Financial Statement Analysis and Valuation

Introduction

An auditor must possess strong competencies in financial statement analysis and valuation.

Financial Statement Analysis:
The course demonstrates how financial information can be used to evaluate a company’s past performance and present circumstances to be able to contemplate what might transpire in the future.

In performing preliminary analytical procedures, financial statement analysis is an important part of understanding the client’s business and assessing client business risk. Unusual changes in ratios compared to prior years or to industry averages help identify areas having increased risk of misstatements that require further attention during the audit.

An auditor also need to evaluate whether the client is likely to continue as a going concern and must therefore evaluate the financial health of the business.

Valuation:
Under IFRS 3, the acquirer shall measure the cost of a business combination allocate that cost to the assets acquired, both tangible and intangible, and the liabilities and contingent liabilities assumed. Under IAS 36, an entity is required to conduct impairment tests for its assets to see whether it has incurred any impairment losses. In recent years accounting standards have put an increased emphasis on fair value accounting.

Cost allocation under IFRS 3, impairment testing under IFRS 36 as well as fair value accounting require that auditors have good skills in applying different valuation techniques.

This course provides both a sound theoretical framework for valuation and a thorough discussion of how valuations are actually done in the real world. .

Course content

• Use of financial statement analysis within the audit profession
• Accounting and performance qualityt
• Analysis of income statement and balance sheet
• Analysis of cash flows
• Analyses of key figures
• Growth analyses
• Forecasts
• Use of financial statement analysis within the audit profession
• Valuation models
• Stipulation of the required rate of return
• Analysis of credit risk