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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q6 – External Auditors and Corporate Governance

Discuss six responsibilities of external auditors in promoting good corporate governance in banks, and explain four mechanisms for maintaining financial reporting integrity and enhancing shareholder confidence.

a) Discuss the responsibilities of External Auditors in promoting Good Corporate Governance of banks. (You are required to state and discuss six (6) key responsibilities.) (12 marks)

b) Explain how External Auditors contribute to maintaining the Integrity of Financial Reporting and enhancing Shareholder confidence. (You are required to list and explain four (4) mechanisms.) (8 marks)

(Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q5 – Budgetary Control and IFRS 10 Consolidation

Explain budgetary control system and three ways it ensures operational efficiency; explain consolidated financial statements and four circumstances where control exists but consolidation not required.

a) Budgetary Control is a crucial aspect of managing businesses finances. By implementing a robust Budgetary Control System, businesses can use their financial resources effectively and efficiently to achieve their goals and objectives.

You are required to:

i) Explain what is meant by Budgetary Control System. (3 marks) ii) Recommend three (3) ways by which Budgetary Control System can help to provide information to ensure operational efficiency. (6 marks) b) IFRS 10: Consolidated Financial Statements outlines the requirements for the preparation and presentation of Consolidated Financial Statements, requiring entities to consolidate other entities it controls. The Control Principle in IFRS 10 sets out the following three (3) elements of control: power over the investee; exposure to, or rights to, variable returns from its investment with the investee; and the ability to use power over the investee to affect the amount of those returns.

You are required to: i) Explain what Consolidated Financial Statements are (3 marks) ii) Identify four (4) circumstances under which a company may gain control over another company but would not be required to prepare Consolidated Financial Statements. (8 marks) (Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q4 – Potco PLC Ratios and Performance Report

Compute six ratios for Potco PLC and write a report assessing its financial performance and position relative to the industry.

Potco PLC is a listed Ghanaian company that produces textile prints for both local and African markets. As at the year ended 31 March 2023, the company made a Gross Profit of GH$12,150. Cost of Sales for the year was GH$77,850 and Operating Profit Before Interest and Tax was GH$47,130. Finance Cost for the year was GH$920 and Tax Charged to Profit or Loss was GH$1,400.

The Inventory Turnover was 3.6 times. Dividend Paid Per Share was GH$0. 36 resulting in a Dividend Yield of 6 %. Current Assets consist of Inventory, Cash and Trade Receivables.

Extracts from the Statement of Financial Position as at 31 March 2023 were as follows: GH$

| Non-Current Assets | 63,320 | | Current Asset (excluding Inventory and Cash) | 18,605 | | Current Liabilities | 27,600 | | Shareholder’s Fund | 58,480 | | Cash | 6,000 | | 10% Debenture | 23,500 | | Share Capital (@ GH63) | 18,000 |

The following ratios relate to the industry in which Potco Plc belongs to:

| Profit (after Tax) Margin | 4.1% | | Current Ratio | 1.12 | | Return on Capital Employed (ROCE) | 10.0% | | Inventory Turnover | 3.47 | | Receivables Period | 87 days | | Dividend Yield | 5.8% | | EPS Ratio | 12.0 | | Debt/Equity Ratio | 32.6% |

You are required to: a) As far as the above information permits, compute the following ratios for Potco PLC. i. Profit (after Tax) Margin ii. Current Ratio iii. Return on Capital Employed (ROCE) iv. Receivables Period v. Price/Earnings Ratio vi. Debt/Equity Ratio (12 marks) b) Using the ratios above, write a report to the Board of Potco PLC to assess the Financial Performance and Financial Position of the entity, relative to its industry. (8 marks) [Total: 20 marks]

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q3 – IAS 38 Intangible Assets

Define intangible asset, explain recognition criteria, state five disclosure requirements, explain research and development expenditure, and conditions for capitalisation per IAS 38.

IAS 38: Intangible Assets defines the difference between Research Expenditure and Development Expenditure IAS 38 also lays down rules which must be applied to the Capitalisation of Research and Development Expenditure

You are required to: i. Define an Intangible Asset under IAS 38: Intangible Assets. ii. Explain the Recognition Criteria for Intangible Assets. iii. State five (5) Disclosure Requirements of Intangible Assets under IAS 38 iv. Explain the meaning of the terms Research Expenditure and Development Expenditure. v. Explain the conditions applied to Research and Development Expenditure, according to IAS 38, to determine whether or not the cost should be capitalised. (20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q2 – IAS 8, ZBB Challenges, Budgetary Control Factors

Explain accounting policies and changes in estimates per IAS 8, four challenges of implementing ZBB, and three factors for effective budgetary control.

a) IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying Accounting Policies, Accounting for Changes in Estimates and reflecting Corrections of Prior Period Errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing Accounting Policies for other items that result in relevant and reliable information.

You are required to:

Explain the following in accordance with IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors. i) Accounting Policies (3 marks) ii) A Change in Accounting Estimates (3 marks)

b) Zero Based Budgeting (ZBB) is a process of budgeting that allocates funding based on programme efficiency and necessity rather than budget history. ZBB aims to put the onus on managers to justify expenses and to drive value for an organisation by optimising cost and not just revenue. Adopting a ZBB Approach for a company may seem like an intending task but when weighed against the value derived, the effort is worth the result.

You are required to:

Explain four (4) challenges Management will face when implementing a Zero-Based Budgeting System (8 marks) c) Organisations invest time and resources in creating and controlling budgets to ensure stability and predictability of their operations.

You are required to:

Explain three (3) factors necessary for an effective Budgetary Control System (3 marks)

[Total: 20 marks]

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q1B – AFEN Ltd Mine Accounting Treatment

Explain the accounting treatment for the license, development costs, reclamation provision, and earthquake damage for AFEN Ltd.

AFEN Ltd. obtained a license, free of charge from the government, to dig and operate a gold mine. AFEN Ltd. spent GH$6 million digging and preparing the mine for operation and erecting buildings on the site. The mine commenced operations on 1 September 2022. The license requires that at the end of the mine’s useful life of 20 years, the site must be reclaimed, all buildings and equipment must be removed and the site landscaped. At 31 August 2023, AFEN Ltd. estimated that the cost in 19 years’ time of the removal and landscaping will be GH$5 million and its present value is GH$3 million.

On 31 October 2023, there was a massive earthquake in the area and AFEN Ltd’s mine shaft was badly damaged.It is estimated that the mine will be closed for at least six (6) months and will cost GH$1 million to repair.

You are required to:

Explain the accounting treatment for the license, the development costs, the reclamation provision, and the earthquake damage in the financial statements for the year ended 31 August 2023.

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q1A – Preparation of Financial Statements for Vandee Oil Ltd

Using the provided trial balance and additional information on inventory, asset purchases, depreciation rates, utilities adjustments, and staff bonuses, prepare the Statement of Profit or Loss for 2023 and the Statement of Financial Position as at 31 December 2023.

Vandee Oil Ltd. has been in business for the past ten (10) years. The following Trial Balance was extracted from the books of Vandee Oil Ltd. for the year ended 2023.

Item GH¢’000 (Debit) GH¢’000 (Credit)
Bank 46,200
Petty Cash 4,000
Computer and Accessories 8,370
Furniture and Fittings 10,255
Land and Building 214,000
Office Equipment 12,250
Plant and Machinery 239,400
Inventory 1,900
Staff Loan 5,088
Purchases 355,000
Bank Service Charges 1,300
Business Promotion 1,500
Communication 1,900
Insurance 1,660
Licenses and Permits 6,650
Medical Expenses 155
Printing and Stationery 300
Professional Fees: Legal Fees 500
Repairs: Equipment Repairs 2,600
Salaries 23,050
Electricity 780
Water 280
Vehicle Running Expense 4,560
Trade Payable 25,000
Directors Current Account 320,000
Computer and Accessories: Accumulated Depreciation 3,348
Furniture and Fittings: Accumulated Depreciation 2,050
Land and Building: Accumulated Depreciation 8,560
Office Equipment: Accumulated Depreciation 2,450
Plant and Machinery: Accumulated Depreciation 47,880
Payroll Liabilities 550
Retained Earnings 49,282
Taxation 3,003
Share Capital 10,000
Sales 574,145
TOTALS 993,983 993,983

Additional Information: i) Closing Inventory as at December 2023 amounts to GH¢48,500,000 ii) The following assets were bought during the year 2023. However, these transactions were not recorded in the above Trial Balance:

  • Computers and Accessories GH¢8,000,000
  • Fixtures and Fittings GH¢5,000,000
  • Plant and Machinery GH¢25,000,000 The following are the rates of Depreciation being used by the company, however Depreciation for 2023 is yet to be charged:
  • Land and Building 1%
  • Computers and Accessories 20%
  • Furniture and Fittings 10%
  • Plant and Machinery 20%
  • Office Equipment 20% iii) Electricity stated in the Trial Balance include January 2024 Electricity Bill while that of Water represents six (6) months’ payment for the year 2023. iv) Staff bonuses amounting to GH¢15,000,000 was agreed on 31 December 2023 for staff. However, it was paid after the year end.

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q6 – External Auditors and Corporate Governance

Discuss six responsibilities of external auditors in promoting good corporate governance in banks, and explain four mechanisms for maintaining financial reporting integrity and enhancing shareholder confidence.

a) Discuss the responsibilities of External Auditors in promoting Good Corporate Governance of banks. (You are required to state and discuss six (6) key responsibilities.) (12 marks)

b) Explain how External Auditors contribute to maintaining the Integrity of Financial Reporting and enhancing Shareholder confidence. (You are required to list and explain four (4) mechanisms.) (8 marks)

(Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q5 – Budgetary Control and IFRS 10 Consolidation

Explain budgetary control system and three ways it ensures operational efficiency; explain consolidated financial statements and four circumstances where control exists but consolidation not required.

a) Budgetary Control is a crucial aspect of managing businesses finances. By implementing a robust Budgetary Control System, businesses can use their financial resources effectively and efficiently to achieve their goals and objectives.

You are required to:

i) Explain what is meant by Budgetary Control System. (3 marks) ii) Recommend three (3) ways by which Budgetary Control System can help to provide information to ensure operational efficiency. (6 marks) b) IFRS 10: Consolidated Financial Statements outlines the requirements for the preparation and presentation of Consolidated Financial Statements, requiring entities to consolidate other entities it controls. The Control Principle in IFRS 10 sets out the following three (3) elements of control: power over the investee; exposure to, or rights to, variable returns from its investment with the investee; and the ability to use power over the investee to affect the amount of those returns.

You are required to: i) Explain what Consolidated Financial Statements are (3 marks) ii) Identify four (4) circumstances under which a company may gain control over another company but would not be required to prepare Consolidated Financial Statements. (8 marks) (Total: 20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q4 – Potco PLC Ratios and Performance Report

Compute six ratios for Potco PLC and write a report assessing its financial performance and position relative to the industry.

Potco PLC is a listed Ghanaian company that produces textile prints for both local and African markets. As at the year ended 31 March 2023, the company made a Gross Profit of GH$12,150. Cost of Sales for the year was GH$77,850 and Operating Profit Before Interest and Tax was GH$47,130. Finance Cost for the year was GH$920 and Tax Charged to Profit or Loss was GH$1,400.

The Inventory Turnover was 3.6 times. Dividend Paid Per Share was GH$0. 36 resulting in a Dividend Yield of 6 %. Current Assets consist of Inventory, Cash and Trade Receivables.

Extracts from the Statement of Financial Position as at 31 March 2023 were as follows: GH$

| Non-Current Assets | 63,320 | | Current Asset (excluding Inventory and Cash) | 18,605 | | Current Liabilities | 27,600 | | Shareholder’s Fund | 58,480 | | Cash | 6,000 | | 10% Debenture | 23,500 | | Share Capital (@ GH63) | 18,000 |

The following ratios relate to the industry in which Potco Plc belongs to:

| Profit (after Tax) Margin | 4.1% | | Current Ratio | 1.12 | | Return on Capital Employed (ROCE) | 10.0% | | Inventory Turnover | 3.47 | | Receivables Period | 87 days | | Dividend Yield | 5.8% | | EPS Ratio | 12.0 | | Debt/Equity Ratio | 32.6% |

You are required to: a) As far as the above information permits, compute the following ratios for Potco PLC. i. Profit (after Tax) Margin ii. Current Ratio iii. Return on Capital Employed (ROCE) iv. Receivables Period v. Price/Earnings Ratio vi. Debt/Equity Ratio (12 marks) b) Using the ratios above, write a report to the Board of Potco PLC to assess the Financial Performance and Financial Position of the entity, relative to its industry. (8 marks) [Total: 20 marks]

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q3 – IAS 38 Intangible Assets

Define intangible asset, explain recognition criteria, state five disclosure requirements, explain research and development expenditure, and conditions for capitalisation per IAS 38.

IAS 38: Intangible Assets defines the difference between Research Expenditure and Development Expenditure IAS 38 also lays down rules which must be applied to the Capitalisation of Research and Development Expenditure

You are required to: i. Define an Intangible Asset under IAS 38: Intangible Assets. ii. Explain the Recognition Criteria for Intangible Assets. iii. State five (5) Disclosure Requirements of Intangible Assets under IAS 38 iv. Explain the meaning of the terms Research Expenditure and Development Expenditure. v. Explain the conditions applied to Research and Development Expenditure, according to IAS 38, to determine whether or not the cost should be capitalised. (20 marks)

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q2 – IAS 8, ZBB Challenges, Budgetary Control Factors

Explain accounting policies and changes in estimates per IAS 8, four challenges of implementing ZBB, and three factors for effective budgetary control.

a) IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors is applied in selecting and applying Accounting Policies, Accounting for Changes in Estimates and reflecting Corrections of Prior Period Errors. The standard requires compliance with any specific IFRS applying to a transaction, event or condition, and provides guidance on developing Accounting Policies for other items that result in relevant and reliable information.

You are required to:

Explain the following in accordance with IAS 8. Accounting Policies, Changes in Accounting Estimates and Errors. i) Accounting Policies (3 marks) ii) A Change in Accounting Estimates (3 marks)

b) Zero Based Budgeting (ZBB) is a process of budgeting that allocates funding based on programme efficiency and necessity rather than budget history. ZBB aims to put the onus on managers to justify expenses and to drive value for an organisation by optimising cost and not just revenue. Adopting a ZBB Approach for a company may seem like an intending task but when weighed against the value derived, the effort is worth the result.

You are required to:

Explain four (4) challenges Management will face when implementing a Zero-Based Budgeting System (8 marks) c) Organisations invest time and resources in creating and controlling budgets to ensure stability and predictability of their operations.

You are required to:

Explain three (3) factors necessary for an effective Budgetary Control System (3 marks)

[Total: 20 marks]

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q1B – AFEN Ltd Mine Accounting Treatment

Explain the accounting treatment for the license, development costs, reclamation provision, and earthquake damage for AFEN Ltd.

AFEN Ltd. obtained a license, free of charge from the government, to dig and operate a gold mine. AFEN Ltd. spent GH$6 million digging and preparing the mine for operation and erecting buildings on the site. The mine commenced operations on 1 September 2022. The license requires that at the end of the mine’s useful life of 20 years, the site must be reclaimed, all buildings and equipment must be removed and the site landscaped. At 31 August 2023, AFEN Ltd. estimated that the cost in 19 years’ time of the removal and landscaping will be GH$5 million and its present value is GH$3 million.

On 31 October 2023, there was a massive earthquake in the area and AFEN Ltd’s mine shaft was badly damaged.It is estimated that the mine will be closed for at least six (6) months and will cost GH$1 million to repair.

You are required to:

Explain the accounting treatment for the license, the development costs, the reclamation provision, and the earthquake damage in the financial statements for the year ended 31 August 2023.

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  • 20 Marks

FRPA – APRIL 2024 – L3 – Q1A – Preparation of Financial Statements for Vandee Oil Ltd

Using the provided trial balance and additional information on inventory, asset purchases, depreciation rates, utilities adjustments, and staff bonuses, prepare the Statement of Profit or Loss for 2023 and the Statement of Financial Position as at 31 December 2023.

Vandee Oil Ltd. has been in business for the past ten (10) years. The following Trial Balance was extracted from the books of Vandee Oil Ltd. for the year ended 2023.

Item GH¢’000 (Debit) GH¢’000 (Credit)
Bank 46,200
Petty Cash 4,000
Computer and Accessories 8,370
Furniture and Fittings 10,255
Land and Building 214,000
Office Equipment 12,250
Plant and Machinery 239,400
Inventory 1,900
Staff Loan 5,088
Purchases 355,000
Bank Service Charges 1,300
Business Promotion 1,500
Communication 1,900
Insurance 1,660
Licenses and Permits 6,650
Medical Expenses 155
Printing and Stationery 300
Professional Fees: Legal Fees 500
Repairs: Equipment Repairs 2,600
Salaries 23,050
Electricity 780
Water 280
Vehicle Running Expense 4,560
Trade Payable 25,000
Directors Current Account 320,000
Computer and Accessories: Accumulated Depreciation 3,348
Furniture and Fittings: Accumulated Depreciation 2,050
Land and Building: Accumulated Depreciation 8,560
Office Equipment: Accumulated Depreciation 2,450
Plant and Machinery: Accumulated Depreciation 47,880
Payroll Liabilities 550
Retained Earnings 49,282
Taxation 3,003
Share Capital 10,000
Sales 574,145
TOTALS 993,983 993,983

Additional Information: i) Closing Inventory as at December 2023 amounts to GH¢48,500,000 ii) The following assets were bought during the year 2023. However, these transactions were not recorded in the above Trial Balance:

  • Computers and Accessories GH¢8,000,000
  • Fixtures and Fittings GH¢5,000,000
  • Plant and Machinery GH¢25,000,000 The following are the rates of Depreciation being used by the company, however Depreciation for 2023 is yet to be charged:
  • Land and Building 1%
  • Computers and Accessories 20%
  • Furniture and Fittings 10%
  • Plant and Machinery 20%
  • Office Equipment 20% iii) Electricity stated in the Trial Balance include January 2024 Electricity Bill while that of Water represents six (6) months’ payment for the year 2023. iv) Staff bonuses amounting to GH¢15,000,000 was agreed on 31 December 2023 for staff. However, it was paid after the year end.

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