Question Tag: Auditing Procedures

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  • 15 Marks

AAA – May 2017 – L3 – Q5 – Audit Reporting

Explain the IAASB Clarity Project's objective and describe new requirements in various revised ISAs.

You are an Audit Manager of Lobito James & Co., a firm of Chartered Accountants. You are aware of some significant changes and new requirements in the Revised ISAs as a result of the IAASB Clarity Project issued in October 2008 that are expected to impact the following audit procedures:

(a) Communicating with those charged with governance (ISA 260).
(b) Materiality in planning and performing an audit (ISA 320).
(c) Audit considerations relating to an entity using a service organisation (ISA 402).
(d) Evaluation of misstatements identified during an audit (ISA 450).
(e) External confirmation (ISA 505).
(f) Auditing accounting estimates, including fair value, accounting estimates and related disclosures (ISA 540).
(g) Related parties (ISA 550).

You are required to:

i. Explain the objective of the IAASB Clarity Project. (1 Mark)

ii. Explain TWO new requirements in each of the revised ISAs listed above. (14 Marks)

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  • 15 Marks

FR – May 2019 – L2 – Q5 – Related Party Transactions (IAS 24)

Analysis of related party transactions and disclosure requirements as per IAS 24 for Grandkano Nig. Plc.

Grandkano Nig. Plc. is a company listed on the Nigerian Stock Exchange (NSE) and located in the northwestern part of the country. The company has been paying yearly penalties to NSE in respect of non-disclosure of related party transactions in its published financial statements. The company has therefore approached a partner in your firm to assist in this regard in order to avoid payment of these yearly penalties. The partner in your firm has requested for a list of all transactions with parties connected with the company and the directors of the company provided the following summary:

(i) A factory building had been sold to the brother of Alhaji Nagode, the Managing Director of Grandkano Nig. Plc. for N300 million (net of selling cost of N5 million). The market value of the property (factory building) was N322.5 million. The carrying amount of the factory building was N375 million and its value in use was N270 million.

(ii) Every month Grandkano Nig. Plc. sells N750,000 worth of goods to Malam Bayero, the finance director. The finance director has set up a small retail business for his son (Dongoyaro), and the goods are sold at cost price to him. The annual turnover of Grandkano Nig. Plc. is N4.5 billion. Also, Malam Bayero has purchased his official company’s car from the company for N675,000 (market value N1.2 million). Malam Bayero earns a salary of N7.5 million per annum, and he is a very wealthy man.

Required:
a. Reasons why it is important to disclose related party transactions. (5 Marks)

b. The nature of any disclosures required in transactions (i) and (ii) above under IAS 24 related party disclosures. (10 Marks)

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  • 15 Marks

AAA – May 2017 – L3 – Q5 – Audit Reporting

Explain the IAASB Clarity Project's objective and describe new requirements in various revised ISAs.

You are an Audit Manager of Lobito James & Co., a firm of Chartered Accountants. You are aware of some significant changes and new requirements in the Revised ISAs as a result of the IAASB Clarity Project issued in October 2008 that are expected to impact the following audit procedures:

(a) Communicating with those charged with governance (ISA 260).
(b) Materiality in planning and performing an audit (ISA 320).
(c) Audit considerations relating to an entity using a service organisation (ISA 402).
(d) Evaluation of misstatements identified during an audit (ISA 450).
(e) External confirmation (ISA 505).
(f) Auditing accounting estimates, including fair value, accounting estimates and related disclosures (ISA 540).
(g) Related parties (ISA 550).

You are required to:

i. Explain the objective of the IAASB Clarity Project. (1 Mark)

ii. Explain TWO new requirements in each of the revised ISAs listed above. (14 Marks)

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  • 15 Marks

FR – May 2019 – L2 – Q5 – Related Party Transactions (IAS 24)

Analysis of related party transactions and disclosure requirements as per IAS 24 for Grandkano Nig. Plc.

Grandkano Nig. Plc. is a company listed on the Nigerian Stock Exchange (NSE) and located in the northwestern part of the country. The company has been paying yearly penalties to NSE in respect of non-disclosure of related party transactions in its published financial statements. The company has therefore approached a partner in your firm to assist in this regard in order to avoid payment of these yearly penalties. The partner in your firm has requested for a list of all transactions with parties connected with the company and the directors of the company provided the following summary:

(i) A factory building had been sold to the brother of Alhaji Nagode, the Managing Director of Grandkano Nig. Plc. for N300 million (net of selling cost of N5 million). The market value of the property (factory building) was N322.5 million. The carrying amount of the factory building was N375 million and its value in use was N270 million.

(ii) Every month Grandkano Nig. Plc. sells N750,000 worth of goods to Malam Bayero, the finance director. The finance director has set up a small retail business for his son (Dongoyaro), and the goods are sold at cost price to him. The annual turnover of Grandkano Nig. Plc. is N4.5 billion. Also, Malam Bayero has purchased his official company’s car from the company for N675,000 (market value N1.2 million). Malam Bayero earns a salary of N7.5 million per annum, and he is a very wealthy man.

Required:
a. Reasons why it is important to disclose related party transactions. (5 Marks)

b. The nature of any disclosures required in transactions (i) and (ii) above under IAS 24 related party disclosures. (10 Marks)

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