Order and methods of cash flow, audit and analysis of its main indicators

Table of contents: The Kazakh-American Free University Academic Journal №10 - 2018

Author: Chzhen Marina, Kazakh-American Free University, Kazakhstan

The procedure for audit of cash flow statement. Audit is a strictly organized process, which has certain stages and procedures for maintaining and compiling audit procedures.

While checking the report of cash flow, guided by the definitions of operating, investment and financial activities.

Verification of the correctness of data transfer to column 4 from the report of the previous year of column 3 was carried out. For this purpose, the cash flow statements for 2016 and 2017 were compared. During the audit, the identity of the data of the report of cash flow was also established with the data of the general ledger and the subsidiary ledger No. 1 and No. 2.

In general, the report is prepared in accordance with the requirements. However, there are remarks. In the decoding to the report, the amounts of administrative expenses are not deciphered, although there was a movement on this account.

The audit report contains three parts: introductory, analytical and final.

The introductory part includes all necessary information about an audit firm or an independent auditor.

The analytical part is a report of the audit firm to the enterprise on general results of checking the status of internal control, accounting and financial reporting of the entity's business, as well as compliance by the enterprise with legislation in the performance of financial and business operations.

The final part of the audit report is the auditor's opinion on the reliability of the company's financial statements.

An analytical table is drawn up (Table 1) to study the structure of cash, which reflects the movement of funds by type of activity, their amount and percentage in percentage terms. The articles of inflow and outflow of money resources are expedient for grouping in view of the purposes of the analysis.

The data in Table 1 show that the organization had lacks investment and financial activities in 2016 and 2017. All changes are seen only in terms of operating activities.

The financial position of the enterprise directly depends on how quickly the funds invested in assets turn into real money.

Turnover of working capital means the duration of one complete circulation of funds from the moment of turning working capital in cash into production stocks and until the output of finished products and its sale. Circuit of funds is completed by transfer of income to the enterprise account.

The cash turnover is not the same for enterprises in one or different sectors of the economy, which depends on:

- the organization of production;

- marketing of products;

- the placement of money;

- other factors.

The most generalized view is provided by the cash flow turnover ratio, which reflects the number of turnovers of the entire money capital of the enterprise and characterizes the intensity of the enterprise's use of all available monetary resources, regardless of the sources of attraction.

However, it should be emphasized that the period of funds circulation is largely determined by the internal conditions of the enterprise, and primarily the effectiveness of the strategy for managing its assets (or its absence).

The speed of turnover of the company's cash flows is calculated by formula (1):

, (1)

where, Kt - asset turnover ratio;

I - income from the sale of products (works, services);

A - average annual value of assets.

The average amount of money (cash) on the balance sheet is determined by the formula (2):

, (2)

where, Cb, Ce - the amount of cash at the beginning and end of the period.

The duration of one turnover in days is determined by the formula (3):

, (3)

where, T - the duration of one turnover in days;

K - short-term assets turnover ratio.

Change in the turnover of funds is revealed by comparing the actual indicators with the planned indicators or indicators of the previous period (year or month).

The indicator of loading of funds in turnover characterizes the amount of money advances per one tenge of proceeds from the sale of products. The indicator is calculated by the formula (4):

, (4)

where, L - load factor;

CA - average annual value of current assets;

SR - sales revenue.

The smaller the load factor, the more efficiently circulating assets is used.

With the acceleration of the turnover of money from the circulation, resources and sources of their formation are released, with a slowdown - additional funds are involved in turnover.

Accordingly, it was expedient to conduct an analysis of the cash turnover of the enterprise of BP VOSTOK LLP. The calculated indicators characterizing the turnover are placed in Table 2.

According to the data in Table 2, the following conclusions can be drawn: the analyzed company BP VOSTOK LLP quite efficiently manages its current assets, in general, and in cash, in particular. So, the duration of turnover of all current assets for 2015 was 0.5 day, for 2016 was 1 day, for 2017 was 2 days, therefore, turnover became slower by 1.5 days. This was facilitated by the acceleration of cash turnover by 0.54 days.

The smaller the load factor, the more efficiently circulating assets is used. The enterprise can draw a conclusion on increasing the efficiency of using working capital, because the coefficient of funds in circulation decreased by 1.4 in 2017 compared to the previous period.

A statement of cash flows can be indirectly made based on the balance sheet and income statement.

This will require:

- statements of financial position for the last two reporting dates;

- statement of comprehensive income for the period.

Calculation of the cash flow statement of BP VOSTOK LLP for the year 2017 by an indirect method:

1) Increase in accounts receivable = 14 520 753,5 - 6 412 213,28 = 8 108 540 (tenge).

2) Increase of inventory = 148 785 404,6 – 23 875 428,78 = 124 909 976 (tenge).

3) Increase in short-term accounts payable = 135 911 484 – 32 811 777,29 = 103 099 707 (tenge).

4) Net increase in cash and cash equivalents = 13896083,16 - 475120,53 (tenge).

Table 3 presents the cash flow statement of BP VOSTOK LLP for the year 2017, compiled using an indirect method.

As can be seen from Table 3 and the cash flow statement (direct method), the cash flows from operating activities are compiled by both direct and indirect method.

The indirect method is preferable from the analytical point of view, since it allows determining the relationship between the profit received and the change in the amount of money. Comparing the two methods of compiling a cash flow statement and two corresponding presentation formats, we can note a higher information value of the indirect format for diagnostic purposes.


1. "Cash flow statement" 2011, "EST Audit" LLP, http://www.est-audit.kz/ otchet-o-dvizhenii-denezhnyh-sredstv. html

2. "Methodology for the preparation of a cash flow statement by an indirect method". Y. Lesnova, director of the audit firm "Audit and Consulting Center" in 2016.

3. Recommendations for compiling a cash flows statement http:// www. nationalbank. kz

4. "Procedure for the preparation and content of a cash flow statement". O.Y. May 2015

5. "Two methods for generating a cash flows statement" http:// www. elitarium. ru, 2017

6. "Audit: a guide for accountants." Martynova R.F., 2014.

7. Law of Kazakhstan Republic "About Accounting and Financial Reporting" dated 28.02.2007 No. 234-111.

Table of contents: The Kazakh-American Free University Academic Journal №10 - 2018

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