Limitations – Page 2

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.

Question

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)

Answer

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Tags: Annual Reports, Financial Reporting, IFRS, Integrated Reporting, Limitations
Level: Level 3

Topic: Emerging Trends in Corporate Reporting

FR – Nov 2022 – L2 – Q6c – Limitations of EPS

Identify three limitations of EPS as an indicator of performance.

Question

EPS is probably the single most important indicator of an entity’s performance.
Required:
State THREE of the limitations of EPS.

Answer

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Tags: Entity Performance, EPS, Financial Indicators, Limitations
Level: Level 2

Topic: Earnings Per Share (IAS 33)
Series: NOV 2022

AA – Nov 2015 – L2 – Q4 – Audit Reports

Discussing the scope of statutory audits, limitations of an audit, and overall audit strategy.

Question

Briefly discuss the following:
a. The scope of the statutory audit as described in the independent auditors’ report. (5 Marks)
b. The main limitations of an audit. (5 Marks)
c. The overall audit strategy. (5 Marks)
d. Understanding the entity and its environment. (5 Marks)

Answer

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Tags: Audit Planning, Audit strategy, Limitations, Statutory Audit
Level: Level 2

Topic: Audit Reports, Planning an Audit
Series: NOV 2015

AA – Nov 2020 – L2 – Q1c – Internal Control Systems

Discuss the limitations of internal controls and how they affect an organization’s ability to prevent errors and fraud.

Question

Explain the limitations of internal controls.

Answer

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Tags: Fraud, Human Error, Internal Controls, Limitations
Level: Level 2

Topic: Internal Control Systems
Series: NOV 2020

SCS – Nov 2023 – L3 – Q6c – Professional Practice and Codes of Ethics

Identifying and explaining two limitations of the OECD Principles of Corporate Governance.

Question

The OECD Principles of Corporate Governance, as an international statement of principles about corporate governance, establishes minimum acceptable standards of corporate governance. However, like any such document on corporate governance, it has several limitations.

Required:
Identify and explain TWO (2) limitations of the OECD Principles of Corporate Governance.
(5 marks)

Answer

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Tags: Corporate Governance, International Standards, Limitations, OECD principles
Level: Level 3

Topic: Professional practice and codes of ethics
Series: NOV 2023

FR – Nov 2018 – L2 – SC – Q7a – Conceptual Framework for Financial Reporting

Identify and discuss the limitations of financial statements.

Question

Identify and discuss the limitations of financial statements.

Answer

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Tags: Conceptual Framework, Financial Statements, Limitations
Level: Level 2

Topic: Conceptual Framework for Financial Reporting
Series: NOV 2018

FA – Nov 2022 – L1 – SB – Q4b – Accounting Concepts

State four limitations of the cash basis of accounting.

Question

State FOUR limitations associated with cash basis of accounting.
(8 Marks)

Answer

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Tags: Accounting Concepts, Cash Basis, Financial Reporting, Limitations
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2022

MI – May 2021 – L1 – SB – Q6c – Decision-Making Techniques | Information Systems

Enumerates three advantages and two disadvantages of Decision Support Systems (DSS).

Question

Enumerate THREE advantages and TWO disadvantages of DSS.

Answer

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Tags: Benefits, Decision Support Systems, DSS, Limitations
Level: Level 1

Topic: Decision-making techniques, Information Systems
Series: MAY 2021

BMF – Mar July 2020 – L1 – SB – Q2a – Management, Individual, and Organisational Behaviour

Stating the limitations of Maslow’s hierarchy of needs theory.

Question

The hierarchy of needs theory as propounded by Abraham Maslow is a simple and logical idea about human motivation, but it has significant weaknesses and limitations.

Required:
State the limitations of the theory of hierarchy of needs. (14 marks)

Answer

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Tags: Limitations, Maslow’s Hierarchy, Motivation Theory
Level: Level 1

Topic: Management, Individual, and Organizational Behavior
Series: MAR/JULY 2020

FR – Nov 2023 – L2 – Q4c – Financial Statement Analysis

State two limitations of using financial ratios for company performance analysis.

Question

State TWO (2) limitations of ratios.

Answer

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Tags: Financial Analysis, Financial Ratios, Limitations
Level: Level 2

Topic: Financial Analysis, Financial Ratios, Limitations
Series: NOV 2023

AA – May 2021 – L2 – Q4c – Internal Audit and Its Relationship with External Audit

Explain limitations of the Internal Audit Unit and steps to ensure independence.

Question

Internal audit is one of the supporting functions within an organisation. This function is set up reluctantly in many entities. It is most of the time denied the recognition and resources it requires to operate. Internal Auditors report administratively to the CEO’s of organisations even though they are required to functionally report to the Audit Committees of their respective organisations on professional issues.

Required:
Explain FIVE (5) limitations of the Internal Audit Unit and discuss steps that the Internal Audit Unit can initiate to remain independent even though they are employees of a company. (10 marks)

Answer

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Tags: Audit Committee, Independence, Internal Audit, Internal Controls, Limitations
Level: Level 2

Topic: Internal Audit and Its Relationship with External Audit
Series: MAY 2021

CR – Nov 2016 – L3 – Q4a – Analysis and interpretation of financial statements

Describe two uses of accounting ratios and explain three limitations of their use in appraising financial performance.

Question

It has been suggested that ratio analysis is not necessarily the best way of assessing a company’s performance.

Required:
i) Describe two uses of accounting ratios other than performance assessment. (2 marks)
ii) Explain three limitations of the use of accounting ratios in the appraisal of financial performance. (3 marks)

Answer

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Tags: Financial Performance, Limitations, Ratio Analysis
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: NOV 2016

: MA – May 2019 – L2 – Q1c – Transfer Pricing

Discuss the limitations of using negotiated transfer prices within a company.

Question

When negotiated transfer prices are used in the company, the managers who are involved in the proposed transfer within the company meet to discuss the terms and conditions of the transfer. They may decide not to go through with the transfer, but if they do, they must agree to a transfer price.

Required:
Explain THREE (3) limitations of negotiated transfer prices. (3 marks)

Answer

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Tags: Divisional Performance, Limitations, Negotiation, Transfer Pricing
Level: Level 2

Topic: Transfer Pricing
Series: MAY 2019

MA – April 2022 – L2 – Q1b – Divisional performance

Discuss the impact of involving managers in financial target setting and the disadvantages of using financial indicators alone for performance assessment.

Question

The manager of the fitness club in Papase is dissatisfied with the quarterly bonus system and does not perceive it to be fair. He argues that the financial targets are based on a regional view of all Gyakie fitness clubs and do not take account of specific local circumstances. For instance, the fitness club in Papase is located in a less affluent area of the region. Managers also complain about using solely financial indicators in setting targets. The manager of the fitness club in Papase would like to see participation from all fitness club managers in the development of quarterly financial and non-financial targets.

Required:

i) Discuss the potential impact on Gyakie for involving the fitness club managers in the preparation of their quarterly financial targets. (3 marks)

ii) Explain THREE (3) disadvantages of using financial performance indicators alone to assess performance. (3 marks)

Answer

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Tags: Financial planning, Limitations, Managerial Involvement, Performance Indicators, Target Setting
Level: Level 2

Topic: Divisional Performance
Series: APR 2023

FM – April 2022 – L2 – Q4a – Introduction to Investment Appraisal

Explain the limitations of using the Payback period method in investment appraisals.

Question

In investment appraisal, many methods are available for use by finance and project professionals. One of these methods is the Payback period, but stakeholders have often raised questions on the usefulness of this method due to a number of limitations inherent in the use of the method.

Required:
Explain FOUR (4) limitations of using the Payback period method in investment appraisals. (5 marks)

Answer

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Tags: Investment Appraisal, Investment decision-making, Limitations, Payback Period
Level: Level 2

Topic: Introduction to Investment Appraisal
Series: APR 2022

Question Tag: Limitations

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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.

Required:

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FR – Nov 2022 – L2 – Q6c – Limitations of EPS

Identify three limitations of EPS as an indicator of performance.

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AA – Nov 2015 – L2 – Q4 – Audit Reports

Discussing the scope of statutory audits, limitations of an audit, and overall audit strategy.

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AA – Nov 2020 – L2 – Q1c – Internal Control Systems

Discuss the limitations of internal controls and how they affect an organization’s ability to prevent errors and fraud.

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SCS – Nov 2023 – L3 – Q6c – Professional Practice and Codes of Ethics

Identifying and explaining two limitations of the OECD Principles of Corporate Governance.

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FR – Nov 2018 – L2 – SC – Q7a – Conceptual Framework for Financial Reporting

Identify and discuss the limitations of financial statements.

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FA – Nov 2022 – L1 – SB – Q4b – Accounting Concepts

State four limitations of the cash basis of accounting.

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MI – May 2021 – L1 – SB – Q6c – Decision-Making Techniques | Information Systems

Enumerates three advantages and two disadvantages of Decision Support Systems (DSS).

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BMF – Mar July 2020 – L1 – SB – Q2a – Management, Individual, and Organisational Behaviour

Stating the limitations of Maslow’s hierarchy of needs theory.

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FR – Nov 2023 – L2 – Q4c – Financial Statement Analysis

State two limitations of using financial ratios for company performance analysis.

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AA – May 2021 – L2 – Q4c – Internal Audit and Its Relationship with External Audit

Explain limitations of the Internal Audit Unit and steps to ensure independence.

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CR – Nov 2016 – L3 – Q4a – Analysis and interpretation of financial statements

Describe two uses of accounting ratios and explain three limitations of their use in appraising financial performance.

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: MA – May 2019 – L2 – Q1c – Transfer Pricing

Discuss the limitations of using negotiated transfer prices within a company.

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MA – April 2022 – L2 – Q1b – Divisional performance

Discuss the impact of involving managers in financial target setting and the disadvantages of using financial indicators alone for performance assessment.

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FM – April 2022 – L2 – Q4a – Introduction to Investment Appraisal

Explain the limitations of using the Payback period method in investment appraisals.

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