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Running head: FINANCE AND ACCOUNTING 1

Finance and Accounting

Name

Institution

FINANCE AND ACCOUNTING 2

Finance and Accounting: Materiality and Internal Control

Materiality

Financial audit as an aspect of business management employs various concepts in

ensuring that diverse qualitative analyses have estimated the potential issues that are important in

the running of the business. Materiality is among the applied methods of simple calculations

involved in determining the different decisions that investors consider before committing to any

business ideas. The Materiality calculations are an essential information source to both the

investors and the business management as a factor it helps with the presentation of all company

financial statements and disclosures that in their role help to highlight the existing position of the

company regarding both debts and instruments of equity. The complexity that is associated with

materiality as an aspect of internal audit and control provides room for qualitative estimations

through different methods of analysis in the presentation of the presentation of the company’s

materiality in the form of instances that the business has incurred operational costs at one point

or another through debts

The Internal Controls

Internal Controls refer to the assurances that organizations through their objectives and

missions have sought to achieve through reduced risks that the company exposes itself through

trade. The control of risks include paying much attention to the elements such as safeguarding

the business from aspects such as resource loss from an outright loss that consists of both

mismanagement and waste through errors and abuse from office. Controlling internal business

factors and affairs includes the various checks and balances that are all important in the operation

of the different systems to a level that guarantees their efficiency. Effectiveness in the

management of data creates an element of accuracy in the timelessness of reporting and

FINANCE AND ACCOUNTING 3

promoted compliance. Failure to conduct proper internal audits creates a scenario that leads

quickly to mismanagement and resource abuse. Such managerial factors that are considered

include debts, credits, and company equity.

FINANCE AND ACCOUNTING 4

MEMO

Consolidation and Equity Methods of Accounting

To: The Chief Executive Officer

From: Finance Office

Cc: Human Resource Office

Subject: Consolidation and Equity Methods of Accounting

Date: 13/12/2017

Following the decision of the company to acquire the stocks of one of our leading

competitors, it is vital that as the finance department, we take the initiative of accessing the

various methods applicable in ascertaining the value of such companies before committing to

purchasing shares belonging to the corporations. The technique applied in the evaluation of

company worth from equity involves the two methods of consolidation and equity accounting

methods. The methods are both critical in determining the amount of stake the firm owns and

such value that the stake holds.

Consolidated accounting Method: the method either is applied for assessing stocks of

the company that holds the commanding stake in the business in the forms of equity or shares.

As such, depending on the amount of stake owned by the company at the time of consolidation

either in the types of investment or dividends, the company method of accounting applied in

determining the stake the company holds in its interests in the business. In case the decision

arrived at by the company is to acquire controlling shares, then we shall act as the parent

company of the acquired firm. The parent firm shall treat the subsidiary as a non-existent and

place all its assets and liabilities in our consolidated balance sheets not forgetting to have all its

profits, losses, losses, and revenues to the income statements.

FINANCE AND ACCOUNTING 5

The Equity Method: The equity method ensues in cases where the company in question

has no commanding control of the subsidiary firm that it intends either to purchase or to act as a

parent company to in the business sphere. In equity method of accounting, it becomes important

for the company to record the revenue of the company it intends to acquire without

compromising on its finances. The Equity method makes the company treat the revenues, and all

the cash flows from the other companies treated as capital returns while decreasing the asset

value in the amounts of payments made as part of the fees.

FINANCE AND ACCOUNTING 6

Components of Corporate Governance

The systems of regulations, practices, and processes necessary in providing directions

and controlling the different aspects of the business are considered the elements of corporate

governance. The governance techniques through their different features are important in ensuring

that there exists a balanced nature regarding interests and controlled outcomes. The various

components of governance include among others transparency, accountability, and participation.

The three components have in essence the anchoring grounds from which governance as an

aspect of business management has helped ensure that there exists an appropriate ethical

environment. The three components form the primary principles through which corporate

governance applies.

Transparency as an element of corporate governance has continued to ensure that

employees remain steadfast in carrying out their roles responsibly without absconding. Further, it

enhances the relationship between the management and the employees. Accountability acts as

the second component of governance places forth the responsibility of management to task with

all employees expected to show high vigilance to misappropriation of both firm and personal

resources. Participation comes in as the final component that influences the ethical business

environment immensely. The ethics attached to involvement are entirely related to the feelings

that outline consensus and inclusivity as the primary features of an ethnically inclusive

environment that establishes a working condition that is by far, beyond reproach.

FINANCE AND ACCOUNTING 7

Responses

Godfrey Hullers:

Godfrey manages to outline clearly, the different roles as espoused by both consolidation

and equity accounting methods with regard to the primary factor of firm shares and stakes of

investors.

James Lavery:

James provides a memo that despite identifying the two accounting methods applicable in

the case of firms engaging in business transactions concerning their company shares.

Zheng:

Zheng provides a comprehensive outline based on case studies of how different

companies have employed the various concepts of corporate governance. Such cases are

important in providing outright responses to the happenings within the organizations.

Buxi Wen:

Wen provides an insightful and well detailed review of the corporate governance as a

subject area managing to identify its various influence on company performance. Importantly,

Wen manages to relate the different scenarios presented in organizations as part of the learning

areas that best inform the various segments of business participation. The discussion post

provided by Wen comprehensively covers the topic on governance promptly relating the same to

different aspects of governance with the performance of the business. Among the areas of

relationship where Wen’s post focused include the relationship between the firms’ visions and

missions with the reality that is in the employees, their ethics, and how all such affects

productivity.

FINANCE AND ACCOUNTING 8

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