Unit 11:

Learning hours: NQF level 4: Description of unit

Financial Systems and Auditing

60 BTEC Higher National H2

This unit examines the accounting and management control systems of a business. Learners will analyse these systems and evaluate their effectiveness, particularly in terms of controls and safeguards against error and fraud. The purpose and conduct of an audit will be covered, together with the process of audit reporting.

Summary of learning outcomes

To achieve this unit a learner must: 1 Evaluate the effectiveness of accounting systems within a business 2 Analyse the management control systems of a business 3 Contribute to the planning and conduct of an audit assignment 4 Prepare audit reports.

Content
1 Accounting systems Accounting records: books of prime entry (daybooks), accounts and ledgers (sales, purchases, nominal/general), trial balance, final accounts Fundamental accounting concepts: accruals, prudence, consistency, going concern, materiality, business entity Accounting systems: manual and computerised, effect of business size and structure 2 Management control systems Business risk: types eg operational, financial, compliance; identification of risk and responsibility for risk management, influences on corporate governance eg Cadbury Code Control: control systems and procedures within the business eg segregation of duties, authorisation Fraud: types, implications, detection 3 Planning and conduct of an audit assignment Regulatory environment: legal duties and status of auditors, liability of auditors, auditing standards and guidelines Role of the auditor: internal and external audit and the relationship between the two, responsibilities of management as opposed to auditors Audit planning: scope, materiality, risk Audit testing: systems based (compliance) and substantive testing, sampling methods eg random, stratified, systematic; confidence intervals Records: audit files and working papers, checklists and programmes, flowcharts and questionnaires 4 Audit reports Statutory reports: purpose, content (opinion of auditor), qualified and unqualified, types of qualification Management letters: purpose and content

Outcomes and assessment criteria

Outcomes Assessment criteria for pass To achieve each outcome a learner must demonstrate the ability to: explain the purpose and use of the different accounting records explain the importance and meaning of the fundamental accounting concepts assess the factors which influence the nature and structure of accounting systems identify the different components of business risk describe and evaluate the control systems in place in a business assess the risk of fraud within a business, and suggest methods for detection of fraud define and explain the duties, status and liability of the auditor describe the relationship between internal and external audit plan an audit with reference to scope, materiality and risk identify and use appropriate audit tests record the audit process in an appropriate manner explain and illustrate different types of qualification within an audit report draft suitable management letters in relation to a statutory audit

1 Evaluate the effectiveness of accounting systems within a business

2 Analyse the management control systems of a business

3 Contribute to the planning and conduct of an audit assignment

4 Prepare audit reports explain the purpose and content of a statutory audit report

Guidance
Delivery Exposure to a variety of systems will aid understanding, and visits to local businesses may help to facilitate this. Learners in employment should be encouraged to research the systems used by their own organisations. Role play within case studies may help with the audit outcomes. Hands-on experience of computerised accounting packages will aid understanding, but is not essential. Assessment Assessment is likely to take the form of assignments or case studies based on real or simulated situations. The accounting systems and management control systems outcomes could be assessed via a workplace-based project, although the sensitivity and confidentiality of financial information may hinder this. Links The unit links with others in the programme such as: Unit 2: Managing Financial Resources and Decisions, Unit 6: Business Decision Making, Unit 9: Management Accounting: Costing and Budgeting, Unit 10: Financial Reporting and Unit 12: Taxation. Additionally the unit covers much of the underpinning knowledge and understanding for the following units of the NVQ in Accounting at level 4: Unit 10: Managing Accounting Systems and Unit 17: Implementing Audit Procedures. The unit covers topics essential for learners wishing to make a career within finance and wishing to become members of professional accounting bodies. Support materials Textbooks Sufficient library resources should be available to enable learners to achieve this unit. Particularly relevant texts are: Millichamp A H Auditing (Continuum International Publishing Group, 2002) ISBN: 08264550X Woolf E Auditing Today (FT Prentice Hall, 1997) ISBN: 0135894662 Journals and newspapers The financial and mainstream press is a useful source of background information, and could provide case studies too.