Financial Auditing Session 2 PDF

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 45  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 46  Last Update 01/09/24 I. DEFINITION AND NOW PLAY ON...

Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 45  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 46  Last Update 01/09/24 I. DEFINITION AND NOW PLAY ON FINANCIAL AUDITING - Audrey CHEREF - page 47  Last Update 01/09/24 II. ACCOUNTING PRINCIPLES Presentation Calculations Continuity of operations Historical cost Materiality principle Consistency of methods & valuations / Principle of clarity / Comparability of good information / non- financial statements compensation Period independence Opening balance sheet intangibility Prudency FINANCIAL AUDITING - Audrey CHEREF - page 48  Last Update 01/09/24 III. OBLIGATIONS Income Balance statement The notes sheet or P&L FINANCIAL AUDITING - Audrey CHEREF - page 49  Last Update 01/09/24 IV. USED DOCUMENTS Accounting Accounting & Documents & book auxiliary entry 10 journal years Accounting Accounting ledger balance FINANCIAL AUDITING - Audrey CHEREF - page 50  Last Update 01/09/24 A. BOOK ENTRY Journal nature - date Account Account name Debit Credit number Account debited Debited account name xxx Account credited Credited account name xxx Book entry name FINANCIAL AUDITING - Audrey CHEREF - page 51  Last Update 01/09/24 B. JOURNALS sales purchases cash miscellaneous FINANCIAL AUDITING - Audrey CHEREF - page 52  Last Update 01/09/24 B. JOURNALS Journal nature - Period Book Book Account VAT Date entry Account name entry Debit Credit number code number name xx/xx/xx xx Debited account name xxx xx xx Credited account name xxx xx/xx/xx xx Debited account name xxx xx xx Credited account name xxx xx/xx/xx xx Debited account name xxx xx xx Credited account name xxx FINANCIAL AUDITING - Audrey CHEREF - page 53  Last Update 01/09/24 C. LEDGER ACCOUNT NUMBER ACCOUNT NAME Book entry VAT Date Journal Lettering Debit Credit Balance name code xx/xx/xx xx xxx xxx xx/xx/xx xx xxx xxx xx/xx/xx xx xxx xxx xx/xx/xx xx xxx xxx xx/xx/xx xx xxx xxx TOTAL ACCOUNT NUMBER xxx xxx xxx FINANCIAL AUDITING - Audrey CHEREF - page 54  Last Update 01/09/24 D. BALANCE Account number - N-1 N Balance name Debit Credit Debit Credit Debit Credit xxx - xxxxxxxxxxxxx xxx xxxx xxx xxx - xxxxxxxxxxxxx xx xxxxx xxx TOTAL CLASS 1 BALANCE CLASS 1 xxx - xxxxxxxxxxxxx xxx xxxx xxx xxx - xxxxxxxxxxxxx xx xxxxx xxx TOTAL CLASS 2 BALANCE CLASS 2 GENERAL TOTAL xxx xxx xxx xxx xxx xxx GENERAL BALANCE xxxx xxxx FINANCIAL AUDITING - Audrey CHEREF - page 55  Last Update 01/09/24 VI. ORGANIZATION Accounting vouchers & book entry Accounting software Auxiliary journal Accounting journal Ledger Balance Income statement Balance sheet FINANCIAL AUDITING - Audrey CHEREF - page 56  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 57  Last Update 01/09/24 I. DEFINITION AND NOW PLAY ON FINANCIAL AUDITING - Audrey CHEREF - page 58  Last Update 01/09/24 II. NOMENCLATURE Class 1 Class 2 Class 3 Class 4 Class 5 Inventories and work-in- Capital accounts Fixed assets accounts Third party accounts Financial accounts progress accounts Raw materials and 10 Capital & reserves 20 Intangible assets 31 40 Trade accounts payable 50 Marketable securities supplies Property, plant and Trade accounts 11 Retained earnings 21 32 Other supplies 41 51 Bank equipment receivable Work-in-progress of Staff and related 12 Net income 22 Concession assets 33 42 53 Cash finished goods accounts Assets under Work-in-progress of Social security & other Imprest accounts and 13 Investment grant 23 34 43 54 construction services social organisms letters of credit Investments and Regulated loans non- States and other public 14 26 35 Finished good 44 58 Internal transfers provisions consolidated bodies companies Provisions pour Provisions for Other long-term 15 losses and 27 37 Goods 45 Group and associates 59 impairment of financial investments contingencies financial accounts Provisions for Borrowings and Depreciation of fixed impairment of Sundry receivables and 16 28 39 46 similar liabilities assets inventories and work- payables in-progress Payables to Depreciation of fixed 17 subsidiaries and 29 47 Suspense accounts assets affiliates Provisions for Joint-venture Accruals and deferred 18 impairment of fixed 48 liaison accounts income assets Provisions for 49 impairment of third- FINANCIAL AUDITING - Audrey CHEREF - page 59 party accounts  Last Update 01/09/24 III. FRENCH BS PRESENTATION N ASSET Amortizations & N-1 LIABILITY N N-1 Gross Net depreciations Subscribed capital - uncalled EQUITY ACTIF IMMOBILISE (a) Capital [paid...] (a) Intangible assets Issue, merger and contribution premiums Set-up costs Revaluation adjustment (b) Research and development Goodwill adjustment (c) Concessions, patents, licenses, trademarks, processes, software, rights and similar assets Reserves Business goodwill (1) Legal reserve Others Statutory or contractual reserves Intangible assets in progress Regulated reserves Advances and deposits Others Tangible assets Retained earnings (d) Lands Profit/loss for the year (e) Buildings Investment grants Plant, machinery and industrial equipment Regulated provisions Others Total I Property, plant and equipment in progress Advances and deposits Financial assets (2) Equity securities (b) Receivables from equity investments Long-term portfolio securities PROVISIONS FOR LOSSES & Other long-term securities CONTINGENCIES Loans Provisions for contingencies Others Provisions for losses Total I Total II FINANCIAL AUDITING - Audrey CHEREF - page 60  Last Update 01/09/24 III. FRENCH BS PRESENTATION CURRENT ASSET DEBTS (1) (g) Inventories and work-in-progress Convertible bond loans Raw materials and other supplies Other bond loans Work-in-progress [finished goods and services] (c) Borrowings from credit institutions (2) Intermediate and finished goods Borrowings and other financial debts (3) Goods Advances and deposits received on orders Advances and deposits paid on orders Trade payables and related accounts (f) Receivables (3) Tax and social debts Trade receivables (a) and related accounts (d) Payables on fixed assets and related accounts Others Other debts Subscribed capital - called, unpaid Cash instruments Marketable securities (e) Own shares Other securities Cash instruments Cash and cash equivalents Adjustments Adjustments Prepaid and accrued expenses (3) Prepaid and accrued incomes (1) Total II Total III Deferred charges (III) Loan redemption premiums (IV) Currency translation adjustment (V) Currency translation adjustment (IV) GENERAL TOTAL (I+II+III+IV+V) GENERAL TOTAL (I+II+III+IV) FINANCIAL AUDITING - Audrey CHEREF - page 61  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 62  Last Update 01/09/24 I. DEFINITION AND NOW PLAY ON FINANCIAL FINANCIAL ACCOUNTING AUDITING - Audrey CHEREF - page 63  Last Update 01/09/24 II. NOMENCLATURE Class 6 Class 7 Expense accounts Income accounts Ventes de produits fabriqués, prestations 60 Achats (sauf 603) 70 de services, marchandises 603 Variation des stocks 71 Production stockés (ou déstockage) 61/ Autres charges externes 72 Production immobilisée 62 Impôts, taxes et versements Produits nets partiels sur opérations à long- 63 73 assimilés terme 64 Charges de personnel 74 Subventions d’exploitations 65 Autres charges de gestion courantes 75 Autres produits de gestion courante 66 Charges financières 76 Produits financiers 67 Charges exceptionnelles 77 Produits exceptionnels Dotations aux amortissements et 68 78 Reprises sur amortissements et provisions provisions Participation des salariés – Impôts 69 79 Transferts de charges sur les bénéfices et assimilés FINANCIAL PERFORMANCE MANAGEMENT - Audrey CHEREF - page 64 COMPTABILITE FINANCIAL APPROFONDIE AUDITING2 - Audrey CHEREF - page 64  Last Update 01/09/24 III. FRENCH INCOME STATEMENT EXPENSES N INCOMES N Operating expenses Operating incomes Purchases of goods (a) Sales of goods Change in inventories (b) Sold production (finished goods & services) (a) Purchases of raw materials and other supplies (a) Sub-total A – Net sales Change in inventories (b) Including exports: *Other purchases and external charges Stored production (b) Taxes, duties and similar expenses Fixed assets production Wages and salaries Operating grant Social expenses Reversals of provisions (and depreciation), expense transfers Depreciation, amortization and provisions: Other incomes On fixed assets: depreciation (c) On current assets: provisions (c) For losses and contingencies: provisions Other expenses TOTAL I TOTAL I Share of profits from joint ventures (II) : Share of profits from joint ventures (II) : Financial expenses Financial incomes Depreciation, amortization and provisions From equity securities (2) Interest and similar expenses (2) From marketable securities and receivables from investments (2) Negative foreign exchange differences Other interests and similar incomes (2) Losses on disposals of financial assets Reversals of provisions (and depreciation), expense transfers Positive foreign exchange differences Gains on disposals of financial assets TOTAL III TOTAL III Extraordinary expenses Extraordinary incomes On non-capital transactions On non-capital transactions On capital transaction On capital transaction Depreciation, amortization and provisions Reversals of provisions (and depreciation), expense transfers TOTAL IV TOTAL IV Employee profit sharing V Income tax VI TOTAL EXPENSES (I+II+III+IV+V+VI) TOTAL INCOMES (I+II+III+IV+V+VI) Credit balance (3) FINANCIAL PERFORMANCEDebit MANAGEMENT balance (3) - Audrey CHEREF - page 65 FINANCIAL FINANCIAL ACCOUNTING AUDITING - Audrey CHEREF - page 65 GENERAL TOTAL GENERAL TOTAL  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 66  Last Update 01/09/24 I. DEFINITION In reality No income statement & balance sheet after each transactions Book entry by account number FINANCIAL AUDITING - Audrey CHEREF - page 67  Last Update 01/09/24 II. DEFINITION NEED RESOURCE Increase Decrease Increase Decrease Debit Credit Credit Debit Normal Balance Normal Balance Debit > credit Credit FINANCIAL >- Audrey AUDITING Debit CHEREF - page 68  Last Update 01/09/24 AND NOW, PLAY ON 1. 15/04: Goods purchase (1 000 €) paid in 90 days & not stored (VAT 20%) 2. 17/04: Resale cash of these goods (1200 €) (VAT 20%) Record all the necessary book entries FINANCIAL AUDITING - Audrey CHEREF - page 69  Last Update 01/09/24 FINANCIAL AUDITING - Audrey CHEREF - page 70  Last Update 01/09/24 I. DEFINITION Independence principle Expenses adjustment Accounting document received and therefore Accounting document not received and recorded, but corresponds to an expense for therefore not accounted for a subsequent period Accrued expenses Prepaid expenses Incomes adjustment Accounting document established and Accounting document not established and therefore accounted for, and corresponds to therefore not accounted for revenue for a subsequent period Acrued incomes Prepaid incomes FINANCIAL AUDITING - Audrey CHEREF - page 71  Last Update 01/09/24 II. ACCRUED EXPENSES = Expenses not yet received but related to the period INCOME STATEMENT BALANCE SHEET Debit - 44586 – VAT to be adjusted Debit - 6 – Expenses (ET) Credit - 408 (IT) or other Category Accounts 1688 - Accrued interest on borrowings Financing 5181 - Accrued interest payable (bank credit balances) 5198 - Accrued interest on bank overdrafts 4081 - Suppliers - invoices not yet received Suppliers 4088 - Suppliers - accrued interest 4084 - Fixed asset suppliers - invoices not yet received 4282 - Personnel - accrued vacation payables 4284 - Personnel - provisioned liabilities for employee profit-sharing 4286 - Personnel - other accrued liabilities Tax & social 4382 - Social organisms - social charges on vacation pay 4386 - Social organisms - other accrued expenses7 4482 - State - tax on vacation pay 4486 - State - accrued expenses Others 4686 - Sundry creditors - accrued expenses FINANCIAL AUDITING - Audrey CHEREF - page 72  Last Update 01/09/24 III. ACCRUED INCOMES = earned income not yet recognized and whose amount has not yet been definitively determined INCOME STATEMENT BALANCE SHEET Credit - 44587 – VAT on invoices to be issued Credit - 7 – Incomes (ET) Debit - 418 (IT) Category Accounts 2768 - Other long-term receivables - accrued interests Financing 5088 - Accrued interest on bonds and similar securities 5188 - Bank - accrued interest receivable 4181 - Customers - invoices to be issued Clients 4188 - Customers - accrued interests 4287 - Personnel - accrued incomes Tax & social 4387 - Social organisms - accrued incomes 4487 - State - accrued incomes Others 4687 - Sundry debtors - accrued incomes FINANCIAL AUDITING - Audrey CHEREF - page 73  Last Update 01/09/24 IV. PREPAID EXPENSES & INCOMES Prepaid expenses = expenses recorded in the current year but related to the future one INCOME STATEMENT BALANCE SHEET Debit - 6 – Expenses (ET) Debit - 486 = income received or recognized before the corresponding services have been rendered or supplies provided INCOME STATEMENT BALANCE SHEET Debit - 7 – Incomes (ET) 707 – Sales of goods Credit - 487 – Prepaid incomes 706 – Sales of services FINANCIAL AUDITING - Audrey CHEREF - page 74  Last Update 01/09/24 VI. NEXT PERIOD N+1 At the beginning of the following year, reversal of the book entry and recording of the actual amount in the current year. Category Impact next period N+1 Accrued expenses Expenses to be cancelled in N+1 Prepaid expenses Expenses to be recorded in N+1 Accrued incomes Margin to be cancelled in N+1 Prepaid incomes Margin to be recorded in N+1 FINANCIAL AUDITING - Audrey CHEREF - page 75