Question
a).i) Kwade and Lobi Associates, an audit firm based in Tamale, has been engaged by Mawuena Mines LTD, a licensed medium mining company, to audit their financial statements for the year ending 2023. This engagement marks a significant milestone for the audit firm, as it is their most substantial client to date, with audit fees constituting nearly 40% of the firm’s annual service revenue.
Auditing a mining company necessitates specialised skills, knowledge and experience in the mining industry to form an audit opinion. To address these requirements, the audit firm has engaged Miss Ewoenam Agbesi, the firstborn of the Engagement Partner, who holds an MSc in Mining Engineering from the University of Mines & Technology. Although she has just graduated, her expertise in mining is considered crucial for this audit.
Given the complexity and significance of the audit, the engagement also necessitates the involvement of other auditors to provide their opinions on specific aspects of the financial statements.
Required:
Identify and explain THREE factors Kwade and Lobi Associates should consider when determining whether to use the work of Miss Ewoenam Agbesi as an expert in mining.
ii) What specific aspects of the financial statements might necessitate the involvement of other auditors? Provide examples related to the mining industry.
b) The Auditor General of Ghana has a critical role in ensuring financial accountability and transparency in the country. He has a mandate which includes several key responsibilities.
Required:
Enumerate FIVE mandates of the Auditor General as enshrined in the 1992 Constitution of the Republic of Ghana.
Answer
(i). Competence and Qualifications: The audit firm must evaluate Ms. Serwaa Berko’s qualifications to ensure she possesses the necessary knowledge, skills, and experience in mining. This includes her MSc in Mining Engineering and any relevant certifications or professional experience. Since Miss Ewoenam Agbesi has recently graduated, the firm should review her academic background and any practical experience gained during her studies or internships. Objectivity and Independence: It is crucial to assess Miss Ewoenam Agbesi’s objectivity to ensure her work is free from bias. The fact that she is the Engagement Partner’s daughter may raise concerns about her independence. The audit firm should implement safeguards, such as having her work reviewed by an independent third party, to mitigate any potential conflicts of interest.
Reputation and Reliability: The firm should consider Miss Ewoenam Agbesi’s reputation and reliability in the field of mining. This involves seeking references or feedback from her academic supervisors or colleagues. Although she is new to the profession, any positive testimonials or references can help establish her credibility. (Any 3 points well explained @ 2 marks each = 6 marks)
(ii). Valuation of Mineral Reserves and Resources: Determining the value of mineral reserves and resources requires specialized knowledge and techniques. Accurate valuation is crucial for financial reporting and impacts asset valuation and impairment assessments. Estimating the economically recoverable quantities of minerals and their fair value.
Environmental Liabilities and Provisions: Mining companies often face significant environmental liabilities, including reclamation and remediation obligations. Assessing these liabilities requires expertise in environmental regulations and cost estimation. Calculating the present value of future remediation costs for decommissioned mining sites.
Revenue Recognition from Mining Operations: Revenue from mining operations can be complex, involving multiple streams such as sales of extracted minerals, royalties, and byproducts. Ensuring proper revenue recognition in compliance with accounting standards may require specialized auditors. Verifying the timing and measurement of revenue from the sale of gold and other mined products.
Assessment of Operational Efficiency and Cost Management: Mining operations involve substantial capital and operational expenditures. Evaluating the efficiency of operations and cost management practices may necessitate expertise in mining engineering and operational auditing. Reviewing the efficiency of extraction processes and the allocation of costs to various mining activities.
Compliance with Mining Regulations and Safety Standards: Mining companies must adhere to numerous regulations and safety standards. Auditing compliance with these requirements requires an understanding of the regulatory environment and industry-specific standards. Assessing compliance with local mining laws, health and safety regulations, and environmental standards. (4 marks)
(b). The mandate for public sector audit is vested exclusively in the Auditor-General. Article 187 of the 1992 Constitution of Ghana, provides the mandate of the Auditor General as follows:
- To audit and report on the public accounts of Ghana and of all public offices, including: the courts; the central and local government administrations of the Universities and public institutions of like nature; and any public corporation or other body or organisation established by an Act of Parliament.
- The Auditor-General or any person authorised or appointed for the purpose of the audit by the Auditor-General shall have access to all books, records returns and other documents relating or relevant to those accounts.
- All the public accounts of Ghana and of all other persons or authorities referred to in clause (2) of article 187 shall be kept in such form as the Auditor-General shall approve.
- In the performance of his functions under this Constitution or any other law the Auditor-General shall not be subject to the direction or control of any other person or authority.
- He may disallow any item of expenditure which is contrary to law and surcharge:
- the amount of any expenditure disallowed upon the person responsible for incurring or authorising the expenditure; or
- any sum which has not been duly brought into account, upon the person by whom the sum ought to have been brought into account; or
- the amount of any loss or deficiency, upon any person by whose negligence or misconduct the loss or deficiency has been incurred.
(2 marks each for any 5 well-explain points = 10 marks)
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- Author Samuel Duah
- Professional Bodies ICA (Ghana)
- Programs PROFESSIONAL PROGRAM
- Tags Auditor General, financial accountability, Ghana Constitution, Public Sector Audit
- Series MAR 2025
- Subjects AUDIT & ASSURANCE
- Topics Audit of Public Sector Entities
- 20 Marks
AA – Mar 2025 – L2 – Q5 – Auditor Expertise
Identify factors for using an expert in a mining audit.
Question
a).i) Kwade and Lobi Associates, an audit firm based in Tamale, has been engaged by Mawuena Mines LTD, a licensed medium mining company, to audit their financial statements for the year ending 2023. This engagement marks a significant milestone for the audit firm, as it is their most substantial client to date, with audit fees constituting nearly 40% of the firm’s annual service revenue.
Auditing a mining company necessitates specialised skills, knowledge and experience in the mining industry to form an audit opinion. To address these requirements, the audit firm has engaged Miss Ewoenam Agbesi, the firstborn of the Engagement Partner, who holds an MSc in Mining Engineering from the University of Mines & Technology. Although she has just graduated, her expertise in mining is considered crucial for this audit.
Given the complexity and significance of the audit, the engagement also necessitates the involvement of other auditors to provide their opinions on specific aspects of the financial statements.
Required:
Identify and explain THREE factors Kwade and Lobi Associates should consider when determining whether to use the work of Miss Ewoenam Agbesi as an expert in mining.
ii) What specific aspects of the financial statements might necessitate the involvement of other auditors? Provide examples related to the mining industry.
b) The Auditor General of Ghana has a critical role in ensuring financial accountability and transparency in the country. He has a mandate which includes several key responsibilities.
Required:
Enumerate FIVE mandates of the Auditor General as enshrined in the 1992 Constitution of the Republic of Ghana.
Find Related Questions by Tags, levels, etc.
