson/2015/09/24/the-importance-of-internal-controls/#656021b63d4a
https://uiowa.edu/audit/what-are-internal-controls
- https://www.k-state.edu/internalaudit/intcontr.html