Certificate IV in Financial Services

(Bookkeeping)

Course 11334

Training Package FNS10

APPLY PRINCILPES OF PROFESSIONAL PRACTICE TO WORK IN THE FINANCIAL SERVICES INDUSTRY

FNSINC401A

DEVELOP & IMPLEMENT POLICIES PROCEDURES RELEVANT TO BOOKKEEPING ACTIVITIES

FNSBKG401A

Workbook

Apply Principles of Professional Practice to Work in the Financial Services Industry

FNSICIN401A

Develop & Implement Policies & Procedures Relevant to Bookkeeping Activities

FNSBKG401A

Contents

Part 1: Role and Responsibilities of the Bookkeeper

What is the Financial Services Industry?

External Forces that may Impact the Australian Financial Services Industry

Other External Forces that Impact the Australian

What is a Bookkeeper?

Part 2: Legislation and Codes in the Industry

Legislation in the Financial Services Industry

Ethics in the Financial Services Industry

Part 3: Develop Systems

Organisation Codes, Policies and Procedures

Planning Work and Time Management

Manage Information

Part 4: Personal and Professional Development

Accounting Professional Industry Associations

Bookkeeping Professional Industry Associations

Other Forms of Professional Development

Part 5: Teamwork & Planning

Actively Participate in all Team Processes to Ensure Team Objectives are Met

Team Skills

Part 6: Identify Sustainability Issues for the Financial Services Industry

The Importance of Triple Bottom Line

Determining Best Practice

Apply Principles of Professional Practice to Work in the Financial Services Industry

Develop & Implement Policies & Procedures Relevant to Bookkeeping Activities

Unit Purpose

By working through this resource you will obtain the underpinning knowledgerequired to:

  • Develop, implement and maintain policies, practices and guidelines to ensure that a quality service is provided in relation to bookkeeping activities.
  • Develop a professional working relationship with relevant clients & other relevant parties.
  • Recognise & apply GST implications and code transactions.
  • Carry out research to identify compliance requirements and support materials.

•Set up and maintain appropriate systems to meet compliance requirements.

Part 1: Role and Responsibilities of the Bookkeeper

What is the Financial Services Industry?

The financial services industry represents the single largest component ofall sectors in the Australian economy.

The main sectors of the financial services industry are:

• Accounting

• Insurance

• Superannuation

• Banking

• Financial planning

• Credit and lending services

• Finance and mortgage broking

• Conveyancing

• Worker compensation

• Financial markets

External Forces that may Impact the Australian Financial Services Industry

Over the last 20 years the financial services industry has experienced rapid and extensive change brought about by globalisation, convergence, advances in technology, and innovation in product development and service delivery. These forces are explained below.

1. Globalisation

  • Globalisation is the process by which economic systems and financial markets are integrated across the world.
  • Over the two decades we have seen the rapid development technology based information systems, communication and product delivery systems.
  • For example, foreign banks entered Australia as a result of deregulation of the Australian financial system in 1985 and there are now 13 foreign bank subsidiaries and 14 branches of foreign banks operating in Australia.

2. Convergence

  • Various sectors of the financial services industry are referred to as separate concepts e.g.banking, insurance and superannuation. Financial sector reform enables us to recognise the convergence that has taken place within the financial system.
  • This means we now view these individual sectors as parts of one whole financial services industry.

3. Technological Change

  • Since the introduction of the Automated Teller Machine (ATM) in Australia in 1983 technology has moved ahead at an increasing rate. At the retail end of the market new payment mechanisms such as EFTPOS and other forms of EFT and Internet banking have been introduced.
  • Technology has already had a dramatic impact on all segments of the financial services market. It has been used to develop new products, to improve the quality of existing services, to increase operational efficiency, to lower transaction costs and to increase returns to investors. It is likely that technology will have an even greater impact in the future.

4. Innovation

  • Considerable financial innovation has occurred over the last five to ten years. Technology is a major contributing factor to innovation.

Other External Forces that Impact the Australian

Financial ServicesIndustry

1. The Value of the Dollar

  • The Australian dollar (AUD) was floated in December of 1983 and since that time has fluctuated in value quite considerably. This means the value of the AUD is set by market forces i.e. more demand for the AUD will lead to a rise in the value of the AUD whilst more supply will lead to a decline in the value of the AUD.
  • The main influence on the dollar has been the prices we attract for our commodityexports overseas. With the resources sector performing strongly, demand for the Australian dollar has seen it appreciate in value against other currencies.
  • The stronger AUD means that Australia’s exports become more expensive for overseas buyers whilst it becomes cheaper for Australians to import goods from overseas. When the Australian economy is performing strongly this can mean our imports will exceed our exports.
  • The Reserve Bank of Australia (RBA) is usually happy to allow the market to set the value of the AUD, however if the RBA believes that the value of the AUD is out of step with fair value, the RBA can intervene in the market and conduct what is called ‘smoothing operations’. This means that the RBA enters the market and either buys or sells a parcel of AUD which has the effect of influencing the value of the AUD.

2. Interest rates

  • The US economic downturn following September 11, 2001 and the resulting political uncertainty around the world saw interest rates plunge to a 40 year low in many countries in the Western world. Low interest rates result in higher economic growth. This is because companies are encouraged to borrow, as loan servicing costs are lower. Individuals are also likely to borrow for private purposes such as housing.
  • Interest rate rises in the last 18 months resulted in the loan servicing costs of companies to rise. Higher interest rates discourages further borrowing by companies and individuals, and may result in a decline in economic growth.

3. Political climate

A stable political climate that contributes to economic growth and development is likely to lead to greater turnover in the financial services industry.

4. Economic climate

The economic climate has a major impact on the strength of the financial services sector. The economic climate is the product of a range of economic fundamentals. These include:

• The level of interest rates – the RBA has the task of maintaining conditions in the money market so as to keep the cash rate at or near an operating target decided by the RBA Board. The cash rate is the rate charged on overnight loans between financial intermediaries (e.g. banks). It has a powerful influence on other interest rates and forms the basis on which the structure of interest rates in the economy is built.

• The inflation rate – the RBA has a target range for inflation of 2-3%. If the inflation rate approaches the upper level of this range the RBA is likely to consider lifting interest rates.

• Inflation can have significant economic effects as it can influence the distribution of national income and wealth. The relative rates of inflation in Australia and overseas affect our international competitiveness. A low and stable rate of inflation is desirable both for the health of the economy and for individual welfare.

• Inflation can impose costs on individuals and the economy by affecting purchasing power.

• Unemployment rate – a healthy, strongly performing economy favours falling levels of unemployment.

• Wages growth – wages growth can lead to higher inflation, a rise in interest rates and hence a fall in the level of economic growth.

• Economic indicators - such as retail sales, motor vehicle sales and the level of housing starts. Economists use these to predict future economic activity.

• The level of economic growth and outlook – the outlook for the Australian economy is generally good with relatively low interest rates, a contained inflation rate, strong resource prices all combining to produce anacceptable level of economic growth.

• Media, press and public relations reports - media, press and public relations reports can also have an effect on economic conditions, as reports tend to reflect market conditions and therefore help form a general market sentiment. If market sentiment is positive we tend to see financial markets rise in value and conversely, if market sentiment is negative, we tend to see prices fall.

Activity 1: Value of the Australian Dollar

Use the range of media available to you to research information onthe Australian dollar. This may include:

• Newspapers – The Sydney Morning Herald, The Financial Review

• Websites, such as bank websites, as well as:

• TV and radio – announcements are made at the end of newsbulletins regarding the current exchange rate.

Answer the following questions.

  1. What is the value of the Australian dollar at today’s date?

______

2. What impact is the value of the Australian dollar currentlyhaving on the financial services industry?

______

Activity 2: The Australian Economic Climate

Discuss how you think the economic climate in Australia affects the following:

  1. The housing industry

______

  1. Inflation

______

  1. Government spending

______

  1. Interest rates

______

  1. Investing – what to invest in

______

  1. Jobs in bookkeeping

______

What is a Bookkeeper?

Bookkeeping is a growing profession - it is demanding, exciting, challenging and above all, rewarding. It is about understanding how a business works and then providing accurate figures that enable the business to know exactly how well it is doing.

Every business, no matter how large or small, is required by law to 'keep books'. This involves the recording of the financial transactions of a business, whether manually into ledgers or by entering everything onto a computer. Bookkeepers can set up record keeping systems and manage records. Eligible bookkeepers can also prepare and lodge the Business Activity Statements. However, bookkeepers can’t give taxation advice.

Most people most probably think of bookkeeping and accounting as the same thing, nonetheless bookkeeping is actually one aspect of accounting. In general it can be said that bookkeepers do the recording aspects of accounting work whilst Accountants are responsible for financial report preparation and analysis. Therefore, Accountants themselves may require the services of a bookkeeper.

The type of work a bookkeeper is responsible for includes the following:

  1. Bookkeepers organise source documents pertaining to all of the processes of a business enterprise – the purchasing, selling, transferring, paying as well as collecting. Typically the documents include paperwork including purchase orders, invoices, credit card slips, time cards, time sheets and also cost reports. Bookkeepers in addition identify and input in the source documents, what are identified as the financial results of the transactions, along with other business activities. These include paying the staff members, generating sales, borrowing money or getting goods or raw materials for production.
  2. Bookkeepers record the transactions in the journals and ledgers of the business (whether manual or computerized).
  3. Bookkeepers prepare balance day adjustments and the trial balancewhich can then be given to the Accountant for them to prepare the financial statements.

Activity 3: The Role of a Bookkeeper

What type of things do you think you would be responsible for if you were the Bookkeeper for each of the following types of businesses:

  1. The local hairdresser who employs 2 staff.

______

  1. An electrician who works as a sole trader.

______

  1. You are a contract Bookkeeper for a Registered Tax Agent.

______

  1. You have been employed by a plumbing partnership that previously had manual set of accounts and now want them computerised.

______

  1. A potential client has rung you up asking for taxation advice.

______

Part 2: Legislation and Codes in the Industry

Legislation in the Financial Services Industry

Legislation in the Australian financial services industry acts to regulate behaviour, protect consumers and promote efficiency.

There is various legislation that applies to the financial services industry. The main ones are discussed below.

Anti Discrimination Legislation
  • Discrimination means treating someone unfairly because they happen to belong to a particular group of people.
  • Most of us have prejudices against, or negative views of, groups of people who are different from ourselves. If we aren't careful, these feelings can easily lead us to discriminate against people who belong to those groups.
  • The laws dealing with discrimination help give everyone in Australia an equal opportunity or a 'fair go'. The following types of discrimination are against the law:

Carer’s Responsibilities Discrimination
When someone is discriminated against because they need to care for or support a child or other 'immediate family member'.

Sex Discrimination
When someone is treated unfairly or harassed either because they are a woman or because they are a man. Discrimination against a woman because she is pregnant can also be sex discrimination. Harassment is also against the law.

Race Discrimination
When someone is treated unfairly or harassed because of their race, colour, ethnic background, ethno-religious background, descent or nationality.

Age Discrimination
When someone is treated unfairly or harassed because of their age - for example, because people think someone is too old, too young or too middle aged. Forcing people to retire at the old retirement age is also against the law. This is called compulsory retirement.

Marital Status Discrimination
When someone is treated unfairly or harassed because of their particular marital status, for example, because they are single, or married, or living in a de facto relationship.

Discrimination
When someone is treated unfairly or harassedbecause they are gay or lesbian, or someone thinks they are gay or lesbian.

Disability Discrimination
When someone is treated unfairly orharassedbecause they have a disability.

  • The following state and commonwealth Acts are anti-discrimination legislation:

New South Wales
Anti – Discrimination Act 1977

Disability Services Act 1993

Privacy and Personal Information Protection Act 1998

Commonwealth of Australia
Disability Discrimination Act 1992

Equal Employment Opportunity (Commonwealth Authorities) Act 1987

Equal Opportunity for Women in the Workplace Act 1999

Human Rights and Equal Opportunity Commission Act 1986

Human Rights (Conduct) Act 1994

Privacy Act 1988

Racial Discrimination Act 1975

Racial Hatred Act 1995

Sex Discrimination Act 1984

Privacy Legislation
  • For reasons best known to ourselves we cherish the principle of keeping our private affairs “private”.
  • While Common Law has established some rules in relation to the disclosure of information, a need existed to reinforce the position with appropriate Statute Law.
  • The legislation we are concerned with is:

Privacy Act 1988 (Cth)

  • This Act established privacy standards relating to how personal information is collected, stored, used and disclosed by federal government agencies.
  • The Act also sets out the manner in which consumer credit information and Tax File Numbers (TFN’s) are to be dealt.
  • The Act was amended in 2000 by the Privacy Amendment (Private Sector) Act 2000 which established a national scheme for handling personal information by the private sector.
  • This new legislation came into effect on 21 December 2001.
  • The Privacy Act protects the way in which personal information is handled and used by:
  • Private sector organisations;
  • Government agencies;
  • Credit providers and credit reporting agencies;
  • Those that use or collect tax file numbers; and
  • Data-matching agencies such as the Tax Office and Centrelink.
  • The Act covers the following areas:
  • Collection of Information;
  • Use of Information;
  • Disclosure of Information;
  • Quality & Security of Information; and
  • Rights of access and correction of personal information.

Breach of Privacy Legislation

  • The Privacy Act provides rights to the individual regarding the information recorded about them, which include the:
  • Right to access their own personal credit record (a "reasonable charge" for access may be made)
  • Right to request incorrect information be amended or a statement detailing the request made added to their credit information
  • Right to expect the information to be safely stored, and used by or disclosed to authorised users
  • Right to expect the data to be accurate and consistent in accordance with sound practices of record keeping and information systems management.
  • If the individual has reason to believe that their rights have been breached, they have the right to lodge a complaint with the Federal Privacy Commissioner.
Corporations Law

The provisions of the Corporations Law govern financial corporations and institutions. It provides for the:

  • Incorporation of companies
  • Issuing of prospectuses
  • Allotment of shares and rights and the powers of shareholders

It also provides detailed requirements for the management and administration of the business of companies including:

  • Qualifications of directors and managers
  • Calling of, and procedure, for meetings
  • Provision of regular accounts and audit

The conduct of licensed financial advisors and their representatives is specifically addressed in the Corporations Law. Here are some examples:

Conflict of Interest - Section 849

Investment and financial advisers must avoid conflicts of interest when making oral or written securities recommendations by disclosing to the client:

  • Any benefit, including commissions and fees, that the advisor will receive as a result of the recommendation
  • Any interest of the advisor or an associate of the advisor that may influence the recommendation. For example a large personal holding in the shares they are recommending.

Know Your Client - Section 851

An investment advisor must have a reasonable basis for making a recommendation. The adviser is required to investigate the appropriateness of the recommendation in light of the client’s circumstances. The adviser is liable to compensate a client if the client acts on a recommendation that breaches these rules and suffers a loss as a result.