Definition of Auditing
Auditing is a systematic process for obtaining and evaluating evidence regarding assertions objectively-assertion events and economic events, with a view to determining the degree of correspondence between those assertions-assertions with predetermined criteria and the submission of the results to the parties concerned.
A systematic process is a series of steps or procedures are logical, structured, and organized. SPAP is the professional guidelines relating to the audit process in Indonesia.
Obtain and evaluate evidence in an objective means to check the basic assertions as well as evaluating the results of the investigation impartially and without prejudice, either for or against an individual (or entity) that makes assertions.
Assertions about events and economic events are a representation made by the individual or entity. This assertion is the main subject of auditing. This assertion is the presentation and management done by the management information, financial information, internal control, and a tax return.
The degree of conformity refers to the closeness in which assertions can be identified and compared with predetermined criteria. Expression of these compliance may take the form of quantity, such as the amount of petty cash fund shortage, or it can also take the form of qualitative, such as fairness (or validity) of financial statements.
Established criteria are standards that are used as a basis for assessing assertions or statements. Criteria may include specific regulations made by the legislature, the budget or other performance measures determined by management, GAAP.
Submission of the results obtained through a written report indicating the degree of correspondence between assertions and established criteria. Submission of these results can increase or decrease the degree of trust users of financial information on assertions made by the party being audited.
The parties concerned are those who use (or rely on) the findings of the auditor. In a business environment, they are the shareholders, management, creditors, government offices, and the wider community.
Definition and Functions of Management
Management is a process of planning, organizing, coordinating, and controlling resources to achieve the objectives (goals) effectively and efficiently.
Management is usually classified into three levels:
- Operating the lowest level, for example: supervisor
- Intermediate / Middle, e.g., department head, division head
- Peak (Executive) / Top, example: president
Management functions include:
- Planning the design of the operational program in detail, goal setting, and how to use resources to achieve those goals.
- The organization that is setting the framework in which activities are carried out.
- Control of management is a systematic effort to achieve goals.
- Controlling the executive manager responsible for accounting functions.
Management Accounting is a measure and report financial information and non-financial to be used by managers to make decisions in the context of organizational goals the transistor feat.
Financial Accounting is measuring and reporting business transactions and preparing financial statements are primarily intended for external parties and prepared on a GAAP basis.
Cost Accounting is to provide information to management accounting and financial accounting by measuring and reporting financial information and non-financial related to the cost of acquiring and utilizing resources within the organization.
Steps in Calculating EVA (Economic Value Added)
The steps performed in calculating EVA in more detail as follows:
- Calculate the cost of debt and equity costs
- Calculate the capital structure of the balance sheet
- Calculating NOPAT
- Calculate the rate of return (r)
- Calculate the average cost of capital weighted (C)
- Calculating EVA (Economic Value Added)
EVA is similar to the usual profit calculation but with two important differences in the EVA into accounts the cost of all capital and not blocked by a set of GAAP in financial statements.
Net income reported in the income statement considering that most companies just looking at capital costs such as interest-which ignores cost on equity finance.
Financial Accounting does not calculate finance charges on received by shareholders as an opportunity cost that cannot be measured directly. But the reality is not so.