Table of content

Table of content.............................................................................................................................1
Introduction...................................................................................................................................2
Findings.........................................................................................................................................3
Explain the purpose and use of the different accounting records and discuss whether it is
possible for AC Décor to keep all the transaction record online...............................................3
The importance and meaning of the fundamental accounting concepts applicable in the
scenario......................................................................................................................................6
The factors which might influence the nature and structure of accounting systems of AC
Décor.........................................................................................................................................8
The relevant component of business risk, details of the possible effect or implication of such
weakness/risks and recommendations for improvement...........................................................9
The duties, status and the liability of external auditors...........................................................13
The relationship between the internal and external auditors and comments on Mr. Lam
expression on the external auditors.........................................................................................16
Conclusion...................................................................................................................................18
Reference.....................................................................................................................................19

1
Introduction
AC Décor is a company that manufactures furniture and sells to wholesalers and
corporate customers. AC Decor has a strong brand name and record high turnover for several
years. In year 2008, the company has achieved annual turnover of USD2 million. AC Décor
plans to expand the business and in the process of acquiring financing from Agro bank.
Mr. Lam, the operating manager, indicates that all the operation such as the company
requisition, purchase system, good received, invoice receipts and payments system are done on
manual basis and all records were kept in hard copy. However the company plans to install the
computerized accounting system to improve the operation. The introduction of the
computerized accounting system is hoped to reduce the amount of paperwork.
As an internal auditor of AC Décor, in this report, the purpose and use of different
accounting records as well as the possibility for company to keep all the transaction record
online will be discussed to deal with the problem that AC Décor is facing. The important and
meaning of the fundamental accounting concepts will also be explained. In the report, I will
assess the factors which might influence the nature and structure of accounting systems of AC
Décor. Moreover, the relevant components of business risk, details of possible effect of such
risks are going to be identified. In the third part, the duties, status and the liability of external
auditors and the relationship between internal and external auditors will be described.

2
Findings
Explain the purpose and use of the different accounting records and discuss whether it is
possible for AC Décor to keep all the transaction record online.
Purpose and use of different accounting records
In any company, especially, AC Décor, there are many kinds of accounting records that
involve sales or purchase, receiving or paying money, owning or being owed many.
The cash book is a day book which is used to keep cumulative record for money
received and money paid out by AC Décor. The money which is paid into or out of the
company’s bank account is also recorded in the cash book. According to Edexcel HNC/HND
Business (2004), there are also receipts and payments made by bank transfer, standing order,
direct debit, bank interest and charges. The receipts of cash are recorded in one part of the cash
book and another part is used to record the payment.
Sales day book is used to keep a list of all invoices sent out to customers each day.
From the information in the sales day book, the AC Décor managers can analyze the
company’s sales. In addition, this analysis is useful business information for the AC Décor
managers to device how they will run the company. On the other hand, the ‘sales ledger folio’
in sales day book is a reference to the sales ledger.
Beside that, the accountants have to open a purchase day book to keep and analyze all
the invoices received. Like the sales day book, the ‘purchase ledger folio’ is a reference to the
purchase ledger.
In accordance with Edexcel HNC/HND Business (2004), “the nominal ledger or general
ledger is a file, binder or some other device which contains all the separate accounts of a
business”. It means that nominal ledger is an accounting record which summarizes the financial
affairs of the company. The general ledger includes the details of assets, liabilities and capital,
income and expenditure, profit and loss. It involves a great number of different accounts which
have its own name, code or purpose. Through the nominal ledger, AC Décor managers can
measure the flow of income and expenditure into assets and liabilities accurately. From that, the
profitability will be calculated and monitored.
It is known that the sales day book keeps a time order record of invoices sent out by the
AC Décor to credit customer. However, with sales day book, a customer may appear in

3
different places. That will be difficult to control whether customers owe company’s money or
not. In the sales ledger, we also see the chronological record of invoices. In addition, the
information of how much money each individual credit customer owes and what this total debt
consists of are also recorded in the sales ledger. In this, each customer is given a separate
reference or code number. Due to the records of the amounts paid by customer in the sales
ledger, it is easy to identify the money owed to AC Décor. It's a useful business-planning tool
to enable company to monitor and chase slow payers and find out which customers are most
profitable. All customers who owe company’s money should remain on the ledger until they
pay their debt completely.
Purchase ledger keeps the record of how much company owes each supplier. Each
individual supplier has separate account in the purchase ledger. In overall, the purchase ledger
records all purchases made by the AC Décor. By using purchase ledger, company can control
the business’s outgoings and how much company owes at that time. Moreover, with purchase
ledger, the most regular supplier and the amount that company has spent with each will be
identified and recorded. Therefore, any creditors should remain on the purchase ledger system
until payment is made.
As we see that the roles of sales ledger and purchase ledger are quite similar. The only
different is that sales ledger records the invoice sent out; while, purchase ledger deals with
invoices received. The purpose of both of them is also similar because sales ledger comprises
the personal accounts for credit customers, and purchase ledger comprises the personal
accounts for creditors.
Comment for AC Décor on possibility of keeping records online.
According to Mr. Lam, the operating manager of AC Décor, all the operation such as
the company requisition, purchase system, good received, invoice receipts and payments
system are done on manual basis and all records were kept in hard copy. However the company
plans to install the computerized accounting system to improve the operation. The introduction
of the computerized accounting system is hoped to reduce the amount of paperwork. It is
considered that installing computerized accounting system will have many advantages as well
as disadvantages.
Compared with the manual record, the computerize record will reduce the volume of
work for the accountants. With the computerized accounting system, a large amount of data can

4
be processed and handled quickly and the result is more accurate then the manual accounting
system. Hence, the error which easily to face in manual system will be reduced. In addition, if
an entry in one of the ledgers is put in, it will automatically updates to the others. The
computerized accounting system also automatic produce documents and reports as well as
extract the required data from relevant files. Due to the speed of processing, when the data has
been input, the computerized system will analyze very rapidly to bring out useful information
to the manager of AC Décor. Therefore, the reporting and decision making will be improved.
With the faster response time, we can save time to do other work.
However, when installing computerized accounting system, AC Décor may face some
problems. Firstly, company needs to spend time and cost to install the system and training
personnel. Moreover, just some people have the authority to assess the system and data files
such as the managers, the accountants, and internal auditors of AC Décor. Thus, a system of
coding and checking needs to be developed. Each person will have different code to assess the
system, and different people have separate authority or rights in using the computerized
accounting system. Beside that, it is hard to find out where and how the mistakes have been
made in the system. It is also necessary to check the system regularly due to the existence of
viruses, hackers…Using computerized accounting system increases highly possible risks of
loosing information. Thus, with important information or transaction, the AC Décor
accountants should print it out and keep in hard copy.
Therefore, AC Décor should install the computerized accounting system. However,
company still needs to record and keep the hard copy in anticipation of failed system or power
failure.

5
The importance and meaning of the fundamental accounting concepts applicable in the
scenario
In order to prepare accounts for AC Décor Company, the accountants have to follow
four fundamental accounting concepts such as going concern, prudence, accruals and
consistency; and four additional concepts: separate valuation, materiality, money measurement
and entity.
Todd, P. (2000) indicated that, “The going concern concept simply means that the
Financial Statements have been prepared on the assumption that the company will remain in
operational existence for the foreseeable future”. That means there is no intention to close
down AC Décor Company and cut the scale of operations. Therefore, accountants of AC Décor
need to prepare financial statements such as Profit and Loss Account and the Balance Sheet for
the next accounting period which means next twelve months or 6 months.
According to Edexcel HNC/HND Business (2004), the prudence concept has been seen
to mean that in selecting between alternative procedures, or alternative valuations, the one
selected should be the one which gives the most cautious presentation of the AC Décor
financial position. Thus, provision should be made for all known expenses and losses but it
should not be too high or too low. Based on that, the accountants of AC Décor need to choose
the one that results in a lower profit, a lower asset value and a higher liability value, whenever
there are alternative procedures or values.
The accruals concept states that revenue earned must be matched against the
expenditure incurred in earning it (Edexcel HNC/HND Business, 2004). The purpose of this
concept is to make sure that all revenues and costs are recorded in the appropriate statement at
the appropriate time. For example, the cost of goods sold relevant to the sales need to be
recorded accurately and in full in the income statement of AC Décor. Based on Sift Media
(2002), costs concerning a future period must be carried forward as a prepayment for that
period and not charged in the current profit statement. For example, payments of AC Décor
made in advance such as the prepayment of rent would be treated in this way.
As regard the consistency concept, there must be a consistent application of accounting
policies, both within an accounting period and from one period to the next. The consistency
concept requires that in preparing accounts consistency should be observed in two respects:

6
similar items in a set of account must be treated in similar way. In addition, for similar items,
the same treatment should be applied form one accounting period to another in order to
compare between two periods. However, with the development of accounting practices, the
accounting policies will be adopted and AC Décor is required to disclose fact and explain the
impact of any change.
In accordance with Edexcel HNC/HND Business (2004), the separate valuation
principle states that, in deciding the amount of an asset or liability in the balance sheet, each
component item of asset or liability must be valued separately. The separate valuations must be
aggregated to arrive at the total figures.
Besides, the materiality concept is an important issue toward internal auditors of AC
Décor. It indicates that a significant or important or particular matter in the context of financial
statements influences the decisions made by financial users. There is no absolutely
measurement of materiality. In common, to determine material items, a convenient rule of
thumb will be applied; for example, material items are those with a value greater than 5% of the
profit disclosed by the accounts.
In the money measurement concept, the AC Décor accountants can only do with the
items that can be qualified in monetary value. Thus, things like workforce skill, morale, AC
Décor brand recognition, quality of management…can not be accounted for. In fact, the assets
that can not be qualified in monetary terms are not less important than the one which can be
expressed in monetary terms.
The entity concept is an important term toward AC Décor. On the other hand, the entity
concept applies for not only limited company but also proprietorship or partnership. The
concept states that accounts are kept for entities and not the people who own or run the
company (Money Instructor, 2005). Therefore, AC Décor is an independent entity and does not
be affected by the management of AC Décor.

7
The factors which might influence the nature and structure of accounting systems of AC
Décor
The nature and structure of AC Décor accounting system is influenced by both the
company’s size and structure.
AC Décor operated in Hanoi with 30 employees and overseeing by Mr. Lam as
Operating Manager. Thus, the business size of company is quite small and simple. With the
small size, the accountants do not have a larger number of work as well as the amount of
transactions. It means that the number of accounts and records is small. Thus, AC Décor only
needs a simple accounting system to control accounting activities. When AC Décor expands the
business, the size will be bigger. At that timer, a bigger and more complex accounting system
will be required.
According to the scenario, we see that, AC Décor has purchase department, buying
department, and also accounting department, hence the structure of AC Décor is functional
structure. Each department is responsible for different functions, but they relate and support the
others. As respect to AC Décor, each department is controlled and managed by a supervisor,
then; the supervisor is controlled directly by the manager, Mr. Lam. Therefore, the hierarchy of
authority in AC Décor is also simple. That means company has a flat structure.
Beside that, inside the company, there are three main types of authority that the
department may have: line authority, staff authority and functional authority (Edexcel
HNC/HND Business, 2004). Line authority is the authority a manager has over the subordinate.
Staff authority is the authority that one department may have in giving specialist advice to
another department. The functional authority is the authority of a manager or department to
direct, design and control activities or procedures of another department. Based on that, the
accounting department of AC Décor may have the line and staff authority.
In overall, we see that, due to the influences of the small business size, the functional
and flat organizational structure, the accounting system of AC Décor will be simple.

8
The relevant component of business risk, details of the possible effect or implication of such
weakness/risks and recommendations for improvement
In accordance with Edexcel HNC/HND Business (2004), there are three types of risks:
operational risk, financial risk and compliance risk. Operational risk is the chances of errors or
mistakes being made within the operations of the company. For instance, if there is no
department controls the requirement of purchasing fixed assets, amount of fixed assets that
company does not require may be purchased. Financial risk covers all the risk of incorrect
payment which are made or not all due receipts being collected. The compliance risk is the
overall risk that company will not comply with the entire legal requirement laid out in the
Companies Act.
Based on that, we will identify the relevant risks of AC Décor in the scenario. The
purchase process and procedure are analyzed for this problem. Through the purchase procedure
in the scenario, there are three main phases: issuing purchase requisition form, checking goods
and recording and payment.
As respect to the first step, the issuing purchase requisition form, the procedure is
described in the below chart.

Retained
Two-part purchase
Head storekeeper

requisition form Buying

Department

9
 Head storekeeper
Two-part purchase desk
Respective
Department
(Head storekeeper is absent) Buying
Department

Purchase A two-part
Department pre-numbered
purchase order

Authorized by Mr. Lam Suppliers

According to the scenario, purchases are normally requisitioned by the head storekeeper
who fills out a two-part purchase requisition form. Through the chart, one part of the purchase
requisition is sent to the buying department and one part is retained by the storekeeper. The
head storekeeper may make mistakes of filling the purchase requisition form; thus, the amount
or type of good purchasing may be wrong. However, with two parts purchase requisition form,
the buying department may check again the information of the purchase requisition. Therefore,
this operational risk will be avoided.
When head storekeeper is absent, purchase requisitioned form are filled by the
respective department and one copy is left on the storekeeper desk for filing purposes. In the
case that the copy of purchase requisitioned form loose, the operational risk may happen. In
addition, the respective department may forget to fill the copy form or notice the head
storekeeper about the existence of purchase requisitioned form; thus, the head storekeeper will
not know about the purchase. In order to avoid that risk, the respective department needs to
make another copy of purchase requisitioned form and send it to the head storekeeper when
he/she comes back. The head storekeeper will compare it with another copy that he received
and the fact. He should sign a document to confirm that he received the purchase requisitioned
form.
Occasionally, when the goods are required urgently, Supervisors in Production
department did the ordering themselves over the phone and fills up the purchase requisition
form when the goods or invoices arrived. In this situation, the operational risk will occur if the

10
production department did not fill the purchase requisition form or forget to notice the head
storekeeper. In such circumstance, when the risk happens, it will be difficult to find out. Thus,
right after production department did the ordering themselves over the phone, they have to fill a
two-part purchase requisition form; one is kept for themselves, one is sent to the head
storekeeper. On the other way, after they did the ordering, they can ask the head storekeeper to
fill the purchase requisition form and sent one copy for them. AC Décor should provide a
multipart document including all the requirements for purchasing procedure and sent the copy
to relevant departments or people. Hence, a person will have the responsibility to examine the
performance of those departments. It is also a segregation of duties to the work of head
storekeeper.
The purchase department raises a two part pre-numbered purchase order; this is
authorized by Mr. Lam. One copy is sent to the supplier, the second is filed in the buying
department. With this method, both supplier and AC Décor can check and control, thus, it will
avoid the risk.
The second stage is good checking. Goods are received by the head storekeeper who
checks the quantity of goods, against the purchase requisition form. Therefore, the head
storekeeper can control whether the number of goods they received equal to the goods that they
ordered.
On the occasion that purchase requisition form is not being issued, Supervisor from
Production Department is called to verify the order and filled up the requisition form on the
spot. With this action, the control all the purchase requisition form in order to compare with
the fact.
Providing that the quality is acceptable the storekeeper signed the delivery order and
stapled one copy with the purchase requisition for filing. This is a good step of AC Décor to
control the goods received. In addition, it also reduces the risk that company may face. The
stock received then delivered to the respective department that requested it.
The below chart shows the process of recording and payment of AC Décor to the
suppliers.

11
 Account
Purchase invoice department Purchase day book
payable clerk

Monthly Weekly

Nominal Ledger Purchase Ledger Unpaid invoices file

Remove unpaid
Accountant and the invoices and stamp
No reconciliation operating manager them PAID (end of
for signing month)

Purchase invoices are received by the accounts department payable clerk enters the
details in the purchase daybook before filing the invoice an unpaid invoice file. From that, the
clerk can verify the paid invoices and unpaid invoices. Thus, financial risks of missing
invoices, or confusing paid and unpaid invoice are avoided.
Totals from the purchase daybook are posted to the nominal ledger monthly and details
are posted to the purchase ledger weekly. A list of purchase ledger balances in produced
monthly by the payable clerk. With these steps, AC Décor can reduce the compliance risks. It is
easily for company to give their analysis or decision of financial position.
Payments to the supplier are made at the end of the month from the unpaid files. Clerk
will remove the unpaid invoices and stamp them PAID and write the check accordingly. The
cheques and invoices are passed on to the accountant and the operating manager for signing.
All the steps are performed carefully; hence, the financial risks are prevented. In the case that
the clerk colludes with the suppliers, possible frauds can be overcharging on purchase invoices.
Thus, the AC Décor management should watch out for unusual discounts or commissions being
given or taken. In addition, no attempts have been made to reconcile the unpaid invoice with
the purchase order from purchase department. Thus, some unpaid invoices will not be passed to
the managers or the information in the invoice may not be the same as the purchase order and

12
the real stock. Therefore, the reconciliation of the unpaid invoice with the purchase order from
purchase department needs to be taken at the end of each month.
According to the scenario, statement from supplier were received on monthly basis and
filed in the respective supplier files. If supplier complaints any particular invoices have not
been paid, clerk will check in the unpaid invoices files. If found missing, clerk will request
supplier to issue new invoice and make payment accordingly. The clerk lists all cheques raised
and passes this list to cash book clerk who enters the details into the cash book weekly and
posts the details to the purchase and nominal ledgers monthly. This procedure of AC Décor is
quite good and can avoid the possible risks.

The duties, status and the liability of external auditors

The duties and status/rights of external auditors are set and referenced from ss 235 and
237 of the Company Act 1985.
Duties of external auditors
According to the Company Act 1985, the duties of auditors are to report on truth and
fair view of every balance sheet and profit and loss account laid before the company general
meeting. The auditors have to report their opinion on whether the statements have been
prepared in accordance with the relevant legislation and whether they give a true and fair view
of the profit or loss for the year and state of affairs at the year end.
Beside that, the auditors have duty to form an opinion on certain other matters and to
report any reservations (Spenford IT Ltd, 2006). There are some factors that the external
auditors must consider. Firstly, the auditors need to see whether the company has kept proper
accounting records and the accounts agree with the accounting records and returns or not. In
addition, all the information and explanations that the auditor considers necessary for the
purposes of the audit have been obtained and they have had access at all time to the company’s
books, accounts and vouchers.
The detail of directors’ salary, compensation and other benefits has to be shown
correctly in the financial statement as well as the particulars of loans and other transactions in
favor of directors. Moreover, the information which is given in the directors’ report should be
appropriate with the accounts. If any of six above factors is not true, the external auditors have
the duties to report. Therefore, the auditor is required to apply ‘reasonable skill and care’ in

13
conducting the audit. In accordance with Spenford IT Ltd (2006), the auditor has a limited duty
to review the other information issued alongside the audited financial statements.
Status of the external auditors
Based on the Companies Act 1985, the external auditors have six main status/rights
(Edexcel HNC/HND Business, 2004). The external auditors have the right to access at all times
to the books, accounts and vouchers of the company. They also can require from company’s
staff the information and explanations which they think necessary for the performance of their
duties.
The external auditor has the right “attendance at/notices of general meetings”. Thus,
they can attend any general meetings of the company. Moreover, they may receive all notices
of and communications relating to the meetings as any member of the company. Followed the
Companies Act 1985, the auditors have the right to speak at the general meetings which they
attend on any part of the business that concerns them as auditors. In addition, they have the
rights in relation to written solution. That means they can receive a copy of any written
resolution proposed. The external auditors can give notice in writing to require a general
meeting be held for the purpose of laying the accounts and reports before the company.
Liabilities of the external auditors
The external auditors are liable under both law of contract and law of tort. Under law of
contract, both express and implied terms affect upon external auditors.
According to Edexcel HNC/HND Business (2004), as usual, the express terms of the
audit contract can not over-ride the Company Act by limiting the company auditors’ statutory
duties or imposing restrictions upon the statutory rights which are designed to assist them with
discharging the duties. However, if the auditors and company agree that the auditors’
responsibilities should be extended beyond the term set by the Companies Act, express term
will be significant. In these situations, the auditors have high risk to be judged on the content of
the report that they issued. Therefore, they should ensure that their report is clear and the
impact of any limitations that there have been upon their extent and scope of work.
As regard to implied terms, they are unstated but the law will impart into the contract.
There are three factors that should be concerned: the auditors have a duty to exercise reasonable
care; the auditors have duty to carry out the work required with the reasonable expediency and
the auditors have a right to reasonable remuneration (Edexcel HNC/HND Business, 2004).

14
 The auditors’ duty of care is set under the Supply of Goods Act 1982. Thus, the external
auditors should use accepted auditing techniques and act honestly and carefully. It is considered
that if auditors form an opinion carefully, they must give due consideration to all relevant
matters. However, if the opinion is not reasonably competent, the auditors may be held
negligent.
According to Millichamp, A. H. (2002), negligence is “some act or omission which
occurs because the person concerned (an external auditor) fail to exercise that degree of
reasonable skill and care which is reasonably to be expected in the circumstance of the case”.
There are three matters must be proved: ‘duty of care’ which states there existed a duty of care
enforceable at law; ‘negligence’ that means the auditors were negligent in the performance of
that duty; and ‘damage’ – the client has suffered some monetary loss as a direct consequence of
the negligence on the part of the auditors.
The external auditors may be liable for negligence not only in the contract but also in
tort, in the circumstance that a person to whom he/she owed duty of care has suffered loss as a
result of his/her negligence. In common, the external auditors owe the duty of care to his/her
own client; for instance, the case of Caparo Industries plc v Dickman & others 1990, Hedley
Byrne & Co Ltd v. Heller & Partners 1963. However, the decisions of the courts appeared to
expand the classes of case in which a person professing some special skill (as the external
auditor) may be liable for negligence to someone other than his/her own client.

15
The relationship between the internal and external auditors and comments on Mr. Lam
expression on the external auditors.
In the scenario, Mr. Lam has advises that Agro Bank will engage external auditors to
audit the company before making decision on AC Décor loan application. He said “We need to
get everything in order before the external auditor comes and poke their nose into everything”.
Therefore, understanding the relationship between the internal and external auditors is very
important.
In accordance with Millichamp, A. H. (2002), the internal and external auditors has
some common interests. Both internal and external auditors focus on evaluating the
effectiveness of the internal control and continuous effective operation of the system. They
also interested in adequate management information flow, asset safeguarding and adequate
accounting system. Moreover, they both need to ensure the compliance with statutory and
regulatory requirement.
Besides, there are some important different between the nature of internal and external
auditors. The external auditors are independent toward AC Décor, while the internal are
determined by the company management. The internal auditors are answerable only the
management; whereas, the responsibility of external auditors is fixed by the statue. In addition,
the external auditor is responsible to the shareholders or even to the wider public. As respect to
internal auditors, they report to the AC Décor management; however, the external auditors will
report their work to the members, shareholders. The external auditors concentrate on expressing
the truth and fairness of the accounts; while, internal auditors have a large number of activities
including the appraisal of the internal control system and the management information system.
Because, Mr. Lam has said that he wanted to get everything in order before the Agro
Bank external auditors came. Thus, we need to consider the relationship between internal and
external auditors or in which occasion; the external auditor from Agro Bank would coordinate
with the internal auditors of AC Décor. The Agro Bank external auditors may require some
periodic meetings with the AC Décor internal auditors to plan the overall audit ensure to ensure
adequate coverage. Some other meetings will be hold for discussing matters of mutual interests
which are mentioned above. Internal and external auditors will together access to audit program

16
and working papers, exchange the audits report and management letters and develop the audit
techniques, methods and terminology (Edexcel HNC/HND Business, 2004).
On the other hand, due to the importance of the internal control system and the common
objectives of internal and external auditors, the external auditors may rely on the work of the
internal auditors. The Agro Bank external auditors can use the work of AC Décor internal
auditors in two ways: by taking into account the work done by the internal auditors; and by
agreeing with management that internal audit will render direct assistance to the external
auditors (Millichamp, A. H., 2002).
However, to place and rely on the work of AC Décor internal auditors, the Agro Bank
external auditors have to assess the internal auditor and his work. Firstly, the external auditors
need to ensure that the internal auditor whom they place reliance must be independent and be
able to communicate freely with the external. They also evaluate whether the scope and
objectives of the internal audit function areas such as accounting systems and internal control
or financial and operation information to manager, are useful for them. The work of the AC
Décor internal auditor should be done in a professional manner to be useful for the Agro Bank
external auditors. In addition, the external auditor must assess if membership of a professional
body with its competence and ethical implications is desirable (Millichamp, A. H., 2002). The
internal auditor needs to provide high standard report and the internal audit department should
be useful to the external auditors. If AC Décor internal audit department achieves the entire
requirement, the Agro Bank external auditors will use the work of internal auditors.
Because Mr. Lam wants the Agro Bank external auditors has a good view of AC Décor
before they make the decision of company’s loan application; a carefully preparation is
necessary. In addition, Mr. Lam wants to get everything in order before the Agro Bank external
auditors come. Thus, all the business risks need to be correct quickly and opportunely. Besides,
the internal auditors and accountants should ensure that all the transactions, records are
prepared in right format. Internal auditor department can reach all the above requirements in
order to make the external auditors rely on internal auditor’s work. Thus, the external auditors
will not ‘poke their nose into everything’. When the internal auditors and accountants finish the
preparation, they should report to Mr. Lam before the Agro Bank external auditors come.

17
Conclusion
To deal with the problem that AC Décor is facing, the purpose and use of different
accounting records as well as the possibility for company to keep all the transaction record
online were mentioned. The important and meaning of the fundamental accounting concepts
were explained. In the report, I assessed the factors which might influence the nature and
structure of accounting systems of AC Décor. Moreover, the relevant components of business
risk, details of possible effect of such risks were identified. In the third part, the duties, status
and the liability of external auditors and the relationship between internal and external auditors
were described.

18
Reference
1. BPP Professional Education (2004) Financial Reporting Supporting Foundation
Degrees, Great Britain: BPP Professional Education.
2. BPP Professional Education (2004) Financial System and Auditing Supporting
Foundation Degrees, Great Britain: BPP Professional Education.
3. Millichamp, A. H. (2002) Auditing, London: Continuum Publisher.
4. Todd, P. (2000), Understanding the fundamental concepts [online] ACCA, Available
from:
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