Series: Nov 2024

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  • 12 Marks

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.

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.

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  • 14 Marks

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.

(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. 

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  • 6 Marks

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

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

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:

  1. The total number of equity shares outstanding was 1.2 million and 1.4 million at 30 June 2023 and 30 June 2024 respectively.
  2. 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.
  3. Non-current liabilities at 30 June 2023 and 30 June 2024 amounted to GH¢250,800 and GH¢308,510 respectively.
  4. 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:

  1. Operating profit margin
  2. Return on parent’s equity
  3. Earnings per share
  4. Current ratio
  5. Trade receivables days
  6. Total liabilities to total assets %

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  • 5 Marks

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.

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?

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  • 15 Marks

CR – Nov 2024 – L3 – Q4a – Corporate Reconstruction

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

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:

  1. 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.

  2. 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.

  3. 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%.

  4. The deficit on retained earnings is to be written off and the bank overdraft is to be repaid immediately.

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.

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  • 10 Marks

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

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

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.

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  • 10 Marks

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

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.

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  • 5 Marks

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

Compute the pension amounts for Oboisah PLC under IAS 19.

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.

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  • 5 Marks

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

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

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.

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  • 10 Marks

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

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

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.

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  • 15 Marks

AAA – Nov 2024 – L3 – Q2a – Audit Risks and Responses for Ecowud Co. LTD

Identifying audit risks in Ecowud Co. LTD and how auditors should respond.

Ecowud Co. LTD (Ecowud) is a sustainable goal-oriented company that develops, manufactures, and sells plywood made from rice husk and plastic waste. The company has a wide customer base, including construction companies and furniture manufacturers across Ghana and West Africa.

You are the Audit Manager of Adomako & Associates and are planning the audit of Ecowud for the year ended 31 December 2023. You and the Audit Engagement Partner attended a planning meeting with Ecowud’s Finance Manager.

You are reviewing the initial meeting notes to develop the audit strategy and plan. The following key matters were captured:

  1. Development Expenditure: Revenue for the year was forecast at GH¢32 million. During the year, Ecowud spent GH¢3.5 million on developing new types of plywood. Some of these are in the early stages of development, while others are nearing completion. The Finance Manager intends to capitalize the entire GH¢3.5 million spent on development since all projects are likely to succeed.

  2. Inventory Valuation: Ecowud uses a standard costing method to value inventory. However, the company has never updated its standard costs since adopting this policy. The company operates multiple warehouses in Ghana and across West Africa, most of which are third-party rented premises.

  3. Accounting Software: A new accounting software was developed internally and implemented in August. The old and new software did not run parallel, as management deemed it burdensome. Two months after implementation, the IT Manager resigned, and a new IT Manager will take over in January 2024.

  4. Long-term Loan and Share Capital: Ecowud restructured its finances, raising GH¢2 million through share issuance and GH¢3.5 million through a long-term loan. The loan has bank-imposed financial conditions, including a minimum total asset level. If breached, the loan becomes immediately repayable.

  5. Revaluation of Land & Buildings: Ecowud follows a revaluation model for land and buildings. The Finance Manager has announced that all land and buildings will be revalued at the year-end.

Required:
Identify FIVE audit risks in relation to Ecowud Co. LTD and for each risk, explain how the auditor should respond.

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  • 10 Marks

AAA – Nov 2024 – L3 – Q1b – Group Audit Risks and Consolidation Issues

Audit risks and procedures for a multinational group audit engagement.

You are a Senior Auditor at Dromo Audit Firm, assigned to audit a new client, Afroherb Pharma LTD, a multinational pharmaceutical company. During the initial stages of engagement planning, you discovered that Afroherb Pharma LTD operates in multiple jurisdictions, including Ghana, Liberia, Sierra Leone, and The Gambia. The parent company is in Ghana, and the companies in the other jurisdictions are all subsidiaries. All these jurisdictions have significant regulatory requirements and operational difficulties. The company has recently expanded its product line to include vaccine production following the introduction of The Vaccine Centre in Ghana. The production of vaccines is also subject to stringent regulatory reviews.

Required:
i) State FOUR audit procedures you could perform in relation to the consolidation of the financial statements of Afroherb Group. 
ii) Identify TWO specific risks associated with auditing Afroherb Pharma LTD, particularly in relation to its expansion into vaccine products. How should these risks be managed?
iii) State TWO problems associated with the planning of group audits

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  • 10 Marks

AAA – Nov 2024 – L3 – Q1a – Ethical Issues in Audit Engagements

Ethical issues and professional conduct in an audit engagement involving conflict of interest.

You are the Audit Partner of a mid-sized audit firm, Amoah Sonko and Associates. One of your major clients, Kudi LTD (Kudi), has approached you for a significant audit engagement. Kudi has been experiencing rapid growth and plans to get listed on the Ghana Alternative Market within the next year. During preliminary discussions, the Managing Director of Kudi, a friend, promised you a bonus if the audit report is completed quickly and is favourable, highlighting the company’s strengths.

In the course of the audit of Kudi, you came across a series of unusual financial transactions. These included large intercompany loans with its sister companies, other significant related-party transactions with the directors, and an unusually high volume of sales recorded a few days before the end of the financial year. Upon further investigation, your team found discrepancies in inventory records and evidence of potential non-compliance with revenue recognition standards. The Finance Manager insists these transactions are legitimate and necessary for the company’s rapid growth.

Additionally, you noticed that Kudi was involved in a high-profile legal battle with a major competitor, which was not fully disclosed in the financial statements. The lawyer for Kudi insists that you omit this information from the audit report, arguing it would damage the company’s reputation and its plans to get listed on the Ghana Alternative Market.

Required:
i) Identify TWO potential ethical issues in the scenario and explain the potential impact on your professional conduct.                      ii) Identify the steps you should take to address the conflict of interest presented by the Managing Director’s offer. 
iii) Discuss the potential sanctions for accepting the Managing Director’s offer and providing a favourable audit report without proper verification. 
iv) Evaluate the impact of the undisclosed legal battle on Kudi LTD’s financial statements and the upcoming initial public offer.

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  • 4 Marks

PSAF – Nov 2024 – L2 – Q5c – Functions of the State Interests and Governance Authority

Explains four functions of the State Interests and Governance Authority (SIGA) in overseeing state entities.

The Nine Hundred and Ninetieth Act of the Parliament of the Republic of Ghana entitled the State Interests and Governance Authority Act, 2019 was established to oversee and administer state interests in state-owned enterprises, joint venture companies, and other state entities and to provide for related matters.

Required:

Explain FOUR functions of the State Interests and Governance Authority (SIGA).

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  • 6 Marks

PSAF – Nov 2024 – L2 – Q5b – Nolan’s Principles of Public Life

Explains four of Nolan’s Seven Principles of Public Life, which guide ethical behavior in public office.

 Nolan’s Seven Principles of Public Life serve as guidelines for ethical behavior in public service. They are not typically enforceable through direct legal actions; instead, they often operate as moral and professional standards shaping the behavior of individuals in public office.

Required:

Explain FOUR of these principles.

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  • 4 Marks

PSAF – Nov 2024 – L2 – Q5a – Public Financial Management Regulations

Explains the provisions in PFM Regulation 2019 for a Principal Spending Officer in the payment process and differentiates between misapplication and misappropriation of funds.

a) The Public Financial Management Regulation makes the Principal Spending Officer (PSO) personally responsible for all payments of the covered entity. To mitigate possible risk exposure of the PSO during the payment process, the regulations provide guidance to assist approving authorities before signing off any payment.

In recent times, the Auditor-General has faulted PSOs for infractions such as misapplication of funds, misappropriation of funds, and partially accounted payments among others. Similar observations were cited in the 2023 Management Letter of Nipa Ye Municipal Assembly.

Required:

i) With reference to the PFM Regulation 2019, LI 2378, explain the provisions available to the PSO in the payment process before approval.

ii) Distinguish between misapplication of funds and misappropriation of funds as used by the Auditor-General with an example each.

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  • 3 Marks

PSA – Nov 2024 – L2 – Q4c – Events After the Reporting Date

Explanation of events occurring after the reporting date and their impact on financial statements.

Explain THREE limitations of ratio analysis

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  • 9 Marks

PSAF – Nov 2024 – L2 – Q4b – Public Expenditure and Financial Accountability

Explanation of the Public Expenditure and Financial Accountability framework and its application.

Based on your results in (a), write a report to the newly appointed board analyzing and indicating whether their performance is better in comparison with the old board.

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  • 8 Marks

PSAF – Nov 2024 – L2 – Q4a – Financial Ratio Analysis

Compute financial ratios for Ghana Wind Farms LTD to analyze performance trends.

Ghana Wind Farms LTD, a State-Owned Enterprise (SOE), has appointed a new Board of Directors in January 2023. The new Board, after settling for a year, is interested in assessing their performance for the year 2023 against the performance of the previous Board in the year 2022 through ratio analysis. Below is the financial statement of Ghana Wind Farms LTD for the two years.

Ghana Wind Farms LTD

Statement of Profit or Loss for the Year Ended 31 December 2023

2023 (GH¢) 2022 (GH¢)
Revenue 9,860,000 6,218,000
Direct Cost (5,905,000) (5,822,000)
Gross Profit 3,955,000 396,000
Distribution Costs (297,000) (264,000)
Administrative Expenses (505,000) (455,000)
Other Income 236,000 13,000
Other Gains – 1,482,000
Operating Profit 3,389,000 1,172,000
Finance Cost (1,000,000) (334,000)
Profit Before Tax Expense 2,389,000 838,000
Tax Expense (500,000) (144,000)
Profit After Tax 1,889,000 694,000

Ghana Wind Farms LTD

Statement of Financial Position as at 31 December 2023

2023 (GH¢) 2022 (GH¢)
ASSETS
Non-Current Assets
Property, Plant & Equipment 17,000,000 15,000,000
Investment 5,000 2,000
Advances & Loans – 30,000
Total Non-Current Assets 17,005,000 15,032,000
Current Assets
Inventories 687,000 546,000
Trade and Other Receivables 2,829,000 1,978,000
Prepayments 87,000 42,000
Cash and Cash Equivalents 383,000 434,000
Total Current Assets 3,986,000 3,000,000
TOTAL ASSETS 20,991,000 18,032,000
EQUITY & LIABILITIES
Equity
Government Equity 8,000 8,000
Other Government Equity 613,000 306,000
Capital Surplus 8,471,000 7,599,000
Income Surplus (1,434,000) 478,000
Total Equity 7,970,000 8,697,000
Non-Current Liabilities
Deferred Credit 6,692,000 670,000
Deferred Tax Liabilities 2,498,000 2,572,000
Borrowings (Due After One Year) 1,297,000 950,000
Total Non-Current Liabilities 10,487,000 4,192,000
Current Liabilities
Bank Overdraft 166,000 180,000
Provision for Company Tax 109,000 109,000
Trade and Other Payables 1,820,000 4,516,000
Borrowings (Due Within One Year) 439,000 338,000
Total Current Liabilities 2,534,000 5,143,000
Total Liabilities 13,021,000 9,335,000
TOTAL EQUITY AND LIABILITIES 20,991,000 18,032,000

Required:

a) Compute the following ratios:

i) Current Ratio
ii) Quick Ratio
iii) Inventory Turnover (Days)
iv) Trade Receivable Collection Period (Days)
v) Trade Payables Period (Days)
vi) Working Capital Cycle
vii) Interest Cover Ratio
viii) Total Debt – Total Asset Ratio

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  • 10 Marks

PSAF – Nov 2024 – L2 – Q3b – Public Expenditure and Financial Accountability (PEFA) Assessment

Evaluate the financial performance of a local government based on PEFA assessment results and recommend strategies for improvement.

 Accounting and reporting constitute a key pillar of an organised and transparent public financial management system in the public sector. The effectiveness of accounting and reporting reflects the integrity of financial data, the accuracy of in-year budget reports, and the quality of annual financial statements. In a recent Public Expenditure and Financial Accountability (PEFA) assessment, a local government had the following results:

  • Annual financial reporting: D
  • In-year budget report: D+
  • Financial data integrity: C

Required:
i) Explain the assessment performance to the Municipal Chief Executive of the local government.
ii) Recommend two strategies for improving the performance of the local government in each of the assessed areas.

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