Finance and Investment Cycle

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Finance and Investment Cycle I. Introduction A. Special purpose entities B. Transaction: less frequent, large and complex C. Focus of control activities: authorization of transactions & compete of accounting personnel D. Focus of substantive procedures: understanding of the transactions, verifying amounts and calculations, ensuring presentation and disclosures II. Inherent risks E. Lease accounting 1. The classification of operating or capitalized lease is based on the assumption in ASC840 F. Loan covenants 2. Intend to keep the borrower’s financial position at the same level as it was when the bank initiated the loan 3. Covenants restrict payment of…show more content…
When parts of the notes become due: CFO and controller reclassify current/LT x. Calculated liabilities and credits: lease obligation, deferred tax, pension, foreign currency gain/loss, etc. --- try to capture the economic reality by following GAAP 26. Periodic reconciliation xi. Verify number of shares: Obtain reports from registrar and transfer agent to verify company’s record of number of shares outstanding agrees with registrar’s number xii. Trustee: handle ownership of bond xiii. Ownership of bond: Obtain confirmation and reports from trustee to reconcile the trustee’s records to the company’s records xiv. Small companies self issue stock by using “stock certificate book” authorized by board of directors. Responsible person should periodically inspect the stock certificate book to determine if the missing certificate is in possession of owners. (By confirm ownership of shares with the holder of the records) O. Investing transactions: investments and intangibles (3) 27. Authorization xv. High level approval required xvi. Auditing: vouch major acquisition to the documented approval 28. Custody xvii. Negotiable certificate (bond, stock): kept in brokerage account xviii. Negotiable certificate (title to real estate): in the actual possession of client, or in the bank safe deposit box of the company xix.
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