Series: MAY 2022

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  • 15 Marks

TAX – May 2022 – L2 – SA – Q7 – The Nigerian Tax System

Discuss the aspects of the tax system in Nigeria, focusing on tax policy, key tax laws, and administrative bodies.

The tax system in Nigeria has been reviewed in recent times with a view to ensuring ease of doing business in Nigeria, among other things. With the enactments of Finance Acts 2019 and 2020, many enabling Acts were amended.

The tax system usually involves a tripartite aspect, namely, the tax policy, tax law, and tax administration.

Required:
a. Explain tax policy. (5 Marks)
b. State notable tax legislations. (5 Marks)
c. State the bodies charged with the administration of taxes in Nigeria. (5 Marks)

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  • 15 Marks

TAX – May 2022 – L2 – SA – Q6 – Tax Administration and Enforcement

Identify the badges of trade and compute the minimum tax payable for a given year of assessment.

a. The difficulty in determining what constitutes a trade has led to many litigations and the huge number of tax cases that exist on the issue. The problem from the decided cases is that of finding an absolute test for identifying a trade.

The conclusion had always been that there are no fixed rules but that each case could be examined on its own facts.
Required:
State FOUR considerations that influence the identification of badges of trade. (8 Marks)

b. Ndakogi Nigeria Limited commenced business in 2007. The extract of the statement of profit or loss of the company for the year ended December 31, 2021, has revealed the following:

Required:
Compute the minimum tax payable

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  • 15 Marks

TAX – May 2022 – L2 – SA – Q5 – Withholding Tax (WHT)

Discuss the contents of withholding tax returns, the time frame for compliance, and the merits and demerits of the withholding tax scheme.

Withholding tax is a tax deducted at source from proceeds made to a taxable person for the supply of goods and services. It is not another form of tax, but simply an advance payment of tax, as the withholding tax deducted at source is off-set against any subsequent tax liability that may be due in respect of the income.

Required:
a. State the contents of withholding tax returns/payment schedule. (5 Marks)
b. State the time frame for compliance with withholding tax returns. (5 Marks)
c. Explain the merits and demerits of the withholding tax scheme. (5 Marks)

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  • 20 Marks

TAX – May 2022 – L2 – SA – Q4 – Companies Income Tax (CIT)

Explain the recent changes in taxation introduced by the Finance Acts of 2019 and 2020, specifically related to insurance companies.

Bakosa Insurance Co. Plc. is a company engaged in both life and other insurance businesses. You were appointed as the tax consultant of the company on June 30, 2021. The Managing Director of the company invited you to a meeting of the directors with a view to intimating them of the recent changes introduced by the Finance Acts 2019 and 2020, relating to insurance business.

Required:
Explain the following to the management of the company:
a. Recent changes introduced by Finance Acts 2019 and 2020, that relate to the computation of tax liabilities of insurance companies. (16 Marks)
b. Additional documents/information to be filed by insurance companies. (4 Marks

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  • 20 Marks

TAX – May 2022 – L2 – SA – Q3 – Tax Administration and Enforcement

Identify the taxes and levies collectible by the Federal, State, and Local Governments in Nigeria, in light of a recent court ruling.

The Federal Government of Nigeria expanded the taxes and levies which the tiers of government can impose through the Schedule to the Taxes and Levies (Approved List for Collection) Act (Amendment) Order, 2015. In this Order made by the Minister of Finance, several new tax/levy heads, such as infrastructure maintenance/development levy, wharf landing charge/fee, consumption tax, the National Information Technology Development levy, etc., were introduced.

However, on May 8, 2020, the Federal High Court sitting in Lagos, delivered judgment in suit number FHC/L/CS/1082/2019, between The Registered Trustees of Hotel Owners and Managers Association of Lagos (suing for itself and on behalf of all its members) vs The Attorney-General of the Federation and others. The court held that the Ministerial Order of 2015 is unconstitutional, null, and void.

The court submitted that the Constitution vests the legislature with the power to make laws. The court further stated that schedules to a law are part and parcel of the law and, as such, only the legislature can amend schedules to a law. The implication of this ruling is that all the taxes and levies that were added to those in the Taxes and Levies (Approved List for Collection) Act Cap. T2 LFN 2004, via the Ministerial Order 2015, are illegal and cannot be enforced.

Since the judgment, your firm has been faced with a series of inquiries from taxpayers on the taxes/levies they are now expected to pay.

Required:
a. State five (5) taxes collectible by the Federal Government.
b. State five (5) taxes/levies collectible by the State Governments.
c. State ten (10) taxes/levies collectible by the Local Governments.

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  • 20 Marks

TAX – May 2022 – L2 – SA – Q2 – Personal Income Tax (PIT)

Compute the personal income tax assessable for each partner in a partnership, considering legal fees, capital allowances, and profit-sharing.

You attended an interview for employment as Assistant Manager (Tax) in a professional firm. The following were presented to you to proffer solutions:

Mariam, Ola, Jude and Co., a firm of quantity surveyors, makes up its accounts to December 31 of each year. The following details were extracted from the firm’s accounting books in respect of the year ended December 31, 2019:

Item Amount (N)
Net profit for the year 1,540,000
Legal expenses for successfully defending one of the partners for alleged professional misconduct 100,000
Depreciation 360,000
Profit on sale of property, plant and equipment 4,220
Balancing charge 10,400
Balancing allowance 6,900
Capital allowances for the year 300,000

Additional information:

  1. Profit sharing ratio agreed by the partners: Mariam 2, Ola 3, Jude 5
  2. Mariam, Ola, and Jude received N7,400 each per annum as interest on loan to the firm
  3. Salaries paid to each of the partners are:
    • Mariam: N240,000
    • Ola: N200,000
    • Jude: N220,000

Required:
Compute the personal income tax assessable for each partner for the relevant year of assessment.

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  • 30 Marks

TAX – May 2022 – L2 – SA – Q1 – The Nigerian Tax System

Discuss the tax filing obligations and implications of non-compliance for a new company, covering both corporate tax and VAT.

Mr. Danko Chinyere, who has worked in a neighboring African country for many years, returned to Nigeria in August 2018. He incorporated a private limited liability company known as ChiDan Limited located in Lagos on October 30, 2018. The company deals in processing and packaging of plantain chips for local consumption.

The directors of the company opened a business bank account with one of the leading commercial banks in November 2018. The company commenced full operations on January 2, 2019.

Your firm, Adama & Co., was appointed as the tax consultant to ChiDan Limited in January 2021. At the first engagement meeting with the company, you discovered that the company was yet to register with the Federal Inland Revenue Service (FIRS). Relevant taxes, including value-added tax (VAT), were not remitted to FIRS.

An extract of the company’s first set of financial statements made up to December 31, 2020, is as follows:

Required:
Advise management of the company on the following:
a. Due date for submission of audited financial statements to the tax office. (2 Marks)
b. Requirements for filing of VAT returns and remittance of VAT liabilities – Section 16 of VAT Act (as amended). (4 Marks)
c. Basis of assessment on commencement of business – Section 29 (3) of CITA
(as amended) (6 Marks)
d. The income tax liabilities payable for the relevant year of assessment
(18 Marks)

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  • 15 Marks

CSME – May 2022 – L2 – SC – Q7 – Business Ethics and Corporate Governance

Explain personal, business, and professional ethics, and describe Kohlberg’s stages of moral development.

a. All accountants are expected to act ethically in the discharge of their respective duties. In light of this, evaluate the following concepts as they apply to professional accountancy practice:

  • i. Personal Ethics (1 Mark)
  • ii. Business Ethics (1 Mark)
  • iii. Professional Ethics (1 Mark)

b. With the aid of a clear example, explain the term “ethical/moral dilemma.” (2 Marks)

c. Explain Kohlberg’s stages of moral development. (10 Marks)

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  • 15 Marks

CSME – May 2022 – L2 – SC – Q6 – Corporate Governance

Discuss the purpose of board remuneration, the role of the remuneration committee, and the challenges of linking board pay to company performance.

At the Annual General Meeting of TAIMAKO Nigeria Limited, shareholders expressed displeasure about what they considered to be excessively high remuneration paid to members of the company’s board of directors. Some shareholders believed that board remuneration should be tied to the company’s financial performance. Consequently, a group of shareholders has asked you to advise them on the position of the Code of Corporate Governance on remuneration of directors.

Required:

a. The purpose and structure of the remuneration package for board members. (5 Marks)

b. The role of the remuneration committee. (5 Marks)

c. The problems of linking board members’ rewards with the company’s performance. (5 Marks)

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  • 15 Marks

CSME – May 2022 – L2 – SC – Q5 – Risk Management and Corporate Strategy

Advise on investment strategies to minimize risks and explain factors determining risk appetite.

a. A friend of yours who recently lost his job came to you for advice on how to invest his life savings in a way that will minimize the risk of loss of capital.

  • i. Advise him on how risk of losses could be minimized using the following:
    1. Risk Diversification (1 Mark)
    2. Risk Transfer (1 Mark)
    3. Risk Sharing (1 Mark)
    4. Risk Hedging (1 Mark)
    5. Risk Avoidance (1 Mark)
  • ii. Explain to your friend when risk diversification is the best option for him. (4 Marks)

b. What is risk appetite? Explain THREE factors that determine the risk appetite of a company. (6 Marks)

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  • 20 Marks

CSME – May 2022 – L2 – SB – Q4 – Corporate Governance

Analyze governance roles in public companies, focusing on the CEO, Chairman, and non-executive directors.

Chief Etido has recently increased his shareholdings in Food Plc, a leading manufacturer of some fast-moving consumer goods (FMCG) in the country, to over 51%. As his close friend, he recently approached you for advice on how to actualize his ambition of becoming both Chief Executive Officer and Chairman of Food Plc as he is in several other private limited liability companies.

Required:

a. Advise Chief Etido on the possibility of becoming both the CEO and Chairman of a public limited liability company like Food Plc, as provided for by the Code of Corporate Governance. (2 Marks)

b. The roles of the following in a public limited liability company:

  • i. The CEO (5 Marks)
  • ii. The Chairman (5 Marks)

c. His responsibilities on the board of directors, if he chooses to become a non-executive member instead. (8 Marks)

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  • 20 Marks

CSME – May 2022 – L2 – SB – Q3 – Environment analysis

Explain the nature, benefits, and key elements of environmental reporting, audits, and Environmental Management Accounting (EMA).

There is a growing concern that organizations should act in a responsible manner to ensure sustainability of their environment. To this end, environmental reporting has become an important part of the reporting obligation of firms. Hence, you have been approached for advice by a manufacturing company that seeks to incorporate environmental reporting into its annual reports. You are to present to the management a report detailing the following:

a. Nature and benefits of environmental reporting. (5 Marks)

b.

  • i. Key elements of the Sustainability Balanced Scorecard (SBSC) as a measure of a firm’s performance. (2 Marks)
  • ii. Elements of an environmental audit. (4 Marks)

c. Nature and use of Environmental Management Accounting (EMA). (9 Marks)

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  • 20 Marks

CSME – May 2022 – L2 – SB – Q2 – Risk Management and Corporate Strategy

Advise on risk management for a supermarket chain facing security challenges and new regulations.

A supermarket chain recently established more outlets in the city. Due to increased risk exposure occasioned by heightened insecurity in the country, the company saw the need to implement an effective management strategy aimed at minimizing attendant risks. The need is made even more apparent due to the introduction of more stringent regulatory requirements on handling perishable food items by the National Agency for Food and Drugs Administration and Control (NAFDAC). To this end, you have been engaged to provide advice to the company on risk management.

Required:

a.

  • i. Using the ALARP principle, advise the management on how to effectively manage the company’s risks. (2 Marks)
  • ii. Advise the company on the need to engage a risk manager. (2 Marks)
  • iii. Enumerate the roles of a risk manager. (5 Marks)

b.

  • i. What is a risk audit? Should the firm engage internal or external auditors (or consultants) to conduct a risk audit? Justify your position. (7 Marks)
  • ii. Illustrate to the management of the company the stages involved in conducting a risk audit. (4 Marks)

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  • 30 Marks

CSME – May 2022 – L2 – SA – Q1 – Corporate Strategy Formulation

Analyze Abiodun Farms' growth strategy using SOAR and PESTEL, and suggest strategic directions for growth.

Abiodun Farms Limited is a company established to engage in poultry farming. Currently, it owns and runs a poultry farm located at Ota, Ogun State. With five years of experience in egg production, the company produces 700 crates of eggs per day, all of which are sold in Ota. The current demand for eggs in Ota is estimated at 2,000 crates per day. The company’s vision is to become the country’s biggest egg producer within the next ten years.

As a growth strategy, Abiodun Farms Limited plans to expand production to 10,000 crates of eggs per day through the installation of more cages and pens on its premises at Ota, acquisition of more chickens, and other required inputs. The focus is to serve the market for eggs in selected towns in Southwestern Nigeria, all of which have an estimated daily demand of 50,000 crates of eggs. The production capacity of all competitors of Abiodun Farms Limited in the market for eggs in the Southwest was estimated at 32,000 crates per day. The company hopes to take advantage of this demand gap through the establishment of distribution outlets across major cities in the region for effective marketing. Aggressive advertisement campaigns to stimulate demand for its products will also be embarked upon.

The establishment of a new poultry or expansion of the production capacity of an existing one has no legal requirements except for making adequate arrangements for waste management. Capital requirements are high. However, the Central Bank of Nigeria (CBN) recently approved the release of soft loans to all interested poultry farmers as part of the government’s agri-loan scheme aimed at promoting farming. Abiodun Farms Limited intends to fund 60% of its growth plan through the agri-loans scheme which the CBN has approved and is currently awaiting disbursement.

For the success of the proposed growth strategy, it hopes to leverage the following:

  • Knowledge and experience of poultry business acquired in the company’s 5 years of operation
  • Size of land owned by the company, where current production takes place, is adequate for the proposed expansion
  • Strong business relationships with the biggest and most reliable suppliers of poultry inputs, such as point-of-lay chickens, cages, feeds, medicines, egg crates, etc.
  • Growth rate of demand for eggs is currently in line with that of the population of the country, which is estimated at 3%
  • The company has access to current technology in egg production, which has not changed in decades. It hopes to install automatic solid chicken waste flushers, egg pickers, and sorters. There are also plans to employ two in-house veterinarians
  • The problem of kidnapping has become worrisome in the area where the company operates. Recently, it had to pay a huge ransom to kidnappers for the release of one of its kidnapped marketers. To mitigate this risk, the company plans to engage five local hunters to provide security for its employees in addition to those securing the farm premises currently
  • There is currently no public water supply to the farm location. Hence, the company provides its own water, using a huge borehole it drilled three years ago, which has the capacity to generate adequate water to meet current and future needs. In the same vein, the company relies mostly on its generating sets for its electricity needs, due to the unreliable and epileptic public electricity supply
  • With the increase in egg production comes an increase in solid waste generation and air pollution. Therefore, it is envisaged that the increased air pollution could attract some negative reactions from people in the Ota community. However, the company has an existing waste disposal system which it hopes to expand to properly dispose of all poultry waste
  • Required human resources are available within the Ota community

Required:

a. Use the SOAR model to analyze the strategic position of Abiodun Farms Limited. (12 Marks)

b. Using the PESTEL analysis, assess the business environment of Abiodun Farms Limited, explaining how each component will impact the company’s growth strategy. (12 Marks)

c. Suggest strategies for Abiodun Farms Limited to achieve its goal of becoming the biggest poultry products producer and seller in Nigeria under the following strategic directions:

  • i. Market development (2 Marks)
  • ii. Market penetration (2 Marks)
  • iii. Diversification (2 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q7 – Public Sector Reforms,

Discuss reasons for divergence between private and public appraisal of projects and explain key differences in cost-benefit and cost-effectiveness analysis.

Investment appraisal is a process of finding out the least possible costs of an investment and the maximum economic benefits, which may accrue from the commitment of resources.

Required:
a. Highlight FOUR reasons for divergence between private and public appraisal of a project. (4 Marks)
b. How does cost-benefit analysis (CBA) differ from cost-effectiveness analysis (CEA)? (5 Marks)
c. Identify THREE procedures and THREE limitations of cost-effectiveness analysis. (6 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q6 – Public Sector Reforms

Discuss effects and principles of public expenditure on the economy.

Public expenditure is an important segment of the budgetary activities. It refers to the expenses incurred by the government in the course of its activities.

Required:
a. Discuss TWO effects of public expenditure on the economy. (5 Marks)
b. Identify and explain FIVE principles of public expenditure. (10 Marks)

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  • 15 Marks

PSAF – May 2022 – L2 – SA – Q5 – Public Sector Reforms

Discuss principles of debt rescheduling and forms of debt conversion.

Rescheduling is the rearrangement of payment terms of debt with respect to new maturities, grace period, and readjustment of the interest rate. The essence is to facilitate convenience in debt repayment.

Required:
a. Identify and explain TWO main principles of debt rescheduling. (5 Marks)
b. Discuss FIVE forms of debt conversion. (10 Marks)

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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q4 – Government Revenue

Compute financial ratios for Koki Event Center and highlight ways to conduct analytical reviews.

The following information relates to Koki Event Center which is owned and managed by Ogbonge Local Government.

Koki Event Centre
Statement of financial position as at September 30, 2021 (Extract)

Required:
a. Compute the following relevant ratios for the event centre and comment on your results:
i. Current ratio (3 Marks)
ii. Acid test ratio (3 Marks)
iii. Working capital/Total assets ratio (3 Marks)
iv. Total debts/Total assets ratio (3 Marks)
v. Long-term debts/Total assets ratio (3 Marks)

b. Highlight THREE ways by which analytical review can be conducted. (3 Marks)

c. Explain TWO ways the performance appraisal of a profit-oriented entity would differ from that of a public-oriented entity. (2 Marks)

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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q3 – Government Revenue

Identify the powers and functions of state boards of internal revenue and other agencies in revenue generation.

Revenue generation is an important role carried out by some agencies of government with a view to meeting the expenditure of government, required for taking care of the welfare of the citizens. Revenue Mobilisation, Allocation and Fiscal Commission Act 1989 specifically mentioned some powers and functions of the Commission.

Required:
a. Identify FOUR powers and responsibilities of State Board of Internal Revenue Service in Nigeria. (4 Marks)
b. Explain FOUR specific functions of the Department of Petroleum Resources (DPR). (4 Marks)
c. Highlight SIX powers entrusted to the Revenue Mobilisation, Allocation and Fiscal Commission. (6 Marks)
d. Explain THREE sources of revenue payable to the federation account in Nigeria. (6 Marks)

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  • 20 Marks

PSAF – May 2022 – L2 – SA – Q2 – Ethics and Integrity in Public Sector Financial Management

Discuss measures needed for anti-corruption enforcement and ways to detect bid rigging.

Transparency International is committed to advancing accountability, integrity, and transparency. The mission is to stop corruption and promote transparency, accountability, and integrity at all levels and across all sectors of society, while the vision is a world in which government, politics, business, civil society, and the daily lives of people are free of corruption.

Required:
a. Discuss FIVE measures that are needed to ensure transparent, effective, and consistent application and enforcement of laws and regulations on anti-corruption. (10 Marks)
b. Explain TWO ways by which procurement officers can detect bid rigging. (5 Marks)
c. Explain FIVE powers of the Code of Conduct Bureau. (5 Marks)

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