The Finance Function and Financial Information

Question 1

What are the 4 tasks of the finance function?

Answer 1

Recording financial transactions - accurate
Management accounting - information internally
Financial reporting - information externally
Treasury management - liquidity

Question 2

What is involved in business partnering?

Answer 2

Strategy formulation, implementation
Commercial decision making
Business analysis
Sounding board

Question 3

Why do businesses need financial information?

Answer 3

Planning
Controlling
Recording
Performance measurement
Decision making

Question 4

What are the types of information?

Answer 4

Planning information
Operational information
Tactical information
Strategic information

Question 5

Who uses financial information?

Answer 5

Shareholders - equity decisions
Lenders - will loans be repaid
Employees - assess employer
Customers - stay in existence
Suppliers - being paid
Government - regulations, tax, stats
Public - assess trends

Question 6

What are the fundamental qualitative characteristics?

Answer 6

Relevance
Faithful representation

Question 7

What are the enhancing qualitative characteristics?

Answer 7

Understandability
Comparability
Verifiability
Timeliness

Question 8

What are the limitations of financial information?

Answer 8

Conventional representation
Backward looking
Omission of non-financial info

Question 9

What makes data effective? CATIVA

Answer 9

Completeness
Accuracy
Timeliness
Inalterability
Verifiability
Accessibility

Question 10

What are the components of information systems?

Answer 10

Input -> Processing -> meaningful output

Question 11

What are the risks to data?

Answer 11

Human error
Entering incorrect info
Technical error
Natural disaster
Deliberate actions

Question 12

What are the aspects of security?

Answer 12

Prevention
Detection
Deterrence
Recovery
Correction
Avoidance

Question 13

What are the qualities of secure information?

Answer 13

Availability
Confidentiality
Integrity
Authenticity
Non-repudiation
Authorisation

Question 14

What are the 3 measures of performance?

Answer 14

Profitability
Activity
Productivity

Question 15

What 3 measures of resources are there?

Answer 15

Effectiveness
Economy
Efficiency

Question 16

What are the limitations of financial measures?

Answer 16

Information problems
Comparison problems

Question 17

What is the balanced scorecard?

Answer 17

Customer - how do customers see us
Internal business processes - what must we excel at
Innovation and learning - how can we grow and improve
Financial - how do we look to shareholders

Question 18

What activities are for internal controls?

Answer 18

Approval
Authorisation
Verification
Reconciliation
Business performance reviews
Segregation of duties

Question 19

What 5 components do COSO say make up internal controls?

Answer 19

Control environment
Risk management
Control activities
Information and communication
Monitoring activities

Question 20

How does the FRC define risk management and internal control systems?

Answer 20

System encompassing policies, culture, behaviour, processes, systems and other aspects of a company that:
Assess risks and respond appropriately
Reduce likelihood of poor decisions, excessive risk, human error
Ensure quality of reporting
Ensure compliance