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BTF > Chapter 6 - Finance function and financial information > Flashcards

Chapter 6 - Finance function and financial information Flashcards

1
Q

What are the 4 interrelated tasks the finance function is involved in?

A

Recording financial transactions
Management accounting
Financial reporting
Treasury management

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2
Q

What is business partnering?

A

the finance function works alongside other business function providing advice and support

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3
Q

As part of a business partnering role, what should members of the finance function be increasingly involved in?

A

Strategy formulation, implementation and communication
Commercial decision making and negotiations
Business analysis
Being a sounding board, trusted advisor and critical friend

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4
Q

Why do businesses and managers require financial information?

A

Planning
Controlling
Recording transactions
Performance measurement
Decision making

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5
Q

What are the different types of information(POTS)?

A

Planning
Operational
Tactical - short term issues/opportunities
Strategic - long term decision making

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6
Q

Who uses financial information and what for?

A

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

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7
Q

What are fundamental qualitative characteristics?

A

attributes that make information provided in financial statement useful

Relevance and faithful representation

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8
Q

What are enhancing qualitative characteristics(VUCT)?

A

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

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9
Q

What are the limitations of financial information in meeting user’s needs?

A

Conventional representation
Backward-looking
Omission of non-financial information

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10
Q

What is information processing?

A

Data once collected is converted into information for communicating more widely within the business

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11
Q

What criteria should successful information processing meet (CATIVA)?

A

Completeness - everything that needs processing should be
Accuracy - no errors
Timeliness - real time access
Inalterability
Verifiability
Accessibility - effectiveness of processing open to scrutiny

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12
Q

What is a system?

A

A set of interacting components

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13
Q

What is a business system?

A

Collection of people, machines and methods organised to accomplish a set of specific functions

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14
Q

What are ISs?

A

Systems and procedures involved in the collection, storage, production and distribution of info

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15
Q

What is IT?

A

Equipment used to capture, store, transmit or present info

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16
Q

What are the 3 components of a system?

A

Inputs
Processes
Outputs

17
Q

What is a system boundary?

A

Separates information system from its environment

18
Q

What is a transaction processing system (TPS)?

A

Performs, records and processes routine transactions

19
Q

What is a management information system (MIS)?

A

Converts data from mainly internal sources

20
Q

What are risks to data?

A

Human error
Entering incorrect transactions
Technical errors which corrupt data
Natural disasters
Deliberate actions like fraud

21
Q

What the aspects of the security of information?

A

Prevention
Detection
Deterrance
Recovery
Correction
Avoidance

22
Q

What are the qualities of secure information (ACIANA)?

A

Availability
Confidentiality
Integrity
Authenticity
Non-repudiation
Authorisation

23
Q

What are integrity controls in the system?

A

Data verification
Data validation
Back up and archive strategy
Personnel selection
Segregation of duties

24
Q

What are types of performance measure?

A

Qualitative - subjective and judgmental
Quantitative - objective and based on data, expressed in numerical terms

25
Q

What are the 3 points of reference for measurement in a business?

A

Profitability - TR-TC
Activity -
Productivity - quantity produced

26
Q

How is resource use measured?

A

Economy - reduction/containment of cost
Effectiveness - measure of achievement
Efficiency - being effective at min cost

27
Q

How are KPIs measured?

A

Benchmarking

28
Q

What 4 recommendations did the TCFD make in 2017 surrounding corporate disclosure?

A

Governance - climate-related risks and opportunities
Strategy - impact of climate risks
Risk management - identifies, assesses and manages climate risks
Metrics and targets

29
Q

What are limitations of financial measures?

A

Information problems
Comparison problems - effect of changes in price
Comparison problems - usefulness of norms based on industry averages

30
Q

What is Kaplan and Norton’s balanced scorecard?

A

Integrated set of performance measures linked to the achievement of strategic objectives

4 perspectives:
Customer
Internal business processes
Innovation and learning
Financial

31
Q

What is financial control?

A

Form of internal control implemented to reduce the risk of asset mismanagement

32
Q

What is an internal control?

A

Process designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting and compliance.

33
Q

What characterises an internal control?

A

Geared towards achievement of organisational objectives
Affected by people
Adaptable to structure

34
Q

What activities are classified as internal controls?

A

Approval
Authorisation
Verification
Reconciliation
Business performance reviews
Segregation of duties

35
Q

What 5 interrelated components are involved in effective internal control?

A

Control environment
Risk management
Control activities
Information and communication
Monitoring activities

36
Q

What encourages organisations to improve reporting of their economic

A

Global Reporting Initiative (GRI) standards

The Triple Bottom Line approach

37
Q

What are 3 characteristics of management accounting information?

A

It is both forward looking and historical

Likely to include a cash flow forecast

Likely to include budgetary information

BTF (11 decks)

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