Outline and discuss the Capital Asset Pricing Model (CAPM) as means of Essay - 3

Outline and discuss the Capital Asset Pricing Model (CAPM) as means of valuing securities and their risk. What are the drawbacks - Essay Example Some other financial experts like Lintner and Mossini also explained and purified CAPM and its interpretation in later years (Gassen, and Sellhorn, 2006). Capital Asset Pricing Model Being a quantitative tool for computing the yield of a security, CAPM is used for pricing the financial asset through mathematical calculations (Fields and Vincent, 2001). There are three main components of CAPM model which are stated as follows: Rf = Risk-free rate Beta = Risk of individual security with respect to market Rm – Rf = Market Risk Premium Risk-free Rate Risk free rate is considered as the rate at which the investor does not face any risk yet he obtains a specified return. This risk-free return can be obtained by investing in government securities which are considered are risk free. However, the term risk-free is referred to only the risk related to default risk. Since governments are considered as the ones which are not supposed to face default risk, therefore, their securities are c onsidered as risk-free securities (Babu, 2012). Beta Beta is the factor which indicates the risk of a particular security associated with the overall market risk (Vishwanath, 2007). ... This is the risk which is beyond the control of an investor as well as the corporations whose securities are being traded in the capital market. This risk is called as the overall market risk such that the whole market is exposed to that risk and bears its consequences (Berk and DeMarzo, 2010). On the contrary, unsystematic risk is the risk related to a specific security such as downfall in the earnings, or slow growth, heavy fine etc. This is the risk which does not affect the market and can be eliminated through diversification by adding more securities in the portfolio. Market does not reward unsystematic risk of a particular because this risk can be eliminated through diversification. But it does reward the systematic risk as this risk is faced by every security simultaneously in the whole market (Watson and Head, 2009). In a more concise manner, beta is the measure of systematic risk of the individual security with respect to market risk. In other words, it tells how much volati le an individual security is with the market volatility. Beta of the overall market is 1. So if the beta of the individual security exceeds 1, it means that the security is having more risk as compared to market risk. On the contrary, if the beta is less than 1, it means that the security is having less volatility as compared to market risk. A risk taker invests in those securities which have a beta of greater than 1 whereas a risk averse investor tends to remain at a safe side and invest in those securities which have a beta lower than 1. Market Risk Premium Market risk premium is actually the difference between the overall market return and the risk free return (Brigham and Ehrhardt, 2010). In other words, it is actually the excess return that market provides above the

Managment Accounting Essay Example | Topics and Well Written Essays - 2000 words

Managment Accounting - Essay Example It can be viewed that the business models adopted in the visual arts sector in the nation are relatively inefficient due to inadequate financial support. In this regard, almost every visual arts sector is seemed to be undercapitalized. The arts sector is facing ample challenges to retain a sustainable performance in this competitive business environment. In this context, the major challenges that face by arts sector in England include cultural aspects, free entry strategy and inability in tackling factors that are accountable for under performance. The sector has been facing the aforementioned challenges mainly due to limited investment of funds and inappropriate allocation of financial resources (Royce, 2011). In relation to the arts sector of England, it can be viewed there is a lack of income which is generated from the entry tickets due to the provisions of free entry. Free entry of visitors in relation to this sector is often regarded as a blessing for public, but this practical implication has led towards inadequate public funding. In this respect, these organisations are more inclined towards incompetency and inefficient performance in the present competitive business environment. Consequently, inadequate availability of public funding has restricted the organisations associated with arts sector in allocating funds for development, maintenance and repair. It can be affirmed that the implication of free entry will be effective in attracting a huge number of customers, but will not facilitate the organisations to obtain adequate funds for complying with future requirements and making greater development. Respectively, the organisations, with inadequate revenues will be unable to meet the requirements of the business costs. Moreover, the... This paper descusses from the above discussion, it can be affirmed that the present business scenario is incessantly changing due to gaining momentum of globalisation and prevalence of extreme business market competition. In this changing business market conditions, organisations are required to develop appropriate strategies and plans in order to maintain sustainable growth and performance. The arts sector in England is surrounded with certain threats that include operational inefficiency and ineffective allocation of financial resources within the context of competitive business environment. In this regard, this sector should adopt efficient business models with the objectives of performing in a sustainable way. In relation to the arts sector of England, it can be viewed there is a lack of income which is generated from the entry tickets due to the provisions of free entry. Free entry of visitors in relation to this sector is often regarded as a blessing for public, but this practical implication has led towards inadequate public funding. In this respect, these organisations are more inclined towards incompetency and inefficient performance in the present competitive business environment. This report makes a conclusion that management accounting is often viewed to be an important business tool which helps organisations in making better decisions and suitably maintaining financial resources at large. Specially mentioning, the statement of Royce can be identified to hold positive viewpoints about the formation of efficient business models for better management of the arts sector. On the other hand, Taylor holds opposing viewpoints about the need of forming effective business models, as this might increase the complexity of business operations and procedures by a certain degree.

Airline Passenger Security Screening Essay Example | Topics and Well Written Essays - 1000 words

Airline Passenger Security Screening - Essay Example The security of the aviation sector has been significantly strengthened over the past several years through the efforts of the Federal government working with State, local, and tribal governments, the international community, and the private sector, but One of the major steps taken was when in June 2006 President ordered the development of a comprehensive National Strategy for Aviation Security in which the Secretary of Homeland Security, in accordance with challenges identified in NSPD-47 and HSPD-16, was to coordinate the operational implementation of seven supporting plans. These plans are Aviation Transportation System Security Plan, Aviation Operational Threat Response Plan, Aviation Transportation System Recovery Plan, Air Domain Surveillance and Intelligence Integration Plan, International Aviation Threat Reduction Plan, Domestic Outreach Plan, and International Outreach Plan. Other plans such as Alien Flight Student Program were also implemented (AFSP) to ensure that foreign students seeking training at flight schools regulated by the Federal Aviation Administration (FAA) are not to be given flight training until Secretary of Homeland Security first determines that doing so will not pose a threat to aviation or national security. Although such plans might seem rude, but it's a necessary impoliteness to ensure safety. Q2: The Q2: The greatest threat faced by the United States aviation after the tragic event of September 11, 2001 at present is terrorism, and this incident can serve as the best case in point of the amount of damage and chaos that can be caused due to threats to aviation security. This can also serve as an example as to how with enhancements in security measures, terrorists have also shown ability to evolve and exploit weaknesses, and the amount of damage they can cause due to proliferation of weapons of mass destruction. All aircraft are under threat of onboard bombs, hijacking and use of standoff weapons, and these aircrafts can also be used as weapons to disrupt aviation transport system as mentioned in above example. Use of such unconventional attack methods by terrorists is not a recent phenomenon. Decade of 1970s has been a witness to it. Hijacking of Trans World Airlines Flight 847 in 1985; hijacking of Pan Am Flight 73 in 1986 in Karachi, Pakistan; the destruction of Pan Am Flight 103 over Scotland in 1988 are just a few examples of religious extremism and state-sponsored terrorism. Interest to instigate terrorism can lie with terrorist groups, who are politically and religiously motivated, and kill civilians indiscriminately to fuel propaganda campaigns. Over time their capabilities have increased due to advancement in technology. It can lie with hostile nations, who have aggressive intentions and support terrorism. Some nations which are politically and economically weak, have weak infrastructure and leadership, can be host to terrorist groups unknowingly. Some domestic criminals with detailed knowledge of aviation sector can also be a great threat if exploited by external elements. Thus it is the need of the hour that United States take preemptive measures to counter terrorism threats, because although financial loss is great and can be recovered, but lives lost have no price. Q3: In United States, airport security is not controlled centrally, but is managed at state or local

Reading respond Essay Example | Topics and Well Written Essays - 1000 words

Reading respond - Essay Example Question 2 A business organization brings together people from diverse backgrounds and with abilities that are uniquely different. Among other organizational management skills required for an efficient management organization is the need for an effective communication system. Such a system should recognize the different abilities shown by the staff. The imminent increase in diversity at places of work have had imminent influences on organizational set ups. This has been so irrespective in terms of communication and human behavioral adaptations. The aspect of communication also entails the aspect of giving what would be defined as nonverbal communication. In this sense, it is important to acknowledge that diversity at places of work have led to obvious issues which need to be addressed if the organization setup is to remain as conventional as would be suitable for everyone involved within the organization. A) Effect on communication The imminent issues that would arise from such event ualities affect communication. These are a myriad. However, the most evident would be based on the cultural differences that people inherently have. For instance, some people are from tolerant background while it is naturally anticipated that other people would harbor intolerable traits. In handling the diversities at the places of work, it is important to a strike a balance in making everyone be comfortable with one another irrespective of the cultural or even social background. Language is a tool of communication. In every communication, it forms an important aspect since it facilitates conveyance of message. Common issues that arise in workplaces with diverse personalities are language problems. This might come from persons having intolerable speech impediments or even plain miscommunications due to language issues. People need to be enlightened on the issues that exist in the workplace. Through that, prejudices and misconceptions would be overcome. Consequently, such moves would aid communication in immeasurable ways. B) Nonverbal communication entails using means or platforms which are not audible. These involve using platforms of communication which might be including signs, gestures, or even written notes. In an organization with a diverse background, there are bound to be issues in communication using the nonverbal platform. In such circumstances, communication might be hindered by such issues as levels of technological sophistication. This comes from the fact that there are those persons within the diverse workforce who might have least exposure to technology compared to others. For instance, the older generation would find it hard to communicate with the younger workmates through social media and other similar platforms. Consequently, it is important to bridge the gap between the two groups to aid effective coexistence and effective communication (Gibson 148). Other forms of communication such as gestures might be influenced by cultural backgrounds. This insinuates that people of different cultural backgrounds at a diverse place of work might have unique interpretations to different gestures. For instance, a facial gesture from one employee might insinuate a different meaning altogether to another employee. In such circumstances, such communication might be hampered. Besides, gender and religion also play an important role in gestures as forms of communication amongst the employees of diverse origin. For instance, a gesture to female employee

Singal processing and linear systems + Matlab Essay

Singal processing and linear systems + Matlab - Essay Example The square wave response of a dynamic system measures how the dynamic system responds when a square wave is applied to its input. Generally a unit step function is applied defined by the following equation: Laplace transform and Fourier transform both are use for analysis of aperiodic signals. Laplace yields the result in s-domain where as Fourier transform yields it in frequency domain. Laplace is more often used because in s-domian it is easier to analyze the performance of the system by looking at the poles and the zeros. The Laplace transform is usually used in the context of one-sided signals, i.e. signals that are zero for all values of  t  less than some value. Usually, this "start time" is set to zero, for convenience and without loss of generality, with the transform integral being taken from zero to infinity. The Fourier transform is used for analyzing systems that process signals that are infinite in extent, such as modulated sinusoids. (LTI) The signal is compared both in frequency and time domain, before and after filtering. As seen in the graphs the amplitude of the signal after filtering is 1. The amplitude thus decreases from 2 to 1, showing 3dB attenuation. In frequency domain the higher frequency coefficients are zero. They cover almost half the total bandwidth. Thus the half band filter has made half of the coefficients zero with 3dB

Working With Teams Essay Example for Free

Working With Teams Essay The scenario is inaccurate coding and lack of patient information which delays payments for the doctor. As head of the billing department a process will be implemented to solve problems on this issue. The current process is not working and because of the loss of productivity, a team was assembled to solve problems. The goal is to find where the error is, and recoup the loss revenue. The first person to question would be the front office personal who checks in a patient upon arrival. After getting the insurance card and demographic page, it is important to compare that information on file to be certain it is accurate, and up to date. A copy of the insurance card should be taken at every visit. Even if the patient were there just there a few weeks ago, it is important to establish a routine of quality. Second, the front office personal should check the insurance carrier to see if a referral is necessary. However, most insurance carriers do not require a referral for family practice it is advantageous to determine if the doctor is in network. When the patient is called back to their examining room, the medical assistant will ask for the reason for the visit. It is up to medical assistant to write down the signs and symptoms of the patient. The documentation must be detailed and recorded properly on the patients face sheet. The department manager of nurses should be scrubbing the documentation before it is submitted to the billing department. For example, if a patient has a routine check and the physician decides to order labs, the lab draw must be documented; even though it was not the reason for the visit. The communication starts with the first point of contact, which is the front office. This person must be detailed, efficient and willing to ask questions without hesitation. They do not assume or fill in the blanks. They are assertive and responsible, to answer staff questions. Without this, the team will spiral downward like a domino effect. For example, the check out personal will not be able to excuse the patient without collecting the co pay. The co pay is not determined unless the insurance is entered correctly by the front office. According to Veean (2012) â€Å"We are paying more attention to electronic devices than to one another. The person to person communication between doctor and staff; and doctor to patient is decreasing. The answer to the question, is we can save health care by utilizing a balance of words and computers†. The team will be organized by personality types. Keeping in mind the group of people has a variety of experience, skills and talents working to help each other achieve a common goal. The group has the task of problem solving why the billing codes are incorrect, and where the missing link is for payment. According to Chong (2007) â€Å"team performance can be positively correlated with the teams that are organized based on their individual characteristics†. Each person will be responsible for their role. Selecting the team by department will make sure all employees are contributing to their individual duty and this will equal success. There will be one leader, a couple of nurses to scrub the documentation for errors, two administration personal to make sure the demographics and insurance information is correct. A person from the billing department who will run a report from the last 120 days. The doctor also needs a friendly reminder, to document according to the procedure. The doctor must know that treating patients is not their sole responsibility in an office. Consequently, all team members were selected according to their talents and skill level. How well they communicate with written and verbal communication. According to Cheesebro, (2010) the ability to solve problems and think critically are good traits to have. They have a desire to accomplish the task and be held accountable for their performance. The potential for conflicts would consist of pointing fingers and judging without investigating. A person might already know who the employee is that started the problem and approach the person, unprofessionally. The process needs to be redefined and no one should be singled out as the culprit. Furthermore, a conflict may ignite if communication is not open. Hence, one person might feel an idea or strategy is not helpful to reach the goal. Although, good teamwork creates a positive environment. If there is a heated disagreement, it can lower the mood, and demotivate the rest of the team. However, according to Cheesebro, (2010) Conflict is healthy in certain situations, because it will bring a team together. Research has shown, employees who feel part of a strong team are happier and more productive. An acronym for team is: trust, empathy, attitude and mutual respect. In conclusion, the best way to avoid future billing failures is to call the insurance company. According to University of Florida, College of Medicine, (2010) Cigna, United Health Care, Medicare and Medicaid will notify the billing office the reasons for denial. It could be as simple as the birth date does not match what is on the enrollment application. A modifier was not placed after an International Classification of Disease, 9th Revision (IDC-9) code. Perhaps the Current Procedural Terminology (CPT) was entered as a 4 digit code instead of a 5 digit code. Even though a report will catch this error, if a person overlooks uploads it electronically anyway, it will be denied. The rules for assigning these codes are complex, and have a significant role in coding; so that payment can be received. For example, if a bill for CPT 31256, nasal/sinus endoscopy would not be supported by ICD-9 826.0, closed fracture of the foot. This claim would be rejected and sent back. In most offices, it is presumptuous to label the front office as the reason for failure in payment. It could be anyone’s guess the reason; hence a team approaches to solve the mystery of lack of payment is effective to problem solving. A person from the billing office would concentrate on these rejected claims, repair the error’s, and return them for payment. They will have 15 days to reprocess the claims, and recover the blunder.

Media Prima and Astro Malaysia: Staff Management

Media Prima and Astro Malaysia: Staff Management 1.0 Introduction Media Prima is the biggest listed media group in Malaysia, owning all main private television stations and having approximately 54 percent of Malaysian television viewers, with its closest rival, the pay-television satellite operator, Astro, which offers over 100 channels or stations, controlling a market share of roughly 29 per cent. RTM controls 17 per cent of the market. Media Prima wholly owns TV channel like TV3, NTV7 and TV9 and holds a 99.5 per cent interest in 8TV. TV3, Media Primas flagship television station and the number one free-to-air television station in the country, finished the 2007 season dominating the years top 20 programmes (The New Straits Times, 4 January 2008). TV3 recorded a 33 per cent share of viewers in 2007 among over a hundred channels available on satellite and FTA TV (The New Straits Times, 4 January 2008). The group also controls radio stations Fly FM and Hot FM, with a combined listenership of 3.5 million. Besides that, Media Prima has a 43 per cent stake in the equity of The New Straits Times Press, which has four newspapers in its stable. Media Prima is said to reach 22 million Malaysians daily: about 11 million television viewers, seven million newspaper readers and four million radio listeners. Malaysias population is a little over 25 million. Astro All Asia Networks Plc, the group that has the monopoly over Malaysias subscription television operation, reaches about 10 million viewers in some two million homes representing a penetration rate of approximately 38 per cent of Malaysias TV households in 2010. (Astro Annual Report, 2010) Astro began operating in 1996 and today offers over 100 channels with a wide mix of foreign and local programmes. Its sister company Airtime Management Programming runs the eight radio stations in its stable, include Hitz, Mix, Light Easy, Era, My, Xfresh, THR, and Sinar. 2.0 Training and Development Conduct a Training and Development in an organization is essential where it needs is identified during each employees annual career development review. From this process, the acquisition of new skills, competencies, attitudes and knowledge will lead the employees to changed behaviour from reactive to proactive, greater maturity and critical thinking. In Astro, employee satisfaction survey was carried out to complement existing communication channels. Opinions of 3,054 employees were collated through online survey forms. The survey sought employees views on 13 major categories covering various aspects of their jobs. (Appendix B) The total favourable for Training and Career Development where employees think about Astro is doing are 65 percent. This figure is considered moderate where it should take further action to improve. Thus, in 2009, Astro convened two full-scale Town Hall meetings to share latest developments and discussed the Companys direction, 48 training seminars on topics ranging from leadership courses to safety and health trainings as well as introduce new high definition service which is branded as Astro B.yond. Information that had transpired was recorded in DVDs, and will send to Astro offices across the country in future for training and development purposes. Realities in economic and advances in technology cause the availability of jobs in TV station have changed rapidly. Therefore, there were several training initiatives designed to increase the number of skilled people in Media Prima. In 2009, the organization invested about RM1.14 million for staff training which involved 3,615 man-days in total in the organization. A summary of the organization training breakdown for 2008 and 2009 is shown in Appendix C. The majority of the training is provided to technical staff which conducted at the organization itself. This is to ensure that the organization maintain the best quality and keep up to date with the latest technology and techniques available in media production. Although both organization utilize Training and Development, but the ways of conduct is very different. Astro adopt an audiovisual method where used of DVDs for training and development will helps the organization to reduce cost, manpower and not time consuming. On the other side, Media Prima utilize apprenticeship training where the employees enter the skilled trades given through instruction and experience in the practical and theoretical aspects of work. When employees face problems in workplace, they can solve it based on their experience gained during the training. 3.0 Performance Management System A new performance evaluation system in Astro consists of a 360Â ° feedback mechanism to get a balanced assessment of the employee own peers. The need for this balance is also reflected in a revised Performance Review Form. One significant aspect of the new performance evaluation is the Relative Ranking Rating which rewards high performing employees in a transparent manner. Employees who fall under the lowest of the three-tier scale will be coached and guided via a Low Performance Management Process (CAP) system. (Appendix D) At Astro, employees are given clear expectations of the accomplishments desired of them as well as the ways to perform and achieve these expectations. This is done through the Performance Management System (PMS) under which periodic performance evaluation exercises are conducted to review employees performance. With this system, employees are aware of their strengths and also given ample room to work on improving their performances. The reviews run in 2 cycles in the span of the financial year; a year end review in January followed by a midyear review in July. Media Prima has introduced a 360 degree feedback system which is also referred to as the multirater or multisource feedback. It provides employees with performance feedback from supervisors, co-workers, peers, customers and reporting staff. It also includes self-assessment. We implemented this system as we take human capital management and development very seriously. 360 degree assessment is a process whereby the company takes stock of its capability once every two to three years to meet business challenges. The process begins with the company putting in place a competency framework which is aligned to the business direction of the company. The competency framework is used as a guide to recruit, develop, assess and compensate the employees based on performance and capabilities. In the case of Media Prima, an external consultant was hired to conduct the data collection process as well as the feedback and the follow up process. 4.0 Compensation and Rewards The Group operates a performance based bonus scheme for all employees, including the executive directors. The criteria for the scheme is dependent on the achievement of key performance indicators (KPI) set for the Groups business activities as measured against targets, together with an assessment of each individuals performance during the period. Bonuses payable to the executive directors are reviewed by the Remuneration Committee and approved by the Board. Employees compensation is determined by their performance which is measured across various Key Performance Indicators (KPIs). Media Prima uses a point-based system which ranges from 2 to 5 in determining the weight of the bonus (5 being the highest performing). This process is used to assess all employees (100%). The percentage of employees achieving each performing level and the entitlement of each level is listed in Appendix E. Exploring the Four Stages of the Audit Process: Case Study Exploring the Four Stages of the Audit Process: Case Study Internal Audit is an independent function that provides an objective assurance and consultancy activity to improve and add value on an organizations operation. The auditors aim to help the Merami Berhad accomplish its objectives by evaluating the effectiveness of its risk management, control, and governance processes by bringing a discipline, systematic approach. The audit process is divided into four stages which are Planning (Preliminary Review), Fieldwork, Audit Report, and Follow-up Review. One of the main key objectives to carry out an audit is to minimize the time and avoid disrupting ongoing activities. As we are a public accounting firm for Merami Berhad for the past five years. Meramin Berhad is a public listed company, whose sales for the year 2009 were over RM 25 million. The audit fees we normally charge to Merami Berhad are RM 50,000. Before an audit is assigned to staff, the auditor must consider a few matters such as the size of the company to be audited. If it is a Public Listed Company, 3 or 4 staff will be required. Besides that, the budget is very important as the auditor are always advised to stay within the budget so that the audit fees is sufficient to cover all the cost incurred especially the disbursements. The auditor should also consider about the deadline. An audit assignment usually has very tight deadlines and therefore staff must ensure that the Audit Report is submitted to the Partner of Review on time so that the signing of accounts is not delayed. When the audit manager assigns a job to the senior, the first thing the senior does is to meet with his team members to discuss about the job and to delegate duties to the respective members. The audit assistant will normally be asked to retrieve the previous years file of the company from the filling room. The previous year file is always used as a guide only. Staff must always tailor-make the audit for the year according to the events that occurred during the year. Once the last years file is retrieved, a new file will be opened for the current years audit. STAGE 1: PLANNING (PREMILIRARY REVIEW) Planning is essential as this is the first time we understand Merami Berhad business and their controls in the company. During the planning stage of the audit, the auditorwill contact the client to notifythem of an upcoming audit and to schedule a time during the year that is most convenient for the audit to commence and take place. The auditor will send them a preliminary checklist. This is a list of documents (e.g. organization charts, financial statements) that will help the auditor learn about their unit before planning the audit. After reviewing the information, the auditor will plan the review, conduct a risk workshop primarily to identify key risks and raise risk awareness, draft an audit plan, and schedule an opening meeting. Engagement Letter Merami Berhad is informed of the audit through anannouncement or engagementletter from the Internal Audit Director. This letter communicates the scope and objectives of the audit, the auditors assigned to the audit, the audit methodology used in the audit and other relevant information. This letter serves as a contract which outlines the responsibilities of the auditor and client to prevent any unnecessary misunderstanding of what is expected or required of the other party. The auditor and the client must also agree on the terms of the engagement. Opening Conference Nearer the start of the audit, the auditor will arrange a meeting with Merami Berhad to discuss the scope and objectives of the audit. The opening conference should be held to gather information about the mission, critical processes, and control procedures of the unit to be used in the preliminary survey process. The opening meeting should include senior management and any administrative staff that may be involved in the audit. Merami Berhad describes the unit or system to be reviewed, the organization, available resources (personnel, facilities, equipment, funds), and other relevant information. The audit senior usually discusses with the client about the companys performance for the year in terms of increase or decrease in profitability. This may due to factors ranging from launching of new products during the year to high-position staffs leaving the company. These will all be documented in the Business Understanding Document. The internal auditor meets with the senior officer directly responsible for the unit under review and any staff members he wishes to include. It is important that the client identify issues or areas of special concern that should be addressed. The time frame of the audit will be determined, and we should discuss any potential timing issues (e.g. vacations, deadlines) that could impact the audit. The opening conference is an important step in a regular audit. It is an opportunity to establish the proper tone and to begin building good relationships. Preliminary Survey In thisphasethe auditor gathers relevant information that they have gained from the opening conference is used in conjunction with other relevant information about the unit in order to obtain a general overview of operations. He talks with key personnel and reviews reports, files, and other sources of information. This may include information on budgets and strategic plans as well as past audit reports. There are certain risks that the auditor will always review to ensure that they are being adequately controlled and managed these include financial transactions, local risk management and business continuity planning. Internal Control Review All of this information is then used to make a preliminary assessment of the risks and controls for Merami Berhad unit. The auditor will review the units internal control structure, a process which is usually time-consuming. In doing this, the auditor uses a variety of tools and techniques to gather and analyze information about the operation. The review of internal controls helps the auditor determine the areas of highest risk and design tests to be performed in the fieldwork section. In the interests of quality and consistency, the Head of Internal Audit reviews this work and agrees the scope of work to be carried out. Audit Program Preparation of theaudit programconcludes the preliminary review phase. The audit program establishes theproceduresnecessary to complete an efficient and effective audit. It includes a detailed plan of the work to be performed as well as the steps required to achieve the audit objectives. There should be sufficient detail for less experienced staff to perform the steps however it should not be overly detailed whereby it might cause auditors to execute steps routinely and override their judgment. STAGE 2: FIELDWORK Transaction Testing Revenue Cycle Sales procedure and cash receipt transaction are the 2 checking procedures under revenue cycle. Sales Procedure A sales quotation provides a pre-sales processing environment which allows prospective buyers to examine the costs involved for a completion of work. A sales quotation typically consists of information like quantity, item and its description, unit prices and etc. Many businesses cannot have an upfront price for the service they provide. Thus, sale quotation should be provided by companies to its customers to give them an estimate of the cost involved. In addition, a delivery order is written directions from a consignor or shipper of a shipment to a carrier or freight forwarder to release the shipment to the named delivery party in freight-prepaid shipment. It allows direct delivery of goods to the carrier or warehouseman. Invoices are essentially a detailed bill left by vendors and outside supplier for goods or services rendered to a company under sales procedure. The document may be called a Sales Invoice, from the point of view of the vendor, or a Purchase Invoice by the buyer. A typical invoice might list the quantity of each item, prices, billable hours, service description and a contact address for payment. While some expenses may be paid through an accounts payable department by the posted due date. Besides, cash sale can be used in several different contexts. A cash sale has to do with the purchase of goods or services and involves the immediate possession of the new owner, without any delay in time between purchase and assuming full ownership in just about every situation. In the world of finance and in retail situations, people are engage in cash sales on a delay basis, Segregation of duties is critical to effective internal control. It reduces the risk of both erroneous and inappropriate actions. The handling of cash receipts and accounting for such receipt need to segregate. This is to reduce the likelihood that errors will remain undetected by providing an accounting check over the receipt of cash. For example, those who handle cash receipts would not have the authority to prepare or sign cheques, would not have access to accounting records and would not be involved in reconciling bank accounts. If a person has access to both the cash receipts and the accounts receivable records, it is possible for cash to be diverted and the shortage of cash in the accounting records to be covered which can result in theft of the entitys cash. In the other hand, for those who perform sales activity including those who maintain contact with customers and issue sales orders, would not perform any credit approval, billing, shipping, credit memo, cash receipts and a ccounting activities. Cash Receipt Transaction Most business customers pay by cheque or electronically. Cash receipts are only given to acknowledge cash payments; which are rarely made by business customers. Cash register and lockboxes are often used as safeguards here. In order to prevent fraud and error, different employees should be responsible for receiving and recording cash collections here. The purpose of preventing fraud and error is the validity, completeness, timeliness, authorization, valuation, classification, posting and summarization. Its very important to the cash receipt transaction. The auditor can check monthly bank reconciliation to prevent any recorded cash receipts not deposited in order to ensure the validity of the cash receipt transaction. For instance, misstatement in sales that may occur includes fictitious sale being recorded in the account o f a regular customer. Expenditure Cycle There are two checking procedures under expenditure cycle, which are purchasing procedure and cash disbursement transaction. Purchasing Procedure A purchasing transaction normally begins with a purchase requisition generated by a department or support function. A purchasing order is then the purchase of goods or services from a supplier. As soon as the goods and services have been rendered, the entity records a liability to the supplier and pays later. Basically, there are three types of for purchase transactions which are the purchase of goods or services on cash or credit, payment of the liabilities arising from such purchases and return of goods or services. The second type is cash disbursement transaction to clear liabilities resulting from purchase of goods or services. The final type is a purchase return transaction which involves the return of goods previously purchased to supplier for cash or credit. Good segregation of duties must be done in order to prevent embezzlement or any fraudulent activities. Firstly, a purchaser who orders should not be the person who receives goods. This can prevent the purchaser from placing excessive orders and keeping the rest of goods. Next, a person who purchases items should not be the person who writes the cheques for it. This can avoid the person from creating orders and make payments to fictitious companies. Then, the person who writes cheques should not handle the reconciliation. This is because nobody will aware even if he writes cheques to himself or relatives. Cash Disbursement Transaction Cash disbursement can be defined as paying out of funds in a discharge of a debt or expense. Transaction Related Audit Objective (TRAO) is used here to evaluating the existence and quality of controls. The auditors transaction-related audit objectives follow and are closely related to management assertion. That is because the auditors primary responsibility is to determine whether management assertions about financial statements are justified. These transaction-related audit objectives help the auditor accumulate sufficient competent evidence required by the standard of fieldwork and decide proper evidence to accumulate for classes of transactions with a framework. In order to ensure the validity of the cash disbursement transaction, the auditor tests the validity of purchase transactions whether there is any fictitious or non-existent purchases may have been recorded in the clients records. Assets or expenses will be overstated if fraudulent transactions are recorded. As for Completeness, auditor must ensure that purchase that has been made in recorded accordingly. If fail to do so will lead to understating of assets or expenses, and the corresponding accounts payable will also be understated. As for Timing, a timing error occurs if transactions are not recorded on the dates the transaction took place. As for Authorization, the person who has authority to approve purchase should not have access to cash disbursement for the purchase. As for Valuation, appropriate methodology is used to calculate transactions and to review various reconciliations. The valuation of accruals depends on the type and the nature of the accrued expenses. As for Classifications, the major issues related to the presentation and disclosure assertions are identifying and reclassifying any material debits contained in accounts payable. For instance, segregation of purchasing and cash disbursement journal is crucial to ensure that correct amount would be allocated properly. If purchase transactions are not properly classified, assets and expenses will be misstated. As for Posting and summarization, control tools should be used to reconcile vouchers to the daily accounts payable listing or else the daily postings to the purchases journal should be reconciled to the accounts payable subsidiary records. Income Statement or Profit and Loss Account First of all, the auditor should determine and try to find out the major changes or the modification that would affect the normal relationship has been made in the production and sales area. Audit assistant are responsible to handle on detect the significant adjustment in the policies of company that would affect the item stated in the income statement. After analyze on such adjustment to ensure that no material error is found then it will continue proceed to the final stage of the audit section. For example, significant changes in employee benefits might affect salaries and employee compensation and have an effect on the income statement. Other than checking in the income statement of a company, the auditor would also look into the balance sheet on the assets and liabilities. Before the auditor start to work on it, a copy of clients balance sheet should be prepared to working papers. There are procedures of carrying out an audit on assets and liabilities. Auditors should categorize each item in the balance sheet accordingly to the audit checklist. Assets All of these are the components of assets. For Cash in Bank To ensure the information that stated in the column of the balance is complied what it really had in the bank, a confirmation request letter will be sent to all the related bank which the entity had dealing with within the financial period. In addition to get confirm to relevant bank that the balance in the bank of the company, the auditors also can get an opportunity to request the bank to provide other information such as the securities that the company held in the safekeeping. The response from the bank give the company a gold evidence to prove that cash at bank that stated in the balance sheet is complied with the real amount in bank at the balance sheet date. With the cooperation of bank, the confirmation of cash on deposit provides evidence to the existence of cash at bank and as to rights and obligations. If the balance per bank statement is different, bank reconciliation would have to be done by the audit assistants. For Account Receivable A details list of account receivables balances of the customer should be obtain before the auditor and access to the balance. The auditor will trace totals to comparative summary of accounts receivables balance and randomly select customers account from the listing to send itemized statements to get the response or confirmation of the balance. Review the confirmation replies letter from them and test accounts where there are no replies. Keep track with the potential bad debts to be written off, if exist, check the opening balances again. For Inventories When inventory is material to the financial statements, the auditor is required to attend the entitys physical inventory counting unless it is impracticable. Examine clients physical inventories count determine whether the clients counting methods are effective. The purpose of inventory attendance is to enable the auditor to obtain audit evidence regarding the existence and condition of the inventory and consider if there is any obsolescence in it. The auditor may select a sample of inventory items from the client count records and trace them to the perpetual inventory records for checking purposes. For Prepayment expenses Randomly choose the official receipts or documents that can support prepayment expenses and test on it. Then, send conformation letter to conform the amount due. For Non Current Assets The auditor should obtain a list of fixed assets expenses that register under the clients company such as depreciation charges, loss or gain on the disposal of the fixed asset, net book value, revaluation amount and etc. The revaluation done should be back by the evidence or documentation authorized by the professional. Check to invoice and agree to the description, price, date and etc. The physical existence and the condition of the assets should be check and determine whether it is located at companys premises. As for disposal of fixed assets, ensure that there is proper authorization and that profit or loss on disposal is properly recorded. Liabilities For Short Term Notes Payable A bank conformation letter should be sent out to inquire loan balance status of the company. Auditors have to calculate the principal and interest paid to check whether it comply with the figure in the balance sheet. For Long Term Debts Review the loan agreement and direct the attention to the relevant information to acquire the accurate interest charged based on the nominal interest rate calculation and auditor have to be ensuring that the interest rate stated in the income statement same with the result of calculation. For Income Tax Account The documentation of the transaction of the company is required to keep for minimum 7 year required by law. Client is required to show documentation and support for every aspects of companys tax return. For example, if the client claims itemized deductions, receipts for those deductions must be produced. In addition, to justifications for why the taxpayer felt that those deductions were legitimate. Besides that, taxpayers must open their accounting methods to inspection and demonstrate that all of their income was in fact properly documented and claimed on the tax return. This can be done through proper recording and classification for provision for taxation and deferred taxation. Advice Informal Communications As the fieldwork progresses, the auditor discusses any significantfindingswith the client. Hopefully, the client can offer insights and work with the auditor to determine the best method of resolving the finding. Usually these communications are oral. However, in more complex situations, memos and/or e-mails are written in order to ensure full understanding by the client and the auditor. A lot of information is shared via e-mail, of course, but there is more face-to-face conversation.Other than that, I would like to mention for this communication question is language. Most communications with a greater group of people (and formal meetings) are held in English; however it depends a lot on who is speaking if you will understand that person. Also if it is only me and, says, two other Indians, it is very likely that they switch to Hindi or Kannada (local language) without noticing. I then sometimes have to remind them to stay with English. Distinguishing between first and surnames is als o impossible for me, same with deciding if a name is male or female I just have to guess or find some neutral ways to address or ask for people. In particular cases, we may also provide drafts of organizations charts, proposed forms or modifications to forms, financial data or other statistics, or drafts of findings and recommendations that later may be incorporated into the formal audit report. These are all considered informal communications between the auditor and the client. Their purpose is to promote constructive communication and avoid misunderstandings. Our goal: NO SURPRISES. Audit Summary / Financial Monitoring Upon completion of the fieldwork, the auditor summarizes the audit findings, conclusions, and recommendations necessary for the audit report discussion draft. Write a summary memo to document the results of fieldwork. Conclude as to whether the information reported by the state agency in the Section 1512 reports is accurate, reliable, and timely. The audit summary gives an overview of all work done sheets according to their topics. The audit summary template gives the title, the audit number, the topic of the summary and of the work done sheets, and the creation date. In addition to the work done sheets, the audit summary also contains a summary of the observations and findings as well as an overall assessment and conclusion of the audit result. Before writing the audit summary, auditors should agree the working papers on which the summary is based with their audit lead. Working Papers Working papers are a vital tool of the audit profession. They are the support of the audit opinion. They connect the clients accounting records and financials to the auditors opinion. They are comprehensive and serve many functions. The result of audit activities must be documented truthfully, consistently, clearly, and completely, with a comprehensible description of all material details. This involves both the contents of a fieldwork activity and the procedure itself. This documentation of fieldwork activities is referred to as working papers to express its connection with the work results. The basic requirements for proper documentation apply to all types of fieldwork activities, although there are different types of documents, depending on the nature of the audit. In addition to the working papers which are mandatory, other documents can be created as optional extras; they contain information beyond the minimum information requirement. The working papers are an indication of the audit quality in general. This needs to be considered because queries by different groups of addresses or their requests for information may often require access to this documentation. Accordingly, the working papers may serve as discussion or evidence documents, for example for queries from the Board, the unit requesting the audit, Internal Audit Management, the Audit Committee, or the external auditors. The preparation of working papers is subject to certain organizational requirements. Each auditor always has the main responsibility for preparing the documents, both during and immediately after fieldwork. Even though the audit lead and Audit Manager have ultimate responsibility for quality assurance, each auditor has to prepare and maintain the working papers with the necessary attention to detail. Working papers may be compiled by hand or entered directly into a system (which is normally more expedient, because it makes it easier to access the information again). STAGE 3: AUDIT REPORT The third stage of carrying an audit is to prepare an audit report. After all the evidence for each of the item in the financial statement have been collected and proven, the senior audit and the audit assistant is going to check the closing balance amount of the balance sheet and the trial balance with the ledger account whether they are compatible with each other and to ensure that each figure is agreeing with the previous year audit account in order to prepare a working trial balance and the working paper. After this all procedure has been done, our audit assistant will prepare an audit report which expresses the opinion of the auditor, evidence of audit and recommendation for the information improvement. Discussion Draft In order to implement this process, first the auditors will discuss to prepare a draft for internal audit report to outlining the audits work, recommendation for the information that should provided and the timeframe to complete the report. The draft that prepared by the management department will show that who will responsible to implement the job, the action to be taken and the timeline to do the job. After the draft has been discussing, a meeting among the auditor will be held in order to assign the job to the person selected for preparing the report and meanwhile the draft will be sent to the particular auditor. Formal Draft The report will become the final report if the response of the management is integrated with the audit report draft. The important information that present in the report includes the title of the report, the duty of the management and the auditor in preparing the report, the scope paragraph that show the evidence of the examination and the accounting principles use to prepare the report, the opinion paragraph which expresses the opinion of the auditor and whether the financial statement is complying with the statutory requirement and the name, signature and address of the auditor who preparing the report. This is to make sure that if there is any fault present in the report, it is the responsibility of the particular auditor to in charge with the case. Final Report After that, the auditor will present the final report to the audit committee and the copies of the report will sent to the senior auditor, the management department of the audit firm and our client, Merami Berhad to review and get the approval. Client Response In our report, we could include or attached the client response in the audit finding prior to issuance of the final report. The client should highlight how report findings will be determined and include an implementation timetable in the response. However, some managers may likely to make a decision which not to implement an audit recommendation and to accept the risks that might occur with an audit finding. For example, the treasury balances are reconciled monthly instead of reconciled daily. The differences are out of the way and have been controlled since that date. The adjusting entries are made with proper documentation and review. Client Comments In our report, we always include the clients comment on our Internal Audits performance as it is part of the Internal Audits self-evaluation program. The feedback has proven to be very beneficial to us as we improve our procedures due to clients suggestion. STAGE 4: FOLLOW-UP Followed-Up Review These required certain actions taken to resolve the audit report findings may be tested to ensure the desired result were achieved. For each item included in the follow-up, review status information provided by management to determine if information addresses all parts of finding and if a corrected date or revised due date has been provided. During this stage, we will contact unit management to obtain any missing information. We also evaluate action reported as taken in response to each finding to see whether the finding has been satisfactorily corrected. If necessary, develop audit tests to prove that the finding has been corrected based on the nature of the finding and responses. The Director of Internal Audit or the auditor in charge of the follow-up review will prepare a memorandum for senior management that notifies them that audit activities are underway and describes the follow-up process. This memo should include timeframes for the project, a copy of the outstanding findings relating to areas reporting to that senior manager, a request that they distribute the findings to these areas and ask the managers to provide Internal Audit with the information requested, a statement that these comments were previously distributed as part of an audit report or close-out letter, and notification that the results will be reported to the Chancellor and Board of Trustees. Followed-Up Report In the follow-up report, it lists all of the actions taken by the client to resolve the original report findings. Unresolved findings will also appear in the follow-up report and will include a brief description of the finding, the original audit recommendation, the client response, the current condition, and the continued exposure to board of company. A discussion draft of each report with unresolved findings is circulated to the client before the report is issued. The follow-up review results will be circulated to the original report recipients officials as deemed appropriate.