Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

Question

The Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, is concerned about the lack of a “standardised risk management system” and “good corporate governance” at Bazar. Following Continuous Professional Development (CPD) training organised recently by the Institute of Chartered Accountants, Ghana (ICAG), on this subject and attended by you as a member of the Finance Team, duly paid for from Bazar’s training budget:

Required:
You have been asked by management to brief your finance team members on the following:

i) The International Standardisation for Organisation (ISO 31000) framework for risk management using the three (3) main elements. (5 marks)
ii) TWO (2) out of the Six OECD principles of Corporate Governance. (5 marks)

Answer

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Tags: Corporate Governance, ISO 31000, OECD principles, Risk Management
Level: Level 3

Topic: Controlling Risk
Series: AUG 2022

SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

Question

Remuneration packages should attract individuals to a company and persuade them to work for the company. Ghana’s Code of Best Practices makes three statements about remuneration policy. The Code adds that the remuneration level for individual directors should reflect their experiences and the level of responsibilities they undertake.

Required:
i) Explain the three statements about remuneration as stated in the Ghana’s Code of Best Practices policy to support Bazar management engagement with the General Welfare Committee (GWC). (6 marks)

ii) Explain to the management of Bazar why executive remuneration is a governance issue. (4 marks)

Answer

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Tags: Director Compensation, Executive Remuneration, Governance, Remuneration Policy
Level: Level 3

Topic: Ethics and social responsibility
Series: AUG 2022

SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

Question

The management style of Bazar is in transition from a somehow authoritarian style described by some managers as almost autocratic and militaristic to a more ‘open’ style that encourages managers and supervisors to seek ideas from staff and to operate in an informal manner.

Required:
Using Lewin’s Model for Managing Change, (unfreeze, change, re-freeze) suggest an approach to introducing planned transformational change in the management style of Bazar.

Answer

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Tags: Change Management, Lewin's Model, Re-freezing, Transformation, Unfreezing
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

Question

Using the additional information presented by AB Consult & Associate to the Director of Finance and Operations, Mrs. Emma Owusu-Kwakye, on 4 August, prepare the following:

i) Little Bee new forecasted Statement of financial performance after the changes that will be discussed at the board meeting on the 5 August 2022. (4 marks)
ii) Calculate the operating gearing, measured as the ratio of the percentage increase in profit before interest and tax divided by the percentage increase in sales. (2 marks)
iii) Calculate the financial gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in profit before interest and tax. (2 marks)
iv) Calculate the Combined gearing, measured as the ratio of the percentage change in total earnings (or EPS) to the percentage increase in sales. (2 marks)
v) Explain the significance of operating gearing and financial gearing to the management of Bazar. (10 marks)

Answer

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Tags: Business Valuation, Combined Gearing, Financial Forecast, Financial Gearing, Operating Gearing
Level: Level 3

Topic: Financial management
Series: AUG 2022

SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

Question

Within an entity, there is a primary value chain and there are support activities (also called secondary value chain). Porter identified five primary value chain activities which can be applied to a retailing company such as Bazar.

Required:
Using the concept of the value chain, explain using a diagram the FIVE (5) primary value chain as explained by Porter to the management of Bazar highlighting their relevance. (10 marks)

Answer

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Tags: Business operations, Porter, Retail Industry, Strategic Success, Value Chain
Level: Level 3

Topic: Competitive Advantage
Series: AUG 2022

SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

Question

“Whistleblowing” means reporting suspicions of illegal or improper behaviour to a person in authority.

Required:
In relation to the comments above, explain to the Director of Human Resources and Organisational Culture, Mrs. Raju Asha, the consequences of comments recorded by an employee. Additionally, advise the employee on what he/she should consider before deciding on “blowing the whistle” and the potential difficulties that the staff might encounter.

Answer

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Tags: Corporate Governance, Ethics, Reporting, Unethical Behavior, Whistleblowing
Level: Level 3

Topic: Conflicts of Interest and Ethical Conflict Resolution
Series: AUG 2022

SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

Question

In discussing the report presented by AB Consult & Associate, the Director of Finance and Operations made a strong point for acquisition and mergers as a growth strategy instead of internal development. She gave her full support to the decision to acquire the 20 stores.

Required:
Write a report detailing the advantages of an acquisition and mergers method of growth instead of an internal development. Conclude your report by explaining why the financial position and financial performance of Bazar will support or not support the decision to acquire the 20 stores.

Answer

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Tags: Acquisitions, Financial strategy, Growth Strategy, Internal Development, Mergers
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

Question

Mintzberg identified six different organizational configurations. Explain to Bazar management FOUR (4) of these organizational configurations suitable to support the change management process highlighting the differences.

Answer

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Tags: Change Management, Mintzberg, Organizational Configurations
Level: Level 3

Topic: Strategy implementation
Series: AUG 2022

SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

Question

The organisational structure of Bazar is ‘family centric management’ while not interested
in changing the structure any time soon. It is important to recognise that the most suitable
organisation structure depends partly on circumstances and partly on management
preference. An organisation structure can therefore be changed.
Required:
Using the Mintzberg’s five building blocks for organizational configurations, explain and illustrate with a diagram to the management of Bazar, why management needs to review its current organization structure in order to coordinate its business activities and work processes effectively.

Answer

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Tags: Business Processes, Mintzberg, Organizational Coordination, Organizational Structure, Strategic Apex
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: AUG 2022

AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

Question

ISA 706 (Revised): Emphasis of Matter Paragraphs and Other Matter(s) paragraphs in the Independent Auditor’s Report requires that an auditor’s report may include an “emphasis of matter” paragraph and/or an “other matter” paragraph.

Required:
Distinguish between Emphasis of Matter and Other Matter paragraphs, showing clearly requirements of Audit Report and communication with those charged with governance.

Answer

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Tags: Audit report, Communication with Governance, Emphasis of Matter, ISA 706, Other Matter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

AA – Aug 2022 – L2 – Q5b – Audit and Assurance Evidence

States factors that influence the reliability of audit evidence.

Question

ISA 500: Audit Evidence requires among other things that audit evidence must be reliable.
Required:
State FOUR (4) factors that influence the reliability of audit evidence.

Answer

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Tags: Audit evidence, ISA 500, Reliability
Level: Level 2

Series: AUG 2022

AA – Aug 2022 – L2 – Q5a – Completion Procedures and Reporting

Identifies the responsibilities of those charged with governance and matters communicated by auditors.

Question

ISA 260 (Revised and Redrafted): Communication with Those Charged with Governance deals with the auditor’s responsibility to communicate with those charged with governance in relation to an audit of financial statements.

Required:
i) Identify TWO (2) specific responsibilities of those charged with governance.
(2 marks)

ii) Explain FOUR (4) examples of matters that might be communicated to them by the auditor.
(4 marks)

Answer

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Tags: Communication with auditors, Governance responsibilities, ISA 260
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

AA – Aug 2022 – L2 – Q4b – Internal Audit and Its Relationship with External Audit

Identifies measures that can be implemented to ensure the independence of the internal audit function.

Question

A major criticism of Internal Audit is that it lacks independence. Many factors may contribute to this perceived lack of independence.

Required:
Identify FIVE (5) measures that can be put in place to ensure the independence of the Internal Audit function.

Answer

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Level: Level 2

Topic: Internal Audit and Its Relationship with External Audit
Series: AUG 2022

AA – Aug 2022 – L2 – Q4a – Completion Procedures and Reporting

Defines going concern and discusses the auditor's responsibilities and procedures in relation to going concern.

Question

Pinto Ltd (Pinto) provides analytical services to a wide range of clients. Typical assignments range from testing food for illegal additives to providing forensic analysis on items used to commit crimes to assist law enforcement officers.

The annual audit is nearly complete. As Audit Senior, you have reported to the Engagement Partner that Pinto is having some financial difficulties. Income has fallen due to the adverse effect of two high-profile court cases, where Pinto’s services to assist the prosecution were found to be in error. Not only did this provide adverse publicity for Pinto, but a number of clients did not renew their contracts. A senior employee then left Pinto, stating lack of investment in new analysis machines thus increasing the risk of incorrect information being provided by the company.

A cash flow forecast prepared internally showed Pinto requiring significant additional cash within the next 12 months to maintain even the current level of services and operations. Pinto’s auditors have been asked to provide a negative assurance report on this forecast.

Required:
i) Define going concern and discuss the auditor’s responsibilities in respect of going concern.
(4 marks)

ii) State FIVE (5) audit procedures that may be carried out to determine whether or not Pinto is a going concern.
(6 marks)

Answer

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Tags: Audit Procedures, Financial difficulties, Going Concern, ISA 570
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

AA – Aug 2022 – L2 – Q3c – Audit and Assurance Evidence

Recommends actions the auditor can take when audit evidence is insufficient due to control weaknesses.

Question

After performing tests of controls, the auditor is of the opinion that the audit evidence is not sufficient to support the audit opinion; in other words, many control errors were found.

Required:
Recommend FIVE (5) actions that the auditor may take in response to this problem

Answer

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Tags: Audit response, Control weaknesses, Insufficient audit evidence, Substantive Testing
Level: Level 2

Topic: Audit and Assurance Evidence
Series: AUG 2022

AA – Aug 2022 – L2 – Q3b – Completion Procedures and Reporting

Lists items that could be included in a management representation letter as part of audit evidence.

Question

ISA 580: Management Representations provides guidance on the use of management representations as audit evidence.

Required:
List FIVE (5) items that could be included in a management representation letter.

Answer

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Tags: Audit evidence, ISA 580, Management representation letter
Level: Level 2

Topic: Completion Procedures and Reporting
Series: AUG 2022

AA – Aug 2022 – L2 – Q3a – Audit and Assurance Evidence

Explains factors that influence the sufficiency of audit evidence obtained during an audit.

Question

Sophie & Co., a firm of Chartered Accountants, is preparing the end-of-year audit for GH Mobile, a client that is listed on the Ghana Stock Exchange. You have been selected to be part of the team to audit the non-current assets of GH Mobile. As an audit associate, you were provided with evidence that you have assessed as not sufficient. Also, you have raised issues regarding the omission of important items in the management representation letter of the client.

Required:
Explain FIVE (5) factors that will influence the auditor’s judgement regarding the sufficiency of the evidence obtained.

Answer

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Tags: Audit evidence, Audit Judgment, Risk Assessment, Sufficiency of audit evidence
Level: Level 2

Topic: Audit and Assurance Evidence
Series: AUG 2022

AA – Aug 2022 – L2 – Q2c – Professional and Ethical Considerations

Explains factors to consider before accepting a new audit client and preconditions for agreeing to an audit engagement.

Question

There are factors to consider and procedures to follow before accepting a new client, a new engagement for an existing client, or agreeing to the terms of any new engagement. It could be an audit, a non-audit engagement, or an assurance engagement. Acceptance decisions are critical since new clients and/or engagements can impair the objectivity or expose the firm to an audit risk, both of which must be carefully considered.

Required:
i) Explain TWO (2) factors a professional accountant in public practice should consider before accepting a new audit client.
(5 marks)

ii) Explain TWO (2) preconditions that should exist when agreeing to the Terms of Audit Engagement.
(5 marks)

Answer

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Tags: Audit Engagement, Client Acceptance, Preconditions for audit, Professional Ethics
Level: Level 2

Topic: Professional and Ethical Considerations
Series: AUG 2022

AA – Aug 2022 – L2 – Q2b – Institutional Regulation and Standard-Setting

Identifies and explains the roles of the main committees established under the ICAG Act, 2020 (Act 1058).

Question

The Institute of Chartered Accountants, Ghana Act, 2020 (Act 1058) gives power to the council to establish committees to regulate the Accountancy Profession and Practice.

Required:
Identify THREE (3) main committees and their role as stated under the new Act.

Answer

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Tags: Accountancy profession, Committees, ICAG Act, Regulatory committees
Level: Level 2

Topic: Institutional Regulation and Standard-Setting
Series: AUG 2022

AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

Question

The Managing Partner of A & B Partners, Mr. Pumpa, has decided to put measures in place for the survival of the firm immediately after the enactment of the Company Act, 2019 (Act 992), which requires that “An Auditor shall hold office for a term of not more than six years and is eligible for re-appointment after a cooling-off period of not less than six years.”

Mr. Pumpa then had a gentle arrangement with his colleague, also a Managing Partner in C & D Associates, to transfer all clients who have exceeded their mandatory six years with A & B Partners and vice versa.

Required:
Discuss FIVE (5) major threats to the auditor’s independence and objectivity and how these inherent threats could be mitigated in the decision to transfer client C & D Associates.
(5 marks)

Answer

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Tags: Auditor Independence, Client transfer, Safeguards, Threats to objectivity
Level: Level 2

Topic: Professional and Ethical Considerations
Series: AUG 2022

Series: AUG 2022

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SCS – Aug 2022 – L3 – Q8 – Controlling Risk

Explain the ISO 31000 risk management framework and the OECD principles relevant to Bazar's governance concerns.

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SCS – Aug 2022 – L3 – Q7 – Ethics and Social Responsibility

Explanation of remuneration policies in Ghana’s Code of Best Practices and their implications for corporate governance at Bazar.

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SCS – Aug 2022 – L3 – Q6 – Strategy Implementation

Application of Lewin's change model to propose a transformation plan for Bazar's management style from authoritarian to a more open style.

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SCS – Aug 2022 – L3 – Q5 – Financial Management

Prepare Little Bee’s financial forecast and calculate its gearing ratios, explaining their significance to Bazar.

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SCS – Aug 2022 – L3 – Q4 – Competitive Advantage

Explains the five primary activities of Porter's value chain and their relevance to Bazar's business processes.

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SCS – Aug 2022 – L3 – Q3 – Conflicts of interest and ethical conflict resolution

Explains whistleblowing and what an employee should consider before whistleblowing in Bazar.

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SCS – Aug 2022 – L3 – Q2 – Strategy Implementation

A report detailing the advantages of acquisition and mergers as a growth strategy versus internal development for Bazar.

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SCS – Aug 2022 – L3 – Q1b – Strategy implementation

Explanation of four organizational configurations identified by Mintzberg and their relevance in supporting change management at Bazar.

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SCS – Aug 2022 – L3 – Q1a – Strategy, stakeholders, and mission

Explanation and illustration of Mintzberg’s five organizational building blocks and their relevance to Bazar's organizational structure.

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AA – Aug 2022 – L2 – Q5c – Completion Procedures and Reporting

Distinguishes between Emphasis of Matter and Other Matter paragraphs in the audit report and explains communication requirements.

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AA – Aug 2022 – L2 – Q5b – Audit and Assurance Evidence

States factors that influence the reliability of audit evidence.

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AA – Aug 2022 – L2 – Q5a – Completion Procedures and Reporting

Identifies the responsibilities of those charged with governance and matters communicated by auditors.

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AA – Aug 2022 – L2 – Q4b – Internal Audit and Its Relationship with External Audit

Identifies measures that can be implemented to ensure the independence of the internal audit function.

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AA – Aug 2022 – L2 – Q4a – Completion Procedures and Reporting

Defines going concern and discusses the auditor's responsibilities and procedures in relation to going concern.

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AA – Aug 2022 – L2 – Q3c – Audit and Assurance Evidence

Recommends actions the auditor can take when audit evidence is insufficient due to control weaknesses.

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AA – Aug 2022 – L2 – Q3b – Completion Procedures and Reporting

Lists items that could be included in a management representation letter as part of audit evidence.

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AA – Aug 2022 – L2 – Q3a – Audit and Assurance Evidence

Explains factors that influence the sufficiency of audit evidence obtained during an audit.

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AA – Aug 2022 – L2 – Q2c – Professional and Ethical Considerations

Explains factors to consider before accepting a new audit client and preconditions for agreeing to an audit engagement.

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AA – Aug 2022 – L2 – Q2b – Institutional Regulation and Standard-Setting

Identifies and explains the roles of the main committees established under the ICAG Act, 2020 (Act 1058).

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AA – Aug 2022 – L2 – Q2a – Professional and Ethical Considerations

Discusses the threats to auditor independence and objectivity when transferring clients and possible safeguards.

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