Audit and economical analysis

Legal basis for the regulation of relations in the field of organization, conduct, conclusion of financial analysis

 

Methodological Foundations   financial analysis   based on regulatory documents   ,   developed and implemented.   All norms (laws, standards, regulations, instructions, orders, procedures) related to accounting and auditing are also important for analysis.   At the same time, a number of standards were set for the analyst itself, which are carried out on the basis of the need to manage business units.

Financial analysis usually focuses on formal and informal aspects.   Official heights are set on the basis of a mandatory order, well-defined standards, managers, informal managers and managers independently define and implement their goals.

On the official   basis   The following procedures may be included in the analysis of the financial and economic activity of an enterprise:

- assessment of key performance indicators of the enterprise;

- assessment of the economic vulnerability of the business entity;

- assessment of the creditworthiness of the business entity.

In informal aspects, the range of issues covered can be widely implemented and include the following:

-activities, analysis of capital and liabilities;

- analysis of financial stability;

- analysis of solvency and liquidity;

- analysis of market and business activity;

- flow analysis;

- analysis of direct investment;

- analysis of profits and losses;

- analysis of receivables and payables;

- innovative analysis of products and activities;

- investment analysis of activity;

- analysis of social benefits and liabilities;

- logistic analysis and so on.

A number of analytical procedures are performed to evaluate and analyze the activity of a business entity.   The main source of these processes are accounting (financial) data.   A comparative analysis of statistical, macroeconomic and industry indicators is also carried out when forecasting the state of affairs in business and its further development.   At the same time, the analysis of economic units is considered as the most important part of management.

Of course, the use of economic analysis in assessing business entities consists of the following: creating and explaining the financial reports of business entities;   in assessing its financial position;   preparation of a management report on economic insolvency (bankruptcy)   ;   restructuring of its business;   financial rehabilitation;   property relations.

The only method of using financial analysis has not yet been created.   Therefore every   manager   uses a variety  methodological development   , depending on the   him / her own experience, business unit and management characteristics, volume of information sources.

Analysis of the economic and financial activities of economic entities in accordance with international financial reporting standards consists of three stages: the purpose of the analysis and the procedure for its implementation;   Evaluation of the quality of information used in the analysis.   Formation of a reliable database;   analyze methods, methods of analysis and summarize the results.

Methodological foundations of the analysis were often formed on the basis of normative manuscripts.   The existing standards of economic analysis of economic entities are as follows:

National Accounting Standard for Accounting

Decision of the Committee on Economic Failure of the Ministry of Economy of the Republic of Uzbekistan “On the procedure for determining the criteria for monitoring and analyzing the financial and economic condition of enterprises”;

Resolution of the Cabinet of Ministers "On the introduction of criteria for evaluating the effectiveness of joint stock companies and other enterprises with a state share"

International Financial Reporting Standards (IFRS).

The CMS, entitled “Conceptual Framework for the Preparation and Presentation of Financial Statements”, describes the following:   “The purpose of the financial report is to provide information on the financial, business and financial situation of an economic entity ...”

The financial report also contains information for: deciding on investment decisions and loans;   Estimation of the future cash flows of the enterprise;   evaluation of its resources and obligations in relation to the resources assigned to the enterprise;   evaluate the effectiveness of governing bodies.

In particular, the following paragraphs of this IFRS provide for economic resources, financial structure, liquidity, solvency, ability to respond to changes in the working environment, control a business entity, predict future cash and cash equivalents, activity indicators, its profitability and the need to assess potential changes in economic resources.

Consolidation of financial statements at different times is also a necessary requirement for analytics.

In accordance with the Decision of the Committee on   economic insolvency   of enterprises under the Ministry of Economy of the Republic of Uzbekistan “On the procedure for determining the criteria for monitoring and analyzing the financial and economic condition of enterprises”   it is recommended to study the scorecard   economic   indicators   economic entities: solvency or redemption ratio;   the ratio of the content of working capital, the profitability of assets and expenses of the enterprise.   In addition to the final withdrawal, the following additional indicators will be studied: the ratio of own funds and the ratio of short-term borrowing;  capacity utilization rate;   total asset ratio.

"The Cabinet of Ministers of the Republic of Uzbekistan, to the share of joint-stock companies and other organizations" On the introduction of criteria for evaluating the effectiveness of evaluation,   are recommended   the following   indicators.

1. Key performance indicators: The advantages of the enterprise before interest, taxes and depreciation, the ratio of costs and income;   attracted capital gains;   return on equity;   return on capital investment;   return on assets;   absolute liquidity ratio;  Financial independence ratio;   turnover of creditors' liabilities;   turnover of receivables;   repayment ratio (solvency);   dividend payout ratio;   Reduced receivables.

2. Additional performance indicators: impairment of fixed assets;   coefficient of renewal of fixed assets;   labor productivity;  refund;   capacity utilization; energy efficiency (   share of value   energy in   cost   product   );   share of innovative products sold in the product structure;   the share of innovation in the structure of total costs;   the cost of staff training, the coefficient of excess labor;  the level of implementation of the planned investment program;   capacity factor; The implementation of the planned export volumes.

Evaluating   economic imperfection of the enterprise   ,   the conditions for declaring and liquidating economic entities as a bonus (economic insolvency) are strictly established by the authorities acting on behalf of the state.   This body has a Committee on Economic Insolvency at the Ministry of Economy of the Republic of Uzbekistan.¹³

Liabilities   ,   broken into a competition   ,   must match the following   requirements   :

-   proper distribution and management of existing funds;

-   achieving a positive result;

-   find ways to avoid overdue debts and take steps to pay off existing debts;

-   Oversee the period of debt repayment by the debtor.

In determining the economic vulnerability of companies and companies should rely on the following system of indicators:

- the study of the solvency of the company and the solvency ratio of the company;

- to study the financial independence and dependence of the company and the company;

- the study of current and long-term assets;

- to study the relationship between debt and debt;

- Development of return on assets, capital and liabilities

- the study of the real level of capacity utilization;

- to study the level of use of fixed and intangible assets;

- Study the status of overdue receivables and payables.

The inability of the debtor to fulfill the requirements of creditors for monetary obligations and (or) to comply with its obligations for mandatory payments   recognized signs of bankruptcy, if the debtor does not perform   its commitment   within three months from   obligations and (or) payment   .

In accordance with the procedure for determining the criteria for monitoring and analyzing the financial condition of enterprises, the financial and economic situation of enterprises is divided into the following groups:

- economically stable;

- economic hazards (risky);

- economic instability * - **:

* companies with the ability to restore solvency:

** companies that are not able to restore their solvency.

It is recommended to study the system of indicators to assess the economic condition of business entities.¹⁴

- cost ratio or coverage (Ktl):

- self-employment rate (floating)

- return on operating assets and expenses (Ra, Rx)

In addition to the final conclusion, the following additional indicators will be studied:

- product and short-term loan ratio (ratio)

- capacity utilization ratio

- association coefficient of wear

When analyzing the creditworthiness of businesses in the analysis of financial statements, it is recommended to consider the following topics:

-   profitability of firms and companies;

-   working capital status;

-   the volume of own funds, their participation in capital and working capital;

-   growth rates of manufactured and sold products;

-   the status of the receivables and obligations of the creditor, which have expired and overdue;

the importance of having money and securities of companies and companies and other aspects.

In today's practice   it is necessary to characterize the study indicators   5 content groups in the system of indicators that are analyzed by commercial banks in the financial analysis of long-term and short-term loans to business entities.   These indicators are as follows :¹⁵

1. Productivity and liquidity ratios

2. The coefficients of labor activity

3. Financial leverage ratios

4. The profitability ratios

5. Coefficients describing debt repayment

The most important procedure for assessing creditworthiness in   advanced economies   is conditional   Procedure "1,   C-5 "   It characterizes the main effects.¹⁶

S1 - reputation of a charter lender in the market, determining its status

C2-Capacity is the ability of a borrower to complete a business, have the right income and pay off loans.

C3 - capital adequacy of capital of the borrower

C4-Terms - Conditions for business development

C5-mortgage

These rules are fully implemented in our credit practice, but not in the formal aspects of this policy.

The differences in the methodology of creditworthiness can be explained by the fact that our country is based on the national standard for accounting, analysis and audit, distribution and presentation of financial reports.

2. 
   Forms of financial analysis. Taking into account the aspects of the organization of financial analysis, such as the nature of the enterprise, the scope of activities, the competitive role
   

Due to the lack of formalities on the financial analysis, traditional routes can be used to organize it.

Typically, clear rules and procedures set out in official accounting for accounting or auditing (internal, external) serve as the basis for organizing this process.

In particular, the Article 11 of the Revised Law "On Accounting" establishes the accounting records and reports of the head of the accounting subject and regulates the competence of the head of the accounting subject. Theserightsinclude:

• 
  the accounting or bookkeeping service managed by the head of the Accounting Service;
  
• 
  on a contractual basis to maintain the accounting records to a specialized organization (audit organizations, tax consultants' organizations and other organizations that provide for accounting services);
  

• 
  accounting shall be maintained independently.
  

These procedures of accounting and bookkeeping are directly proportional to the financial analysis.

It is desirable to form an internal financial analysis and formulate an external financial analysis.

External financial analysis will allow the study of the financial condition of business entities on the basis of financial reporting forms reflecting limited information and will not allow disclosing all the secrets of the company's achievements. This analysis is carried out by stakeholders, interested in business activities, owners or government agencies, who are unable to access the internal information base.

Important aspects of external financial analysis are:

- a large number of subjects and information users;

- the diversity and diversity of inquiries;

- normative rules of reporting and reporting, definition of official specifics of the analysis;

- the analysis should be based solely on the information contained in the financial statement forms;

- limited analytical issues;

- the maximum exposure to the results of the analysis of the results of business activity for information users.

The main aspects of external financial analysis are the analysis of the business assets, capital and liabilities changes, solvency and liquidity, financial condition and sustainability, market and business activity, financial and economic capacity, economic strength and weakness, profitability and profitability current and private equity, determination of the company's economic rating.

Internal financial analysis differs from the external financial analysis by the internal scrutiny of the organization, its employees, and the scope of the sampling. The scope of the internal financial analysis and the scope of the study covered are broader than the external financial analysis. Its information base can include not only financial reports but all sources of financial accounting and extra-budgetary resources. Scope of the issues can be determined based on the interests of managers and analysts. The characteristics of this type of analysis can be explained by the following aspects.

The peculiarities of the internal financial analysis:

- narrow band of subjects;

- the results of the survey are focused exclusively on internal requirements, business management;

- high availability of a wide range of information in carrying out financial analysis;

- access to unobservable methods, in conjunction with standardized methodologies for the interpretation of specific regulations (s);

- the ability to conduct a deep financial analysis on the preparation of clear management decisions;

- organization of analytical work based on the requirements of the device.

The content of the financial analysis is structured into a full range of financial analysis and thematic financial analysis

Complete financial analysis is a complex study of all aspects of financial activity of the enterprise. Thematic financial analysis will be used to study the particular aspects and aspects of financial activity of the enterprise. The subject of thematic financial analysis is the following: issues of effective use of assets, optimal utilization of certain sources of financing of assets, solvency and financial sustainability, optimal investment activity, financial disruption of capital.

The financial analysis can include a complete (one-on-one) financial analysis of business entities, an analysis of the financial condition of separate units and units (based on economic responsibility centers), as well as the analysis of separate financial processes.

The financial analysis for the transition period is structured into prior, current, and prospective types of analysis.

Previous financial analysis is based on the knowledge of the financial condition of the entity's business as a whole or as a separate financial transaction (for example, an entity's solvency assessment for long and short-term bank borrowings).

Current (financial) analysis is a type of analysis that can effectively influence the financial situation in the performance of certain financial plans or financial transactions.

Persistent financial analysis is a kind of analysis that evaluates the expectations of future changes in the financial condition and its separate units, based on the current situation.

It is appropriate to define the stage of the financial analysis on the basis of the economic analysis and its components on a single basis, but we think it is appropriate to conduct it in the following sequence on the financial analysis.

1. 
   Determination and plan of financial analysis;
   
2. 
   Database collection on financial analysis;
   
3. 
   The stage of direct financial analysis;
   
4. 
   The stage of summarizing and drawing up the analysis results;
   
5. 
   Decisionstobemade;
   
6. 
   The stage of sales results analysis.
   

Different approaches in the field of economic analysis or the organization of financial analysis, their content is definitely one aspect, that is, the quality of the analysis.

In the analysis of the financial analysis, it is necessary to take into account the peculiarities of each branch and industry. In particular, the types of activity of economic entities are quite different. Difficulties vary from their activities, not just to business, but to property, to capital, to property distribution, to scale. Although the financial statements have the same meanings and content, their pumps and the rules for the formation of lines are fundamentally different.

While the differentiation of these issues is not important in evaluating the financial situation and effectiveness, the solution of the problem is in its sub-segment, the type of activity, the nature, the distribution, the property and the financial relationships.

Even if one or another economy is united, it is fundamentally different from other relationships. This difference should be taken into consideration in the financial analysis.

Differences in the information base can also be observed. For example, subjects of small business develop and maintain a simplified financial reporting, and large business entities make a generalized financial report. Similarly, there are differences in the number and content of the auditor's conclusions. Financial statements may include compulsory and optional composition of auditor's conclusions.           

 

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