Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

Question

Regarding the audit of a non-life insurance company, which of the following reserves may NOT be reviewed?
A. Reserve for unexpired risks
B. Reserve for outstanding claims
C. Contingent reserve
D. External reserve
E. Statutory reserve

Answer

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Tags: Audit, Non-Life Insurance, Reserves, Specialized Industries
Level: Level 3

Topic: Audit of Specialized Industries
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

Question

Which of the following assignments can be regarded as a continuous audit function?
A. Examining the effectiveness, efficiency, and economy of a cement project
B. Evaluating the adequacy of the security and control measures of the information technology
C. Ascertaining the fairness of the annual financial statements and notes to the accounts
D. Reviewing the internal control procedures before commencing the audit
E. Reviewing the company’s compliance with relevant guidance and release of financial information periodically

Answer

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Tags: Compliance, Continuous Audit, Financial Reporting, Internal Control
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

Question

The main users of financial reports that auditors need to be primarily concerned about are:
A. Management and directors of the company
B. The general public
C. Banks and other financial institutions that provide working capital
D. Suppliers
E. Shareholders of the company

Answer

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Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

Question

Yakubu Chukwu & Co was sued by one of its clients who alleged that the firm failed to satisfy the auditing standards in identifying substandard and obsolete inventory while attending end-of-year stock take. Which of the following is the firm’s best defence?
A. It is quite impossible to expect the firm to identify substandard and obsolete inventory due to the special nature of the inventory
B. Yakubu Chukwu & Co has to prove that its audit has been carried out with reasonable skill, care, and diligence
C. Auditing standards are not legislated, therefore, the client has no right to sue the firm
D. The contributory negligence of the client
E. Identification of substandard and obsolete stock requires an expert opinion

Answer

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Tags: Audit Standards, Auditor Liability, Defence, Obsolete Inventory
Level: Level 3

Topic: Auditor’s Legal Liability
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

Question

When a client has control over a subsidiary, what is the most appropriate audit procedure to obtain evidence to verify subsidiary accounts before consolidation?
A. Arrange for independent valuation of the assets and liabilities of the subsidiary
B. Be involved in the appointment of the subsidiary auditors
C. Rely on additional work carried out by the internal auditors
D. Send a template of your expectation to subsidiary auditors
E. Provide audit program for the subsidiary auditors

Answer

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Tags: Audit Procedure, Consolidation, Group Audits, Subsidiary Accounts
Level: Level 3

Topic: Group audit
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

Question

The main reasons why auditors send a letter of enquiry to the legal firm handling litigation or claims on behalf of their client is to provide:
A. Auditors with weak position in client litigation and claims
B. Auditors with written submission and statement of claims to the court
C. Information concerning the progress of outstanding cases to date
D. Auditors with corroborative audit evidence
E. Auditors with impact of legal opinion on financial statements

Answer

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Tags: Audit evidence, Legal claims, Letter of Enquiry, Litigation
Level: Level 3

Topic: Audit Reporting
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

Question

Factors that contribute to the weaknesses of local auditing standards include the following EXCEPT:
A. Standard setters being subject to political pressures
B. Having inadequate resources
C. Being insufficiently timed in response to market needs
D. Loss of investment by stakeholders
E. Having sources of fund which raise questions about their independence

Answer

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Tags: Audit Standards, Independence, Local Auditing Standards, Regulatory Framework
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

Question

Social audit has to do with the extent to which a company gets involved and interacts with the society in which it operates. This means that social audit does not extend to ONE of the following:
A. Corporate code of conduct and business ethics
B. Pricing policy, product safety, and quality control
C. Transaction audit
D. Employee health and safety
E. Environmental pollution

Answer

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Tags: Business Ethics, Corporate Responsibility, Environmental audit, Social Audit
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

Question

Which of the following is the primary purpose for obtaining an understanding of client’s internal control?
A. Provide a basis for making constructive suggestions in a management letter
B. Determine the nature, timing and extent of tests to be performed in the audit
C. Obtain sufficient and competent evidential matter to afford a reasonable basis for an opinion on the financial statements under examination
D. Provide information for communication of internal control related matters to management
E. Obtain sufficient evidence to afford a basis for an opinion on the financial statements

Answer

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Tags: Audit Planning, Audit strategy, Internal Control
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

Question

Which of the following is an analytical procedure generally used to produce audit evidence?
A. Confirmations mailed directly to the auditor by the client’s customers
B. Physical observation of inventories
C. Relationship among current financial balances and prior balances, forecasts, and non-financial data
D. Detailed examination of external and internal documents
E. Circularisation letters to debtors and creditors of the company

Answer

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Tags: Analytical procedures, Audit evidence, Audit Techniques
Level: Level 3

Topic: Advanced Audit Planning and Strategy
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q6C – Company Law

State three reasons why a company may be wound-up voluntarily.

Question

There are different ways by which a company may be wound-up. State THREE reasons why a company may be wound-up voluntarily.

Answer

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Tags: Company Liquidation, Winding-up
Level: Level 1

Topic: Company Law
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q6B – Company Law

State the difference between “transfer” and “transmission” of shares.

Question

The shares of a company represent the unit of ownership in the company. State the difference between “transfer” and “transmission” of shares. (4 Marks)

Answer

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Tags: Share Transfer, Share Transmission
Level: Level 1

Topic: Company Law
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q6A – Company Law

Explain five circumstances when a company may alter its businesses.

Question

The objects of a company are contained in its incorporation document. Explain FIVE circumstances when a company may alter its businesses. (5 Marks)

Answer

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Tags: Alteration Circumstances, Company Objects
Level: Level 1

Topic: Company Law
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q5 – Company Law

Comment on the validity of an annual general meeting notice.

Question

Lewis Adey, as company secretary, sends a notice of meeting dated 2 March to members for an Annual General Meeting scheduled for 30 March. The notices were sent out by Lewis on 12 March.

Required:
a. Comment on the validity of the notice. (7 Marks)
b. Explain TWO situations in which a general meeting of a company shall be deemed duly called notwithstanding that it is called by a shorter notice. (4 Marks)
c. Explain briefly TWO businesses which a notice for a company’s annual general meeting must specify. (4 Marks)

Answer

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Tags: AGM, Company Law, Notice Validity
Level: Level 1

Topic: Company Law
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q4B – Law of Contract

Discuss the role of an insurance agent and the concept of material facts in insurance contracts.

Question

Musa, an insurance agent employed by Baloon Insurance Limited, assisted Uche to complete an insurance policy proposal form.

Required:
i. Explain briefly whose agent Musa is in this situation. (2 Marks)
ii. Explain what is meant by “material fact” in relation to insurance contracts? (3 Mar

Answer

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Tags: Insurance Agents, Material Facts
Level: Level 1

Topic: Law of Contract
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q4A – Law of Contract

Advise Onome regarding a life insurance policy under a common mistake.

Question

Chief Newton is responsible for the university education of Onome who then decides to insure Chief Newton’s life with Maxim Assurance Plc. The policy became effective on 2 March, but unknown to Onome and Maxim Plc, Chief Newton had died back in the village on 28 February.

Required:
Advise Onome as to whether or not she can sustain a claim under the policy, giving reasons for your advice.

Answer

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Tags: Common Mistake, Insurance
Level: Level 1

Topic: Law of Contract
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q3 – Law of Contract

Advise on the validity of a contract regarding an offer and its acceptance.

Question

Angela sells fresh fish and made an offer to Mike at a party. Mike undertook to let Angela know his mind by post, since Angela could be reached only by post. On 2 March, Mike posted an acceptance letter to Angela, which got to Angela the day after Angela had sold her fresh fish to Andrew on 5 March. Mike wants to sue Angela for breach of contract.

a. Advise Angela as to whether or not she was bound to Mike by contract. (5 Marks)

b. Does Mike have a valid case against Angela? Give reasons for your answer. (3 Marks)

c. Is Andrew liable to Mike? State the reason for your answer. (2 Marks)

d. Explain briefly TWO differences between an “offer” and an “invitation to treat”. (5 Marks)

Answer

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Tags: Acceptance, Contract Law, Offer
Level: Level 1

Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q2C – Law of Contract

Explain three remedies for breach of contract.

Question

Explain briefly THREE remedies for breach of contract.

Answer

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Tags: Breach of Contract, Remedies
Level: Level 1

Topic: Law of Contract
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q2B – Law of Contract

Advise on a contract involving an apprentice who is a minor.

Question

Johnson is 16 years old. He served as an apprentice barber at Okay Salon for two years. He paid the apprenticeship premium for only one year. Okay Salon wants to sue for the balance. Advise the parties.

Answer

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Tags: Contracts, Infants
Level: Level 1

Topic: Law of Contract
Series: NOV 2012

BL – Nov 2012 – L1 – SB – Q2A – Law of Contract

Advise on the legal protection available to illiterates in contract agreements.

Question

Dickson is an illiterate. He entered into an agreement with Continental Bakery Limited to supply bags of flour at N15.00 per bag. Unknown to him, the written agreement, which he thumb-printed, read N10.00 per bag. He had supplied 1,000 bags for which the company wants to pay the price in the written contract. Advise Dickson in the circumstances.

Answer

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Tags: Contracts, Illiterates Protection
Level: Level 1

Topic: Law of Contract
Series: NOV 2012

Series: NOV 2012

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AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries"

AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance

This question identifies assignments that qualify as continuous audit functions.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q19 – Internal Audit and Corporate Governance"

AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting

This question assesses knowledge of the main users of financial reports that auditors focus on.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q18 – Audit Reporting"

AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability

This question examines the best defence an audit firm can present when accused of failing to identify substandard and obsolete inventory.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q17 – Auditor’s Legal Liability"

AAA – Nov 2013 – L3 – A – Q16 – Group Audits

This question assesses the appropriate audit procedure for verifying a subsidiary’s accounts before consolidation.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q16 – Group Audits"

AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting

This question assesses the primary purpose of sending a letter of enquiry to a legal firm regarding client litigation.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q15 – Audit Reporting"

AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards

This question assesses knowledge of factors that weaken local auditing standards and identifies an unrelated factor.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q14 – Regulatory Framework and Professional Standards"

AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits

This question assesses the scope of social audit and identifies an area it does not cover.

You're reporting an error for "AAA – Nov 2013 – L3 – A – Q13 – Environmental and Sustainability Audits"

AAA – Nov 2013 – L3 – A – Q12 – Advanced Audit Planning and Strategy

This question assesses the primary purpose of understanding a client’s internal control system.

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AAA – Nov 2013 – L3 – A – Q11 – Advanced Audit Planning and Strategy

This question tests knowledge of analytical procedures used to produce audit evidence.

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BL – Nov 2012 – L1 – SB – Q6C – Company Law

State three reasons why a company may be wound-up voluntarily.

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BL – Nov 2012 – L1 – SB – Q6B – Company Law

State the difference between “transfer” and “transmission” of shares.

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BL – Nov 2012 – L1 – SB – Q6A – Company Law

Explain five circumstances when a company may alter its businesses.

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BL – Nov 2012 – L1 – SB – Q5 – Company Law

Comment on the validity of an annual general meeting notice.

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BL – Nov 2012 – L1 – SB – Q4B – Law of Contract

Discuss the role of an insurance agent and the concept of material facts in insurance contracts.

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BL – Nov 2012 – L1 – SB – Q4A – Law of Contract

Advise Onome regarding a life insurance policy under a common mistake.

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BL – Nov 2012 – L1 – SB – Q3 – Law of Contract

Advise on the validity of a contract regarding an offer and its acceptance.

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BL – Nov 2012 – L1 – SB – Q2C – Law of Contract

Explain three remedies for breach of contract.

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BL – Nov 2012 – L1 – SB – Q2B – Law of Contract

Advise on a contract involving an apprentice who is a minor.

You're reporting an error for "BL – Nov 2012 – L1 – SB – Q2B – Law of Contract"

BL – Nov 2012 – L1 – SB – Q2A – Law of Contract

Advise on the legal protection available to illiterates in contract agreements.

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