How to Obtain Financial Data and Assess Its Validity

How to obtain financial data and assess its validity

Apple is an innovative consumer electronics market leader. It has different range of digital products from such as the iPod, digital music distribution through its iTunes Music Store, also Macbook, PC's and Apple TV's. In the generations of smart phone market, Apple iPhone's 4 generations is the best and high market share holding product at fair price and excellent quality customer service. Apple is committed to delivering the best personal computing experience to its students, professors, creative professionals and consumers around the world through its high tech innovative hardware, software and Internet offerings everywhere to every customer in every possible way.

Financial data are the set of documents prepared by the business organisation at the end of the accounting period which includes the summary of the accounting data for that period and information. These data should be accurate and should be based on facts. There are two different sources of collecting financial data. They are:

Internal sources External resources:

The organisation's accounting system Company House

Other managers Companies website

Suppliers Databases of financial information

Customers Libraries

Employees Research documents

Internal data are difficult to get from the Apple Inc. for the security issues. Whereas the customer receipts, data protection, supplier invoice are some of the internal information which are issued by the Apple Inc. Whatever information is exposed or published are the external information. Public Limited Companies publishes their financial statements in order to get more investment from the shareholders.

The financial data must be valid, truthful and based on the facts. Unreliable data can make the report loose its significance. In order to ensure that the financial data is validated, Apple should use process mapping to identify where possible errors or problems may occur in the system. The example of this is, if two senior managers (CEO & CFO) signatures are required to proceed with a payment, then this may cause delays and therefore, give a wrong figure of the amount of liquid money available.

Some of the possible factors that influence the reliability of financial data are:

Financial system redesign was suggested by Sekaly. He mentioned that to ensure reliability of financial data emphasis is on controls and central transaction processing: and the better to achieve this end is by inverting the triangle (i.e. delegating task to many heads so that the occurrences of frauds will be minimized). This will result in reduction f data entry errors and gives more time for the accountants to concentrate on decision and risk management.

Internal auditing is a self-governing, objective assurance and consulting activity designed to add value and improve the operations of the organization. It helps an organization to achieve its objectives by bringing a systematic, disciplined approach to assess and improve the effectiveness of risk management, control, and governance processes. Most of the organization has authority matrix. It may be formal and informal depending upon the kind of decision to be made and by whom. The role of the internal auditor is to assist the external auditors and let them go through the financial statements during the financial audit.

External auditor is appointed by the shareholders in order to verify that the financial statement is true and fair. Shareholders have invested in the company and they are concerned if the fund they spent in the company is being used in the right way. External auditor can have access to all kinds of reports of the company and are responsible to make sure that the management is doing their job in the right way. The published reports and data are very essential for the external auditors to conduct an independent audit. At the same time it only ensures that only certain rules and standards are adhered to it.

The word validity refers in here, who audit the auditor there are many institute which monitor the auditing system some of them are General Accepted Accounting Principles (GAAP), Institute for Public Sector Accounting Standards (IPSAS) international Federation of Accountants (IFAC). These lead the development of auditing.

Auditing Practices Board (APB)

It is part of the Financial Reporting Council practice in UK, in order to:

Establish high standards of auditing

Meet the developing need of users of financial information

Ensure public confidence in the auditing process

IFAC's board set the following standards:

International standards on auditing, assurance engagements and related services.

International standards on quality control.

International code of ethics.

International education standards.

International public sector standards.

Fig.1: The financial reporting

Limitations:

Internal auditors are the employees of the company. If something untrustworthy is going on in the company then the internal auditor has to take a decision. He either reports the misconduct or he tries to cover his back leaving the ethics far behind. He is restricted and commanded what to do and what not to do by the management team.

External auditor does not ensure that the information produced by the company is in a comparable format to others or check whether or not the rules have been followed in one of the many differing and acceptable ways. Their decision is based on random samples and they are not checking everything. Due to that absolute assurance is not given but rather a reasonable assurance is given.

(Robert R. Moeller, Brink's Modern Internal Auditing: A Common Body of Knowledge, 2009)

1.2 Applying different types of analytical tools and techniques to a range financial documents and formulate conclusions about performance levels and needs of stakeholders.

A. Profitability ratios

1. Return on capital employed (ROCE):

It is a primary ratio indicating how well a business has generated profit from its long-term financing. Increase in ROCE