The benefits of audit

In our earlier issue, we explained the role of company directors in meeting some of their key obligations set out in the Companies' Act

Financial records are a continuing interest of the Directors, shareholders, creditors, and other people who deal with the company. This significance is more pronounced when final accounts are prepared, audited and issued to the shareholders.

The law requires that the company "keeps proper books of accounts". Such books must indicate all financial activities of the company during the year. Companies would therefore seek to use the services of a qualified accountant to meet this requirement. Quite often, the company auditors are asked to help with the accounting work. The key advantage in this is that the auditor is extensively versed with all aspects of financial records and the company is sure to obtain first class professional service.

One question that comes to mind quickly is: Is there a shared responsibility between the company (represented by Directors) and the auditor for the accuracy or otherwise of these financial statements?

We believe the answer to the above is "Yes", but with clearly defined limits. The primary responsibility of the accuracy of such statements is that one of directors. The directors must therefore ensure that the required books to record such financial activities for the year are kept. Assistance may be obtained from your auditor to advise on the required books, and the scope of the directors' responsibility. In brief, such books, when used to record financial statements, must give a true and fair view of the company's state of affairs and its operating results.

The auditor would then come in to examine these records, test such assumptions, estimates and judgements using accounting standards issued by the Institute of Certified Public Accountants of Kenya and/or International Accounting Standards Committee. The auditor's responsibility is then confined to "expressing an opinion" on statements as already prepared by directors. In order to form such an opinion, they carry out an audit process.

Why must you have your financial statements audited? These are some of the key reasons:

• You obtain an independent opinion on your financial statement certified by a professional
• You also obtain additional assurance that the basis of your assumptions, estimates and judgements meet the requirements of accounting standards and the law

As a result of the above assurances, your shareholders, potential investors, bankers, tax authorities and other users of your financial statements attach full confidence in them, and therefore your operations and activities.

At "Alexander Grant & Associates" we continue to lay greater emphasis on clients' excellence of performance. We believe in sharing ideas other than imposing ideas. Give us a call to discuss your business ideas. We will help shape them up for you.

NEWS FLASH

We are pleased to announce that "Alexander Grant & Associates" has established a Training Department headed by Mr. Jophece Yogo, formerly of the Institute of Certified Public Accountants of Kenya. Mr. Yogo will be supported by a team of professionals drawn from different disciplines, amongst our associates in Kenya and overseas.

We cannot overemphasise here, the benefits clients stand to derive from having staff appropriately trained in their areas of discipline. Increased attention must be given to training that equip staff with skills and knowledge to help businesses compete more effectively.

It is not our intention to provide the "traditional" training that emphasises on principles and standards. We will emphasise on the situational realities with a view to offering viable solutions to your business needs. Training can be run outside your premises or in-house within the confines of your premises.

Our first course in this series is "You and your company" in which staff will be assisted to appreciate the benefits of loyalty to their companies. Other available courses for which clients are asked to confirm interest are:

• How to manage your time
• Use of the telephone as a business tool
• Management of Meetings
• Customer care
• Public speaking skills
• Effective presentation skills

Which Accounting Software package?

On the face of it, this is a very simple question. There are many accounting packages on the market such as Scala, ACCPAC, Sage, Sun Systems, Tetra 2000, Pastel, and many others. The problem is that a typical layman will not tell the difference between any two of these products. Their prices vary tremendously, but while it is easy to see for example that a Mercedes car does cost more than a Nissan car with the same engine and sitting capacity, it is not so easy to see why for example a package like Sun does cost a lot more than a package like Sage. As a result, many companies tend to go for the more affordable package - the idea being that it must be useful since it is on the shelf.

That often is where the problem starts. I have known many companies purchase an accounting package and thereafter found it hard to use the same for months and even years.

The problem is that each accounting package is addressed to a particular group of clientele and an easy way to identify a suitable package for your use is therefore by finding out if it is in satisfactory use by an organisation very similar to yours both in nature and size of business. Alternatively, you can seek some technical advice in order to identify the most suitable package for your kind of business and budget.

There is no simple rule of thumb for determining a suitable package for any organisation. To try and adopt a package designed for manufacturing companies for example and use it in a service company may present a lot of operational problems. Another consideration is the training your staff must undergo in order to utilise the newly acquired package. This is an area that is often overlooked by many companies, particularly the smaller ones, when embarking on computerising their accounting functions.

When all is said and done, careful planning plus good technical advice and good supervision during implementation will go a long way to ensure satisfactory choosing, installation and usage of the package most suited to your company.

The first myth of management is that it exists. The second myth of management is that success equals skill (Robert Hellar)

Management is the art of getting other people to do all the work (Anon)

So much of what we call management consists in making it difficult for people to work (Peter F. Drucker)

I don't want any yes-men around me. I want everybody to tell me the truth even if it costs them their jobs (Samuel Goldwyn)

Desire to have things done quickly prevents their being done thoroughly (Confucius)

If you can keep your head when all about you are losing theirs, it's just possible you haven't grasped the situation (Jean Kerr)

ALEXANDER GRANT & ASSOCIATES

VICTOR HOUSE, 4^TH FLOOR, KIMATHI STREET, NAIROBI, KENYA

Telephones : 002542 221306 / 245694 Facsimile : 002542 224314

Although all reasonable care has been taken in the preparation of this news briefing, Alexander Grant & Associates cannot accept any responsibility in law for its contents. Clients are advised to seek independent professional advice before taking action in consequence of anything contained herein.