Analyzing the Financial Leverage Effect – Special Technique for an Entity’s Performance Audit

Author:PhD. Student George CALOTĂ, PhD. Student Mirela GANEA



Keywords:performance audit, financial structure, the financial leverage effect, economic profitability, financial profitability

Today, regarding through the prism of the ever increasing needs and decisions based on financial situations and information regarding the firm’s performance, the internal audit’s role becomes increasingly important.\r\nIn order to bring value to the entity’s financial administration process, the auditors turn to procedures and specific techniques that have to evaluate the manner in which expenses are made, in general, and, in particular, the measures taken to obtain an optimal usage for these expenses. In this context, internal auditors use the technique entitled „the analysis of the financial structure’s influence over performance” in order to establish a diagnosis with regards to the efficiency/inefficiency of the administration activity.\r\nThrough this article the authors realized a theoretical and practical approach for the technique the analysis of the financial structure’s influence with the purpose to identify concrete solutions for increasing the level of the economic rate of return, solutions that the internal auditors can recommend to the management and, as such, to ensure, for this level, the return of the invested capital and the coverage for economical and financial risks for investors (shareholders or creditors).\r\nBearing in mind today’s demanding, the article represents a practical model for obtaining a pertinent image for the entities’ internal situation and can be considered a starting point for internal auditors for the development of the internal audit missions and, also, for the realization of practical guides which will act as support for coherent performance audit missions.