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GEAR 111 Test 1
Unit 1-4
| Term | Definition |
|---|---|
| What are acc records | Complete financial records of all transactions the entity entered into |
| Purpose of acc records | Capture fin transactions so business can manage its activities. Used in decision making, audit trails and prep of fin statements |
| Need fo acc records | Required for companies act compliance, tax calcs and accountability/audit evidence |
| What are fin statements | Reports compiled by entity detailing fin activities and overall performance & health |
| Purpose of fin statements | Summarizes acc info for users; shows P/L, fin position & cash flows |
| Need for fin statemetns | Users rely on them for decision making Users include banks, owners & government |
| Assertions | Management claims about financial info; needs to be proven Adresses reporting risks |
| Types of assertions | Existence (Transactional) Completeness (Transactional) Accuracy (Transactional) Valuation Rights & obligations Occurrence Cut off (Transactional) Classification (Transactional) Presentation & Disclosure |
| Companies Act | SA legislation that provides for incorp, registration & management of companies |
| CA Section 28 | Governs accounting records Complete & Accurate In an official SA language At registered office Explains transactions 7 years |
| CA Regulation 25(3) | Minimum requirements for acc records Income & Expenses Assets & Liabilities Inventory |
| CA Section 24 | Documents & accounts needs to be retained for 7 years |
| CA Section 29 | Compiled i.t.o. correct reporting standards like IFRS; shows date |
| CA Section 30 | Needs to be prepared 6 months after year end, directors & auditor sign-off & first shareholders meeting after approval |
| CA Section 31 | Copy sent to all shareholders |
| Corporate Governance | System by which an entity is controlled Leadership / accountability Oversight / responsibility Transparency |
| Need & purpose of governance | Ensures org are directed responsibly Ethics Risk Man Compliance Admin |
| Capitals of Corporate Governance | 1. Financial Capital 2. Manufactured capital 3. Intellectual capital 4. Natural capital 5. Social & relational capital (norms & values) 6. Human capital |
| Risk (King IV) | Effect of uncertainty on achieving org objectives, can be positive or negative. |
| Business risk | Risks affecting business objectives; operations, financial, strategical & environmental |
| Risk management | Process of identifying and managing risk - Risk identification - Risk assessment - Risk response & mitigation - Risk monitoring & reporting - Risk-aware culture & communication |
| Risk identification | Finding potential risks internally or externally |
| Risk evaluation/assessment | Assessing likelihood & impact using quantitative & qualitative analysis; Probability (likelihood) and consequence (impact) |
| Risk response / mitigation | Strategies to address risks. Avoid - stop or change activity Reduce - implement controls Transfer - insurance or joint ventures Accept - proceed without controls |
| Risk monitoring & reporting | Tracking risk indicators & reporting to stakeholders |
| Risk culture & training | Promoting risk-aware culture for ethical and responsible risk man |
| Risk appetite/tolerance | Degree of uncertainty the org is willing to accept; board approved; limits risks |
| Level of risk tolerance | Averse: Highly cautious Conservative: Takes minimal risk, but willing to accept low-level risks Balanced: Calculated risks Aggressive: Higher risk for higher reward High-risk seeking: Substantial risks, volatile environments |
| Residual risk | Remaining risks after controls were implemented Inherent risk - Effectiveness of controls = Residual risk |
| Responsible for governance | Directors |
| Relation between governance & risk | Good governance ensures effective risk man through oversight and strategy |
| Internal control | Business process that provides reasonable assurance over objectives Covers operations, reporting & compliance |
| Business process | Tasks or activities to reach a certain goal |
| Reasonable assurance | High level of assurance but not absolute, that statements are free from error |
| Purpose & need for internal control | Helps reach objectives & minimize risks, safeguarding assets, preventing fraud and ensuring reliable info |
| Components of IC | Ethical values & integrity Human resource policies & procedures Organizational structure Participation of those in charge of governance Management style Responsibility assignment |
| Contol activities | Policies & procedures that ensures tasks are done properly & fraud and risk is minimized ex. segregation of activities |
| Information system | System that collects & processes data in timely manner so that personnel can carry out responsibilities |
| Types of control activities | Documentation & records Auth & approval Segregation of duties Access control Independent checks & recon (think social) |
| Components of information systems | Business processes Audit trail Computerized Acc system Communication |
| Acc system | System that records financial transactions Source docs, journals, ledgers |
| Acc system stages | Initiate: transactions Record: journal entries Process: ledgers Report: fin statements |
| Business cycles | Revenue Expenditure Inventory HR Financing & investements |
| Inherent limitations of control | Control cannot eliminate ALL risks Human error, Collusion, Management override |
| Routine vs non-routine transactions | Routine: normal Non-routine: Out of ordinary, unusual |
| Preventative, Detective & Corrective controls | Prevent: before occurrence Detect: identify after occurrence Corrective: fix errors |
| Key components of computer information systems | Hardware, software, people, procedures, data |
| Information systems process | Input: data entered Processing: processed to info Output: provided to users Storage: saved for future use Feedback: improve processes |
| Communication via networks | LAN: Local Area Network WAN: Wide Area Network VPN: Virtual Provate network |
| Communication via | Cabling, Wireless connections, Internet |
| Manual vs Electronic Accounting | Manual: Labour intensive, prone to error, time consuming Electronic: Automation, accurate, enhanced security,easier compliance with regulations |
| How does computerised acc system work | Modules: Ledges etc. Automation: Calcs and data entries Integration: Links fin data to other processes Security: Access control, backups |
| Software | System & application software System: instructs hardware what to do Application: performs functions as required by user, requires system software |
| Acc packages | Application software designed to manage fin transactions, accounts and reporting |
| Database | Collection of data organised to efficiently be retrieved |
| Master files | Contains permanent data about entity |
| Transaction files | Store data of individual transactions |
| Real-time VS batch processing | RT processing: System processes data upon entry (ex, online banking) Batch processing: Processes in groups or batches often at scheduled times |
| Data | Raw unprocessed facts & figures |
| Field | Single unit of data |
| Record | Collection of fields |
| File | Collection of records |
| Blockchain tech | Decentralized digital ledger recording transactions across many computers to prevent alterations or tampering. Used for Crypto, SCM, Secure transactions |
Created by:
CARA.FAURIE
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