Chapter 6 - Finance function and financial information Flashcards
What are the 4 interrelated tasks the finance function is involved in?
Recording financial transactions
Management accounting
Financial reporting
Treasury management
What is business partnering?
the finance function works alongside other business function providing advice and support
As part of a business partnering role, what should members of the finance function be increasingly involved in?
Strategy formulation, implementation and communication
Commercial decision making and negotiations
Business analysis
Being a sounding board, trusted advisor and critical friend
Why do businesses and managers require financial information?
Planning
Controlling
Recording transactions
Performance measurement
Decision making
What are the different types of information(POTS)?
Planning
Operational
Tactical - short term issues/opportunities
Strategic - long term decision making
Who uses financial information and what for?
Shareholders - equity investment decisions
Lenders - whether loans will be repaid
Employees - employers stability
Customers - whether business will continue
Suppliers - likelihood of being paid on time
Gov - regulation, tax and allocation of resources
Public - trends and developments
What are fundamental qualitative characteristics?
attributes that make information provided in financial statement useful
Relevance and faithful representation
What are enhancing qualitative characteristics(VUCT)?
Attributes that enhance the fundamental usefulness of info provided in financial statements
Understandability - clear and concise
Comparability - consistent measuring
Verifiability - knowledgeable and independent
Timeliness - readily available
What are the limitations of financial information in meeting user’s needs?
Conventional representation
Backward-looking
Omission of non-financial information
What is information processing?
Data once collected is converted into information for communicating more widely within the business
What criteria should successful information processing meet (CATIVA)?
Completeness - everything that needs processing should be
Accuracy - no errors
Timeliness - real time access
Inalterability
Verifiability
Accessibility - effectiveness of processing open to scrutiny
What is a system?
A set of interacting components
What is a business system?
Collection of people, machines and methods organised to accomplish a set of specific functions
What are ISs?
Systems and procedures involved in the collection, storage, production and distribution of info
What is IT?
Equipment used to capture, store, transmit or present info
What are the 3 components of a system?
Inputs
Processes
Outputs
What is a system boundary?
Separates information system from its environment
What is a transaction processing system (TPS)?
Performs, records and processes routine transactions
What is a management information system (MIS)?
Converts data from mainly internal sources
What are risks to data?
Human error
Entering incorrect transactions
Technical errors which corrupt data
Natural disasters
Deliberate actions like fraud
What the aspects of the security of information?
Prevention
Detection
Deterrance
Recovery
Correction
Avoidance
What are the qualities of secure information (ACIANA)?
Availability
Confidentiality
Integrity
Authenticity
Non-repudiation
Authorisation
What are integrity controls in the system?
Data verification
Data validation
Back up and archive strategy
Personnel selection
Segregation of duties
What are types of performance measure?
Qualitative - subjective and judgmental
Quantitative - objective and based on data, expressed in numerical terms
