Series: NOV 2017

Search 500 + past questions and counting.
  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

AAA – Nov 2017 – L3 – Q7 – Audit of IT Systems and Data Analytics

Assess key controls for an online trading business, evaluate associated risks with electronic data interchange, and suggest effective risk mitigation controls.

Young Entrepreneur Trading (YET) is an online trading business established by Yemisi Tumfere. YET sources household goods from various local and international manufacturers, placing orders online with suppliers. Customers also place online orders, and invoices are processed and sent to stores for dispatch through a network of delivery centers across the country.

YET, dissatisfied with its previous auditors, has approached your firm for the audit engagement, with professional clearance obtained. As the audit manager, you are responsible for the engagement, with several new trainees under your supervision who are unfamiliar with controls for online businesses.

Requirements:
a. Discuss FIVE controls an auditor should focus on to assess the effectiveness of controls in an online system like YET. (5 Marks)
b. Evaluate FOUR risks associated with YET’s use of electronic data interchange in an online business and recommend FOUR effective controls to minimize these risks. (10 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q7 – Audit of IT Systems and Data Analytics"

AAA – Nov 2017 – L3 – Q6 – Audit Reporting

Discuss audit report modifications, draft modified report on grant treatment, and analyze auditor’s responsibilities regarding asset valuation.

During the audit of fixed assets for Next Engineering Plc as of December 31, 2016, two issues were encountered:

  1. The cost calculations for direct labor on assets under construction were destroyed, with the direct labor cost totaling ₦20,000,000.
  2. A government grant of ₦50,000,000, received for plant and equipment purchased during the year, was fully credited to the income statement as an exceptional item, though the plant and equipment have a 10-year useful life.

Requirements:
a. Discuss the general forms of modifications available to auditors in drafting their report and specify circumstances for each form.

(6 Marks)
b. Assuming a modified audit report is necessary regarding the government grant treatment, draft the relevant section (entire report not required).

(5 Marks)
c. Analyze the auditor’s general responsibility concerning the directors’ report on land and building valuation.

(4 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q6 – Audit Reporting"

AAA – Nov 2017 – L3 – Q5 – Audit Evidence

Evaluate XYZ Bank’s provision for litigation, discuss audit procedures per ISA 501, and prepare litigation disclosure for financial statements.

You are the audit manager for XYZ Bank Limited for the year ended December 31, 2016. The Bank’s Board noted a litigation issue involving a lawsuit from BBB Limited, where the Bank was found liable for a cheque conversion worth ₦2.1 billion. The high court imposed a penalty on the Bank for this amount, which BBB Limited is now claiming.

The Bank has objected to the judgment, appealing to the Court of Appeal, with legal counsel advising that a favorable outcome is expected. The Bank’s litigation-related financial information is as follows:

  • Provision for litigation (recognized in financial statements): ₦96 million
  • Litigation cases as defendant: 50
  • Litigation cases as plaintiff: 10
  • Claims in favor of the Bank: ₦2.7 billion
  • Claims against the Bank (including the ₦2.1 billion case): ₦3.2 billion

Requirements:
a. Discuss FOUR specific considerations under ISA 501 for obtaining audit evidence on litigation provisions.

(5 Marks)
b. Evaluate the adequacy of the litigation provision recognized in the financial statements as at December 31, 2016.

(5 Marks)
c. Prepare a summary disclosure of the litigation status for inclusion in the financial statement notes as at December 31, 2016.

(5 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q5 – Audit Evidence"

AAA – Nov 2017 – L3 – Q4 – Risk Management in Audits

Assess audit risks in taking on Pony Bank Plc, recommend management and audit firm actions to address financial statement risks, and draft a management letter.

The management of Pony Bank Plc and its wholly owned subsidiary, Ponte Micro Finance Bank Limited, engaged in fraudulent activities involving the arrangement of bogus loans amounting to ₦5.5 billion in worthless assets, which were undetected by the previous auditors. The former auditors attributed the oversight to a well-organized group within Pony Bank that actively deceived and obstructed the audit process to conceal their actions.

Your firm, Vic Viv & Co, has recently taken on the audit of Pony Bank Plc.

Requirements:
a. Advise the engagement partner on the risks involved in taking up the audit.

(4 Marks)
b. Recommend appropriate actions for management and your firm to address financial statement risks.

(8 Marks)
c. Prepare a management letter with two matters suitable for submission to the directors.

(8 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q4 – Risk Management in Audits"

AAA – Nov 2017 – L3 – Q3 – Audit Reporting

Assess material and pervasive effects on financial statements, audit procedures, and draft audit report opinion paragraphs for Tophem Bank’s foreign associate investment.

Tophem Bank Nigeria Plc has been operational for 20 years, with your firm auditing the company for the past five years. During the year, Tophem acquired an investment in Accra Insurance Limited, a foreign associate, which is accounted for using the equity method and listed at ₦575 million on the Statement of Financial Position as of December 31, 2016. Tophem’s income for the year includes its share of Accra’s net income. However, the audit team was denied access to Accra’s management, auditors, and financial data.

Following a review of the audit file for the year ended December 31, 2016, your partner has recommended a modified opinion for the audit report, providing a draft outline and requesting your input to complete it.

Requirements:
a. Evaluate the circumstances under which a matter could be both material and pervasive in its effect on the financial statements.

(4 Marks)
b. Explain EIGHT appropriate procedures to follow in the audit assignment before finalizing the audit opinion.

(8 Marks)
c. Draft an appropriate basis of opinion paragraph suitable for inclusion in the auditor’s report.

(4 Marks)
d. Draft an appropriate opinion paragraph suitable for inclusion in the auditor’s report.

(4 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q3 – Audit Reporting"

AAA – Nov 2017 – L3 – Q2 – Group Audits

Assess business risks for Chuks Zaka Limited post-acquisition, evaluate financial statement risks, and outline audit considerations.

Chuks Roberts Plc (CRP) operates as an auto-parts manufacturing company in Nigeria with headquarters in Lagos. CRP plans to manufacture drones for parcel distribution across Africa and has acquired Zaka Roberts Limited (ZRL), a South African company based in Johannesburg, to bring this plan to fruition.

Zaka previously specialized in manufacturing computer-controlled equipment for laboratories and other industries in Africa and the Middle East. The company was owned by five directors/shareholders who accepted CRP’s offer on February 1, 2016, to purchase Zaka’s manufacturing equipment, technology (patent-protected), Cape Town factory, and Johannesburg head office for US$450 million, representing 75% of Zaka’s value.

Effective March 31, 2016, Zaka ceased manufacturing, making most employees redundant except for a select few in marketing, accounts, and administration, with one month’s notice. The restructured entity, now named Chuks Zaka Limited (CZL), will operate as a marketing arm selling CRP’s drones in the South African region, with CRP holding a 55% stake.

Your firm has been CRP’s external auditor and is now engaged to audit CZL.

Required:
a. Analyse and evaluate the business risks that would be assessed by the management of CZL. (6 Marks)
b. Analyse and evaluate the business risks that would be assessed by the directors of CRP.

(6 Marks)
c. Assess and advise on the financial statements’ risks to be considered in planning the audit of CZL for the year ended December 31, 2016.

(8 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q2 – Group Audits"

AAA – Nov 2017 – L3 – Q1 – Quality Control in Audit Firms

Evaluate audit quality issues and procedures in response to a regulatory review of NigerKap Plc.

Bode, Ugo, Musa and Company is a firm of Chartered Accountants that has existed for over 20 years and achieved a strong reputation for quality audit work. The firm has expanded significantly over the past ten years – doubling its client base across different sectors of the Nigerian economy. The firm currently audits two banks, five listed entities, and over seventy other companies. It has also increased its audit staff base and grown the number of its partners from two to seven over the same period.

However, in the last two years, the firm has had a series of regulatory reviews due to several instances of errors noted in some financial statements audited by the firm. One of the clients, the shareholders of NigerKap Plc, petitioned the regulator over a misstatement in the value of their investment property. This resulted in an overstatement of profit and overpayment of taxes by the company based on the financial statements for the year ended December 31, 2015. The shareholders also threatened to take legal action against the firm.

The Managing Partner (MP) of the firm is very concerned about this situation and has commenced internal procedures to evaluate the quality of audits performed by the firm, especially for the NigerKap audit of 2015. A committee has been set up…

Required:
Discuss the internal procedures that Bode, Ugo, Musa and Company should implement to improve audit quality and prevent further regulatory issues.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "AAA – Nov 2017 – L3 – Q1 – Quality Control in Audit Firms"

FM – Nov 2017 – L3 – Q7 – Portfolio Management

Evaluate investment risk in different portfolio scenarios and explain the implications of beta and alpha values for KT Plc’s equity.

a. In the context of the selection and holding of investments, discuss each of the following scenarios:

i. An investor holding only one security needs to be concerned with the unsystematic risk of that security. (3 Marks)

ii. However, an investor who holds a number of securities should take account of total risk. (3 Marks)

iii. An investor should never add to a portfolio an investment that yields a return less than the market rate of return. (3 Marks)

b. The equity beta of KT Plc. is 1.2 and the equity alpha is 1.4. Explain the meaning and significance of these values to the company. (6 Marks)

(Total 15 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – Nov 2017 – L3 – Q7 – Portfolio Management"

FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management

Explore ethical considerations in capital investment and apply the Black-Scholes model in company valuation.

You have recently taken up employment with Large Plc., a Nigerian company with manufacturing subsidiaries in many countries across Africa. As the Financial Analyst, you report directly to the Managing Director who currently requires briefings on the following areas:

(i) Ethical issues and capital investment decisions,
(ii) Options and company valuation

Required:

a. Explain, with examples, ethical issues that might affect capital investment decisions and discuss the importance of such issues for Strategic Financial Management. (8 Marks)

b. Explain the circumstances in which the Black-Scholes Option Pricing (BSOP) model could be used to assess the value of a company, including the data required for the variables used in the model. (7 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management"

FM – Nov 2017 – L3 – Q5 – Corporate Governance and Financial Strategy

Identify stakeholder financial objectives and discuss methods to incentivize directors to maximize shareholder wealth.

Private sector companies have multiple stakeholders who are likely to have divergent interests.

Required:

(a) Identify FIVE stakeholder groups and discuss briefly their financial objectives.
(10 Marks)

(b) Explain ways in which companies’ directors can be encouraged to achieve the objective of maximisation of shareholders’ wealth.
(5 Marks)

(Total 15 Marks)

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "FM – Nov 2017 – L3 – Q5 – Corporate Governance and Financial Strategy"

CR – Nov 2017 – L3 – Q5b – Regulatory Framework and Ethics

Discuss the need for an international conceptual framework for financial reporting and its practical impact on accounting issues.

The financial reporting process is concerned with providing information that is useful in the business and economic decision-making process. Therefore, a conceptual framework will form the theoretical basis for determining which events should be accounted for, how they should be measured, and how they should be communicated to the user. Although theoretical in nature, a conceptual framework for financial reporting has practical aims.

Required:
Discuss whether an agreed international framework for financial reporting is needed in order to resolve practical accounting issues.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q5b – Regulatory Framework and Ethics"

CR – Nov 2017 – L3 – Q5a – Beyond financial reporting

Identify limitations of financial reporting in social and environmental impact reporting and discuss current practices.

In recent years, the discourse has shifted from Corporate Social Responsibility to Sustainability Reporting. Indeed, some critics would argue that there is very little difference between the two. However, sustainability in this context is a complex and contested concept as it is about ensuring that there are sufficient resources available for future generations. It is very difficult for this to be addressed at an individual firm level. There are huge external pressures for companies to disclose information in relation to their impacts on carbon emissions, waste management, protection of biodiversity, and health and safety. Expectations of key users (stakeholders) are changing.

Required:
i) Identify FOUR limitations of financial reporting in the context of reporting the social and environmental impacts of corporate activity to users of financial statements.
ii) What are companies currently doing to report their social and environmental performance?

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q5a – Beyond financial reporting"

CR – Nov 2017 – L3 – Q4 – Presentation of financial statements

Prepare a statement of changes in equity for Ahomka Ltd for the years ended 30 April 2016 and 2017.

Ahomka Ltd is a public listed manufacturing company. Its summarised financial statements for the year ended 30 April 2017 (and 2016 comparatives) are as follows:

The following additional information is available:
i) There were no additions to, or disposals of, non-current assets during the year.
ii) In order to help cash flows, the company made a rights issue of shares during the year ending 30 April 2017, all of which ranked for dividend. No shares were issued during the year ended 30 April 2016.
iii) The dividend per share has been reduced by 50% for the year ended 30 April 2017.

Required:
a) Prepare a statement of changes in equity for years ended 30 April 2016 and 2017 for Ahomka Ltd as the above information permits.

b) Analyze and discuss the financial performance and financial position of Ahomka Ltd as portrayed in the financial statements and in the additional information provided. Your analysis should be supported by relevant ratios.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q4 – Presentation of financial statements"

CR – Nov 2017 – L3 – Q3b – Business Valuation

Estimate the value per share of Agos Limited using net assets, dividend valuation, and P/E ratio methods.

Santader Limited intends to take over Agos Limited. The financial statements of Agos Limited for the year ended 30 June 2016 are as follows:

Here are the tables from Question 3b exactly as they appear in the attachment:


Agos Limited – Income Statement for the year ended 30 June, 2016

Description Amount (GH¢)
Profit before tax 450,000
Tax (125,000)
Profit after tax 325,000

Agos Limited – Statement of Retained Earnings for the year ended 30 June 2016

Description Amount (GH¢)
Balance at beginning 250,000
Profit after tax 325,000
Dividend paid (180,000)
Balance at end 395,000

Additional Information
Turnover, profits before tax, and dividends of Agos Limited over the past 5 years:

Year Ending 30 June Sales (GH¢) Pre-tax Profits (GH¢) Dividend (GH¢)
2012 5,800,000 250,000 65,000
2013 6,900,000 320,000 80,000
2014 7,700,000 330,000 100,000
2015 8,500,000 410,000 120,000
2016 9,800,000 450,000 180,000
  1. The patent represents a license to produce and sell a special product. This product is expected to generate a pre-tax profit of GH¢12,000 per annum in perpetuity.
  2. The discount rate of Agos Limited is 10% per annum.
  3. Nhyira Limited, a major competitor of Agos Limited, is listed on the Stock Exchange and has a P/E ratio of 8 and a dividend yield of 10%.
  4. Nhyira Limited expects a return of 11% of the net assets.

Required:
Estimate the value per share of Agos Limited as at 30 June, 2016 using the following methods:
i) Net Assets
ii) Dividend Valuation
iii) Price/earning ratio

 

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q3b – Business Valuation"

CR – Nov 2017 – L3 – Q3a – Other information in the annual report

Identify and explain three listing requirements for a company on the Ghana Stock Exchange.

A company is said to be listed when its securities are approved to be bought and sold on the Stock Exchange. Newly issued shares cannot trade in the Over-The-Counter (OTC) Market before getting listed on the Ghana Stock Exchange (GSE). You need to communicate this intention to the GSE and work with the Exchange’s listing requirements before the public floatation.

Required:
Identify and explain THREE requirements a company is expected to meet before it gets listed on the Ghana Stock Exchange.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q3a – Other information in the annual report"

CR – Nov 2017 – L3 – Q2e – 17 Financial instruments: Recognition and measurement Corporate reporting

Advise on the accounting treatment for an investment bond not held to maturity under IFRS 9.

DanKay Ltd bought a ten-year bond on 1 August 2016 at a cost of GH¢45 million. The bond carries an interest coupon of GH¢5 million paid annually in arrears, and its effective yield to maturity was 12% at the date of purchase. DanKay Ltd is holding the bond as a speculative investment, expecting its value to increase, and hopes to sell the bond at a profit in the short to medium term. On 31 July 2017, its reporting date, the fair value of the bond had declined to GH¢43 million. The interest payment was received as scheduled.

Required:
Advise DanKay Ltd on the treatment of the above in the financial statements for the year ended 31 July 2017 in accordance with IFRS 9: Financial Instruments.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2e – 17 Financial instruments: Recognition and measurement Corporate reporting"

CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period

Recommend the accounting treatment for a doubtful debt arising after the reporting period.

Adonko Ltd is a listed Ghanaian company that reports under International Financial Reporting Standards (IFRS) with 31 December as the financial year-end. The company performed some work for Adenta Municipal Assembly, a local government authority, during 2016 and issued an invoice for the work for GH¢12 million in July 2016. The invoice was accepted as valid by the local government authority but remains unpaid at the year-end.

In January 2017, following extensive press coverage, financial information was published showing that Adenta Municipal Assembly is heavily indebted and is unable to meet its obligations and pay its suppliers, including Adonko Ltd. This was unexpected by Adonko Ltd, and no allowance had previously been made against the debt in Adonko Ltd’s financial statements.

The Government of Ghana stated on 1 February 2017 that it was not prepared to fund the excesses of regional and local governments and that regional and local governments will need to make the necessary sacrifices to balance their budgets. Adenta Municipal Assembly stated that its priority was the provision of social amenities and economic well-being of its inhabitants and that other suppliers must wait for payment, with no date specified. Based on written correspondence with the local government’s legal advisers, Adonko Ltd believes it will eventually receive full payment, although this may take several years, and that interest on late payments is unlikely.

Required:
As the Finance Director of Adonko Ltd, recommend the accounting treatment of the above, in the financial statements for the year ended 31 December 2016.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2d – IAS 10: Events After the Reporting Period"

CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets

Recommend the treatment of training, marketing, and customer list expenses in the financial statements.

Oyarefa Ltd acquired 80% ordinary shares in Abokobi Ltd on 1 January 2015. The intangible assets of Abokobi Ltd include GH¢9 million of training and marketing expenditure incurred during the year ended 31 December 2016. The Directors of Abokobi Ltd believe that these should be capitalised as they relate to the startup period of a new business venture in Oyibi, and they intend to amortise the balance over the five years commencing 1 January 2017.

On 1 July 2016, Oyarefa Ltd purchased a customer list from the liquidator of a competitor. The price paid was GH¢4 million and was based on the list having a useful life of two years. At 31 December 2016, the Finance Director of Oyarefa Ltd commissioned a report on the value of the customer list from a firm of independent valuers. The firm has valued the customer list at GH¢5 million and estimates a total useful life of five years. The customer list is currently included in intangible assets at a carrying value of GH¢4 million, but the Finance Director wants the list to be revalued to the higher amount.

Required:
Recommend the treatment of the above in the consolidated financial statements for Oyarefa Ltd Group for the year ended 31 December 2016 in accordance with IAS 38: Intangible Assets.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2c – IAS 38: Intangible assets"

CR – Nov 2017 – L3 – Q2b – IAS 24: Related Party Disclosures

Explain the importance of disclosing related party relationships and transactions in financial statements.

Related party relationships are a common feature of commercial life. The objective of IAS 24: Related Party Disclosures is to ensure that financial statements contain the necessary disclosures to make users aware of the possibility that financial statements may have been affected by the existence of related parties.

Required:
Explain TWO importance of disclosing related party relationships and transactions in financial statements.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2b – IAS 24: Related Party Disclosures"

CR – Nov 2017 – L3 – Q2a – IAS 20

Explain the financial reporting treatment for a grant awarded for equipment purchase and subsequent repayment under IAS 20.

Dodowa Ltd is a large textile manufacturing company. Wherever possible, it structures its operations to take advantage of any financial assistance available from national and regional authorities.

During the year, a heavy-duty equipment was purchased for Dodowa Ltd’s main manufacturing operation for GH¢12 million on 1 April 2015. The equipment was expected to be used for 10 years, with a zero residual value. Dodowa Ltd pre-applied for a government grant on 1 January 2015, meeting all necessary criteria for awarding the grant. On 1 February 2015, the grant was awarded for 40% of the equipment’s cost and the cash was received on 1 July 2015. Conditions relating to maintaining employment are attached to the grant and if they are not satisfied, then the grant becomes repayable, or partly repayable.

Dodowa Ltd expected to meet these conditions when the grant was applied for. However, due to worsening economic conditions, redundancies for some staff on 31 December 2016 resulted in a repayment of 10% of the original grant becoming due. The repayment was made on 1 February 2017. Dodowa Ltd accounted for the grant as a reduction in the carrying amount of the asset.

Required:
Explain, with suitable calculations, the financial reporting treatment of the above in the financial statements of Dodowa Ltd for the year ended 31 December 2016 in accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance.

Login or create a free account to see answers

Find Related Questions by Tags, levels, etc.

Report an error

You're reporting an error for "CR – Nov 2017 – L3 – Q2a – IAS 20"

Oops!

This feature is only available in selected plans.

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

If you’re not subscribed to a plan, click on the button below to choose a plan