Auditing Client Assets, Expenses & Investments

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Assessing Controls Related to Cash

When you assess an auditing client’s cash control risk, remember that control risk is directly affected by the internal controls the company has set in place. Cash is a risky account because the money [more…]

Monitoring the Frequency of Deposits and Account Balances

While you’re interviewing the audit client, find out about its sources of cash and how often it makes bank deposits. If an audit client — especially a retail client or one receiving a preponderance of [more…]

How to Check Bank Reconciliations

Your audit client will prepare bank reconciliations, which compare and adjust its cash balance per its bank statements with its book cash balances. When you audit the bank reconciliations, you must make [more…]

How to Test Investments

As an auditor you have to test security investments such as your client’s stocks and bonds. Testing investments during an audit is no different from testing any other financial account, such as cash. You [more…]

Auditing Prepaid Expenses and Deferred Charges

As an auditor you have to pay attention to all of a company’s assets. Prepaid expenses and deferred charges appear on a company’s balance sheet as other assets [more…]

Examining Inherent Risks of Fixed Assets

At every step of an audit, you have to consider risks of misstatement and their associated controls. When you are auditing assets, be sure to focus is on identifying risks in the fixed-asset management [more…]

Assessing Fixed-Asset Control Risk

When auditing a company’s assets, don’t forget to take a look at asset control risk features the company has in place. During your audit you can perform tests of internal controls to limit the number of [more…]

Testing Transaction Assertions During an Audit

During your audit, you need to test management financial statement assertions for fixed and intangible asset transactions. The six assertions that you must attend to when auditing — occurrence, ownership [more…]

Temporary Differences in Tax Accounting

Temporary differences occur because financial accounting and tax accounting rules are somewhat inconsistent when determining when to record some items of revenue and expense. Because of these inconsistencies [more…]

How Investments Lose Value over Time

Both inflation and interest rates, in their ability to change the value of money over time, play a very important role in how corporations manage their liquid assets and their investments. Therefore, to [more…]

How to Predict the Future Value of Investments

The future value of an asset refers to the amount of value that you estimate something will have at any point in the future. Want to know what a machine will be worth after 5 years? Want to know how much [more…]

How to Calculate the Present Value of Investments

The ability to estimate the value of something today that will change value over time is essential not only to buying and selling assets, it’s also a critical element of tracking the progress and efficiency [more…]

Just What Is Capital Budgeting?

Capital budgeting is the process by which you evaluate the financial potential for each of one or more possible capital investments. In those cases where several options are available but the corporation [more…]

How to Calculate the Accounting Rate of Return

The simplest rate of return to calculate is the accounting rate of return (ARR). This is a very fundamental calculation to determine how much value an investment generates for the corporation and its owners [more…]

Make the Most of the Internal Rate of Return through Modification

The accounting rate of return is helpful, but it’s so simple that it’s extremely limited in its ability to provide you with information that’s useful in your attempt to manage assets, investments, and [more…]

How to Calculate Net Present Values

One of the core calculations used in capital budgeting is net present value (NPV). Net present value is calculated using the following equation, which says that you add up all the present values of all [more…]

How to Determine the Payback Period on Investments

The payback period is the number of periods it will take to pay back the initial investment on a piece of capital. In other words, it’s the number of years it will take for a corporation to break even [more…]

How to Manage Capital Allocations

How do you compare different potential investments? Every investment has an opportunity cost — the loss of the next best option — so corporations really need to ensure that they’re picking the best option [more…]

Value Schedule Metrics

Earned value management includes ensuring that everything remains on schedule. Time is money. So anytime that there’s a deviation in the schedule regarding when a project will be completed or when it will [more…]

Budget Metrics as Part of Earned Value Management

When it comes to allocating resources toward an investment to derive value from it (you can’t just buy a machine without allocating resources to the operation, maintenance, and financing of that machine [more…]

Bond Rates in Corporate Finance

In the world of corporate finance, you need to consider fixed-rate bonds and floating-rate bonds. Fixed-rate bonds are pretty simple. If the bond says it pays 1 percent interest plus principal, then that’s [more…]

How to Read Bond Information

You need to know how to read bonds in the language of corporate finance to understand their potential impact on your corporation. Look in the finance portion of any newspaper [more…]

What You Need to Know About Bond Valuation for Corporate Finance

The valuation of bonds refers to the process by which you determine the value of a bond. This information is then used, in conjunction with your personal estimates of what you’re willing to pay or your [more…]

The Different Types of Stock Orders in Corporate Finance

After you decide that you want to buy or sell stock, you have to decide the type of buy or sell order you want to place, the price at which you want the transaction to take place, and the timing of the [more…]

Compare Long and Short Stocks

To truly understand the role that stocks play in corporate finance and investing, you need to understand the terms longand short. In the context of equities trading, tend to remain a mystery for a large [more…]

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