Question Tag: Financial Reporting

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SCS – Nov 2024 – L3 – Q1b – Digital Challenges in Accounting

Discuss the challenges of digital transformation in accounting, covering cybersecurity, compliance, and ethical concerns.

Question

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

Answer

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Tags: Cybersecurity, Digital Transition, Ethical Dilemmas, Financial Reporting, Regulatory Compliance
Level: Level 3

Topic: Cybersecurity, Ethics, Regulatory Compliance

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

AAA – Nov 2024 – L3 – Q5a – Roles of an Audit Committee in Corporate Governance

Explain four roles of an audit committee in compliance with good corporate governance practices.

Question

An Audit Committee is a sub-group of a company’s Board of Directors responsible for the oversight of the financial reporting and disclosure process. The duties and responsibilities of the Audit Committee greatly contribute to good corporate governance practices of a company.

Required:
Explain FOUR roles of an Audit Committee in compliance with good corporate governance practices.

Answer

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Tags: Audit Committee, Compliance, Corporate Governance, Financial Reporting, Internal Audit, Oversight, Regulatory Framework, Risk Management
Level: Level 3

Topic: Institutional Regulation and Standard-Setting
Series: Nov 2024

AAA – Nov 2024 – L3 – Q2a – Audit Risks and Responses for Ecowud Co. LTD

Identifying audit risks in Ecowud Co. LTD and how auditors should respond.

Question

Ecowud Co. LTD (Ecowud) is a sustainable goal-oriented company that develops, manufactures, and sells plywood made from rice husk and plastic waste. The company has a wide customer base, including construction companies and furniture manufacturers across Ghana and West Africa.

You are the Audit Manager of Adomako & Associates and are planning the audit of Ecowud for the year ended 31 December 2023. You and the Audit Engagement Partner attended a planning meeting with Ecowud’s Finance Manager.

You are reviewing the initial meeting notes to develop the audit strategy and plan. The following key matters were captured:

Development Expenditure: Revenue for the year was forecast at GH¢32 million. During the year, Ecowud spent GH¢3.5 million on developing new types of plywood. Some of these are in the early stages of development, while others are nearing completion. The Finance Manager intends to capitalize the entire GH¢3.5 million spent on development since all projects are likely to succeed.
Inventory Valuation: Ecowud uses a standard costing method to value inventory. However, the company has never updated its standard costs since adopting this policy. The company operates multiple warehouses in Ghana and across West Africa, most of which are third-party rented premises.
Accounting Software: A new accounting software was developed internally and implemented in August. The old and new software did not run parallel, as management deemed it burdensome. Two months after implementation, the IT Manager resigned, and a new IT Manager will take over in January 2024.
Long-term Loan and Share Capital: Ecowud restructured its finances, raising GH¢2 million through share issuance and GH¢3.5 million through a long-term loan. The loan has bank-imposed financial conditions, including a minimum total asset level. If breached, the loan becomes immediately repayable.
Revaluation of Land & Buildings: Ecowud follows a revaluation model for land and buildings. The Finance Manager has announced that all land and buildings will be revalued at the year-end.

Required:
Identify FIVE audit risks in relation to Ecowud Co. LTD and for each risk, explain how the auditor should respond.

Answer

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Tags: Audit Risk, Development Expenditure, Financial Reporting, IFRS Compliance, Internal Controls, Inventory Valuation
Level: Level 3

Topic: Audit Approach
Series: Nov 2024

PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

Question

Based on your results in (a), write a report to the newly appointed board analyzing and indicating whether their performance is better in comparison with the old board.

Answer

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Tags: Accountability, Budgeting, Compliance, Financial Reporting, Public Expenditure
Level: Level 2

Topic: Financial Statements Discussion and Analysis
Series: Nov 2024

PSAF – Nov 2024 – L2 – Q3b – Public Expenditure and Financial Accountability (PEFA) Assessment

Evaluate the financial performance of a local government based on PEFA assessment results and recommend strategies for improvement.

Question

Accounting and reporting constitute a key pillar of an organised and transparent public financial management system in the public sector. The effectiveness of accounting and reporting reflects the integrity of financial data, the accuracy of in-year budget reports, and the quality of annual financial statements. In a recent Public Expenditure and Financial Accountability (PEFA) assessment, a local government had the following results:

Annual financial reporting: D
In-year budget report: D+
Financial data integrity: C

Required:
i) Explain the assessment performance to the Municipal Chief Executive of the local government.
ii) Recommend two strategies for improving the performance of the local government in each of the assessed areas.

Answer

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Tags: Budget Reporting, Data Integrity, EFA, financial assessment, Financial Reporting, Local Government
Level: Level 2

Topic: Public expenditure and financial accountability framework
Series: Nov 2024

PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

Question

You have been engaged as an Accounts Officer in Abokobi LTD. Sales of GH¢10,000,000 were inadvertently under-declared. A team from the Ghana Revenue Authority (GRA) is at your premises conducting an audit. The GRA Audit Team did not review the sales revenue. After the audit, you noted that the amount constituting the under-declaration of the sales was mistakenly credited to the suppliers’ account in the ledger.

Required:

Detail out your position on the above as to what action to take.

Answer

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Tags: Financial Ethics, Financial Reporting, Ghana Revenue Authority (GRA), Tax Audit, Tax Compliance, Tax Penalty, Tax Regulations, Under-declared Sales
Level: Level 2

Topic: Tax Administration
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

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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 – Q4b – Audit Report and Basis for Opinion

Justify the audit report type and draft the basis for the opinion section.

Question

You are part of the audit team auditing a client in the retail business. During your risk assessment procedures, you were informed by management that accounts receivable records in one of the company’s branches were destroyed in a fire. The company is in the process of obtaining these accounts receivable records but was not able to do so prior to the approval of the financial statements. The fire incident happened on 31 December 2023 and the estimated amount involved is GH¢20 million. The audit team assessed that they are unable to obtain sufficient appropriate audit evidence due to inadequate accounting records. Possible effects are deemed material but not pervasive.

Required:
i) Justify the type of audit report to be issued in the above scenario.

ii) Draft the basis for the above opinion section of the auditor’s report.

Answer

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Tags: Audit report, Basis for Opinion, Financial Reporting, Material Misstatement, Qualified Opinion, Sufficient Audit Evidence
Level: Level 2

Topic: Completion Procedures and Reporting
Series: Nov 2024

FA – May 2013 – L1 – SA – Q4 – Accounting Concepts

The question concerns the process of eliminating variations in accounting practice.

Question

The process to reduce or eliminate variations in accounting practice and to introduce a degree of uniformity into financial reporting is:

A. Accounting Standards
B. Accounting Concepts
C. Accounting Manuals
D. Accounting Statements
E. Accounting Records

Answer

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Tags: Accounting Standards, Financial Reporting, Uniformity
Level: Level 1

Topic: Accounting Concepts
Series: MAY 2013

FA – May 2013 – L1 – SA – Q3 – Regulatory Environment of Accounting

This question tests knowledge of the body responsible for developing IFRS.

Question

IFRS are developed and published by:

A. International Accounting Standards Committee
B. International Accounting Standards Advisory Council
C. International Accounting Standards Board
D. International Accounting Standards Foundation
E. International Accounting Reporting Standards Board

Answer

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Tags: Financial Reporting, IFRS, International Standards
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: MAY 2013

FA – May 2013 – L1 – SA – Q2 – Regulatory Framework of Accounting

This question is about the collective term for rules and regulations that apply to financial reporting.

Question

The rules and regulations which apply to financial reporting may be collectively referred to as the “regulatory framework.” In practice, most of these frameworks refer to:

A. Entities
B. Stock markets
C. Financial accounts
D. Cash flow statements
E. Fund statements

Answer

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Tags: Financial Reporting, Regulatory Framework
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: MAY 2013

FR – March 2020 – L2 – Q6b – Financial Reporting

Discuss objectives of FRCON and ethical issues in reporting.

Question

b. The regulatory body responsible for issuing accounting standards in accordance with local and international regulations in Nigeria is the Financial Reporting Council of Nigeria (FRCON).
Required:
Explain briefly THREE main objectives of setting up the Financial Reporting Council of Nigeria (FRCON) and identify TWO ethical issues in financial reporting which companies may be sanctioned for by this body.
(10 Marks)

Answer

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Tags: Conceptual Framework, Economic Decisions, Financial Reporting
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: MAR/JULY 2020

FA – May 2014 – L1 – SA – Q20 – Control Accounts

This question tests knowledge of the document used by a consignee to report to a consignor in consignment transactions.

Question

What is the name of a periodic statement sent by a Consignee to a Consignor?

Answer

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Tags: Business Communication, Consignment Accounting, Financial Reporting
Level: Level 1

Topic: Control Accounts
Series: MAY 2014

CR – Nov 2020 – L3 – Q2b – Sale and Leaseback of Warehouse

Accounting treatment for sale and leaseback transaction under IFRS 16 for Tekyiman Ltd.

Question

Tekyiman Ltd (Tekyiman) sold one of its warehouses on 1 July 2019 to a finance house and leased it back under an operating lease on the same date. The carrying amount of the warehouse on 1 July 2019 was GH¢16 million. The terms of the sale and leaseback were as follows; sale proceeds of GH¢23.5 million and half-yearly lease rental payments of GH¢1 million paid in arrears on 31 December and 30 June over a period of 4 years.

The open market value of the property would have been GH¢20 million if not leased back on these terms. The lease rental payments were approximately double market rates for such a lease. The finance house can terminate the lease at any time with a month’s notice to Tekyiman, at which point any excess of the sales proceeds over market value of the property not yet repaid becomes repayable immediately.

Tekyiman depreciated the property up to 1 July 2019 and then derecognised it, recognising a profit of GH¢7.5 million (netted against expenses in the statement of profit or loss). The first GH¢1 million, 6 monthly lease rental payment, made on 31 December 2019 has been charged to cost of sales. No other accounting entries have been made.

Tekyiman now wishes to amortize the excess of the sales proceeds over market value on a straight-line basis over the period the warehouse will be used (4 years).

Required:
Advise the directors of the entity of the correct accounting treatment of the above transaction under IFRS 16: Leases (as the information permits) for the year ended 31 December 2019.

Answer

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Tags: Accounting for Leases, Financial Reporting, IFRS 16, Leases, Sale and Leaseback
Level: Level 3

Topic: IFRS 16: Leases
Series: NOV 2020

FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5

Assess the classification of certain operations as discontinued operations under IFRS 5 for two scenarios.

Question

In accordance with IFRS 5: Non-Current Assets held for Sale and Discontinued Operations, explain with reasons whether each of the following could most likely be classified as a discontinued operation in this year’s financial statements:

i) A reportable operating segment that met the definition of held for sale after the year-end but before the financial statements were authorised for issue.
ii) A division of a business, classified as held for sale, that was correctly treated as a discontinued operation in last year’s financial statements but which has not been sold by this year-end due to the sale being referred to the Securities and Exchange Commission (SEC). SEC is not expected to report its findings until 6 months after this year-end.

Answer

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Tags: Discontinued Operations, Financial Reporting, IFRS 5, Non-current Assets
Level: Level 2

Series: MAY 2020

FR – May 2020 – L2 – Q2d – Accounting for Government Grants under IAS 20

Explain the financial reporting treatment of government grants in Dambai Ltd’s financial statements under IAS 20.

Question

Dambai Ltd is a large manufacturing company. During the year, it decided to relocate some operations to a regional development area, which offers attractive labour costs and tax incentives. The regional government agreed to contribute GH¢200,000 as a result of Dambai setting up in the regional development area. There are no particular conditions as to what the money should be spent on. The cash was received on 1 August 2019.

Required:
In accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance, explain the financial reporting treatment of the above in the financial statements of Dambai for the year ended 31 December 2019.

Answer

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Tags: Financial Reporting, Government Grants, IAS 20, Revenue Recognition
Level: Level 2

Topic: Financial Reporting Standards and Their Applications
Series: MAY 2020

FR – May 2020 – L2 – Q3a – Preparation of Statement of Profit or Loss

Prepare the statement of profit or loss for Badu Trading Ltd for the year ended 31 May 2020.

Question

Answer

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Tags: Final Accounts, Financial Reporting, Statement of Profit or Loss
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAY 2020

FR – May 2020 – L2 – Q3b – Statement of Financial Position

Prepare the statement of financial position for Badu Trading Ltd for the year ended 31 May 2020.

Question

Prepare the statement of financial position for Badu Trading Ltd for the year ended 31 May 2020.

Answer

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Tags: Final Accounts, Financial Reporting, Statement of Financial Position
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAY 2020

Question Tag: Financial Reporting

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SCS – Nov 2024 – L3 – Q1b – Digital Challenges in Accounting

Discuss the challenges of digital transformation in accounting, covering cybersecurity, compliance, and ethical concerns.

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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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AAA – Nov 2024 – L3 – Q5a – Roles of an Audit Committee in Corporate Governance

Explain four roles of an audit committee in compliance with good corporate governance practices.

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AAA – Nov 2024 – L3 – Q2a – Audit Risks and Responses for Ecowud Co. LTD

Identifying audit risks in Ecowud Co. LTD and how auditors should respond.

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PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

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PSAF – Nov 2024 – L2 – Q3b – Public Expenditure and Financial Accountability (PEFA) Assessment

Evaluate the financial performance of a local government based on PEFA assessment results and recommend strategies for improvement.

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PT – Nov 2024 – L2 – Q2e – Tax Audit and Under-declaration of Sales

Action to be taken regarding an under-declared sales revenue during a tax audit.

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

Explain three substantive tests for verifying accounts receivable balance.

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AA – Nov 2024 – L2 – Q4b – Audit Report and Basis for Opinion

Justify the audit report type and draft the basis for the opinion section.

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FA – May 2013 – L1 – SA – Q4 – Accounting Concepts

The question concerns the process of eliminating variations in accounting practice.

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FA – May 2013 – L1 – SA – Q3 – Regulatory Environment of Accounting

This question tests knowledge of the body responsible for developing IFRS.

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FA – May 2013 – L1 – SA – Q2 – Regulatory Framework of Accounting

This question is about the collective term for rules and regulations that apply to financial reporting.

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FR – March 2020 – L2 – Q6b – Financial Reporting

Discuss objectives of FRCON and ethical issues in reporting.

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FA – May 2014 – L1 – SA – Q20 – Control Accounts

This question tests knowledge of the document used by a consignee to report to a consignor in consignment transactions.

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CR – Nov 2020 – L3 – Q2b – Sale and Leaseback of Warehouse

Accounting treatment for sale and leaseback transaction under IFRS 16 for Tekyiman Ltd.

Required: Advise the directors of the entity of the correct accounting treatment of the above transaction under IFRS 16: Leases (as the information permits) for the year ended 31 December 2019.

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FR – May 2020 – L2 – Q2b – Classification of Discontinued Operations under IFRS 5

Assess the classification of certain operations as discontinued operations under IFRS 5 for two scenarios.

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FR – May 2020 – L2 – Q2d – Accounting for Government Grants under IAS 20

Explain the financial reporting treatment of government grants in Dambai Ltd’s financial statements under IAS 20.

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FR – May 2020 – L2 – Q3a – Preparation of Statement of Profit or Loss

Prepare the statement of profit or loss for Badu Trading Ltd for the year ended 31 May 2020.

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FR – May 2020 – L2 – Q3b – Statement of Financial Position

Prepare the statement of financial position for Badu Trading Ltd for the year ended 31 May 2020.

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Required:
Advise the directors of the entity of the correct accounting treatment of the above transaction under IFRS 16: Leases (as the information permits) for the year ended 31 December 2019.