APPLICABLE FINANCIAL REPORTING FRAMEWORK is the financial reporting framework adopted in the preparation of the financial statements that is acceptable in
view of the nature of the entity and the objective of the financial statements, or that is required by law or regulation.
EXTERNAL AUDIT is an audit conducted by an individual or firm that is independent of the company being audited. These independent auditors audit the books of a company generally once per year (see INTERIM AUDIT) after the completion of the companys fiscal year. Their role is to give an opinion of the financials statements reflection of the status and operations of the company being audited. Based on what they witness during the audit they will also produce, for management and board utilization, a management letter. Although a financial statement audit is the most common type of external audit, external auditors may also conduct special purpose audits which might include; performing specific tests and procedures and reporting on the results, a less intensive review, and compilations.
SWOT ANALYSIS is one of the most used forms of business analysis. A SWOT examines and assesses the impacts of internal strengths and weaknesses, and external opportunities and threats, on the success of the "subject" of analysis. An important part of a SWOT analysis involves listing and evaluating the firms strengths, weaknesses, opportunities, and threats. Each of these elements is described:
1. Strengths: Strengths are those factors that make an organization more competitive than its marketplace peers. Strengths are what the company has a distinctive advantage at doing or what resources it has that is strategic to the competition. Strengths are, in effect, resources, capabilities and core competencies that the organization holds that can be used effectively to achieve its performance objectives.
2. Weaknesses: A weakness is a limitation, fault, or defect within the organization that will keep it from achieving its objectives; it is what an organization does poorly or where it has inferior capabilities or resources as compared to the competition.
3. Opportunities: Opportunities include any favorable current prospective situation in the organizations environment, such as a trend, market, change or overlooked need that supports the demand for a product or service and permits the organization to enhance its competitive position.
4. Threats: A threat includes any unfavorable situation, trend or impending change in an organizations environment that is currently or potentially damaging or threatening to its ability to compete. It may be a barrier, constraint, or anything that might inflict problems, damages, harm or injury to the organization.
A firms strengths and weaknesses (i.e., its internal environment) are made up of factors over which it has greater relative control. These factors include the firms resources; culture; systems; staffing practices; and the personal values of the firms managers. Meanwhile, an organizations opportunities and threats (i.e., its external environment) are made up of those factors over which the organization has lesser relative control. These factors include, among others, overall demand, the degree of market saturation, government policies, economic condition, social, cultural, and ethical developments; technological developments; ecological developments, and the factors making up Porters Five Forces (i.e., intensity of rivalry, threat of new entrants, threat of substitute products, bargaining power of buyers, and bargaining power of suppliers.)
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