You presently work for Ford Motor Company in the Accounting and Reporting department. As part of the annual requirements of a publicly traded company, an external auditing firm just completed the required audit on Ford’s financial statements. The auditing firm determined the internal control procedures Ford developed were sufficient but noted Ford Motor Company could have benefited from more detailed written procedures in preparing the statement of cash flows. You have been assigned the task of analyzing procedures for developing the statement of cash flows.
Write an operational procedure to explain the process staff should follow to develop the different sections of the statement of cash flows using the indirect method. Use the 2018 Statement of Cash Flows for Ford Motor Company and include the following:
In the procedures:
Define the components of the operating section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
Define the components of the financing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
Define the components of the investing section of the statement of cash flows and which accounts an employee should evaluate to develop this section.
Explain what non-cash items must be disclosed on the statement of cash flows.
Comment on the cash generated from operations versus other activities and why this is important to evaluating liquidity.
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