Question Tag: Audit Procedures

Search 500 + past questions and counting.

AAA – Nov 2024 – L3 – Q5b – Anti-Money Laundering Regulations and Auditor Responsibilities

Discuss anti-money laundering regulations in Ghana and auditors' responsibilities in compliance.

Question

Lamsey Jewelers is a family-owned business specializing in high-end jewellery, located in Dunkwa-On-Offin in the Central Region of Ghana. The company sources gold from various suppliers in the small-scale mining sector. Recently, the Minerals Commission received anonymous tips suggesting that Lamsey Jewelers may be involved in laundering money through its operations. Authorities suspect that the business could be used to conceal the origins of illicit funds through gold purchases and sales.

To investigate these suspicions, regulatory authorities have appointed Baba Yara and Associates, an independent auditing firm, to conduct a thorough review of Lamsey Jewelers’ operations and financial transactions. During the audit, Baba Yara and Associates discovered that Lamsey Jewelers has been accepting large cash payments for custom jewellery orders without conducting proper due diligence on the customers. Several transactions involving cash payments exceed typical retail amounts, raising suspicions of potential money laundering.

Required:

i) Discuss the key legal and regulatory requirements in Ghana related to anti-money laundering relevant to Lamsey Jewelers.

ii) Discuss the obligations placed on professional firms such as Baba Yara and Associates in relation to money laundering.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Anti-Money Laundering, Audit Procedures, Compliance, Due diligence, Financial Crimes, Professional Ethics, Regulatory Framework, Risk Assessment
Level: Level 3

Topic: Regulatory Framework and Audit Responsibilities
Series: Nov 2024

AA – Nov 2024 – L2 – Q5b – Substantive Testing of Accounts Receivable

Explain three substantive tests for verifying accounts receivable balance.

Question

Baaba & Associates, an audit firm, is conducting a year-end audit of Rashida LTD. The audit team is particularly concerned about the accuracy of the accounts receivable balance reported on the statement of financial position as of December 31, 2023. Therefore, as part of their audit procedures, they need to perform substantive tests to identify any material misstatements, errors, or fraud that could impact the accuracy of the financial statements.

Required:
Explain THREE substantive tests that the audit team at Baaba & Associates should perform to obtain sufficient appropriate audit evidence regarding the accuracy of Rashida LTD’s accounts receivable balance.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounts Receivable, Audit evidence, Audit Procedures, Financial Reporting, Risk Assessment, Substantive Testing
Level: Level 2

Topic: Audit and Assurance Evidence
Series: Nov 2024

AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

Question

Oboshie Audit Firm has been engaged to audit the financial statements of Abakah Manufacturing LTD for the year ended December 31, 2023. During the planning phase of the audit, the audit team identified that Abakah Manufacturing LTD relies heavily on its internal control system to ensure the accuracy and completeness of its financial reporting.

Required:
i) Explain TWO tests of control to be performed by Oboshie Audit Firm to evaluate the effectiveness of Abakah Manufacturing LTD’s internal controls over its financial reporting.

ii) Identify a method that should be used under each test of control in (i) above.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Approval of Transactions, Audit Procedures, Control Testing, Internal Controls, Risk Assessment, Segregation of Duties
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: Nov 2024

AAA – May 2016 – L3 – Q6 – Audit Reporting

Discuss audit work and written representation letter for legal claims, outstanding balances, and investments.

Question

Bob Removals Limited is a removals company. In the year ended December 31, 2015, the company made a trading profit of N800,000. You are the manager in charge of the audit.
The following issues have arisen:

(i) A customer is suing the company for N1 million for damage caused to antique furniture. The company is defending the claim and believes that the furniture was a reproduction as opposed to antique and therefore worth only N100,000.
(ii) A balance due from Safe Storage in respect of sub-contract work, of N300,000, has been outstanding for over six months. Your firm has been asked by Bob Removals’ accountant not to write to Safe Storage for direct confirmation of this amount as the latter company objects to such letters. You have been assured by the accountant that the relationship between the two companies is good and that the outstanding balance will be paid.
(iii) Bob Removals has recently invested in four new removal vans and is currently carrying out extensive refurbishment of its premises. As a result of this expenditure, the company has reached its overdraft limit of N500,000.

Required:

For each of the above issues:
a. State, with reasons, the audit work that you would expect to find when undertaking your review of the audit working papers for the year ended December 31, 2015.
b. Draft the relevant sections dealing with these issues of the written representation letter you would wish the directors to sign.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Investment, Legal Claim, Outstanding Balance, Written Representation
Level: Level 3

Topic: Audit Reporting

AAA – May 2016 – L3 – Q5 – Ethical Issues in Auditing

Identify and discuss fraud and error in the audit of Badagry Yachting and Marina.

Question

Badagry Yachting and Marina (BYM) have a marina on the West Coast of Nigeria and a large sales operation dealing in yachts and speedboats. You are responsible for the audit of BYM and have found some potential causes of concern that could indicate fraudulent activity or financial misconduct within the company. In particular:

(i) 30% of the yachts on sale by BYM are supplied through one of the major international boating companies with a special finance arrangement deal. However, BYM have also obtained separate finance on these yachts, which are therefore in effect being ‘double financed’.
(ii) Ten yachts shown as assets by BYM cannot be located, with no explanation other than that they have not been sold. These yachts are worth approximately N50 million.
(iii) Long delays have occurred in performing reconciliations, with the last four months of reconciliations still not completed. At the time of the last reconciliation, material differences had been identified upon which no action appears to have been undertaken.
(iv) Sales have been overstated by N100 million in the current financial statements.
The finance director has been off sick with stress for the last five months and therefore has not been available to discuss any of the issues identified.

Required:

a. Explain the difference between fraud and error and how the issues shown here could be categorised as fraud or error. (6 Marks)
b. Discuss the role of management and the role of the auditor in the prevention and detection of fraud and error. (3 Marks)
c. Describe what steps you would take to further investigate and then report on the matters referred to above. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Error, Financial Misconduct, Fraud, Investigation
Level: Level 3

Topic: Ethical Issues in Auditing

AAA – May 2017 – L3 – Q6 – Group Audits

Draft a memorandum describing challenges, procedures, and instructions for a group audit engagement involving subsidiaries and associates in different countries.

Question

You are an Audit Senior in ABC firm of Chartered Accountants, a Pan-African audit firm. You just resumed from your examination leave and received the following email from Mrs. Chidi, an Audit Manager in your firm.

Dear Audu,

Welcome back from leave and best of luck in your examination.
We have just been appointed as financial statements auditors to Gbogbonise Plc., a conglomerate having its head office in Lagos. Our preliminary discussion with the group Chief Financial Officer (CFO) indicates that the company has five subsidiaries and two associates. One of the subsidiaries is incorporated and operates in Ghana while one of the associates is incorporated and operates in The Gambia. The other members of the group are incorporated and operate in Nigeria. The group operations cover automobiles, agriculture, and manufacturing.
We will be meeting with the audit committee in three weeks to present our audit plan and strategy for the assignment.

Required:

a. Challenges that may be encountered in this engagement. (5 Marks)

b. General procedures that may be performed on significant and non-significant components. (3 Marks)

c. Salient items to be included in the group audit instructions. (3 Marks)

d. Procedures to be performed relating to the consolidation of the group. (4 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Consolidation, Group Audit, Group Instructions, Significant Components
Level: Level 3

Topic: Group audits

AAA – May 2019 – L3 – Q4 – Review of Subsequent Events and Going Concern Assumptions

Analyze the auditor's objectives, implications of going concern assumptions, directors' responsibilities, and risk assessment for going concern status.

Question

Itanforiti Publishers Limited has been in the printing and publishing business for many years in Ibadan. The company has been performing well with a competitive advantage over many companies in the industry as a result of the engagement of a high-profile team of personnel and in-house printing of its published books.

The board of directors comprises two brothers and their wives. The older brother is the chairman, and the younger, the managing director. The fortunes of the company started dwindling in 2013 when conflicts could no longer be resolved amicably among the members of the board of directors.

The chairman, being a majority shareholder, assumed executive powers by combining the roles hitherto played by the managing director with his own as executive chairman in 2015. Governance of the company became unsettled, and key staff of the organization started resigning in turn.

In 2016, the financial reports of the company revealed its inability to pay creditors, and the supply of raw materials became irregular. In addition, the level of receivables became too high with a significant figure of doubtful and irrecoverable debts.

Your firm acts as auditors to the company, and you have been presented with the financial statements for the year ended 31st December 2017, for audit. The financial statements were prepared on a going concern basis.

Required:
a. Identify and explain the objectives of the auditor in the area of going concern in accordance with International Standards on Auditing (ISA 570). (5 Marks)
b. Explain the going concern assumption and the implications for the financial statements if the entity is not a going concern. (5 Marks)
c. Explain the going concern duties of the directors. (3 Marks)
d. Evaluate the risk assessment procedures to be performed by the auditor on the going concern status of the entity. (ISA 570). (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Statements, Going Concern, ISA 570
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions

AAA – May 2021 – L3 – Q6 – Review of Subsequent Events and Going Concern Assumptions

Evaluation of going concern issues at Wazobia Nigeria Limited and audit procedures to address identified risks.

Question

Wazobia Nigeria Limited is a manufacturer of corrugated zinc roofs. Due to the economic recession, revenue continued to decline each year for the past three years. You are aware that the company had only N300,000 in cash at the year end. Extracts from the draft financial statements and other relevant information are given below.

Additional information:
(i) The bank loan was obtained in 2016 when the company started recording losses. The collateral for the loan is a fixed and floating charge on the assets of the company to the tune of the loan balance. The first tranche of repayment of the loan is due in 2019 and the amount repayable is N300 million.

(ii) Wazobia renegotiated its credit line with a major supplier and extended payment terms from 60 days to 90 days in order to improve working capital.

(iii) The terms for accessing the undrawn facilities stipulate that the company must meet certain covenants, including that interest cover is maintained at 2:1 and the ratio of bank loan to total assets does not exceed 1:1.

(iv) The contingent liability relates to litigation against the company by one of its customers for an alleged breach of contract to supply roofing sheets based on agreed specifications.

Required:
(a) Identify and explain the matters which may cast significant doubt on the company’s ability to continue as a going concern in the foreseeable future. (10 Marks)
(b) Recommend the appropriate audit procedures to be performed to adequately address the going concern matters identified. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Bank Loan, Contingent Liabilities, Financial Stress, Going Concern
Level: Level 3

AAA – May 2021 – L3 – Q4 – Advanced Audit Planning and Strategy

Discussion of engagement letter elements, reasons for rejecting an engagement, procedures for new client acceptance, and opening balances audit.

Question

As a Senior Manager in Inagbe and Co. (Chartered Accountants), you act as a mentor to some of the young auditors in practice. As a mentor, you discuss frequently with your young mentees on professional and personal matters. Zainab Nigeria Limited is a cosmetics company and has just recently appointed Inagbe and Co. as its auditor. One of your young mentees has been asked to be part of the engagement team. The mentee has come to you for some advice and you decided to use the opportunity to explain the process and procedures to be carried out when accepting a new engagement.

Required:

(a) Explain the elements of an engagement letter. (7 Marks)
(b) Discuss the circumstances under which an auditor may reject an audit engagement. (3 Marks)
(c) Discuss the procedures that an audit firm needs to carry out before accepting to audit a new client. (4 Marks)
(d) Explain the audit procedures that should be carried out on opening balances. (6 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Acceptance, Audit Procedures, Engagement letter, Opening Balances
Level: Level 3

Topic: Advanced Audit Planning and Strategy

AAA – May 2021 – L3 – Q3 – Audit Completion and Final Review

Evaluation of audit evidence sufficiency, recommendations for further procedures, and reporting internal control deficiencies in accordance with ISA 265.

Question

You are the manager responsible for the audit of Seraphim Nigeria Limited, a manufacturing company which produces biscuits. The company’s financial year ended on December 31, 2018, and you are reviewing the audit work which was completed on a number of material balances and transactions: assets held for sale, capital expenditure, and payroll expenses.

A summary of the audit procedures carried out by the audit team is given below:

(i) Provision for Restructuring:
The board approved changes in the management structure of the company. The directors determined that the company was ‘top heavy’ and decided that 80% of the middle management staff should be laid off. The Finance Director had estimated the cost of the restructuring to be N180 million and a manual journal has been posted to record a provision for restructuring costs. The Finance Director has overridden the segregation of duties control by posting this journal and approving it himself. He told the team that he had done it because he wanted to preserve the confidentiality of the transaction. The audit team discussed the planned restructuring with the Managing Director (MD). The audit team relied on the discussions with the MD and the board resolution approving the restructuring as audit evidence.

(ii) Investments:
The company’s investments trading portfolio is outsourced to a fund manager – Hala Funds Management Limited, which processed all trades done by the company. The investments balance and income on investments recorded in the financial statements have been traced and agreed to year-end reports from the service organization. The audit team relied on the reports from the fund manager which was given to them by the Chief Financial Officer (CFO) of the company.

Based on discussions, the audit team determined that the CFO had not classified the investments in line with the requirements of IFRS 9, and the interest income on its bonds investment was computed using the contractual rate.

The company made some investments directly without passing them through the fund manager, which is not in line with the company’s policy. The audit team traced and agreed those transactions to the bank statement. The amounts of investments made directly without involving the fund manager were not considered material.

Required:
For each of the two matters described above:
(a) Comment on the sufficiency and appropriateness of the audit evidence obtained. (10 Marks)
(b) Recommend further audit procedures to be performed by the audit team. (8 Marks)
(c) Explain the matters which should be included in a report in accordance with ISA 265: Communicating Deficiencies in Internal Controls to Those Charged with Governance and Management. (2 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Internal Control Deficiencies, Investments, Provision for Restructuring
Level: Level 3

Topic: Audit Completion and Final Review

AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning

Discuss matters to consider before accepting a review engagement and recommend procedures for examining a cash flow forecast.

Question

Eebuks Ltd is a retailer of academic textbooks that sells through its own network of bookshops and online through its website. The revenue from the website includes both cash sales and sales on credit to educational institutions. The company has provided historical analysis from its trade receivables ledger indicating that for sales made on credit, 25% payment is received in the month of sale, 70% after 30 days, and the remainder are irrecoverable debts.

You are a Manager in Makafui & Associates, a firm of Chartered Accountants offering a range of services from audit to non-audit for its clients. On 1 July 2023, your firm was asked by Eebuks Ltd, a company that is not an audit client of your firm, to consider a potential engagement to review and provide an assurance report on Prospective Financial Information. Makafui & Associates has already conducted specific client identification procedures in line with money laundering regulations with satisfactory results.

Additionally, Eebuks Ltd has approached your firm to obtain an independent assurance opinion on its cash flow forecast, which is being prepared for its bankers in support of an application for an increase in its existing overdraft facility.

Required:

a) In line with ISAE 3400: The Examination of Prospective Financial Information, discuss FIVE (5) matters to be considered by Makafui & Associates before accepting the engagement to review and report on Eebuks Ltd’s Prospective Financial Information. (10 marks)

b) Assuming Makafui & Associates accepts the engagement, recommend EIGHT (8) procedures to be performed in respect of Eebuks Ltd’s cash flow forecast. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Services, Audit Procedures, Cash Flow Forecast, ISAE 3400, Prospective financial information, Review Engagement
Level: Level 3

Topic: Assurance services, Planning, The audit approach
Series: JULY 2023

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

Question

You are the Manager responsible for the audit of Rail Expert Plc, a listed entity whose principal activity is the operation of a regional railway network. The audit for the year ended 28 February 2021 is the first year your firm is auditing Rail Expert Plc. The draft financial statements received from your client indicated a total asset of GH¢58 million and a profit before tax of GH¢7.4 million. The detailed audit fieldwork has started, and the audit supervisor has brought the following matters to your attention in relation to the testing of key accounting estimates:

a) Cash-settled share-based payment scheme
On 1 March 2020, Rail Expert Plc granted 550,000 share appreciation rights to 55 executives and senior employees of the company, with each eligible member of staff receiving 10,000 of the rights. The fair value of the rights was estimated on 28 February 2020 by an external expert using an options pricing model at GH¢4.50 each. Rail Expert Plc prides itself on good employee relations, and the senior management team has estimated that all 55 staff will qualify for the rights when they vest three years after the granting of the rights on 1 March 2020. The company recognized an expense of GH¢825,000 with its associated liability in the draft accounts. (7 marks)

b) Regulatory penalties
Rail Expert Plc has been subject to a review by the national railways regulator following a complaint from a member of staff with safety concerns. The regulator identified breaches in safety regulations and issued a penalty notice on 30 September 2020. Rail Expert Plc has appealed against the initial penalty payable. Negotiations with the regulator are still ongoing, and the amount payable has not yet been finalized. Rail Expert Plc currently estimates that the total penalty payable as a result of the breach will be GH¢1.3 million, which it expects to repay in equal annual installments over the next ten years, with the first payment falling due on 1 March 2021. The company’s draft statement of profit or loss for the current year recognizes an expense of GH¢1.3 million, and the draft statement of financial position includes a liability for the same amount. (7 marks)

c) Property development
Rail Expert Plc owns an industrial property which it has historically used as a maintenance depot for its engines and carriages. The company has an accounting policy of revaluing its properties to fair value, and at the interim audit, it was noted that the depot was recorded at a carrying amount of GH¢2.5 million in the non-current asset register. During the first week of the audit fieldwork, the audit supervisor identified a year-end journal which has uplifted the depot to a fair value of GH¢4.9 million in this year’s statement of financial position as at 28 February 2021. Management has advised that this represents the estimated sales value of the building following Rail Expert Plc’s plan to develop the building as a residential property. The client has confirmed that the property is suitable for conversion into residential apartments at an estimated cost of GH¢1.2 million and has negotiated secured finance for the development with their bank. The development will be subject to the payment of fees to the local council’s building regulator of GH¢173,000. (6 marks)

Required:
Evaluate the client’s accounting treatments above and state THREE (3) audit procedures you will undertake when auditing each of the transactions.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Cash-Settled Share-Based Payment, IAS 37, IFRS 13, IFRS 2, Property Valuation, Regulatory Penalties
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: DEC 2023

AAA – Dec 2023 – L3 – Q1a – The Meaning of Audit and Assurance | Professional Responsibility and Liability

Explain the concept of professional skepticism and identify areas where it is important in auditing complex, subjective, or judgmental issues.

Question

“Professional Skepticism is an essential concept in auditing practice and theory. It has been identified in almost all existing auditing standards. However, the way it should be characterised is still unclear” according to Maciej Ciolek (2017).

Required:

i) Explain the term Professional Skepticism within the context of the auditing profession. (2.5 marks)

ii) Discuss THREE (3) areas of audit that are complex, subjective or highly judgmental where Professional Skepticism may be important. (7.5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Judgments, Audit Procedures, Complex Areas, Professional Skepticism
Level: Level 3

Topic: Professional responsibility and liability, The meaning of audit and assurance
Series: DEC 2023

AAA – Nov 2020 – L3 – Q5b – The Audit Approach

Identify and comment on the implications of findings related to quality control policies and procedures during an audit engagement.

Question

You are a Partner in Green & Co., a firm of Chartered Accountants, with specific responsibility for the quality of audits. Green & Co. was appointed auditor of Cleanup Co, a provider of waste management services, in July 2019. You have just visited the audit team at the head office of Cleanup Co. The audit team comprises an audit manager, an audit senior, and two audit trainees.

During your visit, a review of the audit working papers revealed the following:

i) On the audit planning checklist, the audit senior has crossed through the analytical procedures section and written ‘not applicable – new client’. The audit planning checklist has not been signed off as having been reviewed.

ii) The audit manager last visited Cleanup Co.’s office when the final audit commenced two weeks ago on 1 August. The audit senior has since completed the audit of tangible non-current assets (including property and service equipment) which amount to GH¢ 600,000 as at 30 June 2019 (2018 – GH¢ 600,000). The audit manager spends most of his time working from Green & Co’s office and is currently allocated to three other assignments as well as Cleanup Co.’s audit.

iii) At 30 June 2019, trade receivables amounted to GH¢ 2.1 million (2018 – GH¢ 900,000). One of the trainees has just finished sending out requests for direct confirmation of customers’ balances as at the end of the reporting period.

iv) The other trainee has been assigned the audit of the consumable supplies, which includes inventory amounting to GH¢ 88,000 (2018 – GH¢ 53,000). The trainee has carried out tests of controls over the perpetual inventory records and confirmed the ‘roll-back’ of a sample of current quantities to book quantities as at the year end.

v) The audit manager has noted the following matter for your attention. The financial statements as at 30 June 2018 disclosed, as unquantifiable, a contingent liability for pending litigation. However, the audit manager has seen a letter confirming that the matter was settled out of court for GH¢ 450,000 on 14 September 2018. The auditor’s report on the financial statements for the year ended 30 June 2018 was unmodified and signed on 19 September 2018. The audit manager believes that management of Cleanup Co. is not aware of the error and has not brought it to their attention.

Required:
Identify and comment on the implications of these findings for Green & Co’s quality control policies and procedures. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Analytical procedures, Audit Engagement, Audit Procedures, Client Acceptance, Quality control
Level: Level 3

Topic: The audit approach
Series: NOV 2020

AAA – Nov 2020 – L3 – Q3a – Audit Evidence | Evaluation and Review

Discuss whether financial statements require amendment for specific events and describe related audit procedures and audit report implications.

Question

a) For each of the three events below:
i) Discuss whether the financial statements require amendment. (3 marks)
ii) Describe audit procedures that should be performed in order to form a conclusion on the amendment. (4 marks)
iii) Explain the impact on the audit report should the issues remain unresolved. (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Amendments, Audit Procedures, Audit report, Financial Statements, Subsequent Events
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: NOV 2020

AAA – Nov 2020 – L3 – Q2b – Audit Evidence | Evaluation and Review

Explain significant audit procedures to be performed in the final audit regarding the warranty provision as at 31 March 2019

Question

Explain the significant audit procedures to be performed during the final audit in respect of the estimated warranty provision in the statement of financial position of Manuf Co. as at 31 March 2019. (3 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Audit Procedures, Financial Statements, Warranty provision
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: NOV 2020

AAA – May 2021 – L3 – Q2 – Audit evidence | Evaluation and review

Recommend audit procedures for validating accounting estimates, evaluate the appropriateness of written representations, and assess the impact of management's refusal to provide representations on the audit report.

Question

Oliso Private Company Ltd has been operating in the manufacturing sector for over a decade. One of its major products is manufacturing equipment, which can reduce toxic emissions in the production of chemicals. The company recently employed a new marketing manager who introduced a series of marketing initiatives. This has resulted in significant growth of the company since the appointment of the marketing manager. One of the initiatives is the warranties that the company gives to its customers. The company guarantees its products for three years, and if problems arise within the period, it undertakes to fix them or provide a replacement for the product.

You are the Senior Manager recently engaged by Integrity Audit Consult responsible for Oliso Private Company Ltd’s audit. You are performing the final review as required by ISA 520 Analytical procedures for the audit and have come across the following issues.

Receivable balance due from Obey Company Ltd: Oliso Private Company Ltd has a material receivable balance due from a customer named Obey Company Ltd. During the year-end audit, your team reviewed the ageing of this balance and found that no payments had been received from Obey Company Ltd for over eight months. Oliso Private Company Ltd however would not allow this balance to be included in the list of balances to be circulated. Instead, management has assured your team that they will provide a written representation confirming that the balance is recoverable.

Warranty provision: The warranty provision included in the statement of financial position is material. The audit team has performed testing over the calculations and assumptions, which are consistent with prior years. The team has requested a written representation from management confirming the basis and amount of the provision. Management is yet to confirm acceptance of the need to issue this representation.

Required:

a) Recommend THREE (3) audit procedures to validate the accounting estimates. (5 marks)

b) For each of the two issues above:

i) Evaluate the appropriateness of written representations as a form of audit evidence. (4 marks)

ii) Describe TWO (2) additional procedures the auditor should perform to conclude on the balances to be included in the financial statements. (6 marks)

c) The directors of Oliso Private Company Ltd have decided not to provide the audit firm with the written representation for the warranty provision as they feel it is unnecessary.

Required:

Explain the steps the auditor of Oliso Private Company Ltd should take to assess the impact of management’s refusal to provide a written representation on the auditor’s report. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Accounting estimates, Audit Procedures, Audit report, Management Representations, Receivables, Warranty provision
Level: Level 3

Topic: Audit evidence, Evaluation and review
Series: MAY 2021

AAA – May 2017 – L3 – Q5a – Audit-related services | Practice management

Compare and contrast the audit of completed financial statements with the review of interim financial statements, focusing on key differences and similarities.

Question

Your audit firm has been the statutory auditors for Apenkwa Co. Ltd. for the last three years. The company prepares its financial statements to December 31 each year. Due to the size of the company, it has been the practice of the client to prepare interim financial information to June 30 every year. At the request of the client, you have been reviewing the interim financial information each year it is prepared.

Required:

Compare and contrast the audit of completed financial statements and the review of interim financial statements. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Assurance Level, Audit Procedures, Financial Statement Audit, Interim Financial Statement Review
Level: Level 3

Topic: Audit-related services, Practice management
Series: MAY 2017

AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability

Discuss the considerations before accepting an engagement to certify benchmark petroleum revenue and the issues related to relying on an independent expert’s certification.

Question

Your firm has been contracted by the Office of the Auditor General (AG) of Ghana to provide the Ministry of Finance (MoF) with the certification of the Projection of Benchmark Petroleum Revenue for 2016.

The Petroleum Revenue Management Act (PRMA), 2011 (Act 815) became law in Ghana on 11 April 2011, and Section 17 of the PRMA requires the Minister responsible for Finance to make a projection of the amount of petroleum revenue that would accrue to the Government of Ghana in the coming year, not later than 1 September of each year.

The first schedule of the Act mandates an independent expert to certify the projection of the Benchmark Petroleum Revenue by the Minister before it would be used in the National Budget for the coming year.

The two major issues in the projection are the quantity of Oil and Gas expected and the world market price at which the oil and gas will be valued.

As part of the documents to be used in performing this assignment, MoF has given you:

Projection of the Benchmark Petroleum Revenue from oil and gas for 2016, and
Certification of the Estimate of the Oil and Gas production for 2016 from the existing and expected oil and gas producing fields in Ghana.

The first schedule of the Act prescribes a formula for the calculation of the Average Unit Price for Crude Oil and Natural Gas on the International Market to be used for the year. The certification in the Estimate of the Oil and Gas production was issued by an independent expert in the Oil and Gas industry.

Required:

i) State FOUR issues your firm will consider in order to decide whether or not to accept this engagement from the Office of the Auditor General. (4 marks)

ii) If your firm decides to accept the engagement, state FOUR issues your firm will consider in order to place reliance on the certification issued by the independent expert in the Oil and Gas industry in performing the engagement. (4 marks)

iii) State TWO audit procedures your firm would perform to determine that the Average Unit Price for Crude Oil and Natural Gas on the International Market for 2016 used by MoF in the Projection of the Benchmark Petroleum Revenue for 2016 is fairly stated. (2 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Engagement Acceptance, Independent Expert, Petroleum Revenue Management
Level: Level 3

Topic: Assurance services, Professional responsibility and liability
Series: MAY 2017

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

Question

The number of international non-governmental organizations (charitable organizations) is increasing in Ghana, and your firm Zumah and Co. Chartered Accountants (a small firm) is contemplating entering that segment of the audit market. Your managing partner has asked you as an audit senior to conduct research on the audit of such entities to enable the firm to start bidding for jobs from those entities.

Required:

Write a memo to the engagement partner detailing the characteristics of such audit clients, what the firm needs to do, and the audit organization that your firm may need to join to enhance your chances of securing engagements to audit such entities.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Market, Audit Procedures, International Non-Governmental Organizations, Transnational Audits
Level: Level 3

Topic: Assurance services, Audit-related services
Series: MAY 2017

Question Tag: Audit Procedures

Filter by Professional Bodies

Filter by Subject

Filter by Series

Filter by Topics

Filter by Levels

AAA – Nov 2024 – L3 – Q5b – Anti-Money Laundering Regulations and Auditor Responsibilities

Discuss anti-money laundering regulations in Ghana and auditors' responsibilities in compliance.

You're reporting an error for "AAA – Nov 2024 – L3 – Q5b – Anti-Money Laundering Regulations and Auditor Responsibilities"

AA – Nov 2024 – L2 – Q5b – Substantive Testing of Accounts Receivable

Explain three substantive tests for verifying accounts receivable balance.

You're reporting an error for "AA – Nov 2024 – L2 – Q5b – Substantive Testing of Accounts Receivable"

AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

You're reporting an error for "AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls"

AAA – May 2016 – L3 – Q6 – Audit Reporting

Discuss audit work and written representation letter for legal claims, outstanding balances, and investments.

Required:

You're reporting an error for "AAA – May 2016 – L3 – Q6 – Audit Reporting"

AAA – May 2016 – L3 – Q5 – Ethical Issues in Auditing

Identify and discuss fraud and error in the audit of Badagry Yachting and Marina.

Required:

You're reporting an error for "AAA – May 2016 – L3 – Q5 – Ethical Issues in Auditing"

AAA – May 2017 – L3 – Q6 – Group Audits

Draft a memorandum describing challenges, procedures, and instructions for a group audit engagement involving subsidiaries and associates in different countries.

Required:

You're reporting an error for "AAA – May 2017 – L3 – Q6 – Group Audits"

AAA – May 2019 – L3 – Q4 – Review of Subsequent Events and Going Concern Assumptions

Analyze the auditor's objectives, implications of going concern assumptions, directors' responsibilities, and risk assessment for going concern status.

You're reporting an error for "AAA – May 2019 – L3 – Q4 – Review of Subsequent Events and Going Concern Assumptions"

AAA – May 2021 – L3 – Q6 – Review of Subsequent Events and Going Concern Assumptions

Evaluation of going concern issues at Wazobia Nigeria Limited and audit procedures to address identified risks.

You're reporting an error for "AAA – May 2021 – L3 – Q6 – Review of Subsequent Events and Going Concern Assumptions"

AAA – May 2021 – L3 – Q4 – Advanced Audit Planning and Strategy

Discussion of engagement letter elements, reasons for rejecting an engagement, procedures for new client acceptance, and opening balances audit.

You're reporting an error for "AAA – May 2021 – L3 – Q4 – Advanced Audit Planning and Strategy"

AAA – May 2021 – L3 – Q3 – Audit Completion and Final Review

Evaluation of audit evidence sufficiency, recommendations for further procedures, and reporting internal control deficiencies in accordance with ISA 265.

You're reporting an error for "AAA – May 2021 – L3 – Q3 – Audit Completion and Final Review"

AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning

Discuss matters to consider before accepting a review engagement and recommend procedures for examining a cash flow forecast.

You're reporting an error for "AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning"

AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review

Evaluate the accounting treatment of cash-settled share-based payments, regulatory penalties, and property valuation, and outline relevant audit procedures for each.

You're reporting an error for "AAA – Dec 2023 – L3 – Q2 – Audit Evidence | Evaluation and Review"

AAA – Dec 2023 – L3 – Q1a – The Meaning of Audit and Assurance | Professional Responsibility and Liability

Explain the concept of professional skepticism and identify areas where it is important in auditing complex, subjective, or judgmental issues.

You're reporting an error for "AAA – Dec 2023 – L3 – Q1a – The Meaning of Audit and Assurance | Professional Responsibility and Liability"

AAA – Nov 2020 – L3 – Q5b – The Audit Approach

Identify and comment on the implications of findings related to quality control policies and procedures during an audit engagement.

You're reporting an error for "AAA – Nov 2020 – L3 – Q5b – The Audit Approach"

AAA – Nov 2020 – L3 – Q3a – Audit Evidence | Evaluation and Review

Discuss whether financial statements require amendment for specific events and describe related audit procedures and audit report implications.

You're reporting an error for "AAA – Nov 2020 – L3 – Q3a – Audit Evidence | Evaluation and Review"

AAA – Nov 2020 – L3 – Q2b – Audit Evidence | Evaluation and Review

Explain significant audit procedures to be performed in the final audit regarding the warranty provision as at 31 March 2019

You're reporting an error for "AAA – Nov 2020 – L3 – Q2b – Audit Evidence | Evaluation and Review"

AAA – May 2021 – L3 – Q2 – Audit evidence | Evaluation and review

Recommend audit procedures for validating accounting estimates, evaluate the appropriateness of written representations, and assess the impact of management's refusal to provide representations on the audit report.

You're reporting an error for "AAA – May 2021 – L3 – Q2 – Audit evidence | Evaluation and review"

AAA – May 2017 – L3 – Q5a – Audit-related services | Practice management

Compare and contrast the audit of completed financial statements with the review of interim financial statements, focusing on key differences and similarities.

You're reporting an error for "AAA – May 2017 – L3 – Q5a – Audit-related services | Practice management"

AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability

Discuss the considerations before accepting an engagement to certify benchmark petroleum revenue and the issues related to relying on an independent expert’s certification.

You're reporting an error for "AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability"

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

You're reporting an error for "AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services"

Our offerings

Contact Info

Customer

Get In Touch

admin