Question Tag: Risk Management

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  • 20 Marks

BO – APRIL 2023 – L3 – Q1 – Functions of Asset-Liability Committee (ALCO)

Identify and explain five functions of the bank's Asset-Liability Committee (ALCO) for ensuring short-term and long-term viability.

a) Your bank’s Asset Liability Committee (ALCO) is a very important committee that ensures the sustainability and viability of the bank both in the short-term and long term. Identify and explain five functions performed by this committee in your bank. [15 marks]

b) Gap analysis is used in Asset and Liability management to measure interest rate risk in a bank’s balance sheet. Explain the phrase ‘Positive Gap’. How is a positive gap affected by rising interest rates? [7.5 marks]

c) Interest rate swaps are often used to manage interest rate risk of an organization. Briefly explain interest rate swaps and the expectation of a buyer of this risk hedging instrument. [7.5 marks]

[Total: 30 marks]

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  • 20 Marks

MFS – APR 2024 – L2 – Q3 – Financial Intermediation and Profitability Enhancement

Describe financial intermediation as a business activity and consider ways to enhance profitability of a financial intermediary with reference to revenue streams and cost components, while maintaining caution.

(a.) How would you describe Financial Intermediation as a form of business activity?                                                                                     (b.) With reference to its revenue streams and cost components, consider how Profitability of a Financial Intermediary could be enhanced within the ambit of caution.

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  • 30 Marks

CML – APR 2024 – L3 – Q4 – Relevance of ESG in Bank Credit Strategy

Discuss the importance of incorporating Environmental, Social, and Governance (ESG) factors into a bank's credit strategy.

Discuss the relevance of ESG considerations in Bank Credit Strategy.

[20 Marks]

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  • 20 Marks

CG – APR 2024 – L4 – Q6 – Role Expansion of Chief Governance Officer in Capital Planning

Discuss whether the evolving role of the Company Secretary to Chief Governance Officer should include capital planning in situations of stressed bank balance sheets.

The changing role of the Company Secretary to become the Chief Governance Officer (CGO) means that in situations of stressed Balance Sheet or Statement of Position of banks, the role of the CGO should be expanded to include Capital Planning. Discuss.

(20 marks)

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  • 20 Marks

SCS – Mar 2025 – L3 – Q2 – Change Management

Explain leadership's role in change management and three of Kanter's skills for AML's diversification strategy.

a) Akosa Minerals Limited (AML) has undergone significant transformations in its operations, particularly with the integration of lithium extraction into its core business. This shift has presented both opportunities and challenges, including regulatory compliance, technological advancements and stakeholder management. Successfully navigating these changes requires effective leadership and change management.

Rosabeth Moss Kanter suggests that managers in change-adept organisations must possess key skills to drive transformation effectively. As AML continues its diversification efforts, the company’s leadership must demonstrate these skills to sustain growth and maintain a competitive edge.

Required:

Identify and explain the critical role of leadership in managing change and THREE out of five key change management skills suggested by Kanter that AML’s leadership should exhibit to effectively manage its diversification and growth strategies.

b) Akosa Minerals Limited (AML) recently engaged a risk consultant from Isodek Consultants to conduct a comprehensive risk assessment and provide recommendations on managing the transformational changes the company is undergoing. The consultant’s report highlights key risks and challenges related to AML’s diversification strategy, operational restructuring, stakeholder engagement and compliance with global sustainability standards.

To navigate these challenges effectively, AML’s leadership needs to apply the Gemini Consultants’ 4Rs model which provides a structured framework for managing large-scale organisational change.

Required:

Using the Gemini Consultants’ 4Rs model, discuss how each component can be applied to address the operational and environmental risks identified in the consultant’s report.

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  • 20 Marks

FM – Mar 2025 – L2 – Q3 – Foreign exchange risk and currency risk management

Determine outcomes of forward contract and money market hedge for GPL's USD payment and recommend the best technique.

a) Gyenyame Pharmaceuticals LTD (GPL), a Ghanaian company, imports raw materials from the United States of America to produce generic drugs for the local market. Due to recent fluctuations in the foreign exchange market, the company’s management is concerned about the impact of exchange rate movements on its costs and profitability.
The company is expected to pay USD750,000 in three months for a shipment of Active Pharmaceutical Ingredients (APIs). GPL also exports locally produced herbal medicine called ‘Koo-pile’ to the Ghanaian community in Oklahoma, USA on credit basis. The company is expecting a receipt of USD250,000 in three months for a consignment exported a month ago.
GPL is considering two hedging strategies to manage the foreign exchange risk: a forward contract and a money market hedge.
The following financial information is available:

  • Current Spot Rate (GHS/USD): 12.00
  • 3-Month Forward Rate (GHS/USD): 12.20
  • 3-Month USD Interest Rate: 3% per annum
  • 3-Month GHS Interest Rate: 14% per annum
  • Expected Future Spot Rate in 3 Months (GHS/USD): 12.50

Required:
i) Determine the outcome of the two hedging techniques and recommend the appropriate technique to GPL based on your computations.
(9 marks)

ii) Explain THREE internal hedging techniques that GPL could use to manage its foreign exchange risk.

b) Technological advancements have significantly transformed financial markets, enhancing the way transactions are conducted, information is accessed and risks are managed. As financial institutions and individual investors increasingly depend on digital tools and innovative technologies, financial markets have become more efficient, accessible and transparent.

Required:
Explain FIVE positive impacts of technological development on financial markets.
(5 marks)

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  • 20 Marks

AA – Mar 2025 – L2 – Q3 – Audit Strategy

Discuss the content and relevance of an audit strategy memorandum in guiding the audit process.

a) The overall audit strategy sets the scope, timing and direction of the audit and guides the development of a more detailed plan. Audit plan converts the audit strategy into a more detailed plan and includes the nature, timing and extent of audit procedures to be performed by the engagement team members in order to obtain sufficient and appropriate audit evidence to reduce audit risk to an acceptable level. Required: Discuss the content of an audit strategy memorandum and its relevance to an audit.

b) Kalomo & Partners, an audit firm, has decided to enhance its audit procedures by integrating Artificial Intelligence (AI) technologies. The firm aims to leverage on AI to audit financial data and transactions more efficiently and effectively. As part of this initiative, the audit team is exploring how AI can be used to analyse large datasets, identify anomalies, and improve the accuracy of their audit findings. The management of Kalomo & Partners is seeking to understand the best practices for using AI in auditing and the potential challenges they may encounter. The firm wants to ensure that the integration of AI aligns with auditing standards and enhances the overall quality of their audit processes.

Required:

i) Explain how AI can be utilised in auditing financial data and transactions.

ii) State TWO potential benefits of using AI in the audit process of Kalomo & Partners.

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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

AA – Nov 2024 – L2 – Q3a – Management’s Expert and Audit Evidence

Explain the term "management’s expert" and four factors to consider before relying on their work as audit evidence.

Question:
ISA 500: Audit Evidence provides guidance for auditors intending to rely on the work of a management’s expert. If the information to be used as audit evidence has been prepared using the work of a management’s expert, the auditor must evaluate the management’s expert.

Required:
i) Explain the term “management’s expert.” 
ii) Explain FOUR factors to consider before relying on the work of a management’s expert as audit evidence.

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  • 5 Marks

AA – Nov 2024 – L2 – Q2b – Advantages of Outsourcing Internal Audit

Explain the advantages and disadvantages of outsourcing the internal audit function.

As organisations look for ways to cut costs, the idea of outsourcing internal audit work goes on the agenda. While outsourcing may be appealing in theory, there are good reasons to keep internal audit in-house.

Required:
i) State TWO advantages of outsourcing the internal audit function. 
ii) State THREE disadvantages of outsourcing the internal audit function.

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  • 1 Marks

BM – May 2024 – L1 – SA – Q16 – Management, Individual, and Organizational Behaviour

Identifying an incorrect strategy for IT risk tolerance.

Strategies of IT risk tolerance does NOT include which of the following?
A. Mitigation
B. Transference
C. Eradication
D. Elimination
E. Avoidance

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  • 1 Marks

MI – May 2024 – L1 – SA – Q16 – Information Systems Development and Security

Identifies an incorrect strategy for IT risk tolerance.

Strategies of IT risk tolerance do NOT include which of the following?

A. Mitigation
B. Transference
C. Eradication
D. Elimination
E. Avoidance

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  • 5 Marks

AA – Nov 2023 – L2 – Q1a – Audit and Assurance Risk Environment

List five ways an external auditor can fulfill responsibilities toward a company’s corporate governance.

The external auditor’s responsibility towards corporate governance is to provide an independent and objective assessment of the effectiveness and efficiency of the company’s corporate governance practices. The auditor’s role is to evaluate the company’s internal controls and make recommendations for improvements to ensure the company is adhering to good corporate governance practices.

Required:
State FIVE (5) ways the External Auditor can fulfill his/her responsibility towards the company’s corporate governance practices.
(5 marks)

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  • 12 Marks

AA – Nov 2017 – L2 – Q2b – Audit and Assurance Evidence

Tabulate four tests of controls the auditor would perform on the sales system of Animo Company Limited, along with their objectives.

Animo Company Ltd has been operating in the manufacturing sector for over a decade. The company achieved significant growth but had weak internal controls in its early stages. To meet increasing demand, Animo acquired a large manufacturing plant and six warehouses for final product storage. Sales ordering, goods despatch, and invoicing customers are organized using unique reference numbers, and a price list is updated quarterly. Customers also receive discounts for bulk purchases. Sales orders are managed electronically, with despatch lists and goods delivery notes generated automatically for each order.

Required:
i) Tabulate four tests of controls the auditor would normally carry out on the sales system of Animo Company Limited and state the objective for each test.

ii) Describe two substantive procedures the auditor should perform to confirm Animo Company Limited’s year-end receivables balance.

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  • 10 Marks

AA – Nov 2017 – L2 – Q2a – Internal Audit and Its Relationship with External Audit

Compare and contrast the roles of internal auditors and external auditors.

Internal audit is a function established by management to assist in corporate governance by assessing internal controls and helping in risk management. It can be a department of employees or outsourced to expert service providers.

Internal auditing is different from external auditing, although the techniques used by both are very similar. While the technique used may be similar, the focus and reasons behind the audit are different.

Required:
Compare and contrast the roles of internal auditors and external auditors.

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  • 10 Marks

AA – Nov 2020 – L2 – Q4b – Internal Audit and Its Relationship with External Audit

Discuss the role of internal audit in corporate governance and risk management.

You have responded to an advertisement by a reputable company for the appointment of an internal auditor. You realized the need to prepare well for the interview.

Required:
In anticipation of the questions you may be asked at the interview, discuss the role of internal audit in corporate governance and risk management.
(10 marks)

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  • 10 Marks

AA – May 2016 – L2 – Q4c – Planning and Approach for Audit and Assurance Engagements

This question discusses the points to consider when advising on a system of control for cash sales.

(c) You have been asked by your client, a garage proprietor, to advise on a system of control for cash sales. Set out the points you would take into consideration before giving your recommendations. (10 marks)

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  • 4 Marks

AA – May 2016 – L2 – Q3b – Institutional Regulation and Standard-Setting

This question explains how an audit committee benefits both external and internal auditors by enhancing communication, independence, and oversight.

(b) Businesses may establish an audit committee to help improve corporate governance within a company. This can provide benefits to both internal and external auditors.

Required:
Explain how an audit committee can benefit both the external auditors and the internal auditors of an entity. (4 marks)

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  • 5 Marks

AA – May 2017 – L2 – Q2a – Internal Audit and Its Relationship with External Audit

Explanation of the role of internal audit in risk management.

Explain the role of Internal Audit in relation to risk management in an organization.

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  • 10 Marks

AA – May 2020 – L2 – Q4b – Audit and Assurance Risk Environment

Identify and describe two major categories of services provided by internal audit.

AA&A Chartered Accountants have been auditing ABC Company Ltd for the past four years. The company intends to list on the Ghana Stock Exchange, which requires the establishment of an internal audit department if the company does not have one already. Management has asked your firm to brief them about internal audit, and you have been asked to assist in the briefing.

Required:
i) Outline TWO (2) major categories of services that the internal audit function undertakes. (5 marks)

ii) Outline the scope of internal audit function. (5 marks)

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