Series: NOV 2013

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CR – Nov 2014 – L3 – SB – Q2c – Revenue Recognition (IFRS 15)

Assess revenue recognition change for NIXAQ sales under IFRS 15 and calculate total revenue for the year.

Question

Maidogo Limited sells NIXAQ, a product manufactured by it, from several retail outlets. In previous years, the company has undertaken responsibility for fitting the product in customers’ premises. Customers pay for the product at the time they are ordered. The average length of time it takes from ordering to its fitting is 14 days. In previous years, Maidogo Limited had not recognised a sale in its books until the product had been successfully fitted because the rectification costs of any fitting error would be expensive.
With effect from 1 April, 2013, Maidogo Limited changed its method of trading by sub-contracting the fitting to approved contractors. Under this policy, the sub-contractors are paid by Maidogo Limited, and they (the sub-contractors) are liable for any errors made in the fitting. Consequently, Maidogo Limited is proposing to recognise sales when customers order and pay for the goods rather than when they have been fitted. Details of the relevant sales figures are:

Sales Figures	Amount (N’000)
Sales made in retail outlets for the year to 31 March 2014	69,000
Sales value of NIXAQ fitted in the 14 days to 14 April 2013	3,600
Sales value of NIXAQ fitted in the 14 days to 14 April 2014	4,800

Note: The sales value of NIXAQ in the 14 days to 14 April 2013 are not included in the annual sales figure of N69million, but those for 14 April 2014 are included.

Required:
Discuss whether or not the above represents a change of accounting policy, and calculate the amount that you would include in the revenue for NIXAQ in the year to 31 March 2014. (6 Marks)

Answer

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Tags: Accounting Policies, Financial Reporting, Revenue Recognition, Risks and Rewards, Sales Transactions, Sub-Contracting
Level: Level 3

Topic: Revenue Recognition (IFRS 15)
Series: NOV 2013

CR – Nov 2014 – L3 – SB – Q2b – Income Taxes (IAS 12)

Discuss reasons for variances in effective tax rates and differences between tax charges and tax payments.

Question

Mr. Ojoowuro, the director of a grocery store, has noticed that the tax charge for his company is N15million on profits before tax of N105million. This is an effective rate of 14.3%. Another company, Irin Plc, has an income tax charge of N30million on profit before tax of N90million. This is an effective rate of tax of 33.3%, yet both companies state that the rate of income tax applicable to them is 25%. Mr. Ojoowuro has also noticed that in the statements of cash flows, each company has paid the same amount of tax of N24million.

Required:
Advise Mr. Ojoowuro on the possible reasons why the income tax charge in the financial statements as a percentage of the profit before tax may not be the same as the applicable income tax rate and why the tax paid in the statement of cash flows may not be the same as the tax charge in the statement of profit or loss and other comprehensive income. (7 Marks)

Answer

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Tags: Cash Flow Variances, Deferred Tax, Effective Tax Rate, Financial Statements, Income Tax, Tax adjustments, Tax provisions
Level: Level 3

Topic: Income Taxes (IAS 12)
Series: NOV 2013

AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Outline audit procedures to identify material subsequent events and explain the purpose and importance of subsequent events review.

Question

You have just concluded the audit of Roico Limited for the year ended 31 December, 2012. During the review of the working paper file, the partner in charge discovered that no information is available on activities after year-end. The partner instructed the team leader to carry out a review of the company’s activities after year-end. The team leader was not comfortable with the instruction and wants to know why it is necessary to examine accounting information relating to the next accounting period.

You are required to:

(a) Enumerate the audit procedures which would be carried out in order to identify any material subsequent events. (10 Marks)

(b) Discuss the purpose and importance of subsequent events review. (5 Marks)

(Total: 15 Marks)

Answer

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Tags: Audit Planning, Audit Procedures, Financial Reporting, Going Concern, Materiality, post-balance sheet review, Subsequent Events
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2013

AAA – Nov 2013 – L3 – SB – Q4 – Audit of IT Systems and Data Analytics

Discuss factors influencing the choice of audit testing methods in a computer environment and propose solutions to address the loss of audit trail.

Question

The availability of computer-assisted audit techniques should be considered by the auditor when planning the nature, extent, and timing of tests in an audit. The auditor must determine his testing strategies which will depend on his choice of either using a manual testing method or computer-assisted method.

You are required to:

(a) Explain FIVE factors that will determine the auditor’s choice of method of testing in the planning of an audit in a computer environment. (10 Marks)

(b) Identify FIVE solutions to loss of audit trail. (5 Marks)

(Total: 15 Marks)

Answer

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Tags: Audit Planning, Audit testing methods, Audit trail, Computer-Assisted Audit Techniques, Data Analytics, IT Systems, manual testing, Risk Assessment
Level: Level 3

Topic: Audit of IT Systems and Data Analytics
Series: NOV 2013

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

Question

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

Answer

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Tags: Audit Planning, Community Relations, Compliance, Environmental impact, Extractive Industry, Financial Reporting, labor issues, Pioneer Status
Level: Level 3

Topic: Audit of Specialized Industries
Series: NOV 2013

AAA – Nov 2013 – L3 – SB – Q2 – Audit Planning and Strategy

Outline reasons for audit planning and describe procedures for planning the audit of an existing client.

Question

Planning an audit involves establishing the overall audit strategy for the engagement and development of an audit plan.

You are required to:

(a) Enumerate SEVEN reasons for audit planning. (7 Marks)

(b) Explain EIGHT audit procedures you would consider in planning the audit of an existing client. (8 Marks)

(Total: 15 Marks)

Answer

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Tags: Audit Objectives, Audit Planning, Audit Procedures, Audit strategy, client understanding, Risk Assessment
Level: Level 3

Topic: Audit Planning and Strategy
Series: NOV 2013

AAA – Nov 2013 – L3 – SB – Q1 – Ethical Issues in Auditing

Evaluate whether to comply with a former executive’s request for audit services while addressing confidentiality in auditor-client relationships.

Question

Your firm acts as the auditors and advisers to Naija Seven Limited, and to its four directors. The company is owned 50% by Praise Caro, 25% by his wife Madame, and 10% by James Patrick. Braima is the Chief Executive, and Julius is the Finance Director. Julius’ sister, Mabel Mama, recently resigned from the executive board following a disagreement with Praise. Mabel Mama formed her own company, Nigeri Heaven, in competition with Naija Seven.

Currently, Mabel is negotiating with her former co-executives on the profit-related remuneration due to her and the sale of her 15% holding of shares in Naija Seven to one or all of them.

Mabel Mama has contacted you to find out Praise Caro’s current remuneration package since he refused to disclose it to her. She has also requested that your firm should continue to act as her personal adviser, financial adviser, and auditor to Nigeri Heaven.

Answer

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Tags: auditor-client relationship, Confidentiality, Conflict of Interest, Ethical considerations, Independence, Professional Behavior
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2013

AAA – Nov 2013 – L3 – AII – Q19 – Ethical Issues in Auditing

Identify the term for codified moral rules and regulations guiding professional behavior.

Question

The codified rules and regulations which are mainly based on moral duties and obligations on how professionals should carry out their duties and how to behave in the society are known as……………….

Answer

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Tags: Code of Conduct, Morals, Professional Ethics
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2013

AAA – Nov 2013 – L3 – AII – Q18 – Public Sector Audits

Identify the body responsible for reviewing the Auditor General's report for the Federation.

Question

The report of the Auditor General for the Federation is reviewed by…………which has the power to invite any person indicted for public hearing.

Answer

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Tags: Audit Review, Auditor General, Public Sector
Level: Level 3

Topic: Public sector audit
Series: NOV 2013

AAA – Nov 2013 – L3 – AII – Q17 – Environmental and Sustainability Audits

Define the audit conducted on a company's societal relationships.

Question

An audit which is carried out on a company in respect of its relationship with shareholders, employees, customers, the community in which it operates, and the public at large is known as……………………..

Answer

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Tags: Public Relations, Social responsibility, Stakeholders
Level: Level 3

Topic: Environmental and Sustainability Audits
Series: NOV 2013

FA – Nov 2013 – L1 – SB – Q1b – Accounting Concepts

Listing and benefits of accounting concepts.

Question

List any SIX accounting concepts and state their benefits.

Answer

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Tags: Accounting Concepts, Accounting principles, Benefits of Accounting Concepts, Financial Reporting
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

FA – Nov 2013 – L1 – SB – Q1a – Accounting Concepts

Definition of accounting concepts.

Question

Define accounting concepts.

Answer

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Tags: Accounting Concepts, Accounting principles, Financial Reporting
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q40 – Recording Financial Transactions

Raising journal entries for the transfer of a personal asset to a business.

Question

Okocha transferred his car for use to his business. Raise journal entries to record this transaction.

Answer

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Tags: Asset Transfer, Business Records, Journal Entries
Level: Level 1

FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

Question

The information below relates to the plant and machinery account of Perfect Fit Designers for the year ended 31 December 2012:

What should be the amount of depreciation charged to the income statement during the year if the plant and machinery were depreciated at 20% per annum on a straight line basis?

Answer

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Tags: Depreciation, Plant and Machinery, Straight-Line Method
Level: Level 1

Topic: Accounting Concepts
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q38 – Elements of Financial Statements

Calculating the original cost of goods using mark-up information.

Question

Jenson Manufacturing Company has the policy of transferring manufactured goods from the factory to the sales department at cost plus 25% mark-up. In the current accounting period, the value of goods transferred from the production to sales department amounted to ₦2,000,000. What was the original cost of the goods to the production department?

Answer

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Tags: Cost Determination, Inventory Valuation, Mark-Up
Level: Level 1

Topic: Elements of Financial Statements
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q37 – Accounting from Incomplete Records

Calculating Adamu's purchases for the period using available data.

Question

Adamu does not keep complete accounting records. However, you were able to extract the following information from the available records for the year ended 31 December 2012:

	₦
Cash purchases	234,000
Cash and cheque payments for goods supplied	1,671,000
Trade payables at 1 January 2012	58,200
Trade payables at 31 December 2012	43,200

What was Adamu’s purchases for the period?

Answer

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Tags: Accounting Calculations, Incomplete Records, Purchases
Level: Level 1

Topic: Accounting from Incomplete Records
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q36 – Accounting for Property, Plant, and Equipment (IAS 16)

Understanding the term for when the carrying amount of an asset exceeds its recoverable amount under IAS 16.

Question

In accordance with IAS 16 (Property, Plant and Equipment), the amount by which the carrying amount of an asset exceeds its recoverable amount is called ____________.

Answer

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Tags: Asset Valuation, IAS 16, Impairment Loss
Level: Level 1

Topic: Accounting for Property, Plant, and Equipment (PPE) IAS 16
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q35 – Regulatory Environment of Accounting

Determining the date of transition to IFRS.

Question

Gbaja Plc has always prepared financial statements to 31 December each year. The company prepared its first IFRS financial statements for the year ended 31 December 2012 with the comparative figures for the year ended 31 December 2011. State the date of transition to IFRS.

Answer

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Tags: Financial Statements, IFRS, Transition Date
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q34 – Regulatory Environment of Accounting

Identifying who can be appointed as the Chairman of the Financial Reporting Council of Nigeria.

Question

Who can be appointed as the Chairman of the Financial Reporting Council of Nigeria?

Answer

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Tags: Corporate Governance, Financial Reporting, Regulatory Bodies
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2013

FA – Nov 2013 – L1 – SA – Q33 – Roles of Accountants in Business and the Economy

Understanding the branch of accounting that provides information to management.

Question

The branch of accounting that offers financial and operating information to the firm’s management to help in planning, controlling, and taking decisions is called ____________.

Answer

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Tags: Business Management, Financial Information, Management Accounting
Level: Level 1

Topic: Roles of Accountants in Business and the Economy
Series: NOV 2013

Series: NOV 2013

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CR – Nov 2014 – L3 – SB – Q2c – Revenue Recognition (IFRS 15)

Assess revenue recognition change for NIXAQ sales under IFRS 15 and calculate total revenue for the year.

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CR – Nov 2014 – L3 – SB – Q2b – Income Taxes (IAS 12)

Discuss reasons for variances in effective tax rates and differences between tax charges and tax payments.

You're reporting an error for "CR – Nov 2014 – L3 – SB – Q2b – Income Taxes (IAS 12)"

AAA – Nov 2013 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Outline audit procedures to identify material subsequent events and explain the purpose and importance of subsequent events review.

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AAA – Nov 2013 – L3 – SB – Q4 – Audit of IT Systems and Data Analytics

Discuss factors influencing the choice of audit testing methods in a computer environment and propose solutions to address the loss of audit trail.

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AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

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AAA – Nov 2013 – L3 – SB – Q2 – Audit Planning and Strategy

Outline reasons for audit planning and describe procedures for planning the audit of an existing client.

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AAA – Nov 2013 – L3 – SB – Q1 – Ethical Issues in Auditing

Evaluate whether to comply with a former executive’s request for audit services while addressing confidentiality in auditor-client relationships.

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AAA – Nov 2013 – L3 – AII – Q19 – Ethical Issues in Auditing

Identify the term for codified moral rules and regulations guiding professional behavior.

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AAA – Nov 2013 – L3 – AII – Q18 – Public Sector Audits

Identify the body responsible for reviewing the Auditor General's report for the Federation.

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AAA – Nov 2013 – L3 – AII – Q17 – Environmental and Sustainability Audits

Define the audit conducted on a company's societal relationships.

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FA – Nov 2013 – L1 – SB – Q1b – Accounting Concepts

Listing and benefits of accounting concepts.

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FA – Nov 2013 – L1 – SB – Q1a – Accounting Concepts

Definition of accounting concepts.

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FA – Nov 2013 – L1 – SA – Q40 – Recording Financial Transactions

Raising journal entries for the transfer of a personal asset to a business.

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FA – Nov 2013 – L1 – SA – Q39 – Accounting Concepts

Calculating annual depreciation using the straight line method.

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FA – Nov 2013 – L1 – SA – Q38 – Elements of Financial Statements

Calculating the original cost of goods using mark-up information.

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FA – Nov 2013 – L1 – SA – Q37 – Accounting from Incomplete Records

Calculating Adamu's purchases for the period using available data.

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FA – Nov 2013 – L1 – SA – Q36 – Accounting for Property, Plant, and Equipment (IAS 16)

Understanding the term for when the carrying amount of an asset exceeds its recoverable amount under IAS 16.

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FA – Nov 2013 – L1 – SA – Q35 – Regulatory Environment of Accounting

Determining the date of transition to IFRS.

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FA – Nov 2013 – L1 – SA – Q34 – Regulatory Environment of Accounting

Identifying who can be appointed as the Chairman of the Financial Reporting Council of Nigeria.

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FA – Nov 2013 – L1 – SA – Q33 – Roles of Accountants in Business and the Economy

Understanding the branch of accounting that provides information to management.

You're reporting an error for "FA – Nov 2013 – L1 – SA – Q33 – Roles of Accountants in Business and the Economy"

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