The design of tests of control that establish the administration and the management on the investments are of vital importance, since these must provide the owners with the reasonable security that the investments exist, were authorized and are property of the company on the date of the Balance general
Establishing controls can help business managers establish a very high degree of trust between themselves and owners, and even more so when this occurs in business investments, since these are a source of resources in the long term.
Investment Overview
Business investments primarily include:
- Securities of affiliated or subsidiary companies or institutions. Negotiable securities. Mortgage loans. Life insurance surrender values.
When making investments, entrepreneurs and managers must evaluate the type of investment to be made, the tools used are:
Frequently
In many occasions the company carries out investment operations and does not take the pertinent measures to safeguard these resources.
1. Internal verification
- Purchases and sales of securities or investments must be approved by a specifically designated official. Detailed records of the investments they show, the serial numbers of the documents, the names in which they are registered, the amounts and the collateral must be kept. if it exists Produce a reconciliation of the detailed records of the investments with the values that are periodically shown in the value. This reconciliation must be carried out by a responsible employee.Request periodically confirmations from the issuers regarding the amount of the investment, from the independent custodians and lending institutions regarding the amounts that are kept in mind, to the borrowers in relation to the guarantee. Investment approval must be made by a responsible official.Investments that have been extinguished must be under the control of the accountant and the administrators. The person responsible for the investments must receive information from the securities regarding partial reductions in the nominal value of the securities, from the endorsement that reduces the value of the investments. and annotation of the securities deposited or withdrawn. An assessment of the investments and collateral guarantees must be made at market rates to compare with the values according to books.An assessment of the investments and collateral guarantees must be made at market rates to compare with the values according to books.An assessment of the investments and collateral guarantees must be made at market rates to compare with the values according to books.
2. Functional control
- Annotations in the general books. Detailed records of the investments or guarantees. Operations of disposal of investments. Preparation of vouchers. Prepare the reconciliations of the detailed analysis with the control accounts. The functions of the custodian of the investments or collateral guarantees. Confirmation requests with detailed records. Check confirmation requests until they have been sent. Compare inspected items with items listed in detailed analyzes. Obtain confirmation of values pledged or held by independent custodians. Periodically prepare the comparison of investments against market value and book value.Verify that all the investments that it owns have been transferred to the name of the institution. It is necessary that more than one person is present when you want to have physical access to the documents that represent securities. Verify that all the investments are correctly classified according to its short and long-term components. Check that the Generally Accepted Accounting standards are met. Make sure that the investment items are recognized in the corresponding unit of measure.Check that Generally Accepted Accounting standards are met. Make sure that investment items are recognized in the corresponding unit of measure.Check that the Generally Accepted Accounting standards are met. Make sure that the investment items are recognized in the corresponding unit of measure.
The auditor's analysis of the controls carried out within the company must provide information on all investments and their inclusion in the balances of the corresponding accounts and the values in the Financial Statements are correct and duly disclosed.
3. Specific controls
- Obtain certainty of the reality of the registered securities. Determine the collectibility of investment accounts. Verify that adequate investment planning and analysis has been carried out. Obtain information about the most representative investment transactions in relation to the procedures. Determine the efficiency and effectiveness of the company's investment methods. Establish compliance with investment policies.
Control procedures for investments
1. Verify the authorization and ownership through the investigation technique that the investments made have been duly authorized by the financial manager.
2. Obtain written verification of the entities involved in the respective investments made.
3. Carry out an analytical review of the Financial Statements to confirm that all the investments are contained in them.
4. Verify if the evaluation base is applied consistently, in accordance with the policy approved by the board of directors.
5. Through the technique of reprocessing transactions, verify that they are correctly registered.
6. Ratify the basic evaluation statement through the recomputing technique.
7. Evaluate the cut of documents to determine if the investments are valued correctly.
8. Check that all movements in investment are reflected in the Financial Statements.
9. Verify that the interests, dividends and others to which the investments have given rise are recorded clearly and in accordance with the generally accepted Accounting Principles.
10. If any of the investments has been sold, verify that the price of said transaction has been authorized by the Board of Directors
With all the recommendations made in this document, it is expected that the control manuals for the investments will be adequately carried out, these should be prepared based on the flaws found in the study and analysis made by the company's external auditors.
