Question Tag: Financial Reporting

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  • 8 Marks

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

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

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.

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  • 5 Marks

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

Compute the pension amounts for Oboisah PLC under IAS 19.

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.

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  • 5 Marks

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

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

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.

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  • 10 Marks

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.

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.

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  • 15 Marks

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.

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:

  1. 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.

  2. 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.

  3. 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.

  4. 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.

  5. 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.

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  • 9 Marks

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

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

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.

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  • 10 Marks

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.

 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.

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  • 5 Marks

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.

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.

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  • 6 Marks

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

Explain three substantive tests for verifying accounts receivable balance.

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.

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  • 10 Marks

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

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

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.

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  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Outline audit procedures to identify material subsequent events and explain the purpose and importance of subsequent events review.

You have just concluded the audit of Roico Limited for the year ended 31 December, 2012. During the review of the working paper file, the partner in charge discovered that no information is available on activities after year-end. The partner instructed the team leader to carry out a review of the company’s activities after year-end. The team leader was not comfortable with the instruction and wants to know why it is necessary to examine accounting information relating to the next accounting period.

You are required to:

(a) Enumerate the audit procedures which would be carried out in order to identify any material subsequent events. (10 Marks)

(b) Discuss the purpose and importance of subsequent events review. (5 Marks)

(Total: 15 Marks)

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  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

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  • 6 Marks

CR – May 2021 – L3 – Q3b – Emerging Trends in Corporate Reporting

Discuss limitations of IFRS-based financial reporting and how integrated reporting enhances annual report usefulness.

The Chief Executive Officer (CEO) of Agege Plc also informed you that as a member of the Institute of Chartered Accountants of Nigeria (ICAN), he recently attended the Mandatory Continuous Professional Education (MCPE) of the Institute. One of the papers presented was in the area of how to improve the quality of information that companies report at year-end.

Required:

As the financial consultant to Agege Plc., identify and discuss three limitations of financial reporting (prepared in accordance with IFRS) and the extent to which integrated reporting might improve the usefulness of the annual reports. (6 Marks)

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  • 7 Marks

CR – May 2023 – L3 – Q5b – Presentation of Financial Statements (IAS 1)

Discuss the importance of optimal disclosure and barriers to reducing excessive disclosures in annual reports.

There have been various arguments globally about the extent of disclosures in the annual reports of companies. Some argue that annual reports should include more extensive disclosures, while others believe that efforts should focus on reducing the quantity of information to avoid overwhelming users of financial statements.

The latter perspective suggests that excessive disclosure is burdensome and may obscure key information. Conversely, some argue that there is no such thing as providing too much useful information to users of financial statements.

Required:

Discuss why it is important to ensure that an optimal level of disclosure is made in annual reports. Also, identify and explain the barriers that may exist when trying to reduce excessive disclosure of information in an annual report. (7 Marks)

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  • 1 Marks

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

Which of the following assignments can be regarded as a continuous audit function?
A. Examining the effectiveness, efficiency, and economy of a cement project
B. Evaluating the adequacy of the security and control measures of the information technology
C. Ascertaining the fairness of the annual financial statements and notes to the accounts
D. Reviewing the internal control procedures before commencing the audit
E. Reviewing the company’s compliance with relevant guidance and release of financial information periodically

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  • 1 Marks

AAA – Nov 2013 – L3 – A – Q3 – Regulatory Framework and Professional Standards

This question assesses knowledge of the organizations represented on the Board of the Financial Reporting Council of Nigeria.

Which of the following organisations has no representation on the Board of the Financial Reporting Council of Nigeria?
A. Chartered Institute of Taxation of Nigeria
B. Chartered Institute of Stockbrokers
C. Nigerian Institute of Bankers
D. Nigerian Institute of Estate Surveyors and Valuers
E. National Insurance Commission

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q2 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

This question discusses the audit steps required to assess the true position of a loan portfolio and the provision for doubtful debts.

Your firm, Alheri & Co, has been appointed to carry out an audit assignment on Barders Bank Limited. The Bank’s year ended 30 September 2010. In the process of carrying out this assignment, it was discovered that no provision was made for doubtful debts. Total loans and advances of N50 billion consisting of 200 customers were found to be at various stages of performance except a N1 billion term loan granted to a Director’s relation’s company on 31 December 2009 to be repaid in N100 million monthly equal instalments commencing from 31 January 2010. Interest was simply agreed at N100,000 per month.

As at the time of this audit, no repayment had been made on this loan.

Required:
a. What audit steps should be taken to ascertain the true position of the loan portfolio? (5 Marks)
b. State the basis and determine the provision that should be made on the loan portfolio. (10 Marks)
(Total 15 Marks)

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  • 1 Marks

AAA – Nov 2012 – L3 – AII – Q9 – Audit of Accounting Estimates and Fair Value Measurements (IAS 36, IFRS 13)

Identifies the valuation methods for non-monetary government grants under IAS 20.

IAS 20 deals with Accounting for Government Grants and Disclosure of Government Assistance. In the Standard, a grant in the form of a non-monetary asset may be valued at …………… or …………… value.

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  • 1 Marks

AAA – Nov 2012 – L3 – AII – Q8 – Public Sector Audits

Identifies the type of monthly accounts submitted to the Accountant-General by a Self-Accounting Unit.

The monthly accounts submitted to the Accountant-General of the Federation by a Self-Accounting Unit are referred to as ……………………

 

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  • 1 Marks

AAA – Nov 2012 – L3 – AII – Q2 – Overview of Advanced Audit and Assurance

Defines an unintentional mistake in the accounting process resulting in material misstatement.

An unintentional mistake is ……………committed by anyone in the accounting process which results in material misstatement.

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