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ACCA F1 > Area C > Flashcards

Area C Flashcards

1
Q

Purchasing/procurement:

A

Establishment of credit terms
Pricing
Payments
Data capture
Inventory management
Budgeting

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2
Q

Production:

A

Measuring, allocation of cost
Budgeting
Cost vs quality
inven mgnt

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3
Q

Marketing:

A

budgeting
advertising
pricing
market share

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4
Q

4 features of Services

A

VIIP
Variability
Intangibility
Inseparability
Perishability

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5
Q

Roles of treasury dept

A

1.Working Capital Management
2.Cash Management
3.Financing [Via Debt or Equity]
4.Maintaining multiple Foreign Currencies 5.Tax Minimization

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6
Q

Internal Audit:

A
  1. Performed by companies
  2. Internal goals: compliance, appropriate controls, consistency, quality.
  3. Also check to ensure appropriate authorization, purchases of assets
  4. Int aud rates the company’s overall effectiveness
  5. evaluating the effectiveness and efficiency of a company’s internal controls.
  6. Accountable to BODs
  7. Auditor most likely to be a employee
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7
Q

External audit

A
  1. Performed by an outsider auditor
  2. Examines the financial statement prepared by the entity’s mgmt.
  3. To ensure it is presented in a fair manner, relevance and accuracy of data presented.
  4. Tests whether the company s complying to professional standards and IAS/IFRS.
  5. Appointed by members
  6. Accountable to shareholders.
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8
Q

Integrated reporting

A

Instead of having a separate section or report to reflect the sustainability, the entire report should comprise of the strategic and operational management actions with a holistic approach to biz
1. Financial capital - traditional equitites, capital section of the balance sheet.
2. Manufactured capital: tangible material goods and fixed assets which the biz owns
3. Intellectual capital: employee knowledge and proprietary information.
4. Huma capital: knowledge skills and motivation
5. Social and relationship capital: refers to org working in partnership with the biz
6. Nature capital

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9
Q

IIRC?

A

International integrated reporting council

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10
Q

Budgets are used for the following:

A

CRUMPET
Coordination
Responsibility
Utilization
Motivation
Planning
Evaluations
Telling

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11
Q

Variance Reports:

A

Summary of total predicted and total actual costs with the difference calculated as variance.

Favorable: Predicted cost<actual cost; Predicted rev> actual rev
Unfavorable: Predicted cost > actual cost; pred rev <actual rev

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12
Q

Noteworthy Terminology

A

Working Capital: lifeblood of the business; this is the amount of money available for day-to-day operations of the business.

Tax Avoidance –this refers to the use of exploiting the loopholes in the tax system in order to reduce the tax liability for the year and this is done within the boundaries of law and is legal

Tax Evasion –As the term sounds it is evading tax which is illegal via the use of deception and misleading the tax authorities of the state of affairs; this is a criminal offense

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13
Q

Responsibility of maintaining financial records:

A

Leas with the BODs , FD, CFO

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14
Q

Terminology:

A
  1. System A series of independent but irrelated tasks which must be followed in order to achieve the desired objective
  2. Policy Guiding principle
  3. Procedure A set sequence of steps to be followed
  4. Guideline A recommended approach or path to follow which is made by the experts in the field
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15
Q

Payroll system

A
  1. Maintaining variable data [timesheets, leaves taken] and fixed data [pay rates, pay rise, details of employees]
  2. Net pay = gross pay - tax
  3. prepare payroll reports, employee payslips
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16
Q

Automated system features:

A
  1. Enhanced Management supervision
  2. Data vulnerable to corruption and hacking
  3. Over concentration of power in IT dept
  4. Stnd procedures and norms for transaction processing.
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17
Q

Data and its types:

A

Consists of raw facts and figures gathered and stored. No clear meaning until it is processed analyzed and sorted into info

  1. Quantitative
  2. Qualitative
  3. Primary
  4. Secondary
  5. Discrete
  6. Continuous
18
Q

Information:

A

Data processed in such a way so that it is meaningful to the person who uses it.
Information should be ACCURATE
Accurate
Complete
Cost-effective
Understandable
Relevant
Accessible
Timely
Easy to use

19
Q

Types of Information System

A
  1. TRansaction Processing System (TPS) - daily transactions
  2. Management information system (MIS) - converts data from TPS inot maingful for the mgnt
  3. Decision support system (DSS) - hepls take decisions using internal and external information
  4. Executive information system (EIS) - used by BODs to gather an overview of the performance
  5. Expert system - designed by specialists and professional
20
Q

Internal control

A
  1. Represents the system policies and procedures implemented by an organisation
21
Q

Internal control components:

A
  1. Control environment - awareness, attitudes and actions of TCWG in realtion to internal control
  2. Entity’s risk assessment process:
  3. Information system & communication
  4. control activities: these are policies and procedures which help ensure the management directives are carried out -> segregation of duties, info processing, authorization etc
22
Q

Ensuring effectiveness of internal financial controls

A

A regular risk assessment protocol ●Systems in place to prevent and detect any frauds and errors
●Safeguard the company assets
●Preparation of company’s financial information in a timely manner
●Recording of accounting records

23
Q

Alternative Internal controls

A
  1. Preventative controls - honest staff, authorisation controls, segregation of duties
  2. Detective controls - internal checks, supervision
  3. corrective control - necessary mngt actions
24
Q

Responsibility if mngt for internal financial control

A
  1. the responsibilty lies with the senior managemetn officials and BODs
  2. BODs are leagally responsible
25
Q

Fraud, Errors, Irregularity, Mistreatment

A

Fraud: intentional act where a party is deceived to obtain an unfair and illegal advantage. - criminal offense
Errors: unintentional mistakes; can we prevented or detected using internal controls
Irregularity: contradiction to a particular rule or standard
Mistreatment: something which is stated incorrectly as a result of fraud, irreg or error

26
Q

3 Pre-requisites of fraud

A

DOM
1. Dishonesty
2. Opportunity
3. Motivation

27
Q

Examples of fraud by management:

A

● Use of company resources for personal gain
●Cooking the books
●False claims

28
Q

Examples of fraud by employees:

A

●Deceiving the company
●Use of company’s resources for personal gain
●Accounting Fraud

29
Q

Examples of fraud by external parties:

A

●Fake Bills
●Overcharging and/or underdelivering
●Ponzi schemes

30
Q

Types of fraud: (elaborate)

A
  1. Misappropriation of assets:
    * Physical assets may be written off or stolen by employees.
    * Sale of intellectual property right to competitors.
  2. Using the company’s assets for personal use:
    * Often done by senior management.
  3. Sales LEdger frauds:
    * Stealing receipts received from detors in the form of cash and either writting them off as bad debt or never recording them in the accounting books.
  4. Purchase ledger frauds:
    * Teeming and lading wherein the purchases dept will collude with a supplier to inflate the prices and takinf their cut form the sup or dumy purchase invoice entered and payments made in the fraudsters ac/c.
  5. Skimming schemes:
    * large vol of small value thefts are commiteed as they are not investigateble
  6. False billing fraud:
    * fake invoices and bills to pocket the cheques written to these fake companies.
  7. Payroll fraud:
    * setup ghost employees in order the pockett the salary
  8. Bank A/C fraud:
    * setting up bogus direct debot and credits form the biz bank a/c to the fraudsters.
  9. Advance fee fraud:
    * committed on email where they ask for a smalll amt while offering them a large amt of money.
  10. Ponzi (pyramid) schemes:
    * abnormal returns are offered to investors.
    * entices new investors
31
Q

Examples of creative accounting

A
  1. Window dressing:
    * misrepresentation of the fin pos via inputting the transaction before the year end and it is reversed after the year end with the intent to inflate the company’s financial well-being.
  2. Delaying or accelerating a company’s expenses:
    * Showing an expense as an asset rather than writting it off against profits- quick wat to improve reported profits.
  3. Manipulation of revenue recognition:
  4. Off balancing sheet accounting: not including certain items in the balance sheet.
  5. Money laundering:
    * money and assets obtained illegally converted to legal through a series of steps.
32
Q

Money Laundering steps:

A
  1. Placement : the amt received from crim act is disposed into an apparently legitimate biz,a ct or assets.
  2. Layering: the amt is transfered from one biz or place to another a few time. Creates many exchanges for the supervisory authorities to go through - impossible to trace the origin
  3. Integration: summing of all the prev procedures, the money gets an official appereance and now can be used by the person.
33
Q

Recognised offenses
PCA includes:

A
  1. Laundering: as per PCA crim propis any propert the offender receives konwing that its derived via crom conduct. Crim conduct: an offense ina ny part of UK; would be an offense in any part of the UK if it occured there.
  2. Failure to report: When an individualcarries on a ‘relevant business’ where they are sure, suspect or have reasonable grounds to suspect that another person in the business is engaged in money laundering, that individualis guilty of failure to report
  3. Tipping off: Where an individual makes a disclosuretothat offender, itmay harm the Money Laundering investigation
33
Q

Recognised offenses
PCA includes:

A
  1. Laundering: as per PCA crim propis any propert the offender receives konwing that its derived via crom conduct. Crim conduct: an offense ina ny part of UK; would be an offense in any part of the UK if it occured there.
  2. Failure to report: When an individualcarries on a ‘relevant business’ where they are sure, suspect or have reasonable grounds to suspect that another person in the business is engaged in money laundering, that individualis guilty of failure to report
  3. Tipping off: Where an individual makes a disclosuretothat offender, itmay harm the Money Laundering investigation
34
Q

Internal controls against money laundering:

A
  1. Must appoint a money laundering compliance principal. (MLCP)
  2. MLCP should be a part of the BOD or a mem of senior mgnt.
  3. Sole practitioners are exempt
  4. must also appoint money laundering repoting officer (MLRO)
  5. MLCP and MLRO can be the same person.
  6. and org must carryo out customer due dilligence (to asses the risk of a customer being a fraudster.)
  7. high risk customers - enhanced due dilligece
35
Q

Role of Management in Measurement and Prevention of Fraud

A
  1. BOD - enssure there is a robust internal control system in place; review the effectveness of the internal control system.
  2. Audit committee - constantly review and improving the internal
  3. Emplyees - detvction and prevention by reportng any suspicious activity to superiors.Pg 173 tb
36
Q

Fintech 01 Cloud computing:

A
  1. store data on the internet
  2. easy sharing and access
  3. flexibility
  4. extra cloud storage
  5. IT costs are reduced
    6.
37
Q

Fintech 02 AI

A
  1. eg: voice recognition, macine learning
  2. IN accounting: forecasting profits , identifying frauds
38
Q

Fintech 03 Big Data

A
  1. data sets - high volume, variety
  2. help analyse patterns and trends of consumer behav
  3. improves company;s efficiency - marketing, accurate forecasts
  4. Characterized by
    * Volume: huge volume
    * Variety: Range of data - structured (easily available, date, amounts, not a major part of the data); unstructured (Difficult to store, analyse, more useful)
    * Velocity: speedc of data being converted into information.
    * Veracity: accuracy
39
Q

Fintech 04-Blockchain Tech

A
  1. Described as adecentralized, distrubuted and public dig ledger - record transactions accross many computers
  2. stored online and cannot be changed
  3. eg: cryptocurrency, bitcoin

ACCA F1 (4 decks)

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