Series: MAR 2023

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SCS – March 2023 – L3 – Q8 – International financial management

Discusses governance structure in terms of the separation of roles between the chairman and the CEO in line with the UK and Ghana Codes of Best Practices.

Question

Dr. Kingsley Tettey is the Chairman of the 4-member board of directors, and Dr. Joy Tettey is the Medical Director. Clearly, the Chairman is not the Chief Executive Officer (CEO) or Medical Director of LCH.

Required:
Discuss what the Ghana Code of Best Practices and the UK Corporate Governance Code state about this governance structure.
(8 marks)

Answer

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Tags: Best Practices, Board Governance, Ghana Code of Best Practices, UK Corporate Governance Code
Level: Level 3

Topic: International financial management
Series: MAR 2023

SCS – March 2023 – L3 – Q7 – Professional practice and codes of ethics

Analyzes LCH board composition using governance codes and discusses OECD principles of disclosure and board responsibilities.

Question

a) LCH’s Board of Directors is composed of four experienced professionals.

Required:
In reference to codes of corporate governance and the composition of LCH’s Board, analyze the view that the board has a suitable balance.
(5 marks)

b) The OECD Principles (2015) provide guidance through recommendations and annotations across six chapters. Principle 5 and 6 deal with disclosure and transparency and the responsibilities of the board respectively.

Required:
Provide the guidance and recommendations given on these principles and how relevant it is to LCH.
(7 marks)

Answer

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Tags: Board Composition, Corporate Governance, Disclosure, OECD principles, Transparency
Level: Level 3

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

SCS – March 2023 – L3 – Q6 – International financial management

Explains the financial reporting implications of debt exchange and compares investing in bonds versus shares

Question

LCH has invested GH¢1,000,000 in a 5-year Government of Ghana Bond with a coupon rate of 20%. As a result of the Government of Ghana DDE programme, LCH has no option but to exchange the old bond with the new bond.

Required:
a) Explain FIVE (5) financial reporting implications of the debt exchange on the financial statements of LCH as at 31 December 2022.
(10 marks)

b) Discuss FOUR (4) advantages and TWO (2) main disadvantages of investing in bonds rather than shares.
(10 marks)

Answer

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Tags: Bonds, Debt Exchange, Financial Reporting, Investment, Shares
Level: Level 3

Topic: International financial management
Series: MAR 2023

SCS – March 2023 – L3 – Q5 – Strategy implementation

Uses Fitzgerald and Moon’s performance measurement dimensions to link LCH’s performance assessment to corporate strategy.

Question

Fitzgerald and Moon (1996) provided a framework for analysing performance management systems in service industries like a hospital. They suggested that a performance management system in a service organisation can be analysed as a combination of three building blocks, namely:
i) Dimensions
ii) Standards
iii) Rewards.

Required:
Using Dimensions as a tool for performance measurement, discuss how LCH could link performance assessment to corporate strategy.
(10 marks)

Answer

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Tags: Corporate Strategy, Healthcare, Performance Dimensions, Performance Management, Service Industries
Level: Level 3

Topic: Strategy implementation
Series: MAR 2023

SCS – March 2023 – L3 – Q4 – Strategy, stakeholders, and mission

Compares mechanistic and organic structures and recommends which is more suitable for LCH.

Question

An appropriate organizational structure should reflect the size and complexity of an entity.

Required:
Using the management study of Burns and Stalker that identified two categories of organization structure—a mechanistic structure and an organic structure—explain the differences between the two types of structures and determine which of the two is suitable for LCH.
(10 marks)

Answer

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Tags: Burns and Stalker, LCH, Mechanistic Structure, Organic Structure, Organizational Structure
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: MAR 2023

SCS – March 2023 – L3 – Q3 – Competitive advantage

Discusses the pros and cons of mergers and acquisitions and uses SWOT analysis to evaluate the business strategy

Question

LCH is facing very stiff competition from both public and private health facilities. You have suggested that LCH consider either acquisition or mergers or both as a strategic move to survive in the industry.

a) Discuss FIVE (5) advantages and FIVE (5) disadvantages of a decision to consider acquisition and merger as a survival strategy.
(10 marks)

b) Using SWOT analysis, identify and discuss key factors that might affect LCH’s business strategy.
(10 marks)

Answer

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Tags: Acquisitions, Business Strategy, Healthcare, Mergers, SWOT Analysis
Level: Level 3

Topic: Competitive Advantage
Series: MAR 2023

SCS – March 2023 – L3 – Q2 – Strategy, stakeholders, and mission

Uses the 4Ps of marketing mix and competitive environment to evaluate the feasibility of adopting telemedicine.

Question

According to the Technical Advisor of the Board of Directors, Telemedicine, the remote diagnosis and treatment of patients by means of telecommunications technology is the way to go. This proposal has been subjected to a basic marketing feasibility analysis.

Required:
Using 4Ps of the marketing mix and the competitive environment that LCH operates, explain the factors to be taken into consideration when deciding on whether to adopt the proposal to move into Telemedicine.
(10 marks)

Answer

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Tags: 4Ps, Competitive Environment, Feasibility Study, Marketing Mix, Telemedicine
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: MAR 2023

SCS – March 2023 – L3 – Q1 – Ethics and social responsibility

Explains the importance of good ethical behavior for accountants and reasons for the public’s high expectations from the accountancy profession.

Question

a) At LCH, the Financial Accountant and the Internal Auditor have been designated as Ethics Focal Persons (EFP) to raise awareness of good ethical behavior among the staff.
As a student of ethics, explain FIVE (5) reasons why good ethical behavior (study and application of ethics) is important to today’s Accountant.
(5 marks)

b) The general public has high expectations of the accountancy profession and the idea of an ethical profession should be reinforced in their minds.
State THREE (3) reasons why the general public has high expectations of the accountancy profession to ensure good corporate governance practices.
(5 marks)

Answer

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Tags: Corporate Governance, Ethics, Professional Conduct, Public Expectations
Level: Level 3

Topic: Ethics and social responsibility
Series: MAR 2023

FR – Mar 2023 – L2 – Q5d – Business combinations and consolidation

Explains fair value in IFRS 13 and its application to assets and liabilities in business combinations.

Question

d) IFRS 3: Business Combinations defines fair value consistently with IFRS 13: Fair Value Measurement. IFRS 3 requires the acquiree’s assets and liabilities to be incorporated into the consolidated financial statements at their fair values rather than at their carrying amounts.

Required:
i) Explain the meaning of fair value in accordance with IFRS 13. (2 marks)
ii) Explain the reasons why the acquiree’s assets and liabilities are measured and recognised at their fair value within the consolidated financial statements. (3 marks)

Answer

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Tags: Assets and liabilities, Business Combinations, Consolidation, Fair Value, Goodwill, IFRS 13, IFRS 3
Level: Level 2

Topic: Business combinations and consolidation
Series: MAR 2023

FR – March 2023 – L2 – Q5c – Preparation of Financial Statements

Determining the initial cost, depreciation charge, and carrying amount of the head office construction under IFRSs.

Question

Lana Ltd is a public listed company in Ghana, located in the Northern Region. The company operates in the manufacturing sector and prepares its accounts to 31 December each year. During the year ended 31 December 2021, Lana Ltd built a head office. The costs associated with the construction of the head office are as follows:

GH¢ million
Fees for environmental certifications and building permits	0.5
Leasehold Land acquisition	10.0
Architect and engineer fees	1.0
Construction material and labor costs (including unused materials)	6.5

At 31 October 2021, when the head office extension became available for use, the cost of unused materials on site amounted to GH¢0.5 million. The total borrowing costs incurred on a loan specifically used to finance the head office extension amounted to GH¢0.8 million. The estimated useful life of the building was 40 years.

Required:
With reference to IFRSs, determine:
i) The initial cost to be capitalized.
ii) The depreciation charge for the year ended 31 December 2021.
iii) The carrying amount as of 31 December 2021.

Answer

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Tags: Borrowing Costs, Capitalization, Construction, Depreciation, IFRS
Level: Level 2

Topic: Preparation of Financial Statements
Series: MAR 2023

AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting

Explain the auditor's responsibilities regarding subsequent events and how a legal claim should be reported in financial statements.

Question

You are an audit assistant for an audit client with a year-end of 31 December 2021. A major customer has instituted a legal action against the company for faulty goods supplied after the year-end. A recently recruited intern who was part of your team was of the opinion that because of the cut-off assertion, any event after 31 December 2021 should not affect the financial statements and therefore the auditor should have no responsibility for issues occurring after the reporting year.

Following your audit of the client, you have concluded that there is a possibility, but not a probability, that the claim will be successful. However, management has decided not to make a provision or disclosure in the financial statements for this matter.

Required:
In reference to the preamble:
i) Describe the auditor’s responsibility for subsequent events occurring between:

The year-end date and the date the auditor’s report is signed; and
The date the auditor’s report is signed and the date the financial statements are issued. (6 marks)

ii) Explain how the matter should be reported in the financial statements. (4 marks)

Answer

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Tags: Auditors' responsibilities, Financial Statements, IAS 37, Legal claims, Subsequent Events
Level: Level 2

Topic: Completion Procedures and Reporting
Series: MAR 2023

AA – Mar 2023 – L2 – Q3 – Audit and Assurance Evidence

Explain why property, plant and equipment, trade receivables, and inventory were selected for further investigation.

Question

Maggie Manufacturing is a long-established manufacturing company. The audit manager has been provided with the following extracts from the draft financial statements for 2021, prior to the final audit planning meeting with the financial controller.

Draft Statement of Financial Position (Extracts):

The manager has reviewed these extracts and has identified three financial statement headings that require further investigation: property, plant, and equipment, trade receivables, and inventory. He has also calculated certain accounting ratios.

Required:
a) Explain why the manager has selected these three headings for further investigation.

b) Detail and explain the further information that the manager should request from the financial controller at the final audit planning meeting to clarify the situation with regards to the three financial statement headings.

Answer

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Tags: Audit Procedures, Financial Information, Financial Statement Headings, Inventory, Property Plant and Equipment, Trade receivables
Level: Level 2

Topic: Audit and Assurance Evidence
Series: MAR 2023

AA – Mar 2023 – L2 – Q2c – Audit and Assurance Risk Environment

Discuss the auditor’s responsibilities concerning fraud and the procedures to follow when fraud risks are identified.

Question

ISA 240: The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements recognizes that financial statements’ misrepresentation can occur as a result of either fraud or error. The distinction is whether the underlying activity that caused the misrepresentation was deliberate or unintentional. An auditor’s job is not to determine whether or not fraud has happened. The external auditor is concerned with getting reasonable assurance that the financial statements as a whole are free of material misstatement, whether due to fraud or error.

Required:
i) Describe TWO (2) ways by which the external auditor may report fraud in an engagement. (2 marks)
ii) Discuss TWO (2) types of fraud in relation to the financial statements. (2 marks)
iii) State SIX (6) audit procedures that the auditor is required to perform in light of the risk of fraud. (6 marks)

Answer

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Tags: Audit Procedures, Auditors' responsibilities, Financial Statements, Fraud, ISA 240
Level: Level 2

Topic: Audit and Assurance Risk Environment
Series: MAR 2023

AA – Mar 2023 – L2 – Q2b – Professional and Ethical Considerations

Discuss the conceptual framework for maintaining independence in audit and assurance engagements.

Question

The independence of a practicing accounting firm needs to be critically assessed, whether performing an audit or other assurance engagements. The independence requirements for audit and review engagements apply to the firm, network firms, and members of the audit review team. The IESBA Code for Professional Accountants outlines a key conceptual framework approach to be applied by accountants in practice.

Required:
Discuss this key conceptual framework approach.

Answer

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Tags: Audit Engagement, Conceptual Framework, IESBA Code, Independence
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

AA – Mar 2023 – L2 – Q2a – Professional and Ethical Considerations

Identify factors to consider before accepting a client for an audit engagement.

Question

M&G Chartered Accountants has been presented with two potential clients. They have written to the firm to appoint them as their external auditors.

Required:
State FIVE (5) factors you will take into consideration before making this client acceptance decision.

Answer

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Tags: Audit Engagement, Client Acceptance, Ethical considerations, ICAG Act
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

AA – Mar 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain the concept of audit planning and enumerate its benefits in conducting audit engagements.

Question

Preparing an audit plan is the first stage in conducting an audit engagement. It has become necessary for audit firms to plan their audit engagements to avoid risks and other litigation issues. ISA 300: Planning an Audit of Financial Statements emphasizes the importance of audit planning in ensuring an effective audit.

Required:
i) Explain audit planning. (3 marks)
ii) Enumerate FOUR (4) benefits or importance of audit planning. (6 marks)

Answer

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Tags: Audit Planning, Benefits of Planning, ISA 300
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

AA – Mar 2023 – L2 – Q1b – Professional and Ethical Considerations

Explain the concept of professional skepticism and its importance in auditing a loss-making entity.

Question

You are the Audit Manager of Golden Beach Hotels Ltd (GBHL), which has been making losses in its operations due to various factors such as competition, renovation of non-current assets, and non-compliance with laws and regulations in the hospitality industry. These factors are not obvious in the draft financial statements submitted for auditing.

Required:
Explain what is meant by professional skepticism, and why this is necessary to understand the financial performance and position of GBHL.

Answer

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Tags: Audit Procedures, Financial Performance, Professional Skepticism
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAR 2023

AA – Mar 2023 – L2 – Q1a – Planning and Approach for Audit and Assurance Engagements

Explain the advantages and audit procedures of conducting an interim audit.

Question

Kosobi Insurance Company Ltd (KICL) prepares its annual financial statements to 31 December each year. Due to the magnitude of transactions, interim financial statements are prepared each year and subjected to an interim audit. This is done to facilitate early completion of the final audit of the annual financial statements. The finance and accounts team of KICL consider this to be more work and unwarranted.

You are the Audit Senior and head of the audit team carrying out the audit field work on KICL. As part of your exit meeting with management of KICL, you intend to justify the need for an interim audit.

i) State THREE (3) advantages in conducting Interim Audit.
ii) Identify TWO (2) audit procedures in conducting Interim Audit.

Answer

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Tags: Audit Advantages, Audit Procedures, Early Completion of Audit, Interim Audit
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: MAR 2023

PT – March 2023 – L2 – Q5d – Taxation of Capital Gains

Explain the transfer of an asset for no consideration under Section 45 of the Income Tax Act, 2015 (Act 896).

Question

Explain the transfer of asset for no consideration under section 45 of the Income Tax Act, 2015 (Act 896).

Answer

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Tags: Capital Gains, Income Tax Act, No Consideration, Taxation, Transfer of Assets
Level: Level 2

Topic: Taxation of Capital Gains
Series: MAR 2023

PT – March 2023 – L2 – Q5c – Taxation of Capital Gains

Explain what constitutes the realization of capital assets.

Question

What constitutes the realization of capital assets?

Answer

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Tags: Capital Assets, Capital Gains, Realization, Taxation
Level: Level 2

Topic: Taxation of Capital Gains
Series: MAR 2023

Series: MAR 2023

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SCS – March 2023 – L3 – Q8 – International financial management

Discusses governance structure in terms of the separation of roles between the chairman and the CEO in line with the UK and Ghana Codes of Best Practices.

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SCS – March 2023 – L3 – Q7 – Professional practice and codes of ethics

Analyzes LCH board composition using governance codes and discusses OECD principles of disclosure and board responsibilities.

You're reporting an error for "SCS – March 2023 – L3 – Q7 – Professional practice and codes of ethics"

SCS – March 2023 – L3 – Q6 – International financial management

Explains the financial reporting implications of debt exchange and compares investing in bonds versus shares

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SCS – March 2023 – L3 – Q5 – Strategy implementation

Uses Fitzgerald and Moon’s performance measurement dimensions to link LCH’s performance assessment to corporate strategy.

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SCS – March 2023 – L3 – Q4 – Strategy, stakeholders, and mission

Compares mechanistic and organic structures and recommends which is more suitable for LCH.

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SCS – March 2023 – L3 – Q3 – Competitive advantage

Discusses the pros and cons of mergers and acquisitions and uses SWOT analysis to evaluate the business strategy

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SCS – March 2023 – L3 – Q2 – Strategy, stakeholders, and mission

Uses the 4Ps of marketing mix and competitive environment to evaluate the feasibility of adopting telemedicine.

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SCS – March 2023 – L3 – Q1 – Ethics and social responsibility

Explains the importance of good ethical behavior for accountants and reasons for the public’s high expectations from the accountancy profession.

You're reporting an error for "SCS – March 2023 – L3 – Q1 – Ethics and social responsibility"

FR – Mar 2023 – L2 – Q5d – Business combinations and consolidation

Explains fair value in IFRS 13 and its application to assets and liabilities in business combinations.

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FR – March 2023 – L2 – Q5c – Preparation of Financial Statements

Determining the initial cost, depreciation charge, and carrying amount of the head office construction under IFRSs.

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AA – Mar 2023 – L2 – Q4a – Completion Procedures and Reporting

Explain the auditor's responsibilities regarding subsequent events and how a legal claim should be reported in financial statements.

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AA – Mar 2023 – L2 – Q3 – Audit and Assurance Evidence

Explain why property, plant and equipment, trade receivables, and inventory were selected for further investigation.

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AA – Mar 2023 – L2 – Q2c – Audit and Assurance Risk Environment

Discuss the auditor’s responsibilities concerning fraud and the procedures to follow when fraud risks are identified.

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AA – Mar 2023 – L2 – Q2b – Professional and Ethical Considerations

Discuss the conceptual framework for maintaining independence in audit and assurance engagements.

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AA – Mar 2023 – L2 – Q2a – Professional and Ethical Considerations

Identify factors to consider before accepting a client for an audit engagement.

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AA – Mar 2023 – L2 – Q1c – Planning and Approach for Audit and Assurance Engagements

Explain the concept of audit planning and enumerate its benefits in conducting audit engagements.

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AA – Mar 2023 – L2 – Q1b – Professional and Ethical Considerations

Explain the concept of professional skepticism and its importance in auditing a loss-making entity.

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AA – Mar 2023 – L2 – Q1a – Planning and Approach for Audit and Assurance Engagements

Explain the advantages and audit procedures of conducting an interim audit.

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PT – March 2023 – L2 – Q5d – Taxation of Capital Gains

Explain the transfer of an asset for no consideration under Section 45 of the Income Tax Act, 2015 (Act 896).

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PT – March 2023 – L2 – Q5c – Taxation of Capital Gains

Explain what constitutes the realization of capital assets.

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