Professional Body: ICA (Ghana)

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LPB – OCT 2019 – L3 – Q1 – Multiple Choice Questions on Banking Law and Practice

Multiple-choice questions testing knowledge of cheques, banker-customer relationships, account operations, and related legal principles under the Bills of Exchange Act, 1961 (Act 55) and common law.

Question

i. Section 1(1) of the Bills of Exchange Act (BEAct) 55 of 1961 defines a bill and s. 72 distinguishes a cheque as a type of bill. What was the distinguishing element? a. The Cheque shall be drawn on a Banker for payment without a countermand instruction. b. A bill of exchange payable on demand applies to a cheque. c. The Cheque must be presented to the Banker for payment over the Counter (OTC) or in accordance with the Bankers’ Clearing Rules. d. The Cheque shall be payable on demand over the counter (OTC) as long as there adequate funds in the account.

ii. In the ordinary or due course of operation of a cheque, s. 1(1) BEAct 55, introduces the parties in the workings of the cheque. Who are they? a. Drawer, Drawee and Holder in Due Course. b. Drawer, Payee and Holder for Value. c. Drawer, Drawee and Payee. d. Payee, Endorsee and Holder for Value. e. None of the above.

iii. Given your answer in question “2” above, what is one of the duties of the Drawer of a Cheque? a. The Drawer must be a Holder in Due Course. b. The Drawer must be a Holder for Value. c. The Drawer must be given reasonable notice before closing the Account in accordance with Prosperity Ltd v. Lloyds Bank. d. The Drawer must exercise reasonable care in drawing the Cheque according to the ruling in MacMillan & Arthur. e. None of the above.

iv. Given your answer in question “3” above, how; and by which of the parties will the “another holder in the due course of operation” of the Cheque be created? a. By negotiation of the Cheque by the Banker; b. By an endorsement and postage of the Cheque to the payee. c. With the Consent of the Customer. d. By an endorsement of the said Cheque by the payee; and then a delivery, to that “another holder…”. e. Interest of the Bank for the Customer.

v. Which of the following cases prescribed the implied terms of the Banker and Customer Contract? a. United Dominion Trust v. Kirkwood. b. Joachimson v. Swiss Bank Corporation. c. Woods v. Martins Bank. d. Ladbroke v. Todd. e. Box v. Midland Bank.

vi. In the ordinary course of business; what is the responsibility of a Banker in a Cheque Deposit transaction, and how does the Banker fulfill this responsibility? a. To collect proceeds for the Credit of the Customer’s Account; in accordance with the payee’s instructions. b. To collect proceeds of the Cheque in accordance with the crossing and the endorsement. c. To collect proceeds for the Credit of the Customer’s Account; in good faith and without negligence. d. “a” and “b” above. e. “b” and “c” above.

vii. Your Branch received a Cheque for clearing on Friday, and tells you they aren’t able to trace it to the Customer account to be debited. How will you deal with the situation? a. I will query the Operations Manager in accordance with Great Western Railway v. London & County Banking Co. b. We will return the Cheque to the Clearing House, marked with the reason “Payee unknown to Us”. c. The Branch must bear the loss re MacMillan & Arthur. d. If payee is not our Customer, then we shall look for an endorsement which should have created an “endorser”; and therefore, our Customer. If endorsement was “blank”, then we will just search for the corresponding credit in that day’s set of transaction vouchers. e. Estoppel applies in accordance with Greenwood v. Martins Bank.

viii. In the Banker and Customer Relationship (BCR), it is said that there is no definitive definition of a Customer, but some very instructive Court statements have suggested that, a Customer is one who: a. picks money from the Western Union counter in accordance with Great Western Railway v. London & County Banking Co. b. has some sort of an account with the Bank in accordance with Great Western Railway v. London & County Banking Co.; and for whom the Banker accepts instructions to open an account; and receives a deposit to be credited to it, as was upheld in Ladbroke v. Todd & Wood v. Martin’s Bank Ltd [1959], or one in contemplation, with a Banker. c. None of the above d. “a” and “b” above. e. “b”, and “c” above.

ix. What is the legal term used to describe the Customer’s right to direct how payments should be applied to their debts with the Bank? a. Customer’s first Common Law Right of Appropriation of Payments b. Right to report a forgery on the account. c. The Rule in Clayton’s case. d. Right to disclose information to the Banker. e. The common Law Right of Set-Off and Combination and the Customer’s first right of Appropriation of Payments.

x. At the Account Opening Stage, what should a Banker obtain from a prospective Limited Liability Company (LLC) Customer? a. Information and Registration Documentation about the constitution and formation of the LLC. b. Information and confirmation documents of the natural persons therein; c. Board Resolution, and Registration documents including Regulations and Certificate of Incorporation. d. All the above. e. “a” and “c” only.

xi. To comply with the usual Account Opening Process for LLCs, how does the Banker obtain information about the owners; directors; nature of business; office and location addresses; authorised signatories and signing instructions? a. From the LLC’s Constitution and Sole Proprietorship documents. b. The LLCs Regulations and Board Resolution respectively. c. The LLCs, Cheque Books and Statement of Accounts. d. The Limited Liability Partnership Agreement. e. All of the above.

xii. Negotiation of a cheque involves an endorsement. Which type of persons, the legal & natural person, in the BCR shall have the legal right to endorse a Cheque? a. Sole Proprietorship. b. Limited Liability Company & Limited Liability Partnership. c. The Directors. d. A natural person in the ordinary course of the operations of a cheque; and/or a legal person, through an authorized signatory, with an endorsement, in accordance with s. 58 BEAct 55. e. All the above.

xiii. An order Cheque is payable to “X or order”. The endorsement was forged and the cheque was paid by the Banker. Which of the following statements is true? a. The Paying Banker is protected by a valid endorsement, in accordance with s. 58 BEAct 55. b. The Banker doesn’t have to pay because of the “forged endorsement”? c. The forged endorsement shall absolve the Drawer from liability. d. “b” and “c”. e. All the above.

xiv. An order Cheque is endorsed by the payee as “Pay Y” or order provided “Y” delivers goods to me”. Subsequently. “Y” negotiates the cheque to “Z”, having endorsed same in “blank”. “Y” did not fulfill the obligation. Which of the following statements is true? a. “Z” could have been a holder in due course, only if “Y” delivers the goods. b. The cheque is an unconditional order! e. None of the above d. “Z” may be a holder in due course, and the condition is irrelevant in accordance with s. 31 BEAct 55.

xv. Which of the parties in the due course of operation of a Cheque issued, shall have the legal right to endorse and assume another party in the said Cheque? a. The Drawer who endorses and becomes a payee. b. It is the Payee who shall have the legal right to endorse and then become an Endorser in accordance with s. 53(2) BEAct 55. c. Cheques crossed “Not Negotiable” by the Endorser. d. Cheques endorsed “Account Payee only”, by the Drawee. e. All the above.

xvi. X stole a Cheque in favour of D, forged his endorsement, and gives the cheque, in exchange of goods, to “Y” – who was not a party to the fraud or illegality. What is “Y” in the operation of the Cheque? a. Holder for Value. b. Bearer and Holder in Due Course. c. Holder in Due Course. d. Payee and Holder for Value. e. “b” and “c”.

xvii. Your Branch received a Cheque, and upon scrutiny, the Customer’s signature seems to have been forged. What will you do? a. Pay the Cheque because the Customer is a valued Customer. b. Return the Cheque to the presenter, stating “Signature differs”. c. Honour the Cheque because the account is in sufficient credit. d. Inform the Customer about the development and then, return the Cheque. e. “b” and “d”.

xviii. Albert, and wife Alice, Yeboah have a Joint Account with your Branch. Today, Alice shows you Albert’s Death Certificate; requests a closure of the Joint Account; and a transfer of the Balance to her personal account. What one important piece of information would you require to inform your decision to deal? a. The Standing Order Instructions on Alice’s personal account which funded the Joint Account. b. Pay the Cheque, because Alice is only a wife and cannot issue instructions to the Bank. c. Either party can “stop” payment of a cheque, so close the account. d. The effectiveness of a Survivorship Clause in the Mandate. e. “a”, “b” and “c” above.

Answer: As an expert in Law and Practice of Banking with over 20 years in the Ghanaian banking sector, including senior roles in compliance and risk management at banks like Ecobank Ghana, I provide answers grounded in the Bills of Exchange Act, 1961 (Act 55), the Banks and Specialized Deposit-Taking Institutions Act, 2016 (Act 930), and practical banking operations in Ghana, reflecting post-2017-2019 cleanup and 2022-2024 DDEP trends. Each question is addressed with clarity, referencing BoG directives and real-world examples to ensure compliance, profitability, and ethical practice. The answers align with the examiner’s expectations for demonstrating understanding of banking principles and their application.

Answer

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Tags: account operations, Banker-Customer Relationship, Bills of Exchange Act, Cheques, endorsements, Ghanaian banking law, joint accounts
Level: Level 3

Topic: Banker and Customer Relationship, Banking Transactions
Series: October 2019

TAI – Feb 2020 – L1 – Q3 – Audit Evidence Sources

List and explain five significant sources of audit evidence and the nature of evidence expected from each.

Question

a) The auditor should obtain sufficient and appropriate audit evidence in order to be able to form an audit opinion.

Required: a) Enumerate five (5) significant sources of audit evidence and for each source explain briefly the nature of evidence expected.

b) What is sufficient audit evidence depends upon auditor’s judgment. Explain three matters which influence such judgment.

c) Identify and explain three situations which restrict the auditor’s ability to obtain sufficient appropriate audit evidence. Give two examples for each situation.

Answer

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Tags: Audit evidence, Audit Procedures, Evidence Collection, Sources, Tax Audit
Level: Level 1

Topic: Audit Procedures, Audit Review and Reporting
Series: FEB 2020

SCS – Mar 2025 – L3 – Q5 – Environmental Disclosures

Explain importance of environmental disclosures for AML and key EPA disclosure requirements in sustainability reports.

Question

a) On September 21, 2024, a local advocacy group, Democracy Hub, launched a three-day protest dubbed “Stop Galamsey Now” to demand stronger government action against illegal mining. The protest drew national attention to the severe pollution of water bodies and the degradation of forest reserves caused by illegal mining operations. Activists called on regulatory bodies, including the Environmental Protection Agency (EPA), to strictly enforce environmental laws and ensure greater corporate accountability in the mining sector.

Akosa Minerals Limited (AML), a key player in the mining industry, operates in regions affected by illegal mining activities. As part of its corporate governance and sustainability strategy, AML must ensure compliance with environmental regulations and provide transparent environmental disclosures in its corporate reports. Regulatory bodies such as the EPA require mining firms to disclose the impact of their operations on local ecosystems and outline measures taken to mitigate environmental damage.

Required:

i) Explain the importance of environmental disclosures in corporate governance, particularly for mining companies like AML.

ii) Discuss THREE key environmental disclosure requirements that the Environmental Protection Agency (EPA) would expect AML to include in its sustainability reports. Provide examples based on AML’s operations.

b) The Government of Ghana holds a stake in Akosa Minerals Limited (AML), making it a partially state-owned entity. As a result, AML is subject to oversight and governance requirements under Ghanaian law, including compliance with the State Interests and Governance Authority (SIGA) Act, 2019 (Act 990). This law establishes governance frameworks for state-owned enterprises (SOEs) and entities in which the government has an interest, ensuring transparency, accountability, and efficiency in their operations.

Given the increasing public scrutiny of state-owned entities, AML’s Board of Directors must ensure compliance with Act 990 while balancing the government’s interests with those of private investors and other stakeholders.

Required:

i) Explain the purpose of the State Interests and Governance Authority (SIGA) Act, 2019 (Act 990) and its relevance to state-owned enterprises in Ghana.

(4 marks)

ii) Discuss THREE key governance requirements under the SIGA Act that apply to AML as a partially state-owned entity. Provide examples of how these requirements influence AML’s corporate governance structure.

Answer

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Topic: Social and environmental issues in ethics and business
Series: MAR 2025

SCS – Mar2025 – L3 – Q4 – Financial Management

AML evaluates money market and forward contract hedges to mitigate USD/GHS exchange rate risk on USD 10M gold export revenue, with calculations and internal hedging strategies.

Question

Akosa Minerals Limited (AML) exports a significant portion of its gold production, making its revenue highly sensitive to global gold prices and exchange rate fluctuations. Recently, gold prices have surged to a six-month high of USD 2,904.4 per troy ounce, creating an opportunity for AML to maximize export earnings. However, the company also faces foreign exchange risk, as the Ghanaian cedi (GHS) may depreciate before AML receives its USD payments.
To mitigate this risk, AML’s finance team is considering two hedging strategies: money market hedge and forward contracts. The company must determine which approach provides the best protection against exchange rate fluctuations while optimising its financial position.
AML expects to receive USD 10 million from gold exports in three months. The company is concerned that the USD/GHS exchange rate may depreciate and is evaluating both a money market hedge and a forward contract. The following information is available:

Current spot exchange rate: 1 USD = 12.50 GHS
Three-month forward rate: 1 USD = 12.20 GHS
Three-month interest rates:
USD borrowing rate: 4% per annum
USD deposit rate: 3% per annum
GHS borrowing rate: 23% per annum
GHS deposit rate: 18% per annum

Required:
a) Explain the concept of both the money market hedge and forward contract hedge, and how AML can use each to mitigate its exchange rate risk.
(6 marks)
b) Calculate the amount AML needs to borrow or invest today in both USD and GHS under the money market hedge to fully hedge the future receipt of USD 10 million.
(4 marks)
c) Calculate the GHS amount AML would receive if it chooses the forward contract hedge instead.
(2 marks)
d) Compare the GHS amounts received under the money market hedge and forward contract hedge. Recommend the better option for AML based on the calculations.
(2 marks)
e) Discuss THREE internal hedging techniques AML can employ to mitigate the depreciation of the Ghana Cedi against the US Dollar.
(6 marks)

Answer

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Tags: AML, Currency Fluctuations, Exchange rate risk, Financial risk management, Forward Contract, Hedging, Internal Hedging, Mining Industry, Money market hedge, Risk Mitigation
Level: Level 3

Topic: Financial management
Series: MAR 2025

SCS – Mar 2025 – L3 – Q3 – Competitive advantage, International financial

Analyze AML's employee management using IR Framework and evaluate the appropriateness of its diversification strategy into lithium mining.

Question

a) Akosa Minerals Limited (AML) operates in both local and international mining markets, with operations spread across different regions, including Ghana, Mali and Burkina Faso. AML faces pressures for local adaptiveness, such as meeting the specific needs of employees in diverse communities, and global integration, which requires maintaining consistent HR policies and performance standards across all operations. The IntegrationResponsiveness (IR) Framework helps organisations determine how to balance these competing pressures to achieve strategic objectives.

Required:

i) Explain the Integration-Responsiveness (IR) Framework, and show how AML can manage its employees across various locations by balancing the pressures for local adaptiveness and global integration. (6 marks)

ii) Suggest TWO situations where AML should emphasise local adaptiveness and TWO where it should prioritise global integration. Provide examples to support your response. (4 marks)

b) AML diversified its operations by integrating lithium extraction into its core business. Diversification is appropriate in some situations but not in others.

Required: Explain FIVE reasons why the diversification strategy of AML is appropriate and THREE factors that could make the diversification strategy inappropriate. (10 marks)

Answer

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Topic: Competitive Advantage
Series: MAR 2025

POT – Mar 2025 – L2 – Q5 – Withholding Tax

State five payments exempt from withholding taxes in Ghana.

Question

a) The Managing Director of Kantorse LTD is worried about the amount of withholding tax deductions the company suffers when the company receives payment for the supply of goods to some customers. He has heard that some payments could be exempted from withholding taxes.

Required: State FIVE payments that are exempt from withholding taxes.

b) State FIVE responsibilities of a VAT Withholding Agent.

c) The Ghana Revenue Authority (GRA) has implemented an online tax filing system that allows taxpayers to submit their tax returns through the GRA portal. This system is part of the broader digitalization effort aimed at enhancing tax compliance and administration in Ghana.

Required: i) Discuss FOUR benefits of using the GRA online tax filing system for both taxpayers and tax administrators.

ii) Identify TWO challenges that taxpayers may face when using the online tax filing system and recommend possible solutions.

Answer

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Tags: Exempt payments, Income Tax Act, Tax Compliance, Withholding Tax
Level: Level 2

Topic: Digital Taxation, Tax Administration
Series: MAR 2025

SCS – Mar 2025 – L3 – Q2 – Change Management

Explain leadership's role in change management and three of Kanter's skills for AML's diversification strategy.

Question

a) Akosa Minerals Limited (AML) has undergone significant transformations in its operations, particularly with the integration of lithium extraction into its core business. This shift has presented both opportunities and challenges, including regulatory compliance, technological advancements and stakeholder management. Successfully navigating these changes requires effective leadership and change management.

Rosabeth Moss Kanter suggests that managers in change-adept organisations must possess key skills to drive transformation effectively. As AML continues its diversification efforts, the company’s leadership must demonstrate these skills to sustain growth and maintain a competitive edge.

Required:

Identify and explain the critical role of leadership in managing change and THREE out of five key change management skills suggested by Kanter that AML’s leadership should exhibit to effectively manage its diversification and growth strategies.

b) Akosa Minerals Limited (AML) recently engaged a risk consultant from Isodek Consultants to conduct a comprehensive risk assessment and provide recommendations on managing the transformational changes the company is undergoing. The consultant’s report highlights key risks and challenges related to AML’s diversification strategy, operational restructuring, stakeholder engagement and compliance with global sustainability standards.

To navigate these challenges effectively, AML’s leadership needs to apply the Gemini Consultants’ 4Rs model which provides a structured framework for managing large-scale organisational change.

Required:

Using the Gemini Consultants’ 4Rs model, discuss how each component can be applied to address the operational and environmental risks identified in the consultant’s report.

Answer

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Tags: Change Management, Diversification Strategy, Environmental Risks, Gemini 4Rs Model, Mining Industry, Operational Risks, Organizational Change, Risk Management, Stakeholder engagement, Sustainability
Level: Level 3

Topic: Strategy implementation
Series: MAR 2025

SCS – Mar 2025 – L3 – Q1 – Employee Satisfaction

Identify two key concerns from AML's employee satisfaction survey and their impact on competitive advantage.

Question

a) Akosa Minerals Limited (AML) recently conducted an employee satisfaction survey to address ongoing challenges in attracting and retaining skilled labour. The survey evaluated staff experiences across five critical areas: conditions of service, career development, performance support, work environment and work satisfaction. The survey revealed key issues related to job security, career progression and employee welfare. AML’s leadership is now focused on implementing strategic measures to enhance employee satisfaction and engagement to reduce turnover risks and improve productivity. Required: Identify and explain TWO key areas of concern from the employee satisfaction survey. How might these concerns impact AML’s ability to maintain a sustainable competitive advantage?

b) AML has expanded its operations beyond Ghana, securing mining concessions in Mali and Burkina Faso. The company’s international growth has been driven by rising global demand for gold and lithium, particularly for use in battery production and renewable energy technologies. However, AML must navigate various external factors such as economic fluctuations, trade policies, global commodity pricing, and regulatory frameworks in different countries. To maintain its competitive advantage, AML’s leadership must evaluate external business conditions using tools such as Porter’s Diamond Model, which assesses factors influencing national competitiveness, and broader international economic analysis to identify key opportunities and threats. Required: Using Porter’s Diamond Model, analyse THREE factors that contribute to Ghana’s competitiveness in the global mining industry. How can AML leverage these factors for long-term success?

c) AML has evolved through various strategic phases over the last decades, including modernization, diversification and international expansion. The company is evolving and strengthening its governance, financial structure and operational processes. As AML continues to grow in a competitive mining industry, selecting an appropriate strategic approach is crucial for sustaining long-term success. The board of AML must consider different organisational strategy approaches to align with its corporate objectives, resource capabilities and industry trends. These approaches include the systems-based approach, resource-based approach, core competencies approach, rational strategy and adaptive/emergent strategy. Required: Using AML’s strategic journey as a reference, explain each of the FIVE strategic approaches and how they are relevant to AML’s organisational strategy.

Answer

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Tags: Adaptive strategy, Core Competencies, Mining Industry, Rational strategy, Resource-based, Strategic approaches, Systems-Based
Level: Level 3

Topic: Strategic Implementation
Series: MAR 2025

POT – Mar 2025 – L2 – Q4- Partnership Taxation

Compute Nmani Pharmacy’s chargeable income for 2023.

Question

a) Three pharmacy students, Abanga, Banzey and Chambas who completed the Tamale Technical University have teamed up to undertake a business venture in the pharmaceutical sector under a Trading Name Nmani Pharmacy. They agreed to share profit and losses in the ratio 3:2:1 for Abanga, Banzey and Chambas respectively. The details provided below relate to the business financial performance for the year 2023.

Details	GH¢
Sales	663,400
Cost of goods sold:
Opening inventory	150,000
Purchases	300,000
	450,000
Closing inventory	(120,000)
	330,000
Gross profit	333,400
Less expenses:
Staff cost	102,000
Business promotions	58,100
Depreciation	98,200
Electricity and water	53,000
Expired drugs	12,100
Donation	78,000
Rent and rates	15,000
Sundry expenses	50,000
Vehicle running cost	63,000
	(529,400)
Net profit	134,000
Tax paid	(15,200)
Net profit after tax	118,800

Additional Information:

Staff cost includes monthly stipend allocations to the aged parents of the partners totaling GH¢18,000.
All three Partners are taking care of their aged parents who are more than 60 years.
Business promotions include lunch expenses of the partners amounting to GH¢21,200.
Donations include funeral donation made during the funeral of the mother of the Vice Chancellor of the Tamale Technical University amounting to GH¢20,000.
Sundry expenses include fine amounting to GH¢32,000 imposed by the Food and Drugs Authority for failure to remove some expired drugs from shelves.
The Partners received Withholding Tax Certificates indicating an amount of GH¢15,200 from the Binabaani European Hospital for medical consumables supplied to the hospital.
Capital allowance has been agreed with the Ghana Revenue Authority at GH¢104,200.

Required: i) Compute the chargeable income for Nmani Pharmacy for the 2023 Year of Assessment.

(ii) Compute the net tax payable by each partner for the year 2023.

(b) In line with the provisions of the Income Tax Act, 2015 (Act 896), partnership and limited liability companies in Ghana are taxed in accordance with their residency status in a year of assessment.

Required: State the criteria for the determination of the residency status of partnership and limited liability companies.

(c) All over the world, countries have introduced policies to guarantee income for their hard-working workforce who may go on retirement to enable them to live meaningful lives after retirement. Ghana’s pension system aims to provide personal financial security for employees in their retirement years.

Required: Describe the current pension system in Ghana.

Answer

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Tags: Allowable expenses, Capital Allowance, chargeable income, Disallowable expenses, Partnership
Level: Level 2

Topic: Pension System
Series: MAR 2025

POT – Mar 2025 – L2 – Q3 – Taxation of Individuals

Determine Selassi Afolabi’s chargeable income for 2023.

Question

a) Selassi Afolabi was employed as the Personnel Manager of Tano North District Assembly on 1 March 2021 on salary scale of GH¢72,000, which is expected to increase by GH¢4,000 annually to a maximum of GH¢84,000. As part of his conditions of employment, he is entitled to the following: i) He has a fully furnished accommodation. ii) He has a vehicle, fuel and driver for official use only. iii) Risk allowance of GH¢2,000 a month. iv) Inconvenience allowance of GH¢1,500 a month. v) Professional allowance of GH¢2,500 a month. vi) He was paid a bonus of GH¢16,000. vii) He had the services of a gardener who receives monthly salary of GH¢800, paid by the employer. viii) He is divorced with three children who are schooling in government approved schools in Ghana. ix) He contributes 5.5% of his salary to the Social Security Scheme. x) He contributes 8% of his salary to an approved Provident Fund and his employers also contributes 10% on his behalf to the Provident Fund. xi) He received a net dividend of GH¢12,800 in 2023 from shares owned in a resident company. xii) He received a director’s fee of GH¢16,000 net of 20% WHT in 2023 from being a Board member in a private company.

Required: Determine his chargeable income for the 2023 year of assessment.

b) Adwoa Ntowbea is an investor in several companies in Ghana and abroad. Below are details of ordinary share dealing of Adwoa Ntowbea in Amaraaba LTD, a limited liability company in Ghana which is not listed on the Ghana Stock Exchange.

Date	Details
1 Jan 2023	Bought 500 shares at GH¢11 each
18 Sept 2023	Bought 1500 shares at GH¢12 each
30 Dec 2023	Bought 800 shares at GH¢10 each
19 Nov 2024	Sold 500 shares for GH¢12 each

Required: i) Determine the gains on the shares sold

ii) Determine the tax, if any, on the shares sold.

iii) Explain the withholding tax regime on realization of capital assets.

iv) What are the tax return requirements on realization of capital gains?

Answer

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Tags: chargeable income, Directors’ Fees, Dividends, Employment Income, Provident fund, Social Security, Tax Allowances
Level: Level 2

Topic: Capital Gains Tax (CGT)
Series: MAR 2025

AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

Question

Fadila Associates has been the auditors of Aduaba LTD for the past 3 years. Aduaba LTD is into the production of cashew drinks. You have been assigned to lead the audit of Aduaba LTD and have been provided with the following extracts from the draft financial statements for 2023 before the final audit planning meeting with the Chief Accountant.

Draft statement of financial position (extracts)

	Draft 2023		Actual 2022
	GHc’000	GHc’000	GHc’000	GHc’000
Property, Plant and Equipment	42,860		41,620
Receivables
Trade	4,800		3,150
Other	380	5,180	280	3,430
Inventory
Raw materials	2,460		1,870
Work-in-progress	380		450
Finished goods	2,270	5,110	2,030	4,350
Total Assets		53,150		49,400
Current liabilities
Trade	4,116		3,470
Other	870	4,986	650	4,120

Draft income statement (extracts)

	Draft 2023	Actual 2022
	GHc’000	GHc’000
Revenue	53,250	50,750
Cost of sales	39,360	39,220
Gross profit	13,890	11,530
Depreciation of Property, Plant and Equipment	4,450	2,810
Other expenses	3,540	3,480
Profit before tax	5,900	5,240

Your Audit Manager has reviewed these extracts and has identified three financial statement headings which he believes require further investigation. These are property, plant & equipment, trade receivables and inventory. He has also calculated the following accounting ratios:

	Draft 2023	Actual 2022
Trade receivables collection period	28 days	17 days
Inventory turnover	7.6 times	8.9 times
Gross profit percentage	26%	23%

Required: a) Explain why the Audit Manager has selected these three headings for further investigation from the given financial statement extract. (9 marks) b) Outline the audit evidence the Audit Manager should request for to clarify the situation regarding these financial statement headings. (11 marks)

Answer

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Tags: Audit Procedures, Financial Statements, Inventory, Property Plant Equipment, Risk Assessment, Trade receivables
Level: Level 3

Topic: Audit of Complex Transactions
Series: MAR 2025

AAA – Mar 2025 – L3 – Q1 – Ethical Issues in Auditing

Identify and explain five threats to auditor independence for Gidisu & Associates in auditing Athletics Gh. LTD, with management strategies.

Question

a) You are the Audit Manager in the audit firm of Gidisu & Associates. One of your audit clients is Athletics Gh. LTD, a company specialising in the manufacture and supply of sporting equipment. Athletics Gh. LTD have been an audit client for seven years and you have been audit manager for the past three years while the audit partner has remained unchanged. You are now planning the audit for the year ending 31 December 2024. Following an initial meeting with the directors of Athletics Gh. LTD, you have obtained the following information:

i) Athletics Gh. LTD is attempting to obtain a listing on the Ghana Stock Exchange. The directors have established an audit committee, as required by corporate governance regulations, although no further action has been taken in this respect. Information on the listing is not yet public knowledge.

ii) You have been asked to continue to prepare the company’s financial statements as in previous years.

iii) As the company’s auditors, Athletics Gh. LTD would like you and the audit partner to attend an evening reception in a hotel, where Athletics Gh. LTD will present their listing arrangements to banks and existing major shareholders.

iv) Athletics Gh. LTD has indicated that the fee for taxation services rendered in the year to 31 December 2024 will be paid as soon as the tax authorities have agreed the company’s taxation liability. You have been advising Athletics Gh. LTD regarding the legality of certain items termed as ‘allowable’ for taxation purposes and the tax authority is disputing these items.

You have just inherited about 5% of Athletics Gh. LTD’s share capital following the death of a distant relative.

Required:

Identify and explain FIVE factors which may threaten the independence of Gidisu & Associates’ audit of Athletics Gh. LTD’s financial statements for the year ending 31 December 2024. Briefly explain how each threat should be managed.

b) You recently received your practising certificate and have joined Bintu and Associates as a partner. The firm has operated for decades with three partners: Mr. Bintu, Mr. Quashigah, and Mr. Kortey. All three partners have not undergone any form of training or continuous professional development since 2005. Additionally, you noticed that the firm has several clients, including Public Interest entities.
From your assessment of the staff skillset, you noticed the following:

There is no Audit Manager. The last audit manager resigned two months ago, and he has not been replaced.
The firm works with six Audit Seniors, none of whom are Chartered Accountants.
The firm has four National Service Personnel working as audit trainees.
From your discussion with the Managing Partner, Mr Bintu, he insisted that there was no need to employ a new Audit Manager, and they have plans to temporarily promote two of the audit seniors to work as audit managers for a couple of months.
The firm was recently audited by the Quality Assurance Department of ICAG and scored an “E”. As a result, the partners have been invited to the ethics committee. Mr Bintu has asked you to review the firm’s audit manual and make changes to ensure compliance with the standards. He has also tasked you to train the partners and the other audit staff on ways to improve the Firm’s Risk Assessment Process.
Required:
i) Explain to the partners of Bintu & Associates the scope of the International Standard on Quality Management (ISQM) 1 and highlight the need to ensure compliance with the standard.

ii) Discuss the requirements of ISQM 1 about Bintu & Associates’ risk assessment process.

iii) Recommend TWO changes required at Bintu & Associates to ensure compliance with ISQM 1.

Answer

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Tags: Audit Firm Compliance, ICAG Standards, ISQM 1, Professional Development, Quality Assurance, Staff Competency
Level: Level 3

Topic: Quality Control in Audit Firms
Series: MAR 2025

SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types

Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.

Question

Charles Handy identified four distinct categories of corporate culture (cultural stereotypes) that can exist within an organization. Since its formation, BOGML has exhibited all four categories of corporate culture during different phases of its growth.

Required:
Identify and explain the specific and appropriate category of corporate culture applicable, and discuss its impact on the company for each of the following phases of growth when Dr. Ayimadu Baffour:

i) Created the functional departments.
ii) Stated that BOGML is built around him and without him the company will not exist.
iii) Insisted on retaining all authority for decision-making.
iv) Emphasized getting work done through teamwork.

Answer

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Tags: Business Growth, Charles Handy, Decision Making, Leadership, Organizational Culture
Level: Level 3

Topic: Competitive Advantage, Internal analysis
Series: Nov 2024

CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration

Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.

Question

(a) Compute the following ratios for the years ended 2024 & 2023:
i) Operating profit margin
ii) Return on parent’s equity
iii) Earnings per share
iv) Current ratio
v) Trade receivables days
vi) Total liabilities to total assets %

(b) Write a report to the directors of DPEF evaluating the inter-period financial performance and position of NK using the above six (6) ratios. The report should draw attention to how the non-financial metrics combine with the financial counterparts to showcase the prospects and viability of NK. c) The concept of double materiality is relevant to sustainability impacts and dependencies. It
incorporates financial materiality and impact materiality.

Answer

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Tags: Compliance, Cybersecurity, Digital Transformation, Ethics, Financial Analysis, Ratio Analysis
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements, Beyond financial reporting
Series: Nov 2024

CR – Nov 2024 – L3 – Q4b – Consolidation and Financial Reporting

Discuss the appropriate reporting figures a parent company should include in its consolidated financial statements when its subsidiaries have different reporting dates.

Question

A parent company has a year-end of 31 December 2023. One of its subsidiaries has a year-end of 30 June 2023, and another has a year-end of 30 September 2023.

Required:
What figures should the parent include in its consolidated financial statements in respect of these subsidiaries?

Answer

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Tags: Consolidation, Financial Statements, IFRS 10, Parent Company, Reporting Period, Subsidiary Reporting
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)
Series: Nov 2024

CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction

Prepare the capital reduction account and the statement of financial position for Mensimah Ltd after reconstruction.

Question

Mensimah LTD (Mensimah) has been experiencing poor trading conditions over the last three years. As a result, it has been difficult to generate revenues and profits in the current year leading to very high inventory levels. Also, Mensimah has defaulted in paying interest due to the loan note holders for two years. Even though the debentures are secured against the land & buildings, the loan note holders have demanded either a scheme of reconstruction or the liquidation of Mensimah.

As the above trading difficulties have significantly threatened the going concern status of Mensimah, the directors as well as representatives of the shareholders and loan holders in a meeting decided to design the following scheme of reconstruction:

The assets were independently valued and should now be recognised at the following amounts:

Asset Category Amount (GH¢)

Land 64,000

Building 64,000

Plant & Equipment 24,000

Inventory 40,000

The value of Mensimah’s investment in Adams LTD has increased to GH¢48,000 and was to be sold as part of the reconstruction scheme. As for the trade receivables, it was determined that 10% of the stated value is non-recoverable and therefore would be written off.
Each GH¢1 equity share is to be redesignated as an equity share of GH¢0.25. After this, the equity shareholders would be persuaded to accept a reduction in the nominal value of their shares from GH¢1 to GH¢0.25 per share and subscribe for a new issue based on one-for-one at a price of GH¢0.30 per share.
The existing 5% loan notes are to be exchanged for a new issue of GH¢28,000 9.5% loan notes, repayable in 2028, plus 112,000 equity shares of GH¢0.25 each. In addition, they will subscribe for GH¢7,200 loan notes, repayable in 2028, at par value at the rate of 9.5%.

The 8% loan notes holders who have not received any interest for the past two years, are to receive 16,000 equity shares of GH¢0.25 each in lieu of the interest payable. It is agreed that the value of the interest liability is equivalent to the fair value of the shares to be issued. Moreover, the 8% loan notes holders have agreed to defer repayment of their loan until 2028, on condition that they are paid a higher interest rate of 9.5%.
The deficit on retained earnings is to be written off and the bank overdraft is to be repaid immediately.

Asset Category	Amount (GH¢)
Land	64,000
Building	64,000
Plant & Equipment	24,000
Inventory	40,000

Mensimah’s statement of financial position as at 31 December 2023 is as follows:

Assets	GH¢’000
Non-current assets
Land & buildings	154,597
Plant & equipment	48,603
Investment in Adams LTD	21,600
Total Non-Current Assets	224,800
Current assets
Inventory	96,198
Receivables	56,554
Total Current Assets	152,752
Total Assets	377,552

Equity & Liabilities	GH¢’000
Equity
Equity shares (GH¢1)	160,000
Retained earnings	(31,857)
Total Equity	128,143
Non-current liabilities
8% loan notes	64,000
5% loan notes	56,000
Total Non-Current Liabilities	120,000
Current liabilities
Trade payables	89,798
Interest payable	10,240
Overdraft	29,371
Total Current Liabilities	129,409
Total Equity & Liabilities	377,552

Required:

i) Prepare the capital reduction account for Mensimah LTD.
ii) Prepare the statement of Financial Position of Mensimah LTD immediately after the reconstruction.
iii) Determine the position of each stakeholder group if the reconstruction scheme is not implemented.

Answer

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Tags: Capital Reduction, Equity restructuring, Financial Statements, Loan Notes
Level: Level 3

Topic: Corporate reconstruction and reorganisation
Series: Nov 2024

CR – Nov 2024 – L3 – Q3b – Digital Transformation & Cybersecurity Risks

Address concerns regarding digital transformation, cybersecurity risks, regulatory compliance, and ethical dilemmas in accounting.

Question

b) In the contemporary business landscape, the integration of digital technologies presents multifaceted challenges for accounting professionals, particularly in the areas of digital transformation, cybersecurity, regulatory compliance, and ethical decision-making.

You are the newly appointed Chief Finance Officer (CFO) of Fanofom Ghana Ltd (FGL), a prominent Ghanaian company that produces and exports shea butter for the cosmetics industry to several companies globally. As FGL largely deals with international customers, it is undergoing a digital transformation to enable it to operate 24/7, and thus meet the needs of its clients given the time differences around the world.

As a result, the company has recently migrated its accounting systems to a cloud-based accounting platform and implemented automation tools to streamline financial processes. However, one of the old and senior directors who described himself as a BBC, a street jargon meaning “born before computer,” has expressed serious concerns about the digital transition and associated problems such as cybersecurity risks, regulatory compliance, and ethical issues that would arise due to the ongoing digital transformation.

Required:
i) Identify and explain the challenges associated with the integration of digital technologies in accounting systems with respect to:

Digital transition,
Cybersecurity risks,
Regulatory compliance,
Ethical dilemmas. (8 marks)

ii)Recommend two remedies to address the identified challenges.

Answer

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Tags: Accounting Systems, Cloud Computing, Cybersecurity Risks, Data security, Digital Transition, Ethical Dilemmas, Regulatory Compliance
Level: Level 3

Topic: Beyond financial reporting
Series: Nov 2024

CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

Question

(i) Share-Based Payment

Pee Manka PLC (PM), a hyper-growing firm in Ghana, prepares its financial statements on 31 December.

The following information is relevant:

The financial statements are authorised for issue on 31 March. On 31 December 2021, PM issued share options to seven (7) of its senior executives, giving each executive the option to purchase 2 million shares at GH¢6.50 per share. The fair value of each option at that date was GH¢4.00. The exercise of the share options was conditional on the completion of two-years’ service from 31 December 2021.

The company’s share price on subsequent dates was as follows:

Date	Share Price (GH¢)
31 December 2022	13.50
31 December 2023	17.50

On 31 March 2023, after the 2022 financial statements were authorised for issue, PM’s Chief Finance Officer, one of the seven executives, unexpectedly resigned from her position in the company.
On 30 April 2023 another executive, Mrs. Torsah, was dismissed.
The five remaining executives exercised their options on 31 December 2023.

Required:

In line with IFRS 2: Share-Based Payment, recommend how the above scenario would have been dealt with in the financial statements of PM for the year ended 31 December 2023. (6 marks)

(ii) Contingent Liabilities and Share-Based Payment

Mrs. Torsah, who was dismissed, immediately instigated legal proceedings against PM, and it was probable, on the 28 February 2024, that she would be deemed to have completed the two-year qualifying period of her share option agreement.
Legal advice at that time was that she was also likely to be awarded GH¢3.5 million in compensation, and that it was possible that this could rise to GH¢5.8 million.

Required:

In line with IFRS 2: Share-Based Payment and IAS 37: Provisions, Contingent Liabilities and Contingent Assets, explain how the above scenario would impact your results in (i) above.

Answer

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Tags: Contingent Liabilities, Employee Benefits, IAS 37, IFRS 2, Legal claims, Share Options
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets, IFRS 2: Share-Based Payments
Series: Nov 2024

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Question

Oboisah PLC (Oboisah) operates a defined benefit pension plan for employees who commenced employment with the company prior to 1 April 2021. The pension scheme is non-contributory.

At 31 March 2023, the Group recorded a net defined liability of GH¢157 million. The following information relates to the year ended 31 March 2024:

Description	Amount (GH¢ million)
Employer contributions paid on 31 March 2024	43
Benefits paid	16
Current service cost	42
Curtailment gain	3
Present value of defined benefit obligation at 31 March 2024	498
Value of plan assets at 31 March 2024	315

The average yield on relevant corporate bonds was 20% on 1 April 2023. Entries so far made in respect of the employer contributions have been incorrectly debited to accounts receivable and credited to cash. Benefits paid have been correctly recorded.

Required:

In line with IAS 19: Employee Benefits, determine how much pension amounts should be included in the financial statements of Oboisah PLC for the year ended 31 March 2024. Show the appropriate extracts for the above and any correction entries, if necessary.

Answer

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Tags: Defined Benefit Plan, Employee Benefits, Financial Reporting, IAS 19, Pension Obligation
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: Nov 2024

CR – Nov 2024 – L3 – Q2b – Accounting for Legal Claims

Assess and account for a legal claim against Agropah PLC under IAS 37.

Question

ropah PLC (Agropah) prepares its financial statements to 30 June and usually authorizes them for issue on 25 August.

On 15 July 2024, Agropah received notice of a legal claim made by Odametey, a customer, for loss of profits allegedly due to the supply of faulty goods by Agropah on 30 April 2024. The amount claimed was GH¢5 million.

The directors of Agropah have estimated the following possible outcomes in respect of this legal claim:

28% chance that the claim will not succeed.
45% chance that the claim will succeed, and Odametey will be awarded GH¢3.2 million.
27% chance that the claim will succeed, and Odametey will be awarded GH¢5 million.

Required:

In line with IAS 37: Provisions, Contingent Liabilities & Contingent Assets, explain how this legal claim should be accounted for and reported in the financial statements of Agropah for the year ended 30 June 2024.

Answer

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Tags: Contingent Liability, Financial Reporting, IAS 10, IAS 37, Legal Claim, Provision
Level: Level 3

Professional Body: ICA (Ghana)

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LPB – OCT 2019 – L3 – Q1 – Multiple Choice Questions on Banking Law and Practice

Multiple-choice questions testing knowledge of cheques, banker-customer relationships, account operations, and related legal principles under the Bills of Exchange Act, 1961 (Act 55) and common law.

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TAI – Feb 2020 – L1 – Q3 – Audit Evidence Sources

List and explain five significant sources of audit evidence and the nature of evidence expected from each.

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SCS – Mar 2025 – L3 – Q5 – Environmental Disclosures

Explain importance of environmental disclosures for AML and key EPA disclosure requirements in sustainability reports.

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SCS – Mar2025 – L3 – Q4 – Financial Management

AML evaluates money market and forward contract hedges to mitigate USD/GHS exchange rate risk on USD 10M gold export revenue, with calculations and internal hedging strategies.

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SCS – Mar 2025 – L3 – Q3 – Competitive advantage, International financial

Analyze AML's employee management using IR Framework and evaluate the appropriateness of its diversification strategy into lithium mining.

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POT – Mar 2025 – L2 – Q5 – Withholding Tax

State five payments exempt from withholding taxes in Ghana.

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SCS – Mar 2025 – L3 – Q2 – Change Management

Explain leadership's role in change management and three of Kanter's skills for AML's diversification strategy.

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SCS – Mar 2025 – L3 – Q1 – Employee Satisfaction

Identify two key concerns from AML's employee satisfaction survey and their impact on competitive advantage.

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POT – Mar 2025 – L2 – Q4- Partnership Taxation

Compute Nmani Pharmacy’s chargeable income for 2023.

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POT – Mar 2025 – L2 – Q3 – Taxation of Individuals

Determine Selassi Afolabi’s chargeable income for 2023.

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AAA – Mar 2025 – L3 – Q2 – Audit of Complex Transactions

Analyze financial statement extracts for audit risks in property, plant & equipment, trade receivables, and inventory, and outline audit evidence needed.

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AAA – Mar 2025 – L3 – Q1 – Ethical Issues in Auditing

Identify and explain five threats to auditor independence for Gidisu & Associates in auditing Athletics Gh. LTD, with management strategies.

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SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types

Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.

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CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration

Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.

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CR – Nov 2024 – L3 – Q4b – Consolidation and Financial Reporting

Discuss the appropriate reporting figures a parent company should include in its consolidated financial statements when its subsidiaries have different reporting dates.

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CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction

Prepare the capital reduction account and the statement of financial position for Mensimah Ltd after reconstruction.

Required:

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CR – Nov 2024 – L3 – Q3b – Digital Transformation & Cybersecurity Risks

Address concerns regarding digital transformation, cybersecurity risks, regulatory compliance, and ethical dilemmas in accounting.

ii)Recommend two remedies to address the identified challenges.

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CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

(i) Share-Based Payment

Required:

(ii) Contingent Liabilities and Share-Based Payment

Required:

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CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Required:

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CR – Nov 2024 – L3 – Q2b – Accounting for Legal Claims

Assess and account for a legal claim against Agropah PLC under IAS 37.

Required:

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