ADVANCED AUDIT AND ASSURANCE – Page 12

AAA – L3 – Q16 – Public sector audit

Detail the functions of the Internal Audit Agency as per the Internal Audit Agency Act (2003) for the Municipal Chief Executive.

Question

Dr. Kwame Asante has been appointed the Municipal Chief Executive (MCE) of Asantekrom Municipal Assembly. He has assumed duty early last month and has carried out a familiarisation tour of all the departments of the Assembly.
You are the Internal Auditor of the Assembly and have worked there for the past two years. During your turn of briefing the MCE, you mentioned to him that the Internal Audit Agency (IAA) exists as an apex oversight body of internal audit units working within MDAs and MMDAs. It was established by the Internal Audit Agency Act (2003) with the object to co-ordinate, facilitate and provide quality assurance for internal audit activities within the MDAs and MMDAs.
At the end of your briefing, the MCE requested for more information on the IAA, especially its functions. You were pleased with the MCE and formally welcomed him to the Assembly.
Required:
Communicate to the MCE in the appropriate form detailing out the functions of the Internal Audit Agency according to the Internal Audit Agency Act (2003).

Answer

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Tags: Audit Regulation, Functions, Ghana, Internal Audit, Internal Audit Agency, Oversight, Public Sector
Level: Level 3

Topic: Public sector audit

AAA – L3 – Q15 – Practice Management

Advise new auditors on ISOM 1 considerations for accepting a nomination as auditors of a former client’s company.

Question

Kofi Amo and Kwame Osei, who recently qualified as professional accountants, have decided to enter into professional practice under the firm name Amo Osei & Partners. These two were trainee accountants at an audit and assurance firm for three years before qualifying.
For their first engagement, the CEO of Adom Ltd has nominated Amo Osei & Partners for appointment as auditors of his company, though Adom Ltd was a former client of their former firm. Kofi Amo and Kwame Osei were never on the engagement team of Adom Ltd.
As beginners, Kofi Amo and Kwame Osei intend to follow best practice as required by ISOM 1 Quality Management for Firms that Perform Audits or Reviews of Financial Statements or Other Assurance or Related Services. However, they are not clear on the matters they have to consider in their acceptance decision according to the standard. They have approached you, a senior partner of their former firm, for advice.
Required:
Advise Kofi Amo and Kwame Osei on the matters they may have to consider in relation to the acceptance decision on their nomination.

Answer

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Tags: Audit Firm, Audit Practice, Client Acceptance, Engagement Decision, Independence, ISOM 1, New Client, Professional Ethics, Quality management, Risk Assessment
Level: Level 3

Topic: Practice management

AAA – L3 – Q14 – Rules of Professional Conduct

Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

Question

Dabidaba & Co., an audit and assurance firm, has been engaged as auditors for the BKG Financial Ltd, a public limited liability company for some time now. BKG Financial has sixty branches throughout the country and branches in Benin, Mali, and Senegal. The Bank is one of the banks in the country which can boast of large landed properties. Dabidaba & Co. receives about 20% of its income from this particular client. Before last year’s audit, the bank engaged the audit firm to value its land and buildings in all its branches and headquarters. This work was executed by the audit firm and a report has been issued to management. The report has been incorporated in this year’s financial statements to be audited soon. Dabidaba & Co. sees BKG Financial Ltd. as a very important client whose works are always executed with dispatch.

Required:
(i) Identify and evaluate the significance of any threats to the Code of Ethics for Professional Accountants raised in the case. (ii) Recommend safeguards to eliminate the threats (mentioned in (i) above) or reduce them to an acceptable level, if these are possible.

Answer

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Tags: Auditor Independence, Ethics, Non-Audit Services, Professional conduct
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – Q13 – Fraud

Comment on the need for ethical guidance for accountants on money laundering.

Question

(a) Comment on the need for ethical guidance for accountants on money laundering. (b) Explain the difference between fraud and error and how the issues shown here could be categorised as fraud or error. (c) Discuss the role of management and the role of the auditor in the prevention and detection of fraud and error.

Daniel’s Maritime and Harbor (DMH) have a marina in Lagos and a large sales operation dealing in yachts and speedboats. You are responsible for the audit of DMH and have found some potential causes of concern that could indicate fraudulent activity or financial misconduct within the company. In particular:

30% of the yachts on sale by DMH are supplied through one of the major international boating companies with a special finance arrangement deal. However, DMH have also obtained separate finance on these yachts, which are therefore in effect being ‘double financed’.
Ten yachts shown as assets by DMH cannot be located, with no explanation other than that they have not been sold. These yachts together are worth approximately ₦50 million.
Long delays have occurred in performing reconciliations with the last four months of reconciliations still not completed. At the time of the last reconciliation, material differences had been identified upon which no action appears to have been undertaken.
Revenues have been overstated by ₦100 million in the current financial statements.
The finance director has been off sick with stress for the last five months and therefore has not been available to discuss any of the issues identified.

(d) Describe what steps you would take to further investigate and then report on the matters referred to above.

Answer

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Tags: Auditor Responsibility, Ethics, Fraud, Money laundering
Level: Level 3

Topic: Fraud and Error

AAA – L3 – Q12 – Professional responsibility and liability

Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

Question

Increasingly, the auditing profession is finding itself on the receiving end of large negligence suits.

Answer

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Tags: Auditor Liability, Legal Claims, Negligence, Professional standards, Risk Management
Level: Level 3

Topic: Professional responsibility and liability

AAA – L3 – Q11 – Quality Management

Provide examples of documentary evidence showing adherence to ISA 220 for audit quality management.

Question

Set out possible examples of documentary evidence which should indicate that the auditor has adhered to ISA 220 (Revised) Quality Management for an Audit of Financial Statements.

Answer

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Tags: Audit Documentation, Engagement Quality, Quality management
Level: Level 3

Topic: Practice management

AAA – L3 – Q10 – Corporate governance

Explain corporate governance and roles of directors, external auditor, internal auditor, and audit committee.

Question

(a) Explain what is meant by corporate governance.

(b) Explain how the following fit into the workings of corporate governance.

(i) The directors

(ii) The external auditor

(iii) The internal auditor

(iv) The audit committee

Answer

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Tags: Audit committee, Corporate Governance, Directors, External auditor, Internal auditor
Level: Level 3

Topic: Corporate governance

AAA – L3 – Q9 – Rules of professional conduct

Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

Question

ICAG has adopted IESBA’s ethical guidance, the International Code of Ethics for Professional Accountants. These rules are applicable to all members and students. If these rules are not complied with disciplinary action may result which could lead to reprimand, fine or exclusion.

Required
(a) Explain why you think fundamental principles of ethics are so fundamental to auditing.
(b) Explain how a member can demonstrate that they are truly independent in carrying out the work they perform, and why it is important that they should do so.
(c) Set out the circumstances in which it is permissible to disclose confidential client information.

Answer

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Tags: Auditor Independence, Client information disclosure, Confidentiality, Disciplinary action, Ethics, IESBA Code, Independence, Professional conduct
Level: Level 3

Topic: Rules of Professional Conduct

AAA – L3 – Q8 – Rules of professional conduct

Outline points for a paper on money laundering obligations for an audit firm, including definitions, offenses, and firm responsibilities.

Question

Points to be included in paper for partners re money laundering

Answer

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Topic: Rules of Professional Conduct

AAA – L3 – Q7 – Assurance Services

Explain the meaning of assurance and the difference between an audit and a review.

Question

(a) The meaning of assurance

(b) The difference between an audit and a review

Answer

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Tags: Assurance, Financial Statements, Negative Assurance, Review, Statutory Audit
Level: Level 3

Topic: Assurance Services

Subject (SQ): ADVANCED AUDIT AND ASSURANCE

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AAA – L3 – Q16 – Public sector audit

Detail the functions of the Internal Audit Agency as per the Internal Audit Agency Act (2003) for the Municipal Chief Executive.

AAA – L3 – Q15 – Practice Management

Advise new auditors on ISOM 1 considerations for accepting a nomination as auditors of a former client’s company.

AAA – L3 – Q14 – Rules of Professional Conduct

Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

AAA – L3 – Q13 – Fraud

Comment on the need for ethical guidance for accountants on money laundering.

AAA – L3 – Q12 – Professional responsibility and liability

Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

AAA – L3 – Q11 – Quality Management

Provide examples of documentary evidence showing adherence to ISA 220 for audit quality management.

AAA – L3 – Q10 – Corporate governance

Explain corporate governance and roles of directors, external auditor, internal auditor, and audit committee.

AAA – L3 – Q9 – Rules of professional conduct

Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

AAA – L3 – Q8 – Rules of professional conduct

Outline points for a paper on money laundering obligations for an audit firm, including definitions, offenses, and firm responsibilities.

AAA – L3 – Q7 – Assurance Services

Explain the meaning of assurance and the difference between an audit and a review.

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Subject (SQ): ADVANCED AUDIT AND ASSURANCE

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Detail the functions of the Internal Audit Agency as per the Internal Audit Agency Act (2003) for the Municipal Chief Executive.

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Advise new auditors on ISOM 1 considerations for accepting a nomination as auditors of a former client’s company.

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Identify and evaluate threats to the Code of Ethics for accountants in BKG Financial Ltd case.

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Comment on the need for ethical guidance for accountants on money laundering.

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Discuss measures to reduce negligence claims against audit firms by firms, the profession, or governments.

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Explain corporate governance and roles of directors, external auditor, internal auditor, and audit committee.

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Explain the importance of ethical principles, demonstrate independence, and outline when confidential client information can be disclosed.

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Outline points for a paper on money laundering obligations for an audit firm, including definitions, offenses, and firm responsibilities.

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