AUDIT OF THE

FINANCING AND
INVESTING CYCLE

Ariele Jondy Bumagat

NATURE
Financing and investment cycles of a
business include the responsibilities of
planning cash needs, raising capital and
investing funds.

Financing Cycle Transaction

Borrowing from other

excluding open trade
accounts with
creditors
Share Capital and
dividend transactions
share issuance and
reacquisition, share
retuned and dividend
declarations

Investing Cycle Transaction

Acquisitions and
disposals of financial
assets
Lending to others,
excluding open trade
accounts with
customers.

THE ACCOUNTS TYPICAL

AFFECTED

Notes Payable non trade

Bonds payable
Mortgage payable
Long-term liability under
Capital lease
Share Capital
Investment in securities
Non trade accounts receivable
Appropriation of retained
earnings
Treasury shares
Dividends declared
Proprietorship capital
Partnership capital

Property, Plant and

Equipment
Accumulated Depreciaton
Intangibles and other
assets
Cash in Bank
Interest Expense
Accrued interest expense
Paid-in capital in excess
of par
Donated Capital
Retained Earnings

DOCUMENTS ANDS RECORD

Share certificate

Bond Certificate

Bond Indenture

Brokers advice

AUDITING THE FINANCING

CYCLE

An entitys financing cycle consists of

transactions pertaining to the acquisition of
capital funds through borrowing from others,
short-term and long term excluding trade
credit and share Capital and Subsequent
redemption and reacquisition of these
securities.

POSSIBLE ERRORS

Failing to make interest accruals,or making

them twice
Accruing interest in the wrong period
Making incorrect estimates of allowances for
obligations
Failing to recognize that entity violated a
debt agreement
Failing to record dividends that were
declared

AUDIT OF INVESTING CYCLE

Audit risk for investing cycle transactions and

balances can generally be kept at a very low
level because in most commercial enterprises
These

transactions occur infrequently

Effectivity controls can be maintained at relatively
little cost