This document provides an introduction to financial statements and auditing. It covers the purpose and components of financial statements, including the balance sheet, income statement, statement of changes in equity, and cash flow statement. It discusses the objectives of an audit and regulatory requirements for auditing financial statements in Pakistan. It also outlines basic accounting principles like fair presentation, going concern, and accrual basis. Finally, it reviews key areas of the balance sheet like property and equipment, investments, loans and advances, and contingencies. The overall document provides a high-level overview of financial statements, auditing, and balance sheet accounts.
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand.
Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to understand.
Essential Components of Financial Statement Invensis
A financial statement is an important tool which gives crystal clear information about a company’s financial situation and is helpful in making sound business decisions. Find out the essential components of financial statement and how outsourcing Finance and Accounting services to Invensis Technologies can improve the fiscal aspect of your company.
Invensis Technologies (http://www.invensis.net) is a leading IT & Business Process Outsourcing Firm based in Bangalore, India with more than 15 years of experience. Our customized End-to-End Finance and Accounting(F&A) Outsourcing Services (http://www.invensis.net/outsource-finance-accounting-bpo-services.php) include Tax Preparation Services, Accounting and Bookkeeping, Financial Analysis reporting, Record to Report Services and Payroll Processing Services.
To find out more about our services and benefits of partnering with us, please contact us at sales{at}invensis{dot}net or you can call us from US +1(302)-261-9036 ; UK +44 203 411 0183 ; AUS +61 3 8820 5183 ; IND +91 80 41155233
Profitability Ratio
A profitability ratio is a measure of financial ratio defining the profit percent and return percent from the business using data from financial statements at a specific point of time
It assess business’s ability to generate gross profit, operating profit and net profit from the sales using data from profit& loss statement
It even takes into consideration various return generating ability of business in terms of return on assets, return on capital employed, return on equity, return on investment using data from balance sheet
Types of profitability ratio
Gross Profit Ratio, Net Profit Ratio, Operating Profit Ratio, Return on Assets, Return on Equity, Return on Investment, Return on Capital Employed
Gross Profit Ratio
Gross Profit Ratio(GPR) is a profitability ratio that shows the relationship between gross profit and the revenue from net sales
GPR = (퐆퐫퐨퐬퐬 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬)
Net Profit Ratio
The net profit ratio is equal to how much net profit is generated as a ratio of revenue earned through sales
Net Profit Ratio = (퐍퐞퐭 푷풓풐풇풊풕)/(퐍퐞퐭 푺풂풍풆풔)
Operating Profit Margin is a profitability ratio used to calculate the percentage of operating profit a company produces from its operations, prior to deduction of taxes and interest charges
Operating Profit Ratio
Operating Profit Ratio = (퐎퐩퐞퐫퐚퐭퐢퐧퐠 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬)
Return on assets (ROA) is a kind of profitability measure used to determine returns on assets relevant when compared across the companies or previous performance of the company
Return On Asset = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐀퐬퐬퐞퐭퐬)
Return on equity (ROE) is a measure of financial performance calculated by dividing net profit by average shareholders' equity
ROE = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐄퐪퐮퐢퐭퐲)
Return on capital employed is a profitability ratio used in valuation of company’s financial position depicting the return out of capital employed
ROCE = 퐄퐁퐈퐓/(퐂퐚퐩퐢퐭퐚퐥 퐄퐦퐩퐥퐨퐲퐞퐝)
Return on investment is a profitability measure used by businesses to identify the efficiency of business in generating return out of an investment
ROI = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐂퐨퐬퐭 퐨퐟 퐈퐧퐯퐞퐬퐭퐦퐞퐧퐭)
Ratio analysis refers to the analysis and interpretation of the data collected from the financial statements (i.e., Profit and Loss Statement, Balance Sheet and Fund/Cash Flow statement etc.)
Thank You for Watching
DevTech Finance
Cost Accounting Vs Management Accounting & Management Accounting Vs Financial...Uttar Tamang ✔
This Slide includes:
1. Cost Accounting Vs Management Accounting
2. Management Accounting Vs Financial Accounting
3. Types of Accounting
4. Difference between Cost, Management and Financial Accounting with basis
Learning Objective 1: To explain the nature and general purpose of financial statements.
Learning Objective 2: To explain certain accounting principles that are important for an understanding of financial statements and how professional judgment by accountants may affect the application of those principles.
Learning Objective 3: To demonstrate how certain business transactions affect the elements of the accounting equation: Assets = Liabilities + Owners’ Equity.
Learning Objective 4: To explain how the statement of financial position, often referred to as the balance sheet, is an expansion of the basic accounting equation.
Learning Objective 5: To explain how the income statement reports an enterprise’s financial performance for a period of time in terms of the relationship of revenues and expenses.
Learning Objective 6: To explain how the statement of cash flows presents the change in cash for a period of time in terms of the company’s operating, investing, and financing activities.
Learning Objective 7: To explain the important relationships among the statement of financial position, income statement, and statement of cash flows, and how these statements relate to each other.
Learning Objective 8: To explain common forms of business ownership—sole proprietorship, partnership, and corporation—and demonstrate how they differ in terms of their presentation in the statement of financial position.
Learning Objective 9: To discuss the importance of financial statements to a company and its investors and creditors and why management may take steps to improve the appearance of the company in its financial statements.
The Cash Flow Statement translates earnings in the Income Statement into cash inflows. Explained in detail above as a part of the topic “Financial accounting”, is brought to you by Welingkar’s Distance Learning Division.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideshareFaccounting
Join us on Facebook: http://www.facebook.com/welearnindia
Follow us on Twitter: https://twitter.com/WeLearnIndia
Read our latest blog at: http://welearnindia.wordpress.com
Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP
Essential Components of Financial Statement Invensis
A financial statement is an important tool which gives crystal clear information about a company’s financial situation and is helpful in making sound business decisions. Find out the essential components of financial statement and how outsourcing Finance and Accounting services to Invensis Technologies can improve the fiscal aspect of your company.
Invensis Technologies (http://www.invensis.net) is a leading IT & Business Process Outsourcing Firm based in Bangalore, India with more than 15 years of experience. Our customized End-to-End Finance and Accounting(F&A) Outsourcing Services (http://www.invensis.net/outsource-finance-accounting-bpo-services.php) include Tax Preparation Services, Accounting and Bookkeeping, Financial Analysis reporting, Record to Report Services and Payroll Processing Services.
To find out more about our services and benefits of partnering with us, please contact us at sales{at}invensis{dot}net or you can call us from US +1(302)-261-9036 ; UK +44 203 411 0183 ; AUS +61 3 8820 5183 ; IND +91 80 41155233
Profitability Ratio
A profitability ratio is a measure of financial ratio defining the profit percent and return percent from the business using data from financial statements at a specific point of time
It assess business’s ability to generate gross profit, operating profit and net profit from the sales using data from profit& loss statement
It even takes into consideration various return generating ability of business in terms of return on assets, return on capital employed, return on equity, return on investment using data from balance sheet
Types of profitability ratio
Gross Profit Ratio, Net Profit Ratio, Operating Profit Ratio, Return on Assets, Return on Equity, Return on Investment, Return on Capital Employed
Gross Profit Ratio
Gross Profit Ratio(GPR) is a profitability ratio that shows the relationship between gross profit and the revenue from net sales
GPR = (퐆퐫퐨퐬퐬 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬)
Net Profit Ratio
The net profit ratio is equal to how much net profit is generated as a ratio of revenue earned through sales
Net Profit Ratio = (퐍퐞퐭 푷풓풐풇풊풕)/(퐍퐞퐭 푺풂풍풆풔)
Operating Profit Margin is a profitability ratio used to calculate the percentage of operating profit a company produces from its operations, prior to deduction of taxes and interest charges
Operating Profit Ratio
Operating Profit Ratio = (퐎퐩퐞퐫퐚퐭퐢퐧퐠 퐏퐫퐨퐟퐢퐭)/(퐍퐞퐭 퐒퐚퐥퐞퐬)
Return on assets (ROA) is a kind of profitability measure used to determine returns on assets relevant when compared across the companies or previous performance of the company
Return On Asset = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐀퐬퐬퐞퐭퐬)
Return on equity (ROE) is a measure of financial performance calculated by dividing net profit by average shareholders' equity
ROE = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐀퐯퐠.퐓퐨퐭퐚퐥 퐄퐪퐮퐢퐭퐲)
Return on capital employed is a profitability ratio used in valuation of company’s financial position depicting the return out of capital employed
ROCE = 퐄퐁퐈퐓/(퐂퐚퐩퐢퐭퐚퐥 퐄퐦퐩퐥퐨퐲퐞퐝)
Return on investment is a profitability measure used by businesses to identify the efficiency of business in generating return out of an investment
ROI = (퐍퐞퐭 퐏퐫퐨퐟퐢퐭)/(퐂퐨퐬퐭 퐨퐟 퐈퐧퐯퐞퐬퐭퐦퐞퐧퐭)
Ratio analysis refers to the analysis and interpretation of the data collected from the financial statements (i.e., Profit and Loss Statement, Balance Sheet and Fund/Cash Flow statement etc.)
Thank You for Watching
DevTech Finance
Cost Accounting Vs Management Accounting & Management Accounting Vs Financial...Uttar Tamang ✔
This Slide includes:
1. Cost Accounting Vs Management Accounting
2. Management Accounting Vs Financial Accounting
3. Types of Accounting
4. Difference between Cost, Management and Financial Accounting with basis
Learning Objective 1: To explain the nature and general purpose of financial statements.
Learning Objective 2: To explain certain accounting principles that are important for an understanding of financial statements and how professional judgment by accountants may affect the application of those principles.
Learning Objective 3: To demonstrate how certain business transactions affect the elements of the accounting equation: Assets = Liabilities + Owners’ Equity.
Learning Objective 4: To explain how the statement of financial position, often referred to as the balance sheet, is an expansion of the basic accounting equation.
Learning Objective 5: To explain how the income statement reports an enterprise’s financial performance for a period of time in terms of the relationship of revenues and expenses.
Learning Objective 6: To explain how the statement of cash flows presents the change in cash for a period of time in terms of the company’s operating, investing, and financing activities.
Learning Objective 7: To explain the important relationships among the statement of financial position, income statement, and statement of cash flows, and how these statements relate to each other.
Learning Objective 8: To explain common forms of business ownership—sole proprietorship, partnership, and corporation—and demonstrate how they differ in terms of their presentation in the statement of financial position.
Learning Objective 9: To discuss the importance of financial statements to a company and its investors and creditors and why management may take steps to improve the appearance of the company in its financial statements.
The Cash Flow Statement translates earnings in the Income Statement into cash inflows. Explained in detail above as a part of the topic “Financial accounting”, is brought to you by Welingkar’s Distance Learning Division.
For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/SlideshareFaccounting
Join us on Facebook: http://www.facebook.com/welearnindia
Follow us on Twitter: https://twitter.com/WeLearnIndia
Read our latest blog at: http://welearnindia.wordpress.com
Subscribe to our Slideshare Channel: http://www.slideshare.net/welingkarDLP
Preparation of financial statements in pakistanAshar Ahmed
Preparation of financial statements in Pakistan according to Companies Ordinance 1984 and IFRS
You can now download the full editable version of this file at following link:
http://www.scribd.com/doc/26760858/Preparation-of-Financial-Statements-in-Pakistan
Conversion Ind AS (the converged IFRS standards) in India Dr Biswadev Dash
02/01/2015 when the Press Information Bureau, Government of India, Ministry of Corporate Affairs (MCA) issued a note outlining the various phases in which Indian Accounting Standards converged with IFRS (Ind AS) is proposed to be implemented in India it was a landmark reforms in accounting & reporting sector. With this the Companies other than Banking Companies, Insurance Companies and NBFCs will be covered. Indian Accounting standard is highly precise. Thus Conversion Ind AS (the converged IFRS standards) in India may significantly affect a company’s day-to-day operations and may even impact the reported profitability of the business itself. Of course Conversion brings a one-time opportunity to comprehensively streamline the financial reporting.
Financial statements of a Company are the introductory and formal periodic reports through which the commercial operation communicates fiscal information to its possessors and colourful other external parties which include investors, duty authorities, government, workers, etc. These typically relate to (a) the balance distance ( position statement) at the end of the counting period, and (b) the statement of profit and loss of a. company. Nowadays, the cash inflow statement is also taken as an integral element of the financial statements of a company.
According to International Accounting Standard Board (IASB), the objective of financial reporting is “to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions.”
Financial Reporting
Anas Alzadjali
ST10299
Roslin Lazarus
Introduction
Analysis of different regulatory framework and governance applicable GIC’s investment strategies and current market operations.
Based on the published annual report of GIC for the year 2019.
ASSUMPTION
GIC consider establishing a joint stock company as a part of its expansion plan
This presentation analysis different regulatory framework and governance applicable to GIC’s investment strategies and current market operations based on the published annual report of GIC for the year 2019, with the assumption that GIC is seriously considering establishing a joint stock company with majority controlling interest in Singapore and India as a part of its expansion plan.
2
Continuation
Financial reporting is the declaration of the financial details to the divergent stakeholders concerning the financial operation and the financial position of the firm for a specified period of time.
Financial reporting standards are the keys that defines the practice standards and financial accounting policies and performs as its basis.
Enhances the financial reporting openness in an international position.
Performs as the accounting end product.
Definition
Financial reporting : declaration of the financial details to the divergent stakeholders concerning the financial operation and the financial position of the firm for a specified period of time.
Financial reporting standards: keys that defines the practice standards and financial accounting policies and performs as its basis.
Enhances the financial reporting openness in an international position.
Performs as the accounting end product.
Components of the financial reporting include;
The Financial statement
Notes to the Financial statement
The prospectus
The Management discussion and analysis
3
Elements Of Financial Statement
The financial statement elements are;
Income Statement : Expenses, Revenues, Purchases and Sales
Balance Sheet: Assets , Liabilities and Capital
Cashflow statement: cashflow from operating activities, investment and financing.
Change in equity.
And notes
Financial statement comprise the critical report of the business that gives financial information which can be used by the stakeholders.
The financial statement elements are;
Income Statement covering expenses, revenues, purchases and sales
Balance Sheet covering assets , liabilities and capital
Cashflow statement covering cashflow from operating activities, investment and financing.
Change in equity showing any change in equity over the period
And notes that gives explanations to the statements.
4
Financial Reporting Objective
Financial statements have been prepared in accordance with: International Financial Reporting Standards (IFRSs),
Applicable disclosure requirements of the Capital Market Authority (CMA)
Relevant requirements of the Commercial Companies Law.
Their objectives are:
To provide information concerning the financial posi ...
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What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
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Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
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In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
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Memorandum Of Association Constitution of Company.pptseri bangash
www.seribangash.com
A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
https://seribangash.com/article-of-association-is-legal-doc-of-company/
Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
https://seribangash.com/promotors-is-person-conceived-formation-company/
Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
https://seribangash.com/difference-public-and-private-company-law/
Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
2. Introduction to Financial
Statements and Audit
We cover in this session the following:
1. Introduction to Financial Statements
2. Why do we audit them
3. Basic Accounting Principles
4. Areas of Balance Sheet
3. Introduction to Financial Statements
Purpose of Financial Statements
Financial statements are a structured representation of the
financial position (Balance Sheet) and financial performance
(Income Statement) of an entity.
The objective of financial statements is to provide information
about the financial position, financial performance and cash
flows of an entity that is useful to a wide range of users in
making economic decisions.
Financial statements also show the results of management’s
stewardship of the resources entrusted to it. To meet this
objective, financial statements provide information about an
entity’s:
4. Introduction to Financial Statements
(a) assets
(b) liabilities
(c) equity
(d) income and expenses, including gains and losses
(e) other changes in equity; and
(f) cash flows
This information, along with other information in the notes,
assists users of financial statements in predicting the entity’s
future cash flows and, in particular, their timing and certainty.
5. Introduction to Financial Statements –
Component of Financial Statements
Components of Financial Statements:
A complete set of financial statements comprises:
a balance sheet;
an income statement;
a statement of changes in equity showing either:
all changes in equity, or
changes in equity other than those arising from
transactions with equity holders acting in their capacity as
equity holders;
a cash flow statement; and
notes, comprising a summary of significant accounting
policies and other explanatory notes.
6. Introduction to Financial Statements –
Reporting Framework
The reporting frame work is applicable in Pakistan while preparing and
presenting of financial statements is as follows:
Applicable Laws and Regulations Regulating Authority
Listed Companies other
than, Insurance, NBFCs’,
Modaraba and Bank
•Companies Ordinance 1984.
•International Financial Reporting Framework (IFRS) as applicable in
Pakistan
•Stock Exchange Listing Regulations
Securities and Exchange
Commission of Pakistan
(SECP)
Banking Companies •International Financial Reporting Framework (IFRS) as applicable in
Pakistan
•Companies Ordinance 1984.
•Stock Exchange Listing Regulations (Particularly Code of Corporate
Governance)
•Banking Ordinance 1962
•Prudential Regulations (Corporate, SMEs’ and Consumers)
Securities and Exchange
Commission of Pakistan
and State Bank of
Pakistan.
Insurance Companies •International Financial Reporting Framework (IFRS) as applicable in
Pakistan
•Companies Ordinance 1984
•Stock Exchange Listing Regulations
•Insurance Ordinance and Rules
Securities and Exchange
Commission of Pakistan.
7. Introduction to Financial Statements –
Reporting Framework
Applicable Laws and Regulations Regulating
Authority
Non Banking
Finance Companies
(Leasing
Companies,
Investment
Companies,
•International Financial Reporting Framework
(IFRS).
•Companies Ordinance 1984.
•Stock Exchange Listing Regulations
(Particularly Code of Corporate Governance)
•NBFC Rules.
•Prudential Regulations for NBFCs’
•Prudential Regulations for Leasing Company
Securities and
Exchange
Commission of
Pakistan.
Modarba •International Financial Reporting Framework
(IFRS).
•Companies Ordinance 1984.
•Stock Exchange Listing Regulations
(Particularly Code of Corporate Governance)
•Modarba Act and Rules
Securities and
Exchange
Commission of
Pakistan and
Registrar of
Modarba
8. Introduction to Financial Statements – User of
Financial Statements
User of the financial statements Interest of the user
Equity investors (existing and potential) They are interested whether buy, hold or sell the shares in
hand and also enable them in payment of dividends.
Loan creditors ie, existing and potential
holders of debentures and loan stock, and
providers of short-term loans
The amount will be paid when due and for continuation of
the business.
Employees (existing, potential and past) Interested in stability and profitability for employment
opportunities, remuneration and retirement benefits.
Business contacts including customers,
trade creditors, competitors and potential
take-over bidders
Whether the payment of loan will be made in due dates and
enable sustainability of business for future business with the
enterprise.
Government, including tax authorities,
government departments and local
authorities
Interested in allocation of resources and also to regulate the
activities of an enterprise and determining tax policies and
as a basis for national income.
Public, including tax payers, ratepayers
and environmental groups
Trends and recent development in the prosperity of the entity
and range of it’s activities.
9. Why do we audit them
In this section we look at the following:
Need for audit
Objective of the audit
Regulatory requirements for audit in Pakistan
10. Why do we audit them- Need for Audit
Principle
(Shareholders)
Directors
Auditor
Information asymmetry
and conflict of interest lead
to information risk for the principle
Principle provides capital
and hires manager
to manage it.
Directors hires audit to
report on the fairness of
manager financial
statements. Risk
information asymmetry of
principle reduce.
Auditor gathers
evidence to evaluate
fairness of manager
financial statements.
Director is accountable to Principle;
provides financial reports.
11. Why do we audit them – Objective of Audit
The objective of the audit is to express an opinion on
the financial statements whether or not the financial
statements present fairly.
12. Why do we audit them
Section 233(3) of the Companies Ordinance requires:
“The balance-sheet and the profit and loss account or income and
expenditure account shall be audited by the auditor of the company, in the
manner hereinafter provided, and the auditor’s report shall be attached
thereto.”
Section 237(3) of the Companies Ordinance requires:
“Every auditor of a holding company appointed under section 252 shall
also report on consolidated financial statements and exercise all such
powers and duties as are vested in him under section 255.”
Section 252(1) of the Companies Ordinance requires:
“Every company shall at each annual general meeting appoint an auditor or
auditors to hold office from the conclusion of that meeting until the
conclusion of the next annual general meeting.”
13. Why do we audit them
Required by the Section 35 (1) of the Banking Ordinance 1962.
“The balance sheet and profit and loss account prepared in accordance with
section 34 (Accounts and balance-sheet) of shall be audited by a person
who is duly qualified, under the Chartered Accountants Ordinance, 1961 (X
of 1961), or any other law for the time being in force, to be an auditor of
companies and is borne on the panel of auditors maintained by the State
Bank for the purposes of audit of banking companies.”
Section 48 (1) of the Insurance Ordinance 2000 requires:
“Every insurer shall appoint an auditor who shall be approved by the
Commission as qualified to perform audits of insurance companies.”
14. Why do we audit them
Section 14(1)(ii) and Section 15 of Modaraba Companies and
Modaraba (Floatation and Control) Ordinance, 1980 requires:
Section 14(1)(ii)
the Modaraba company shall, within six months from the close of the
accounting year, prepare and circulate to the holders of Modaraba
Certificates:
“a report of auditor on the balance sheet and profit and loss
account”
Section 15
“The accounts of a Modaraba shall be audited by an auditor who is
Chartered Accountant appointed by a Modarba Company with the approval
of Registrar.”
15. Basic Accounting Principles
Over all considerations of preparing and presenting financial
statements
Fair Presentation and Compliance with IFRS.
Going Concern
Accrual Basis of Accounting
Consistency of Presentation
Materiality and Aggregation
Off setting
Comparative Information
16. Basic Accounting Principles
Fair Presentation and Compliance with
IFRS.
Financial statements shall present fairly the financial
position, financial performance and cash flows of an entity.
Fair presentation requires the faithful representation of the
effects of transactions, other events and conditions in
accordance with the definitions and recognition criteria for
assets, liabilities, income and expenses set out in the
Framework.
The application of IFRSs, with additional disclosure when
necessary, is presumed to result in financial statements that
achieve a fair presentation.
17. Basic Accounting Principles - Going
Concern
When preparing financial statements, management shall make an
assessment of an entity’s ability to continue as a going concern.
Financial statements shall be prepared on a going concern basis
unless management either intends to liquidate the entity or to
cease trading, or has no realistic alternative but to do so. When
management is aware, in making its assessment, of material
uncertainties related to events or conditions that may cast
significant doubt upon the entity’s ability to continue as a going
concern, those uncertainties shall be disclosed. When financial
statements are not prepared on a going concern basis, that fact
shall be disclosed, together with the basis on which the financial
statements are prepared and the reason why the entity is not
regarded as a going concern.
18. Basic Accounting Principles
Accrual Basis of Accounting
An entity shall prepare its financial statements, except for cash
flow information, using the accrual basis of accounting.
Consistency of Presentation
The presentation and classification of items in the financial
statements shall be retained from one period to the next unless:
it is apparent, following a significant change in the nature of
the entity’s operations or a review of its financial statements,
that another presentation or classification would be more
appropriate having regard to the criteria for the selection and
application of accounting policies in IAS 8; or
a Standard or an Interpretation requires a change in
presentation.
19. Basic Accounting Principles
Materiality and Aggregation
Each material class of similar items shall be presented separately in the
financial statements. Items of a dissimilar nature or function shall be
presented separately unless they are immaterial.
Off setting
Assets and liabilities, and income and expenses, shall not be offset unless
required or permitted by a Standard or an Interpretation.
Comparative Information
Except when a Standard or an Interpretation permits or requires otherwise,
comparative information shall be disclosed in respect of the previous period
for all amounts reported in the financial statements. Comparative
information shall be included for narrative and descriptive information
when it is relevant to an understanding of the current period’s financial
statements.
20. Areas of Balance Sheet
In this section we will cover the following important areas
of the Balance Sheet:
Property, Plant and Equipments
Investments
Loans and Advances
Stock in Trade
Trade Debtors
Cash and Bank Balances
Deferred Liabilities
Long term Loans from Banking Companies
Trade Creditors
Taxation
Contingencies and Commitments
21. Areas of Balance Sheet
Property, Plant and Equipments
Operating Fixed Assets
Inspect assets & trace to records
Vouch additions & deletions with supporting documents.
Examine documents of title.
Re compute gain/loss on disposals.
Check/recalculate depreciation charge.
Check impairment.
Capital Work in Progress
Review board minutes regarding significant additions.
Verify cost incurred with supporting documents
Borrowing cost capitalized are directly attributable to construction,
acquisition or production
22. Areas of Balance Sheet
Investments
Inspect securities in hand and evidence for title of
securities held.
Review investments for income reconciliation.
Vouch sale and re compute gain/loss.
Review classification and description.
Vouch purchases made during the year.
Cash & Bank Balances
Perform physical cash count
Circularize direct confirmations
Obtain reconciliation statements
Review age analysis of long outstanding cheques
23. Areas of Balance Sheet
Loans and Advances
Review agreements
Circularise direct confirmations
Re compute interest and exchange loss
Check subsequent repayment
Check disclosure
Stock in Trade
Perform physical count/inspection
Investigate reasons for any difference between the physical and records
Check valuation as per company’s policy
Identify slow moving items
24. Areas of Balance Sheet
Trade Debtors
Circularise direct confirmations
Check subsequent clearance
Perform age analysis
Deferred Liabilities
Obtain actuarial report and assess reasonableness of assumptions
Vouch payments during the period to ensure completeness
Ensure disclosure requirement of IAS 19
Taxation-Current & deferred
Review updated tax position
Check working of provision for taxation
Vouch payments
Check working of deferred taxation
Ensure disclosure with IAS 12
25. Areas of Balance Sheet
Trade Creditors
Circularise direct confirmations
Check subsequent clearance
Perform age analysis
Loans from Banking Companies
Review agreements
Circularise direct confirmations
Check interest and exchange effects
Check subsequent repayment
Check disclosure
Contingencies and Commitments
Obtain list of commitment and contingencies
Circularise direct confirmations to legal advisors
Review legal fees
Review minutes of Board of Directors meeting
26. Financial Ratios represent an attempt to
standardize financial information in order to
facilitate meaningful comparisons over time
(time series) and between firms or firm to
industry (cross section).
The business is a storehouse of resources
(i.e. assets on the balance sheet) which it
converts to profit through production and then
sales (reported on the income statement).
What are Financial Ratios?
How do Ratios Relate to Business Activity?
27. What are the Four Types of Financial Ratios?
Leverage Ratios
Profitability Ratios
Liquidity Ratios
Efficiency Ratios
28. What Do Liquidity Ratios Measure?
Measure the ability of a firm to meet its short
term financial obligations.
What are the Liquidity Ratios?
Current Ratio
Acid Test Ratio
29. What Do Efficiency Ratios Measure?
Measure how effectively the firm is using it’s
resources to generate sales.
What Are The Efficiency Ratios?
Average Collection Period
Inventory Turnover
Fixed Asset Turnover
Total Asset Turnover
30. What Do Leverage Ratios Measure?
Measure the extent to which non-owner
supplied funds have been used to finance the
firm’s assets.
What Are The Leverage Ratios?
Debt Ratio
Long Term Debt to Total Capitalization
Times Interest Earned
Cash Flow Overall Coverage
31. What Do Profitability Ratios Measure?
Measures the firm’s profitability at different
levels in the firm.
What Are The Profitability Ratios?
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Operating Income Return on Investment
Return On Total Assets
Return On Common Equity