Synoptic Flashcards
What are features of a Tall/heirarchical structure centralised?
- Many Levels of management
- Few Staff per manager
- Often centralized
- Decision making at ‘high’ level - slower
- Support Functions centralized
- Good co-ordination between businesses
- Resources can be allocated according to need effectively
- Economies of scale
What are the features of a Flat structure Decentralised?
- Few management levels
- Many staff working for managers
- Often decentralised
- Decisions made ‘locally’ - better morale and more experienced staff - faster
- Local support functions
- Businesses may make decisions to detriment of other parts of the business
- Decision based on more local market/operations
What type of financial transactions do different types of businesses perform?
- Sales
- Purchases
- Payroll
- Production
- Banking/Cash
- Financial Reporting
Who will control resources in businesses?
Management
How does management control resources?
- Depends on the level in the organisation at to how much can be controlled
- Controlled via budgets
Which type of companies will more likely have more regulations to comply with?
- Public Limited Companies
- Private Limited Companies
- Public Sector Companies
What is a stakeholder?
A person or organisation that has an interest in another organisation. They can be internal or external.
What does MIS stand for?
Management Information System
What are the 5 ethics?
- Professional Behavior
- Professional competence and due care
- Integrity
- Objectivity
- Confidentiality
What are some examples of external regulations?
- Accounting Regulations
- Company Law
- Terrorism Act
- Finance Act
What are some example of external stakeholders?
Customers
Suppliers
Banks
Tax Authorities
What are some examples of internal stakeholders?
Employees
Managers
Directors
What is MIS?
- Computer based
- Up-to-date, accurate, relevant information
- Enable decisions to be made promptly and on an informed basis
What does KPI stand for?
Key Performance Indicators
A good internal control system will achieve what?
- Assets protected
- Fraud risk is as low as possible
- Errors or missing items unlikely
- Financial records accurate and current
- All liabilities are identified and recorded
What are some internal controls in a small organisation?
- small number of accounts staff means they will know the business well so are likely to spot errors quickly
- More emphasis on authorisation and management review by the owner then on policies and procedures
- You must be careful with segregation of duties. A lack of segregation could give an opportunity for fraud.
When we have a good accounting system what is it you want to see?
Lots of controls, operating effectively
When controls are missing what does it lead to?
Systemic weaknesses, missing assets or income, fraud, errors
What does SOAPSPAM stand for?
Segregation of duties Organisational Authorisation Physical controls Supervision Personnel Arithmetical and Accounting Management
What is fraud?
An activity within an organisation where the employer loses money, time or assets.
What is the four different types of fraud?
- theft
- false accounting
- bribery & corruption
- deception
How can management reduce the risk of fraud?
- Identify areas where the risk of fraud exists
- Set up control systems, to prevent fraud
- Monitor the control systems
- Deal with any incidence appropriately
How can we detect fraud?
- suspicious behaviour
- low income, flash car
- long hours/few holidays
- disgruntled staff
- staff known to need money - high mortgage, drugs
An effective system in a business ensure transactions are what?
- complete
- accurate
- business only
- value correctly
- owned by the business
- presented accurately - in the right account an the right period
Why are effective accounting systems important to a business?
- All transactions recorded
- Staff paid for the work they do
- Accurate information
- Reliable information
- Necessary purchases only
- Information is up to date for decision making
- Financial statements are ‘true and fair’
What controls can we put in place for the purchase system?
- Reqs should come from the user
- Authorised order forms should be used
- All orders should be approved before being dispatched
- Suppliers are approved
- Pre-numbered order forms
What controls can we put in place for good received?
- Pre-numbered Goods Received Notes (“GRN”)
- Quantity and conditions verified
- Documented comparison of GRN to original authorised order
- Sign off delivery note (if appropriate)
What controls can we put in place for processing of invoices?
- Invoices are arithmetically confirmed and evidenced to say so
- Invoice details are compared to order to ensure everything is correct
- Invoice should be matched to GRN and/or delivery note
- Invoice approve by appropriate authority
- PLCA reconciled regularly to purchase ledger
What controls can we put in place for cash payment?
- Two cheque signatories
- All cheques issued sequentially
- Cheque books locked away
- Cancelled cheques retained
- No cheque produced without supporting documentation
If internal controls are not in place what can go wrong?
- Purchases will be made the business does not need
- Goods and services may be poor quality & expensive
- Unauthorised suppliers may be used – loss of discounts
- Orders may be placed by unauthorised staff
- Goods received may not have been ordered
- Fraud, through processing of false invoices
- Incorrect invoice amounts being paid
- Invoices not paid or paid twice – supplier?
- Poor cashflow
- Incorrect management information – costing, inventory
If the internal controls in the sales system are not met working, what can go wrong
- Sales to non-creditworthy customers – irrecoverable debts, less profit
- Failure to supply goods – lost sales and profit
- Incorrect VAT – fines from HMRC
- Goods supplied not invoiced, reduced profit, possible fraud
- Goods sold at incorrect price, loss of profits, possible fraud
- Credit notes issued for items other than goods returns (to pay off debt), potential fraud
- Poor cash flow due to poor credit control
- Incorrect management information – sales, inventory
- Theft of money received from customers, fraud
- Inefficient and poor service for customers – loss of reputation.
