Topic: Current issues

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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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  • 10 Marks

AAA – July 2023 – L3 – Q5a – The regulatory environment | Current issues

Discusses factors influencing new auditing standards and procedures for their development by the International Federation of Accountants (IFAC).

The auditing profession is very dynamic and constantly confronted with new challenges emanating from the political and economic spheres. To meet these challenges the global authority responsible for the regulation of accountancy profession, The International Federation of Accountants (IFAC) has been ensuring that the standards for conduct of audit and assurance engagements are revised and brought up to date all the time.

Required: i) Discuss FOUR (4) factors that influence the development of new Auditing Standards. (5 marks)

ii) Identify the procedures for developing new Auditing Standards. (5 marks)

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  • 10 Marks

AAA – Dec 2023 – L3 – Q5a – Current Issues

Justify why companies should focus on sustainable business practices, given the increasing investor interest in the Sustainable Development Goals (SDGs).

Sustainable Development Goals and Investor Interest
The Sustainable Development Goals (SDGs) are 17 goals tackling major world issues agreed by 193 UN member states to be achieved by 2030. These goals include zero hunger, decent work and economic growth, and reduced inequalities.

Required:
Justify FOUR (4) reasons a company should focus on sustainable business practices in view of investor interest in SDGs. (10 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5a – Current issues | Professional responsibility and liability

Assess the global threat of money laundering and discuss Ghana’s efforts to combat money laundering.

a) Money laundering has become a significant threat to the world’s political and economic order. World leaders are collaborating and cooperating in fighting money laundering. However, criminals are maliciously clever and, in some cases, ahead of law enforcement agencies. Every human being has to contribute to the fight against money laundering.

Required:

i) Assess why money laundering poses a big threat to the world’s political and economic order. (5 marks)

ii) Discuss FIVE (5) ways in which Ghana is contributing towards fighting money laundering globally. (5 marks)

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  • 10 Marks

AAA – May 2016 – L3 – Q5b – Audit evidence | Current issues

Discuss factors affecting audit quality according to the IAASB’s recent publication on Audit Quality.

Audit Quality has been a topical issue for discussion in the accountancy profession in recent times. The International Auditing and Assurance Standards Board (IAASB) has recently issued a publication on the Framework for Audit Quality. The objectives of this publication are to raise awareness of the key elements of audit quality; to encourage key stakeholders to explore ways to improve audit quality; and to facilitate greater dialogue between key stakeholders on the topic. Although audit quality is principally the responsibility of auditors, there are many factors that contribute to it. The IAASB describes these other factors as contextual, inputs, outputs, and key interactions.

Required:
Discuss with examples what factors affect Audit Quality according to the recent publication of the IAASB on Audit Quality. (10 marks)

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  • 5 Marks

AAA – Nov 2023 – L3 – Q5b – Audit Evidence, Evaluation and Review

Describe the auditor’s responsibility for subsequent events occurring between specific periods in the audit process.

b) In conducting an audit, audit procedures must be planned and performed so as to consider all significant transactions occurring after the reporting period. This means that the audit work does not stop with events only up to the reporting period. There are two key dates after the reporting period: the date of the audit report and the date that the financial statements are issued.

Required: Describe the auditor’s responsibility for subsequent events occurring between:

i) The year-end date and the date the auditor’s report is signed; and (2 marks)

ii) The date the auditor’s report is signed and the date the financial statements are issued. (3 marks)

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  • 10 Marks

AAA – Nov 2023 – L3 – Q5a – Current Issues, Audit Evidence

Explain the stages of money laundering and audit obligations in a scenario involving suspicious transactions.

a) You have commenced the audit of Atika Ltd, a company involved in the importation and sale of plumbing materials. As part of the audit, you have noticed the following:

  1. Atika Ltd does not pay its suppliers in Germany through the bank. It relies mostly on the black market for the transfer of funds to its suppliers.
  2. Atika only sells its goods in Ghana.
  3. On 25 March within the audit year, there was a cash deposit of US$2,500,000.00 into the forex account of Atika Ltd.
  4. On 30 March the company transferred the following:
    • US$499,999.99 to an unknown account in Cameroon
    • US$399,999.99 to an unknown account in Kenya
    • US$499,999.99 to an unknown account in Niger
    • US$250,000.00 to the personal account of the Managing Director
    • US$150,000.00 to an unknown company.
  5. The company’s general ledger shows a revenue of GH¢1,560,000.00.
  6. The import documentation shows purchases of GH¢36,000,000.00. There is no evidence of payment for the goods from Atika Ltd’s bank accounts.
  7. The closing inventory amounted to GH¢2,145,200.00.

The Audit Manager has raised the issue of money laundering considering the nature of the transactions above.

Required:

i) Explain to the team members the various stages of money laundering and show how the above transactions confirm the client’s engagement in money laundering. (6 marks)

ii) What are the obligations on the firm for money laundering? (4 marks)

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  • 5 Marks

AAA – Aug 2022 – L3 – Q5c – Current issues

Discuss reasons for management’s reluctance to disclose material uncertainty and the auditor's responsibility when going concern assumption is inappropriate.

If indications are identified which suggest that the going concern basis might not be appropriate for preparing financial statements, the auditor is required by ISA 570 (Revised): Going Concern to consider the implications for his audit report. The form of the report will depend on the auditor’s judgement.

There are two possible views:

  1. The use of the going concern is appropriate but material uncertainty exists or
  2. The use of the going concern assumption is inappropriate.

Required:
i) Discuss THREE (3) reasons why management of a client’s company will probably be reluctant to include the disclosure about material uncertainty in relation to the going concern assumption.
(3 marks)

ii) State the auditor’s responsibility where the use of the going concern assumption is inappropriate.
(2 marks)

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  • 20 Marks

AAA – Nov 2023 – L3 – Q3 – Reporting, Current Issues

Brief staff on KAMs, their determination, and their interaction with modifications to the audit report, going concern, emphasis of matter, and other matters.

ISA 701: Communicating Key Audit Matters (KAM) in the Independent Auditor’s Report is a new ISA introduced as part of the International Audit and Assurance Standards Board’s (IAASB) extensive revisions to International Standards on Auditing (ISAs) relating to audit reporting. The objective of the IAASB’s revisions was to make the auditor’s report more detailed and useful for the intended users. ISA 701 applies to audits of complete sets of general purpose financial statements of listed entities.

Subsequently, the Institute of Chartered Accountants, Ghana (ICAG) as the regulator of accountancy profession and practice in Ghana, issued a notice to practitioners and the public which directed that auditor’s report issued on financial statements for periods ending on or after 31 December, 2017 for Public Interest Entities (PIEs) to include a communication on Key Audit Matters as required by ISA 701.

You are the Partner in charge of training with Preko and Associates. An audit team member informed you that one of the clients being audited has an issue which is being contemplated as to whether to report the issue as key audit matter, emphasis of matter paragraph, other matter paragraph, or to modify the audit opinion.

Required: Prepare briefing notes for the staff of your firm regarding the following:

a) KAMs and state TWO (2) categories of entities in Ghana which ISA 701 is applicable as adopted by ICAG. (5 marks)

b) Factors to be considered in determining KAMs.

(3 marks)

c) Interaction between: i) KAMs and ISA 705 (revised): Modifications to the Opinion in the Independent Auditor’s Report
ii) KAMs and ISA 570 (revised): Going Concern
iii) KAMs and Emphasis of Matter
iv) KAMs and Other Matters (12 marks)

 

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5b – Current Issues, Audit-related Services

Discuss the financial reporting implications of a restructuring and recommend auditor actions if financial statements are not amended.

You are the manager responsible for the audit of Obeyeyie Co. Ltd (OCL), a manufacturing company with a year ended 31 December 2018. The audit work has been completed and reviewed and you are due to issue the audit report in three days. The draft audit opinion is unmodified. The financial statements show revenue for the year ended 31 December 2018 of GH¢ 15 million, net profit of GH¢ 3 million, and total assets at the year-end are GH¢ 80 million.

The finance director of OCL e-mailed you this morning in addition to a WhatsApp message to tell you about the announcement yesterday of a significant restructuring of OCL, which will take place over the next six months. The restructuring will involve the closure of a factory and its relocation to another part of the country. There will be some redundancies and the estimated cost of closure is GH¢ 250,000. The financial statements have not been amended in respect of this matter.

Required:

i) Comment on the financial reporting implications, and advise the further audit procedures to be performed. (6 marks)

ii) Recommend the actions to be taken by the auditor if the financial statements are not amended. (4 marks)

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5a – Current Issues, Audit-related Services

Outline the purposes of a cyber security policy and explain what a cyber security audit is intended to achieve.

Recently one of your clients in the financial service sector has had its ICT system hacked and large sums of depositors’ funds stolen. He called and informed you about what happened. You intimated to him that his company needs a cyber security policy and cyber security audit. He requested a briefing on the issue.

Required:

i) Outline the purposes of a cyber security policy.

(5 marks)

ii) Explain cyber security audit and what it is intended to achieve.

(5 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q4b – Current Issues

Discuss IAASB’s Clarity project on ISAs concerning the audit of SMEs.

In the audit of financial statements, auditors are required to comply fully with the International Standards on Auditing (ISAs). In general terms, the International Auditing and Assurance Standards Board (IAASB) takes the view that “an audit is an audit and should be conducted in line with the same auditing standards.” In 2009, IAASB issued a Q&A publication on matters relevant to the audit of SMEs—“applying ISAs proportionately with the size and complexity of an entity.”

Required:
Discuss the IAASB’s Clarity project on ISAs in relation to the audit of SMEs. (10 marks)

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  • 10 Marks

AAA – Nov 2017 – L3 – Q3a – Current Issues, Professional Responsibility and Liability

Evaluate potential money laundering issues in an audit client and discuss the need for ethical guidance for accountants on money laundering.

Sampa Sawmill Ltd. is a company located in the Eastern Region of Ghana, involved in the exportation of wood products to overseas countries. Sampa Sawmill Ltd. is of late being accused of involvement in money laundering. Sampa had been an audit client of Tetteh and Associates, a firm of Chartered Accountants for the past three years.

Required:

i) As an Audit Manager of Tetteh and Associates in charge of Sampa Sawmill Ltd., evaluate the issues you will consider to prove or disprove the allegation. (5 marks)

ii) Discuss the need for ethical guidance for professional accountants on money laundering.

(5 marks)

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  • 4 Marks

AAA – March 2023 – L3 – Q5c – Reporting, Current issues

Differentiate between the emphasis of matter and other matter paragraphs with examples.

An auditor’s report may include an ‘emphasis of matter’ paragraph and/or an ‘other matter’ paragraph. These types of paragraph are the subject of ISA 706: Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report. The purpose of these paragraphs is to provide additional communication in the auditor’s report.

Required:
Differentiate between the ‘emphasis of matter’ paragraph and ‘other matter’ paragraph citing ONE (1) circumstance in each case. (4 marks)

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  • 10 Marks

AAA – March 2023 – L3 – Q5a – Current issues, Government external audit and public accountability

Evaluate five responsibilities of the Board for risk management of rural banks.

The Central Bank of Ghana (BoG) is mandated to ensure the smooth running of the banking system. Over the years, Bank of Ghana has taken pride in enforcing stricter regulation and supervision. In this regard, the BoG formulated the Banks and Specialised Deposit Taking Institutions Act, Act 930 in 2016, which empowers it to be more aggressive in dealing with deviations in the sector. The BoG, aside instituting regulations, undertook a clean-up of the financial sector. This saw the number of universal banks drop from 30 at the beginning of 2018 to 23, as at the end of December 2018. These 23 universal banks were able to meet the minimum capitalisation requirement of GH¢ 400 million by the end of December 2018 (BoG, MPC reports, 2018).

Major corporate failures worldwide have dented investor confidence as well as raised several questions on the effectiveness of a firm’s internal control system and the corporate governance structures and also poor risk management especially for banks. Bank of Ghana in addressing collapse of Rural Banks and the risk management gap of the rural banking space introduced the Risk Management Guidelines for Rural and Community Banks in May 2021.

Required:
Evaluate FIVE (5) of the responsibilities of the Board for risk management of rural banks.

(10 marks)

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  • 10 Marks

AAA – March 2023 – L3 – Q3a – Reporting, Current issues

Comment on the issues raised in the draft auditor’s report for Alpha Ltd.

You are the manager responsible for the audit of Alpha Ltd, a listed company specializing in the manufacture and installation of sound-proof partitions for domestic and industrial buildings. You are currently reviewing the draft auditor’s report on the company’s financial statements for the year ended 31 March 2022. Extracts from the draft auditor’s report are shown below:

Independent auditor’s report to the shareholders and directors of Alpha Ltd

Basis for opinion
We conducted our audit of Alpha Ltd (the Company) in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements which are relevant to our audit of the financial statements in the jurisdiction in which the Company operates, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion
We have audited the financial statements of Alpha Ltd, which comprises the statement of financial position as at 31 March 2022, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at 31 March 2022, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Material uncertainty regarding going concern
The Company is financed by a long-term loan from its bankers which is due for redemption in August 2022. At the date of this auditor’s report, the Company is in the process of renegotiating the loan but has not yet reached a final agreement with its bankers. It is our view that the loan finance is essential to the continued survival of the Company and that at the time of reporting, therefore, the absence of a finalized agreement represents a material uncertainty regarding going concern. The financial statements have been prepared on a going concern basis but do not make any reference to the loan redemption or the ongoing negotiations with the bank. As the external auditor, therefore, we are fulfilling our duty by bringing the matter to the attention of users of the financial statements.

Other information
The Company’s principal activity is the manufacture and installation of sound-proof partitions for domestic and industrial buildings. The Company, therefore, engages in long-term contracts which are incomplete at the reporting date and which are material to its revenue figure. The installation process is complex and significant judgment is applied in assessing the percentage of completeness which is applied to calculate the revenue for the year. The significance of this judgment requires us to disclose the issue as other information which is relevant to the users of the financial statements.

Required:
Comment on the issues raised in the extract from the draft auditor’s report for the year ended 31 March 2022. (Note: You are NOT required to re-draft the extracts from the auditor’s report.)

(10 marks)

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  • 10 Marks

AAA – May 2018 – L3 – Q3b – Current Issues, Reporting, Professional responsibility and liability

Discusses the potential for audit failures to undermine the credibility of external audits and the responses the accountancy profession can implement.

Recent cases of bank failures have called into question the professional competence and integrity of external auditors. Some have explained that an auditor might be misled about the existence of account balances that do not exist. Companies being audited might have furnished the auditor with a document confirming the account’s existence and balance as at the reporting date. Unfortunately, according to allegations, such balances turn out to be either an overstatement or an understatement and the auditor failed to detect a material overstatement of both assets and revenues. Such cases undermine the credibility of auditors and external audit generally in the eyes of users of audited financial statements.

Required:
Explain whether you believe it is possible for such events as the one described above to completely undermine the credibility of external audit. Your explanation should consider the responses that the accountancy profession can put in place in response to such criticisms. (10 marks)

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  • 20 Marks

AAA – April 2022 – L3 – Q2 – Evaluation and review, Group audits, Current issues

Comment on matters raised and state audit evidence required for Lartey Company Ltd for the year ended 30 September 2020.

Lartey Company Ltd (LCL) is a Private Limited Liability Company that was incorporated several years ago under the Companies Act, 1963 (Act 179) now Companies Act, 2019 (Act 992). The company is currently listed on the Ghana Stock Exchange. LCL is one of the world’s leading leisure travel providers, operating under several brand names to sell packaged holidays. The company catered for more than 10 million customers in the last 12 months. Draft figures for the year ended 30 September 2020 show revenue of GH¢320 million, profit before tax of GH¢15 million, and total assets of GH¢410 million. LCL’s executives earn a bonus based on the profit before tax.

You are the senior manager responsible for the audit of LCL. The final audit is nearing completion, and the following points have been noted by the audit senior for your attention:

  1. Acquisition of Esinam Co. Ltd. On 15 November 2020, LCL acquired Esinam Co. Ltd, a company offering adventure holidays for independent travelers. Esinam Co. Ltd represents a significant acquisition, but this has not been recognised in the financial statements.
  2. Aseye Cruises One part of the company’s activities, operating under the Aseye Cruises brand, provides cruise holidays. Due to the economic recession owing to the Covid-19 pandemic, the revenue of the Aseye Cruises business segment has fallen by 25% this year, and profit before tax has fallen by 35%. Aseye Cruises contributed GH¢64 million to total revenue for the year ended 30 September 2020, and has identifiable assets of GH¢23.5 million, including several large cruise liners. The Aseye Cruises brand is not recognised as an intangible asset, as it was internally generated.
  3. Compensation Claim In July 2020, thousands of holiday-makers were left stranded abroad after the company operating the main airline chartered by LCL suffered Covid-19 restrictions. The holiday-makers were forced to wait an average of two weeks before they could be returned home using an alternative airline. They have formed a group which is claiming compensation for the time they were forced to spend abroad, with the total claim amounting to GH¢2 million. The reasons for the group claiming compensation include accommodation and subsistence costs, lost income, and distress caused by the situation. The claim has not been recognised or disclosed in the draft financial statements, as management argues that the full amount payable will be covered by LCL’s insurance cover.

Required: Comment on the matters raised and in your review of the working papers, state the audit evidence required to draw reasonable conclusions for the year ended 30 September 2020.

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