Topic: Assurance services

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  • 15 Marks

AA – May 2024 – L2 – SA – Q6 – Assurance Services

This question focuses on assurance engagements, explaining the differences between reasonable and limited assurance, and details the elements of assurance engagements as performed by a practitioner.

Each assurance engagement is classified on two dimensions: It is either a reasonable assurance engagement or a limited assurance engagement, and either it is an attestation engagement or a direct engagement.

Required:

a. Specify the two channels through which assurance can be provided. (2 Marks)

b. Differentiate reasonable assurance from limited assurance. (3 Marks)

c. Explain the five elements of an assurance engagement performed by a practitioner. (10 Marks)

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  • 20 Marks

AA – Nov 2020 – L2 – Q3 – Assurance Services

Explain the concept of auditor independence and its importance.

Adetutu Company Limited obtained a loan from a bank in the previous year. The bank has requested an independent review of the company’s compliance with the loan covenants, hence, the Finance Controller has contacted your partner and asked that your firm carry out this assurance engagement.

Required:
a. Discuss the elements of an assurance engagement. (10 Marks)
b. Explain the different levels of assurance. (4 Marks)
c. Explain the categories of threats to the professional ethics of an auditor. (6 Marks)

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  • 15 Marks

AA – May 2018 – L2 – Q6 – Assurance Services

Focuses on identifying and explaining the key elements of an assurance engagement.

In an assurance engagement, an “assurance firm” is engaged by one party to give an opinion on a piece of information that has been prepared by another party.

Required: a. Identify and explain FIVE elements contained in an assurance engagement performed by an auditor. (15 Marks)

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  • 20 Marks

AA – MarJul 2020 – L2 – Q5 – Assurance Services and Due Diligence for Hallmark Ltd

Explanation of assurance services, levels of assurance, and elements of an assurance engagement.

The Directors of Hallmark Limited have decided that in order to improve its operating efficiency, there is need to increase the working capital of the company. The last audited financial statements of the company were up to September 30, 2018. A prospective investor has decided to perform due diligence on the company before investing a certain amount of money in the business. The Financial Controller of Hallmark Limited has advised the directors that prior to the due diligence exercise, there might be need to perform assurance services on the company’s financial result as the investor may not be willing to accept the last audited financial statements for the due diligence. Your father, who is a director of the company, has approached you as an accountancy student to give more explanations to him on the foregoing.

You are required to explain:
a. Assurance services (5 Marks)
b. The various levels of assurance services (7 Marks)
c. The components/elements of an assurance engagement (8 Marks)

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  • 5 Marks

AAA – July 2023 – L3 – Q5b – Assurance services | Current issues

Explains appropriate audit procedures for Corporate Social Responsibility (CSR) reports, focusing on assessing impact and stakeholder engagement.

Corporate Social Responsibility (CSR) is the hallmark of every well managed entity. In some cases, cost of CSR may not involve actual expenditure.

Required:

Explain THREE (3) appropriate procedures for audit engagements for CSR reports. (5 marks)

 

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  • 20 Marks

AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning

Discuss matters to consider before accepting a review engagement and recommend procedures for examining a cash flow forecast.

Eebuks Ltd is a retailer of academic textbooks that sells through its own network of bookshops and online through its website. The revenue from the website includes both cash sales and sales on credit to educational institutions. The company has provided historical analysis from its trade receivables ledger indicating that for sales made on credit, 25% payment is received in the month of sale, 70% after 30 days, and the remainder are irrecoverable debts.

You are a Manager in Makafui & Associates, a firm of Chartered Accountants offering a range of services from audit to non-audit for its clients. On 1 July 2023, your firm was asked by Eebuks Ltd, a company that is not an audit client of your firm, to consider a potential engagement to review and provide an assurance report on Prospective Financial Information. Makafui & Associates has already conducted specific client identification procedures in line with money laundering regulations with satisfactory results.

Additionally, Eebuks Ltd has approached your firm to obtain an independent assurance opinion on its cash flow forecast, which is being prepared for its bankers in support of an application for an increase in its existing overdraft facility.

Required:

a) In line with ISAE 3400: The Examination of Prospective Financial Information, discuss FIVE (5) matters to be considered by Makafui & Associates before accepting the engagement to review and report on Eebuks Ltd’s Prospective Financial Information. (10 marks)

b) Assuming Makafui & Associates accepts the engagement, recommend EIGHT (8) procedures to be performed in respect of Eebuks Ltd’s cash flow forecast. (10 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5b – Audit-related services | Assurance services

Discuss how audit software can be used to audit revenue and trade receivables and evaluate the extent of reliance on internal auditor's use of embedded software.

Mike Developers’ Audit Manager is of the view that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with Mike Developers’ Finance Director, and this approach has been agreed as a feasible one. Furthermore, the Finance Director has asked the internal audit team to investigate the possibility of installing embedded software to help the external auditors in their work.

Required:

i) Describe, giving examples, how audit software, in general, could assist the audit firm in their audit of revenue and trade receivables. (6 marks)

ii) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software. (4 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability

Discuss the considerations before accepting an engagement to certify benchmark petroleum revenue and the issues related to relying on an independent expert’s certification.

Your firm has been contracted by the Office of the Auditor General (AG) of Ghana to provide the Ministry of Finance (MoF) with the certification of the Projection of Benchmark Petroleum Revenue for 2016.

The Petroleum Revenue Management Act (PRMA), 2011 (Act 815) became law in Ghana on 11 April 2011, and Section 17 of the PRMA requires the Minister responsible for Finance to make a projection of the amount of petroleum revenue that would accrue to the Government of Ghana in the coming year, not later than 1 September of each year.

The first schedule of the Act mandates an independent expert to certify the projection of the Benchmark Petroleum Revenue by the Minister before it would be used in the National Budget for the coming year.

The two major issues in the projection are the quantity of Oil and Gas expected and the world market price at which the oil and gas will be valued.

As part of the documents to be used in performing this assignment, MoF has given you:

  • Projection of the Benchmark Petroleum Revenue from oil and gas for 2016, and
  • Certification of the Estimate of the Oil and Gas production for 2016 from the existing and expected oil and gas producing fields in Ghana.

The first schedule of the Act prescribes a formula for the calculation of the Average Unit Price for Crude Oil and Natural Gas on the International Market to be used for the year. The certification in the Estimate of the Oil and Gas production was issued by an independent expert in the Oil and Gas industry.

Required:

i) State FOUR issues your firm will consider in order to decide whether or not to accept this engagement from the Office of the Auditor General. (4 marks)

ii) If your firm decides to accept the engagement, state FOUR issues your firm will consider in order to place reliance on the certification issued by the independent expert in the Oil and Gas industry in performing the engagement. (4 marks)

iii) State TWO audit procedures your firm would perform to determine that the Average Unit Price for Crude Oil and Natural Gas on the International Market for 2016 used by MoF in the Projection of the Benchmark Petroleum Revenue for 2016 is fairly stated. (2 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

The number of international non-governmental organizations (charitable organizations) is increasing in Ghana, and your firm Zumah and Co. Chartered Accountants (a small firm) is contemplating entering that segment of the audit market. Your managing partner has asked you as an audit senior to conduct research on the audit of such entities to enable the firm to start bidding for jobs from those entities.

Required:

Write a memo to the engagement partner detailing the characteristics of such audit clients, what the firm needs to do, and the audit organization that your firm may need to join to enhance your chances of securing engagements to audit such entities.

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  • 10 Marks

AAA – Nov 2016 – L3 – Q5b – Assurance Services | Audit Evidence

Evaluate the environmental issues that could lead to misstatements and recommend audit actions for J & K Mining Company.

J & K Mining Company operates in the Abuakwa Community of the Eastern Region as a Sand Wining Company. The youth of the area had been opposing the activities of the company of late. Sasana, the Managing Director of J & K Mining Company, approached Kaku & Associates, a Chartered Accounting firm, to accept an attest engagement to examine and report on the environmental issues of J & K Mining Company Ltd. for the year ended 31 December 2013.

Required:
i) Evaluate the environmental issues that may lead to the risk of misstatements in the Financial Statements. (3 marks)

ii) Recommend the actions and the audit procedures that Kaku and Associates should undertake when they realize that J & K Mining Company Ltd. has environmental issues that may affect the Financial Statements. (7 marks)

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  • 15 Marks

AA – May 2024 – L2 – SA – Q6 – Assurance Services

This question focuses on assurance engagements, explaining the differences between reasonable and limited assurance, and details the elements of assurance engagements as performed by a practitioner.

Each assurance engagement is classified on two dimensions: It is either a reasonable assurance engagement or a limited assurance engagement, and either it is an attestation engagement or a direct engagement.

Required:

a. Specify the two channels through which assurance can be provided. (2 Marks)

b. Differentiate reasonable assurance from limited assurance. (3 Marks)

c. Explain the five elements of an assurance engagement performed by a practitioner. (10 Marks)

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  • 20 Marks

AA – Nov 2020 – L2 – Q3 – Assurance Services

Explain the concept of auditor independence and its importance.

Adetutu Company Limited obtained a loan from a bank in the previous year. The bank has requested an independent review of the company’s compliance with the loan covenants, hence, the Finance Controller has contacted your partner and asked that your firm carry out this assurance engagement.

Required:
a. Discuss the elements of an assurance engagement. (10 Marks)
b. Explain the different levels of assurance. (4 Marks)
c. Explain the categories of threats to the professional ethics of an auditor. (6 Marks)

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  • 15 Marks

AA – May 2018 – L2 – Q6 – Assurance Services

Focuses on identifying and explaining the key elements of an assurance engagement.

In an assurance engagement, an “assurance firm” is engaged by one party to give an opinion on a piece of information that has been prepared by another party.

Required: a. Identify and explain FIVE elements contained in an assurance engagement performed by an auditor. (15 Marks)

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  • 20 Marks

AA – MarJul 2020 – L2 – Q5 – Assurance Services and Due Diligence for Hallmark Ltd

Explanation of assurance services, levels of assurance, and elements of an assurance engagement.

The Directors of Hallmark Limited have decided that in order to improve its operating efficiency, there is need to increase the working capital of the company. The last audited financial statements of the company were up to September 30, 2018. A prospective investor has decided to perform due diligence on the company before investing a certain amount of money in the business. The Financial Controller of Hallmark Limited has advised the directors that prior to the due diligence exercise, there might be need to perform assurance services on the company’s financial result as the investor may not be willing to accept the last audited financial statements for the due diligence. Your father, who is a director of the company, has approached you as an accountancy student to give more explanations to him on the foregoing.

You are required to explain:
a. Assurance services (5 Marks)
b. The various levels of assurance services (7 Marks)
c. The components/elements of an assurance engagement (8 Marks)

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  • 5 Marks

AAA – July 2023 – L3 – Q5b – Assurance services | Current issues

Explains appropriate audit procedures for Corporate Social Responsibility (CSR) reports, focusing on assessing impact and stakeholder engagement.

Corporate Social Responsibility (CSR) is the hallmark of every well managed entity. In some cases, cost of CSR may not involve actual expenditure.

Required:

Explain THREE (3) appropriate procedures for audit engagements for CSR reports. (5 marks)

 

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  • 20 Marks

AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning

Discuss matters to consider before accepting a review engagement and recommend procedures for examining a cash flow forecast.

Eebuks Ltd is a retailer of academic textbooks that sells through its own network of bookshops and online through its website. The revenue from the website includes both cash sales and sales on credit to educational institutions. The company has provided historical analysis from its trade receivables ledger indicating that for sales made on credit, 25% payment is received in the month of sale, 70% after 30 days, and the remainder are irrecoverable debts.

You are a Manager in Makafui & Associates, a firm of Chartered Accountants offering a range of services from audit to non-audit for its clients. On 1 July 2023, your firm was asked by Eebuks Ltd, a company that is not an audit client of your firm, to consider a potential engagement to review and provide an assurance report on Prospective Financial Information. Makafui & Associates has already conducted specific client identification procedures in line with money laundering regulations with satisfactory results.

Additionally, Eebuks Ltd has approached your firm to obtain an independent assurance opinion on its cash flow forecast, which is being prepared for its bankers in support of an application for an increase in its existing overdraft facility.

Required:

a) In line with ISAE 3400: The Examination of Prospective Financial Information, discuss FIVE (5) matters to be considered by Makafui & Associates before accepting the engagement to review and report on Eebuks Ltd’s Prospective Financial Information. (10 marks)

b) Assuming Makafui & Associates accepts the engagement, recommend EIGHT (8) procedures to be performed in respect of Eebuks Ltd’s cash flow forecast. (10 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5b – Audit-related services | Assurance services

Discuss how audit software can be used to audit revenue and trade receivables and evaluate the extent of reliance on internal auditor's use of embedded software.

Mike Developers’ Audit Manager is of the view that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with Mike Developers’ Finance Director, and this approach has been agreed as a feasible one. Furthermore, the Finance Director has asked the internal audit team to investigate the possibility of installing embedded software to help the external auditors in their work.

Required:

i) Describe, giving examples, how audit software, in general, could assist the audit firm in their audit of revenue and trade receivables. (6 marks)

ii) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software. (4 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q4a – Assurance services | Professional responsibility and liability

Discuss the considerations before accepting an engagement to certify benchmark petroleum revenue and the issues related to relying on an independent expert’s certification.

Your firm has been contracted by the Office of the Auditor General (AG) of Ghana to provide the Ministry of Finance (MoF) with the certification of the Projection of Benchmark Petroleum Revenue for 2016.

The Petroleum Revenue Management Act (PRMA), 2011 (Act 815) became law in Ghana on 11 April 2011, and Section 17 of the PRMA requires the Minister responsible for Finance to make a projection of the amount of petroleum revenue that would accrue to the Government of Ghana in the coming year, not later than 1 September of each year.

The first schedule of the Act mandates an independent expert to certify the projection of the Benchmark Petroleum Revenue by the Minister before it would be used in the National Budget for the coming year.

The two major issues in the projection are the quantity of Oil and Gas expected and the world market price at which the oil and gas will be valued.

As part of the documents to be used in performing this assignment, MoF has given you:

  • Projection of the Benchmark Petroleum Revenue from oil and gas for 2016, and
  • Certification of the Estimate of the Oil and Gas production for 2016 from the existing and expected oil and gas producing fields in Ghana.

The first schedule of the Act prescribes a formula for the calculation of the Average Unit Price for Crude Oil and Natural Gas on the International Market to be used for the year. The certification in the Estimate of the Oil and Gas production was issued by an independent expert in the Oil and Gas industry.

Required:

i) State FOUR issues your firm will consider in order to decide whether or not to accept this engagement from the Office of the Auditor General. (4 marks)

ii) If your firm decides to accept the engagement, state FOUR issues your firm will consider in order to place reliance on the certification issued by the independent expert in the Oil and Gas industry in performing the engagement. (4 marks)

iii) State TWO audit procedures your firm would perform to determine that the Average Unit Price for Crude Oil and Natural Gas on the International Market for 2016 used by MoF in the Projection of the Benchmark Petroleum Revenue for 2016 is fairly stated. (2 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

The number of international non-governmental organizations (charitable organizations) is increasing in Ghana, and your firm Zumah and Co. Chartered Accountants (a small firm) is contemplating entering that segment of the audit market. Your managing partner has asked you as an audit senior to conduct research on the audit of such entities to enable the firm to start bidding for jobs from those entities.

Required:

Write a memo to the engagement partner detailing the characteristics of such audit clients, what the firm needs to do, and the audit organization that your firm may need to join to enhance your chances of securing engagements to audit such entities.

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  • 10 Marks

AAA – Nov 2016 – L3 – Q5b – Assurance Services | Audit Evidence

Evaluate the environmental issues that could lead to misstatements and recommend audit actions for J & K Mining Company.

J & K Mining Company operates in the Abuakwa Community of the Eastern Region as a Sand Wining Company. The youth of the area had been opposing the activities of the company of late. Sasana, the Managing Director of J & K Mining Company, approached Kaku & Associates, a Chartered Accounting firm, to accept an attest engagement to examine and report on the environmental issues of J & K Mining Company Ltd. for the year ended 31 December 2013.

Required:
i) Evaluate the environmental issues that may lead to the risk of misstatements in the Financial Statements. (3 marks)

ii) Recommend the actions and the audit procedures that Kaku and Associates should undertake when they realize that J & K Mining Company Ltd. has environmental issues that may affect the Financial Statements. (7 marks)

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