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Financial statement analysis, internal controls, and audit readiness: Bestpractices for Pakistan army financial management officers

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Technical Report

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Naval Postgraduate School Monterey United States

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Pakistan has the worlds sixth-largest standing army, which requires numerous goods and services supplied by contractors to maintain its efficient operation. To ensure the effectiveness of the contract award process, the Pakistan Army financial management officers need further education regarding how-to conduct a financial statement analysis on potential contractors. Furthermore, although the Pakistan Army follows its own internal controls and has an audit system, Pakistan Army financial management officers may benefit from the latest research in these areas for better strategic and financial management of the overall military organization. The purpose of this research is to create a best practices educational guide that includes a framework for the processes of conducting a financial statement analysis of a potential contractor, instituting effective internal controls for an army outfit, and assuring the audit readiness of an army organization that will serve to assist Pakistan Army financial management officers. This research concludes that the four steps of financial statement analysis should be adopted, including vertical and horizontal trend analysis, ten financial ratios, bankruptcy analysis, and fraud analysis. This research also recommends implementing the Committee of Sponsoring Organizations of the Tread way Commission internal control framework and the U.S. Department of Defense Financial Improvement Audit Readiness strategy. An educational guide is created as a reference for Pakistan Army financial management officers to enhance their knowledge of financial management matters related to financial statement analysis, internal controls, and audit readiness.

Subject Categories:

  • Economics and Cost Analysis
  • Military Forces and Organizations

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