ICAEW BF Revision Full
ICAEW BF Revision Full
AND FINANCE
VIETSOURCING TRAINING CENTER
Tutor: Nguyen Phuong Hang FCCA, CPA, SIRM
Module aim
Understand how business operate and how accounting and finance function help business to
achieve their objectives.
Method of assessment
Business’s Organization
objectives and structure and The role of finance
function business strategy
Risks, governance,
The role of
corporate External
accountancy
responsibility and environment
profession
ethics
INTRODUCTION TO BUSINESS
• The world's stocks of natural assets which include geology, soil, air, water and all living
Natural capital things. It is from this natural capital that humans derive a wide range of services, often called
ecosystem services, which make human life possible
• The ability to “meet the needs of the present without compromising the ability of future
Sustainability
generations to meet their own needs”.
• How far a business can operate in sustainable way, and how it should interact with
Business sustainability
individuals and governments in doing so.
Corporate
• The actions, activities and obligations of business in achieving sustainability.
responsibility
MANAGING A BUSINESS
Direction of flow It flows downwards i.e. From It flow upwards i.e. From
top to bottom bottom level to top
Purpose Its purpose is to make decisions Its purpose is to execute the
and get the decisions executed duties assigned by the superior
A functional
A project manager
manager
PLANNING AND
DECISION MAKING
Determining courses of
action
CONTROLLING ORGANISING
Monitoring and Coordination of
evaluating activities activities and resources
LEADING
Managing and
motivating people
Business culture
Price
Physical
environment Product
Marketing
Process mix Promotion
People Place
• Relates to employees' skills, abilities and potential. The objective of HRM policies in this area
Competence should be to attract, retain, motivate, train and promote the right people.
• This is a measure of the extent to which management and employees share a common vision
Congruence for the business and act consistently to attain that vision.
• Concerns operational efficiency and productivity. Outputs are aimed to be achieved at the
Cost-effectiveness lowest input cost. Labour cost and effectiveness by comparison to competitors may be a
measure of HRM achievement in this area
Group development
Entrepreneurial Functional
Divisional Matrix
Decentralised structures
decisions (ie commit
authority to make
people, money and
decisions resources) is passed
down to lower levels
of the hierarchy
Specialisation
Stability
and training
Professional
Technical
nature of
competence
employment
Uniformity in
the Impersonal
performance of nature
tasks
Rationality
General
Companies
partnership
Joint Strategic
Licences
ventures alliances
Agents Groups
INTRODUCTION TO BUSINESS
STRATEGY
Implement Review
Strategic Strategic
and
analysis choice Strategic control
FINANCIAL INFORMATION
ACCURATE
Accurate
Complete
Cost-beneficial
User-targeted
Relevant
Authoritative
Timely
Easy to use
Source of data
Information
processing Completeness Accuracy Timeliness
Data is the same as in its sources and has not been accidentally or deliberately
Integrity
reduced, altered, destroyed or disclosed.
Authenticity Data and information are taken from bona fide sources.
Information is not open to being rejected by its intended users on the grounds
Non repudiation
of faults in the system.
Changes in the system can only be made by persons who are accountable for
Authorisation
them.
• Check digits
• Control totals
Integrity controls • Hash totals
• Range checks
• Limit checks
Management accounting
The tasks of the finance function
Financial reporting
Treasury management
Qualitative measures
Quantitative measures
Non-financial
measures
how efficiently
Productivity
resources are being used
BUSINESS FINANCE
Primary bank
Secondary bank
• Receivable/payable relationship
• Bailor/bailee relationship
• Principal/agent relationship
• Mortgagor/mortgagee relationship
Duties Rights
Honour customer cheque if they have enough money Charge reasonable bank charges and commissions
or sufficient overdraft limit over and above interest
Credit cash/cheques
Repay the amount on demand if the customer makes a
Use the customer's money in any way provided that it
written request for repayment of money in its account
is legal and morally acceptable
Comply with the customer's instructions
Provide a statement showing the transactions on the
account Be repaid overdrawn balances on demand
Respect the confidentiality of the customer’s
Tell the customer if there has been an attempt to forge
the customer's signature on a cheque.
Be indemnified against possible losses when acting on
Use care and skill in its actions
the customer's behalf
Provide reasonable notice if it is to close a customer's
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BUSINESS FINANCE
Forms of money transmission
Treasury
bills
Banker’s Commercial
acceptance papers
Money
market
instruments
Corporate Certificate
bonds of deposits
Repurchase
agreement
Debt International
Leasing
factoring markets
Retaining
earning
Other forms of
Leasing
debt
Business
angels
AIM (Alternative
Investment Crowdfunding
Market)
Venture
capital
(VC)
Export financer
Importance of accountancy
- Public interest
Professional responsibility
Ethics
• Shared accountability
Professional responsibility
The work of the accountancy profession
Financial management
Financial reporting
Technical competence
Knowledge
Attitude Skill
Statutory Investment
Insolvency Probate
audit business
Accounting principles
Double entry
Accrual basis Going concern
bookkeeping
Faith representation:
Accuracy & Substance over form Materiality
completeness
Limits of responsibilities
Legal matters
Administrative matters
FRC
Conduct committee:
Conduct committee: Conduct committee:
corporate reporting
Professional oversight Professional discipline
review
• The government
• The FCA is the competent authority for listing as it incorporates the UK Listing Authority (UKLA). It is therefore the body which
has given considerable force to the FRC's UK Corporate Governance Code. Large companies with a premium listing must comply
with the main principles of the Code
• The FCA issues the following sets of rules which affect accountants in the course of their work for listed companies:
• Listing Rules
• Prospectus Rules, with which companies must comply when issuing new securities
Disciplinary procedures
• Conciliation
• Investigation
- Disciplinary Tribunal
Risk, uncertainty and their effects on businesses themselves and their investors
Type of risk Certainty (no Risk (known risk) Uncertainty (unknown risk)
risk)
Description All possible Potential outcomes and Either the outcome is known but the
information is probability are probability is not known or both the
known; quantifiable/measurable using possible outcomes and their probability
outcomes are statistics and modelling (e.g. the are not known (‘radical uncertainty’ –
certain lottery, games of chance) ibid) (e.g. earthquakes, shocks, health,
romance)
Attitudes to risk
RISK ATTITUDE
Risk classifications
Risks
Operational risk
Strategy risk Enterprise risk Product risk Financial risk
Risks
Business
Legal Reputation Derivatives
probity
File
Phishing Webcam manager Keylogging
hijacker/ransomware
Distributed denial of
Screenshot manager Ad clicker Hacking service (DDoS)
attacks
Boundary firewalls and internet gateways – software that intercepts network traffic in and out of a system
Malware protection – software that prevents and removes unwanted programs from a system
Secure configuration – ensuring the system is set up with cyber security as a priority
Crisis management
Containment
Preparation Business
Detection & damage Learning
& prevention recovery
control
Disaster recovery
Standby procedures
Recovery procedures
Personnel management
GOVERNANCE, CORPORATE
RESPONSIBILITY, SUSTAINABILITY
AND ETHICS
Agency theory
Poor CG
• Domination of the board
Good practice CG
Financial system
¥ Japan $ U.S
• Bank-based financial system • Market-based financial system
• Debt financing • Equity financing
• Stability • Efficiency
• Focused on stakeholders • Focused on shareholders
• Based on private information • Available price information to all market
participants
Rights of
CG framework
shareholders
Board
Structure
Two-tier
Unitary
(Dual)
Single Board
Two Boards
Comprising
Managemen Supervisory
Executive
NEDS t Board Board
Directors
(Power Tier) (Upper Tier)
Business ethics
What is ethics?
• The discipline dealing with what is goods and bad and with moral duty and obligation
• A system of moral principals
• The principals and standards that determine acceptable conduct in business organisations
• Is a form of professional ethics that examiners ethical principles and moral or ethical
problems that arise in a business environment
Business ethics
CORPORATE GOVERNANCE
Division of Responsibilities
The Chairman
Non-executive directors
The
Appointments
Composition Commitment Development
to the Board
of the Board
Information
Evaluation Re-election
and Support
• The board is responsible for determining the nature and extent of the
significant risks it is willing to take in achieving its strategic objectives.
Risk Management and Internal • The board should maintain sound risk management and internal control
Control systems.
Dialogue Constructive
with Use of the
shareholders AGM
Government Consumer
Investment
Saver
by business
Producer Purchaser
Transfer
Investment
payment
Recession (1)
Depression (2)
Recovery (3)
Boom (4)
Inflation a problem?
Consumer behavior
Types of inflation
Inflation
Fiscal Credit
Government economic
policy
Demand
Income (income
Taste and fashion
effect)
Expectation of price
changes
Demand
Seven P’s
Physical
evidence
Supply curve
Price of related
Price
goods
Changes in
Other factors
technology
Equilibrium price
Equilibrium price:
quantity demanded of
a commodity is equal
Qs = Qd
Elasticity
Availability of
The time horizon
substitutes
Luxuries and
Competitor’s pricing
necessities
Percentage of income
Habit-forming goods
spent on a good
Adjustments to equilibrium
Market structures
Free markets
Market failure
EXTERNAL REGULATION OF
BUSINESS
Regulation of business
Addressing
market failure
Protecting the
Regulation
public interest
Functions of the
regulation of
business
• The Competition and Markets Authority (CMA), which replaced the Office of Fair Trading (OFT) and the
Competition Commission in 2014 following the Enterprise and Regulatory Reform Act 2013.
Form of regulation
Implement a primary
piece of legislation
appropriately
Secondary/delegated
legislation
Take account of
particular
circumstances
Regulation of competition
Anti-competitive
agreements
Abuse of
Anti-competitive
dominant
practices
position
Cartel activity
Price regulation
Taxation
Tariffs
Subsidies
Market abuse
Market Fraudulent
Insider trading
manipulation trading
Wrongful Disqualification
trading of directors