Series: Nov 2024

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SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types

Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.

Question

Charles Handy identified four distinct categories of corporate culture (cultural stereotypes) that can exist within an organization. Since its formation, BOGML has exhibited all four categories of corporate culture during different phases of its growth.

Required:
Identify and explain the specific and appropriate category of corporate culture applicable, and discuss its impact on the company for each of the following phases of growth when Dr. Ayimadu Baffour:

i) Created the functional departments.
ii) Stated that BOGML is built around him and without him the company will not exist.
iii) Insisted on retaining all authority for decision-making.
iv) Emphasized getting work done through teamwork.

Answer

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Tags: Business Growth, Charles Handy, Decision Making, Leadership, Organizational Culture
Level: Level 3

Topic: Competitive Advantage, Internal analysis
Series: Nov 2024

CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration

Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.

Question

(a) Compute the following ratios for the years ended 2024 & 2023:
i) Operating profit margin
ii) Return on parent’s equity
iii) Earnings per share
iv) Current ratio
v) Trade receivables days
vi) Total liabilities to total assets %

(b) Write a report to the directors of DPEF evaluating the inter-period financial performance and position of NK using the above six (6) ratios. The report should draw attention to how the non-financial metrics combine with the financial counterparts to showcase the prospects and viability of NK. c) The concept of double materiality is relevant to sustainability impacts and dependencies. It
incorporates financial materiality and impact materiality.

Answer

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Tags: Compliance, Cybersecurity, Digital Transformation, Ethics, Financial Analysis, Ratio Analysis
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements, Beyond financial reporting
Series: Nov 2024

CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation

Compute financial ratios for Nsawkaw PLC to evaluate its financial performance for investment recommendation.

Question

Nsawkaw PLC (NK), a gold processing and trading company, has been identified by Djaraye Private Equity Fund (DPEF) as a target for long-term equity investment. As a financial consultant of DPEF, you have been tasked to evaluate the integrated financial condition of NK and make an investment recommendation.

Below are the summarised versions of NK’s Consolidated Financial Statements for the year ended June 30, 2024 (together with its comparative period):

Summarised Consolidated Statement of Profit or Loss for the year ended 30 June 2024

	2024 (GH¢000)	2023 (GH¢000)
Revenue	2,538,000	2,125,000
Operational expenses	(1,909,100)	(1,592,900)
Interest costs	(186,700)	(157,250)
Taxation	(234,000)	(198,500)
Profit after tax	208,200	176,350
Other comprehensive income	17,900	10,550
Total comprehensive income	226,100	186,900

Summarised Consolidated Statement of Changes in Equity for the year ended 30 June 2024

	Equity Holders of the Parent (GH¢000)	Non-controlling Interests’ Equity (GH¢000)	Total Equity (GH¢000)
2024
Balances b/d	457,200	65,600	522,800
Total comprehensive income	190,800	35,300	226,100
Dividends	(110,000)	(8,700)	(118,700)
Balances c/d	538,000	92,200	630,200
2023
Balances b/d	355,000	46,650	401,650
Total comprehensive income	160,500	26,400	186,900
Dividends	(58,300)	(7,450)	(65,750)
Balances c/d	457,200	65,600	522,800

Summarised Statement of Financial Position as at 30 June 2024

	2024 (GH¢000)	2023 (GH¢000)
Non-current assets
Property, plant, and equipment	718,000	657,000
Others	156,000	99,000
Total Non-current assets	874,000	756,000
Current assets
Trade receivables	140,000	121,000
Others	236,500	123,050
Total Current assets	376,500	244,050
Total Assets	1,250,500	1,000,050
Total Equity and Liability	1,250,500	1,000,050

Additional information:

The total number of equity shares outstanding was 1.2 million and 1.4 million at 30 June 2023 and 30 June 2024 respectively.
Other comprehensive income attributable to non-controlling interests for the years ended 30 June 2023 and 2024 amounted to GH¢8.05 million and GH¢9.6 million respectively.
Non-current liabilities at 30 June 2023 and 30 June 2024 amounted to GH¢250,800 and GH¢308,510 respectively.
The following metrics have been gleaned from NK’s published sustainability reports across the two years:

Metric	2024	2023
Scope 1 & 2 carbon emissions (tonnes of CO2)	650	780
Scope 3 carbon emissions (tonnes of CO2)	2,400	2,380
Women in senior management (%)	21	16
Total recordable injury frequency rate (TRIFR) per 100 full-time workers	3.3	4.1

The scope and definitions of the above sustainability measures have remained materially unchanged across the two years.

Required:

Compute the following ratios for the years ended 2024 & 2023:

Operating profit margin
Return on parent’s equity
Earnings per share
Current ratio
Trade receivables days
Total liabilities to total assets %

Answer

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Tags: Financial Analysis, Investment Decision, Leverage, Liquidity, Profitability, Ratio Analysis, Working Capital Management
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: Nov 2024

CR – Nov 2024 – L3 – Q4b – Consolidation and Financial Reporting

Discuss the appropriate reporting figures a parent company should include in its consolidated financial statements when its subsidiaries have different reporting dates.

Question

A parent company has a year-end of 31 December 2023. One of its subsidiaries has a year-end of 30 June 2023, and another has a year-end of 30 September 2023.

Required:
What figures should the parent include in its consolidated financial statements in respect of these subsidiaries?

Answer

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Tags: Consolidation, Financial Statements, IFRS 10, Parent Company, Reporting Period, Subsidiary Reporting
Level: Level 3

Topic: Consolidated Financial Statements (IFRS 10)
Series: Nov 2024

CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction

Prepare the capital reduction account and the statement of financial position for Mensimah Ltd after reconstruction.

Question

Mensimah LTD (Mensimah) has been experiencing poor trading conditions over the last three years. As a result, it has been difficult to generate revenues and profits in the current year leading to very high inventory levels. Also, Mensimah has defaulted in paying interest due to the loan note holders for two years. Even though the debentures are secured against the land & buildings, the loan note holders have demanded either a scheme of reconstruction or the liquidation of Mensimah.

As the above trading difficulties have significantly threatened the going concern status of Mensimah, the directors as well as representatives of the shareholders and loan holders in a meeting decided to design the following scheme of reconstruction:

The assets were independently valued and should now be recognised at the following amounts:

Asset Category Amount (GH¢)

Land 64,000

Building 64,000

Plant & Equipment 24,000

Inventory 40,000

The value of Mensimah’s investment in Adams LTD has increased to GH¢48,000 and was to be sold as part of the reconstruction scheme. As for the trade receivables, it was determined that 10% of the stated value is non-recoverable and therefore would be written off.
Each GH¢1 equity share is to be redesignated as an equity share of GH¢0.25. After this, the equity shareholders would be persuaded to accept a reduction in the nominal value of their shares from GH¢1 to GH¢0.25 per share and subscribe for a new issue based on one-for-one at a price of GH¢0.30 per share.
The existing 5% loan notes are to be exchanged for a new issue of GH¢28,000 9.5% loan notes, repayable in 2028, plus 112,000 equity shares of GH¢0.25 each. In addition, they will subscribe for GH¢7,200 loan notes, repayable in 2028, at par value at the rate of 9.5%.

The 8% loan notes holders who have not received any interest for the past two years, are to receive 16,000 equity shares of GH¢0.25 each in lieu of the interest payable. It is agreed that the value of the interest liability is equivalent to the fair value of the shares to be issued. Moreover, the 8% loan notes holders have agreed to defer repayment of their loan until 2028, on condition that they are paid a higher interest rate of 9.5%.
The deficit on retained earnings is to be written off and the bank overdraft is to be repaid immediately.

Asset Category	Amount (GH¢)
Land	64,000
Building	64,000
Plant & Equipment	24,000
Inventory	40,000

Mensimah’s statement of financial position as at 31 December 2023 is as follows:

Assets	GH¢’000
Non-current assets
Land & buildings	154,597
Plant & equipment	48,603
Investment in Adams LTD	21,600
Total Non-Current Assets	224,800
Current assets
Inventory	96,198
Receivables	56,554
Total Current Assets	152,752
Total Assets	377,552

Equity & Liabilities	GH¢’000
Equity
Equity shares (GH¢1)	160,000
Retained earnings	(31,857)
Total Equity	128,143
Non-current liabilities
8% loan notes	64,000
5% loan notes	56,000
Total Non-Current Liabilities	120,000
Current liabilities
Trade payables	89,798
Interest payable	10,240
Overdraft	29,371
Total Current Liabilities	129,409
Total Equity & Liabilities	377,552

Required:

i) Prepare the capital reduction account for Mensimah LTD.
ii) Prepare the statement of Financial Position of Mensimah LTD immediately after the reconstruction.
iii) Determine the position of each stakeholder group if the reconstruction scheme is not implemented.

Answer

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Tags: Capital Reduction, Equity restructuring, Financial Statements, Loan Notes
Level: Level 3

Topic: Corporate reconstruction and reorganisation
Series: Nov 2024

CR – Nov 2024 – L3 – Q3b – Digital Transformation & Cybersecurity Risks

Address concerns regarding digital transformation, cybersecurity risks, regulatory compliance, and ethical dilemmas in accounting.

Question

b) In the contemporary business landscape, the integration of digital technologies presents multifaceted challenges for accounting professionals, particularly in the areas of digital transformation, cybersecurity, regulatory compliance, and ethical decision-making.

You are the newly appointed Chief Finance Officer (CFO) of Fanofom Ghana Ltd (FGL), a prominent Ghanaian company that produces and exports shea butter for the cosmetics industry to several companies globally. As FGL largely deals with international customers, it is undergoing a digital transformation to enable it to operate 24/7, and thus meet the needs of its clients given the time differences around the world.

As a result, the company has recently migrated its accounting systems to a cloud-based accounting platform and implemented automation tools to streamline financial processes. However, one of the old and senior directors who described himself as a BBC, a street jargon meaning “born before computer,” has expressed serious concerns about the digital transition and associated problems such as cybersecurity risks, regulatory compliance, and ethical issues that would arise due to the ongoing digital transformation.

Required:
i) Identify and explain the challenges associated with the integration of digital technologies in accounting systems with respect to:

Digital transition,
Cybersecurity risks,
Regulatory compliance,
Ethical dilemmas. (8 marks)

ii)Recommend two remedies to address the identified challenges.

Answer

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Tags: Accounting Systems, Cloud Computing, Cybersecurity Risks, Data security, Digital Transition, Ethical Dilemmas, Regulatory Compliance
Level: Level 3

Topic: Beyond financial reporting
Series: Nov 2024

CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

Question

(i) Share-Based Payment

Pee Manka PLC (PM), a hyper-growing firm in Ghana, prepares its financial statements on 31 December.

The following information is relevant:

The financial statements are authorised for issue on 31 March. On 31 December 2021, PM issued share options to seven (7) of its senior executives, giving each executive the option to purchase 2 million shares at GH¢6.50 per share. The fair value of each option at that date was GH¢4.00. The exercise of the share options was conditional on the completion of two-years’ service from 31 December 2021.

The company’s share price on subsequent dates was as follows:

Date	Share Price (GH¢)
31 December 2022	13.50
31 December 2023	17.50

On 31 March 2023, after the 2022 financial statements were authorised for issue, PM’s Chief Finance Officer, one of the seven executives, unexpectedly resigned from her position in the company.
On 30 April 2023 another executive, Mrs. Torsah, was dismissed.
The five remaining executives exercised their options on 31 December 2023.

Required:

In line with IFRS 2: Share-Based Payment, recommend how the above scenario would have been dealt with in the financial statements of PM for the year ended 31 December 2023. (6 marks)

(ii) Contingent Liabilities and Share-Based Payment

Mrs. Torsah, who was dismissed, immediately instigated legal proceedings against PM, and it was probable, on the 28 February 2024, that she would be deemed to have completed the two-year qualifying period of her share option agreement.
Legal advice at that time was that she was also likely to be awarded GH¢3.5 million in compensation, and that it was possible that this could rise to GH¢5.8 million.

Required:

In line with IFRS 2: Share-Based Payment and IAS 37: Provisions, Contingent Liabilities and Contingent Assets, explain how the above scenario would impact your results in (i) above.

Answer

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Tags: Contingent Liabilities, Employee Benefits, IAS 37, IFRS 2, Legal claims, Share Options
Level: Level 3

Topic: IAS 37: Provisions, Contingent Liabilities and Contingent Assets, IFRS 2: Share-Based Payments
Series: Nov 2024

CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

Question

Oboisah PLC (Oboisah) operates a defined benefit pension plan for employees who commenced employment with the company prior to 1 April 2021. The pension scheme is non-contributory.

At 31 March 2023, the Group recorded a net defined liability of GH¢157 million. The following information relates to the year ended 31 March 2024:

Description	Amount (GH¢ million)
Employer contributions paid on 31 March 2024	43
Benefits paid	16
Current service cost	42
Curtailment gain	3
Present value of defined benefit obligation at 31 March 2024	498
Value of plan assets at 31 March 2024	315

The average yield on relevant corporate bonds was 20% on 1 April 2023. Entries so far made in respect of the employer contributions have been incorrectly debited to accounts receivable and credited to cash. Benefits paid have been correctly recorded.

Required:

In line with IAS 19: Employee Benefits, determine how much pension amounts should be included in the financial statements of Oboisah PLC for the year ended 31 March 2024. Show the appropriate extracts for the above and any correction entries, if necessary.

Answer

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Tags: Defined Benefit Plan, Employee Benefits, Financial Reporting, IAS 19, Pension Obligation
Level: Level 3

Topic: IAS 19: Employee Benefits
Series: Nov 2024

CR – Nov 2024 – L3 – Q2b – Accounting for Legal Claims

Assess and account for a legal claim against Agropah PLC under IAS 37.

Question

ropah PLC (Agropah) prepares its financial statements to 30 June and usually authorizes them for issue on 25 August.

On 15 July 2024, Agropah received notice of a legal claim made by Odametey, a customer, for loss of profits allegedly due to the supply of faulty goods by Agropah on 30 April 2024. The amount claimed was GH¢5 million.

The directors of Agropah have estimated the following possible outcomes in respect of this legal claim:

28% chance that the claim will not succeed.
45% chance that the claim will succeed, and Odametey will be awarded GH¢3.2 million.
27% chance that the claim will succeed, and Odametey will be awarded GH¢5 million.

Required:

In line with IAS 37: Provisions, Contingent Liabilities & Contingent Assets, explain how this legal claim should be accounted for and reported in the financial statements of Agropah for the year ended 30 June 2024.

Answer

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Tags: Contingent Liability, Financial Reporting, IAS 10, IAS 37, Legal Claim, Provision
Level: Level 3

CR – Nov 2024 – L3 – Q2a – Lease Accounting and Foreign Exchange

Discuss lease accounting treatment and foreign exchange effects on lease payments.

Question

On 1 January 2023, Fabin Ghana Airlines PLC (FGA) leased a new fuel-efficient aircraft from German Jets Builders PLC (GJB) for ten (10) years, with an option to extend the lease period for five (5) additional years. However, at lease inception, FGA determined that the renewal option was not economically beneficial and would not be exercised.

The lease formed part of FGA’s sustainability strategy to green its air operations. Lease payments were structured as follows:

Fixed annual lease payments of €6 million, payable at each year-end starting 31 December 2023.
An additional 5% annual payment, conditional on FGA’s aircraft noise footprints and nitrogen oxide emissions declining by at least 15% and 10%, respectively.
At 31 December 2023, the Sustainability Committee determined that these environmental targets were met.

Additional lease details:

Estimated residual value of €15 million at 31 December 2032 and €10 million at 31 December 2037.
Residual Value Guarantee: FGA guaranteed that the relevant residual value will not drop below 30%.
Initial Direct Costs: GH¢500,000 was incurred in setting up the lease.
Discount Rate: 12%
Exchange Rates:
- 1 January 2023: €1 = GH¢10
- 31 December 2023: €1 = GH¢12
- Average rate: €1 = GH¢11

Discount Factors at 12%:

Year	Single-Period Factor	Annuity Factor
10	0.32	5.65
14	0.20	6.63
15	0.18	6.81

Required:

In line with IFRS 16: Leases and IAS 21: Effects of Changes in Foreign Exchange Rates, discuss how this lease should be accounted for in the financial statements of FGA for the year ended 31 December 2023.

Answer

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Tags: Foreign Exchange, IAS 21, IFRS 16, Lease Accounting, Lease Liability, Right-of-Use Asset, Variable Lease Payments
Level: Level 3

Topic: Effects of Changes in Foreign Exchange Rates, IFRS 16: Leases
Series: Nov 2024

FM – Nov 2024 – L2 – Q1b – Ethical Issues in Financial Management

Discuss four ethical issues in financial management and their impact on decision-making.

Question

Finance Managers often encounter decisions that affect the organisation’s financial health and reflect its commitment to ethical standards. Balancing profitability with ethical considerations can be challenging, yet it is essential for sustaining long-term success and protecting an organisation’s reputation.

Required:
Discuss FOUR ethical issues in financial management.

Answer

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Tags: Corporate Governance, Ethics, Financial management, Professional Conduct
Level: Level 2

Topic: Ethical issues in financial management
Series: Nov 2024

FM – Nov 2024 – L2 – Q1a – Sources of Finance

Compare equity and debt financing for business expansion using rights issue and loan notes.

Question

GoodLife Innovations is planning to expand its operations, which will boost its profit before interest and tax by 20%. The company is evaluating whether to fund the GH¢4,000,000 needed for this expansion through equity or debt financing.

If equity financing is chosen, the company will offer a 1-for-5 rights issue to existing shareholders at a 20% discount to the current ex-dividend share price of GH¢5 per share. The par value of the ordinary shares is GH¢1 per share. Alternatively, if debt financing is selected, GoodLife Innovations will issue 20,000 8% loan notes, each with a par value of GH¢200.

The following information was extracted from the financial statement prior to raising new finance:

GH¢’000	Amount
Profit before interest and tax	3,194
Finance costs (interest)	(630)
Taxation	(564)
Profit after tax	2,000
Equity & Liability:
Ordinary shares	5,000
Retained earnings	10,976
Long-term liabilities: 7% loan notes	9,000
Total equity & liabilities	24,976

GoodLife Innovations currently has a price/earnings ratio of 12.5 times. Corporate tax is payable at a rate of 22%.

Required:
i) Calculate the theoretical ex-rights price per share.
ii) Calculate the revised earnings per share after the business expansion:

assuming equity finance is adopted.
assuming debt finance is adopted.
iii) Determine the revised share prices under both financing methods after the business expansion.
iv) Determine which financing method should be used for the planned business expansion using computations for interest cover and share price changes.

Answer

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Tags: Debt Financing, Earnings Per Share, Financial Decision-Making, Rights Issue, Share Price
Level: Level 2

Topic: Sources of finance: debt, Sources of finance: equity
Series: Nov 2024

AA – Nov 2024 – L2 – Q5c – General Principles of Public Sector Auditing

Explain five general principles of public sector auditing under ISSAI.

Question

There are general principles that guide the practice of auditing in the public sector in accordance with International Standards of Supreme Audit Institutions (ISSAI). The principles of auditing are not very different from auditing and assurance in the private sector.

Required:
In relation to the statement above, explain FIVE general principles of public sector audit.

Answer

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Tags: Audit Principles, Audit Risk, Ethical Standards, ISSAI, Materiality, Professional Skepticism, Public Sector Audit
Level: Level 2

Topic: Public Sector Auditing
Series: Nov 2024

AA – Nov 2024 – L2 – Q5b – Substantive Testing of Accounts Receivable

Explain three substantive tests for verifying accounts receivable balance.

Question

Baaba & Associates, an audit firm, is conducting a year-end audit of Rashida LTD. The audit team is particularly concerned about the accuracy of the accounts receivable balance reported on the statement of financial position as of December 31, 2023. Therefore, as part of their audit procedures, they need to perform substantive tests to identify any material misstatements, errors, or fraud that could impact the accuracy of the financial statements.

Required:
Explain THREE substantive tests that the audit team at Baaba & Associates should perform to obtain sufficient appropriate audit evidence regarding the accuracy of Rashida LTD’s accounts receivable balance.

Answer

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Tags: Accounts Receivable, Audit evidence, Audit Procedures, Financial Reporting, Risk Assessment, Substantive Testing
Level: Level 2

Topic: Audit and Assurance Evidence
Series: Nov 2024

AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

Question

Oboshie Audit Firm has been engaged to audit the financial statements of Abakah Manufacturing LTD for the year ended December 31, 2023. During the planning phase of the audit, the audit team identified that Abakah Manufacturing LTD relies heavily on its internal control system to ensure the accuracy and completeness of its financial reporting.

Required:
i) Explain TWO tests of control to be performed by Oboshie Audit Firm to evaluate the effectiveness of Abakah Manufacturing LTD’s internal controls over its financial reporting.

ii) Identify a method that should be used under each test of control in (i) above.

Answer

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Tags: Approval of Transactions, Audit Procedures, Control Testing, Internal Controls, Risk Assessment, Segregation of Duties
Level: Level 2

Topic: Planning and Approach for Audit and Assurance Engagements
Series: Nov 2024

AA – Nov 2024 – L2 – Q4b – Audit Report and Basis for Opinion

Justify the audit report type and draft the basis for the opinion section.

Question

You are part of the audit team auditing a client in the retail business. During your risk assessment procedures, you were informed by management that accounts receivable records in one of the company’s branches were destroyed in a fire. The company is in the process of obtaining these accounts receivable records but was not able to do so prior to the approval of the financial statements. The fire incident happened on 31 December 2023 and the estimated amount involved is GH¢20 million. The audit team assessed that they are unable to obtain sufficient appropriate audit evidence due to inadequate accounting records. Possible effects are deemed material but not pervasive.

Required:
i) Justify the type of audit report to be issued in the above scenario.

ii) Draft the basis for the above opinion section of the auditor’s report.

Answer

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Tags: Audit report, Basis for Opinion, Financial Reporting, Material Misstatement, Qualified Opinion, Sufficient Audit Evidence
Level: Level 2

Topic: Completion Procedures and Reporting
Series: Nov 2024

AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

Question

During the audit of Darko Retail LTD, the audit team from Zalia Audit Firm observed that management has not performed a formal assessment of the entity’s ability to continue as a going concern. It was noted that though the financial statements show a favourable financial position, the company has been facing liquidity issues and has not been able to secure funds for a significant loan due shortly after the balance sheet date.

Required:
i) Outline FOUR factors that can raise questions about the going concern of Darko Retail LTD in the absence of a formal assessment by management.

ii) Describe how the audit team should report their findings related to the going concern assumption in their auditor’s report if they conclude that a material uncertainty exists but is not adequately disclosed in the financial statements.

Answer

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Tags: Audit opinion, Audit Risk, Auditor's Report, Financial Reporting, Financial Stability, Going Concern, Material Uncertainty
Level: Level 2

Topic: Completion Procedures and Reporting
Series: Nov 2024

AA – Nov 2024 – L2 – Q3b – Audit Assertions for the Income Statement

Explain two key audit assertions for the income statement.

Question

Audit assertions are claims made by management regarding the accuracy and completeness of various elements of financial statements. These assertions are used by auditors to develop audit procedures and gather evidence to support their audit opinion. Assertions are categorised into those related to the income statement and those related to the statement of financial position.

Required:
Explain TWO key Audit Assertions for the Income Statement.

Answer

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Tags: Audit Assertions, Audit evidence, Financial Reporting, Financial Statements, Income Statement, Substantive Testing
Level: Level 2

Topic: Audit and Assurance Evidence
Series: Nov 2024

AA – Nov 2024 – L2 – Q3a – Management’s Expert and Audit Evidence

Explain the term "management’s expert" and four factors to consider before relying on their work as audit evidence.

Question

Question:
ISA 500: Audit Evidence provides guidance for auditors intending to rely on the work of a management’s expert. If the information to be used as audit evidence has been prepared using the work of a management’s expert, the auditor must evaluate the management’s expert.

Required:
i) Explain the term “management’s expert.”
ii) Explain FOUR factors to consider before relying on the work of a management’s expert as audit evidence.

Answer

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Tags: Audit evidence, Audit Reliability, External audit, Financial Reporting, Management’s expert, Professional Judgment, Risk Management
Level: Level 2

Topic: Audit and Assurance Evidence
Series: Nov 2024

AA – Nov 2024 – L2 – Q2b – Advantages of Outsourcing Internal Audit

Explain the advantages and disadvantages of outsourcing the internal audit function.

Question

As organisations look for ways to cut costs, the idea of outsourcing internal audit work goes on the agenda. While outsourcing may be appealing in theory, there are good reasons to keep internal audit in-house.

Required:
i) State TWO advantages of outsourcing the internal audit function.
ii) State THREE disadvantages of outsourcing the internal audit function.

Answer

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Tags: Audit Function, Business Strategy, Cost Management, Internal Audit, Outsourcing, Risk Management
Level: Level 2

Topic: Internal Audit and Its Relationship with External Audit
Series: Nov 2024

Series: Nov 2024

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SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types

Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.

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CR – Nov 2024 – L3 – Q5b – Financial Performance & Digital Technology Integration

Evaluating the financial performance of Nsawkaw PLC and addressing challenges of digital technology integration in accounting.

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CR – Nov 2024 – L3 – Q5a – Financial Analysis and Investment Evaluation

Compute financial ratios for Nsawkaw PLC to evaluate its financial performance for investment recommendation.

Summarised Consolidated Statement of Profit or Loss for the year ended 30 June 2024

Summarised Consolidated Statement of Changes in Equity for the year ended 30 June 2024

Summarised Statement of Financial Position as at 30 June 2024

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CR – Nov 2024 – L3 – Q4b – Consolidation and Financial Reporting

Discuss the appropriate reporting figures a parent company should include in its consolidated financial statements when its subsidiaries have different reporting dates.

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CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction

Prepare the capital reduction account and the statement of financial position for Mensimah Ltd after reconstruction.

Required:

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CR – Nov 2024 – L3 – Q3b – Digital Transformation & Cybersecurity Risks

Address concerns regarding digital transformation, cybersecurity risks, regulatory compliance, and ethical dilemmas in accounting.

ii)Recommend two remedies to address the identified challenges.

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CR – Nov 2024 – L3 – Q3a – Share-Based Payment and Contingent Liabilities

Accounting for share-based payments and contingent liabilities in financial statements.

(i) Share-Based Payment

Required:

(ii) Contingent Liabilities and Share-Based Payment

Required:

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CR – Nov 2024 – L3 – Q2c – Accounting for Defined Benefit Pension Plans

Compute the pension amounts for Oboisah PLC under IAS 19.

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CR – Nov 2024 – L3 – Q2b – Accounting for Legal Claims

Assess and account for a legal claim against Agropah PLC under IAS 37.

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CR – Nov 2024 – L3 – Q2a – Lease Accounting and Foreign Exchange

Discuss lease accounting treatment and foreign exchange effects on lease payments.

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FM – Nov 2024 – L2 – Q1b – Ethical Issues in Financial Management

Discuss four ethical issues in financial management and their impact on decision-making.

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FM – Nov 2024 – L2 – Q1a – Sources of Finance

Compare equity and debt financing for business expansion using rights issue and loan notes.

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AA – Nov 2024 – L2 – Q5c – General Principles of Public Sector Auditing

Explain five general principles of public sector auditing under ISSAI.

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AA – Nov 2024 – L2 – Q5b – Substantive Testing of Accounts Receivable

Explain three substantive tests for verifying accounts receivable balance.

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AA – Nov 2024 – L2 – Q5a – Tests of Control and Methods for Testing Controls

Explain two tests of control and their corresponding methods of testing.

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AA – Nov 2024 – L2 – Q4b – Audit Report and Basis for Opinion

Justify the audit report type and draft the basis for the opinion section.

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AA – Nov 2024 – L2 – Q4a – Going Concern Considerations and Audit Reporting

Outline factors raising concerns about going concern and how auditors should report findings.

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AA – Nov 2024 – L2 – Q3b – Audit Assertions for the Income Statement

Explain two key audit assertions for the income statement.

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AA – Nov 2024 – L2 – Q3a – Management’s Expert and Audit Evidence

Explain the term "management’s expert" and four factors to consider before relying on their work as audit evidence.

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AA – Nov 2024 – L2 – Q2b – Advantages of Outsourcing Internal Audit

Explain the advantages and disadvantages of outsourcing the internal audit function.

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