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.

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.

• 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.

1. As a working guideline. The budget serves as a working guideline and provides direction and targets to be achieved by the company’s activities in the future.
2. As a means of coordination of work. With a budget of all the parts contained in the company can support each other and work together well, to get to the targets or goals set by the company.
3. As a means of supervision or control. The budget serves as the benchmark (comparison tool) to assess and evaluate the realization of the company’s activities in the future.

On the other side the budget also has disadvantages such as:

• The budget is just a tool.
• The budget does not replace the management.

The budgeting process:

• Finding the most difficult factor.
• Position the company in competition (Leader / Follower).
• Obtaining accurate data.
• Expert.

How the presentation:

• The number of accurate
• Informative
• Easy to see the movement

The main elements in the budget:

• The overall plan, the determination of the activities carried out in the future.
• The Company’s activity includes all activities to be performed by all sections of the company.
• Expressed in figures, is a unit that can be used on all the activities of various companies.
• A certain period, is the whole of what-what will happen in the future.

There are two kinds of budgets:

1. Strategic Budget, the budget is applicable to long term i.e. more than one accounting period (more than 1 year)
2. Tactical Budget is budget policies for the short term, i.e. one accounting period or less.

Budget prepared by the committee making up the budget (Budgeting Committee). This consists of the holder of the main functions (Participative Budget).

On the other side, activity-based costing (ABC) has a long-term perspective that focuses on improving processes by eliminating activities that are not value-added and reduce the costs incurred by the value-added activities. Therefore, ABC is more useful for profit planning, cost control and long-term pricing.

ABC and TOC are both used to determine profitability of products. But they also have differences in the ABC to develop a long-term analysis that includes all the costs of products. While the TOC to take short-term approaches to the analysis of profitability because this theory is only based on costs related to the material.

ABC provides a comprehensive analysis of cost drivers (cost drivers) and unit costs are accurate, as a basis for strategic decisions regarding pricing and product mix in the long run. Instead TOC provides a useful method to improve short-term profitability through the adjustment of product mix for the short term and through attention to production constraints.

The superiority of ABC is to focus on activities (activity), which is what the labor and equipment to meet customer needs. ABC is commonly used by companies using the method of cost management such as target cost (target costing) and TOC.

There are three kinds of Corporate Diversification Types, namely:

1. Diversified Corporate Limited, which occurs when all or nearly all of the company’s activities take place on a single industry and geographic market consists of two subtypes, namely: (a) a single business companies (95% or more of the company’s revenue comes from a single product market), (b) the dominant business firms (between 70% and 95% of company revenue comes from a single product market)
2. Related to Corporate Diversification, which occurs when less than 70% of company revenue comes from a single product markets and business lines which are connected diverse, consisting of: (a) Related constrained i.e. less than 70% of company revenue comes from a single business and different businesses sharing relationships and attributes, (b) Related Linked i.e. less than 70% of company revenue comes from a single business and the different businesses just to share some attributes or relationships and the relationships and attributes is different.
3. No Related Corporate Diversification: less than 70% of company revenue comes from a single business and there is little or relationships between attributes of business.

Economies of Scope happen to a company when the value of the products or services sold increased as a function of the number of businesses that run the company. Economies of Scope worth Economies of Scope the extents to which a company increase revenues or lower costs than if the Economies of Scope are not used.

1. Operational Economies of Scope

• Shared Activities, a physical activity are the same used by more than one business function at a diversified company.
• Core Competencies, a non-physical activity was used by more than one business function at a diversified company.

2. Financial Economies of Scope

• Internal Capital Allocation, business functions on a diversified company competing for corporate capital allocated to them.
• Risk Reduction, the risk level of the cash flows of diversified firms is lower than the level of risk of cash flow firms are not diversified.
• Tax Advantages, a diversified company can use losses on some of its businesses to offset profits in some other business, thereby reducing the overall tax liability.

3. Anticompetitive Economies of Scope

• Multipoint Competition occurs when two or more diversified firms simultaneously compete in markets that diverse. Multipoint Competition can lead to the emergence of the Mutual Forbearance means to refrain from competition because the present value of profits that companies compete not greater than the present value of losses suffered by companies that are competing.
• Exploiting Market Power, a company may use part of the monopoly profits of a particular line of business of the company to subsidize the operation of other business lines that were previously less profitable business lines that are subsidized so that it can generate monopoly profits as well.

4. Employee and Stakeholder incentives for Diversification

The employees, especially its managers, trying to increase the size of the company are usually measured in sales value, which also determines the amount of compensation for them. One way is through diversification particularly Corporate Diversification Strategies Not related to the form of mergers and acquisitions.

Two risks that will be faced by companies when deciding to implement a corporate diversification strategy in the international context can be a financial risk and political risk.

1. 1.       Financial risk

• Debt Currency fluctuations, which could affect the company’s investment. These fluctuations may result in additional benefits for investments and losses due to decline in value of investments due to currency fluctuations.
• Interest Rate Differentials Inflation, which requires companies to implement practices managerial a complex approach, business strategy, and complex accounting practices.
• Financial risk can be very intimidating for new companies that want to enter the international arena.

1. 2.       Political risk

• Political conditions can affect the value of corporate investment, both macro and micro.

Strategic Alliances are grouped into 3 categories:

• Alliances Non equity
• Equity Alliances
• Joint Venture

Non-equity Alliances are where the companies agree to cooperate in developing, manufacturing, or selling products or services, but they do not take their personal wealth or form an independent organizational unit to manage their joint venture.

Various kinds of agreements in non-equity alliances:

• Licensing Agreements, where one company follows another company to use its brand name in product sales.
• Supply Agreements, whereby one company agrees to supply to other companies.
• Distributions Agreements, where one of the companies agreed to distribute its products to other companies.

Equity Alliances are where firms cooperate with an agreement regarding property rights of the shares in the alliance partner.

Joint Venture is where the companies work together to establish a legally independent company with individual investments so as to produce a profit.

Strategic alliances add value by exploiting opportunities and neutralize threats that exist in the company.