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  • 20 Marks

CR – Nov 2018 – L3 – SB – Q4 – Statement of Cash Flows (IAS 7)

Preparation of Happy Plc’s statement of cash flows and analysis of revaluation and financing adjustments.

Happy is a publicly listed company. Its financial statements for the year ended July 31, 2017, including comparatives, are shown below:

Notes:

  1. On November 1, 2016, Happy acquired an additional plant under a finance lease with a fair value of ₦3 million. The property was also revalued upward by ₦4 million, with ₦1.3 million of the revaluation reserve transferred to deferred tax. No disposals occurred during the period.
  2. Depreciation on property, plant, and equipment amounted to ₦1.8 million, and amortization of deferred development expenditure was ₦0.4 million.

Required:

Prepare the statement of cash flows of Happy Plc for the year ended July 31, 2017, in accordance with IAS 7, using the indirect method. (20 Marks)

 

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  • 30 Marks

CR – Nov 2018 – L3 – SA – Q1a – Consolidated Financial Statements (IFRS 10)

Prepare a consolidated statement of financial position for Adegaga Laboratories Plc., including the effects of an acquisition and goodwill impairment.

Adegaga Laboratories Plc (“AdeLabs”) is one of the largest companies in Nigeria engaged in cosmetic development and manufacturing. Its largest customer base is in the healthcare sector for post-surgery patients and the Nigeria movie industry (aka Nollywood). In the prior financial period, AdeLabs’ expansion strategy has been largely focused on growth by acquisition and joint ventures.

Additional Information:

  1. As part of this, AdeLabs acquired 80% of the equity share capital of Bodegas Limited (“Bodegas”) on January 1, 2015, when the retained earnings of Bodegas was N93.75 million. Following the share acquisition, AdeLabs had control over Bodegas – no shares have been issued by Bodegas following the acquisition. The non-controlling interest in Bodegas was measured at its fair value of N20 million at the date of acquisition.
  2. On January 1, 2016, AdeLabs acquired 50% of the equity share capital of ChidePlastics Limited (“ChidePlast”) when the retained earnings of ChidePlast was N41.25 million. This acquisition was classified as a joint venture in accordance with IFRS 11 Joint Arrangements. ChidePlast has not issued any shares since the acquisition date.
  3. The balance on “other reserves” relates to movements in the values of investments in Bodegas and ChidePlast in the books of AdeLabs. N18.75 million relates to Bodegas, and the remainder to ChidePlast.
  4. AdeLabs’ non-current liabilities relate to a borrowing (long-term) taken out on January 1, 2017. This borrowing has an agreed coupon rate of 4% p.a., and the interest expense due in respect of 2017 has been paid and accounted for in profit for the year. The effective interest rate estimated with this financial liability is 8% p.a.
  5. As part of its annual impairment review, AdeLabs concluded that the goodwill on the acquisition of Bodegas was impaired by 20% at December 31, 2017. No other impairments of goodwill have arisen.
  6. AdeLabs sold goods to ChidePlast with a value of N75 million and a selling margin of 40% in November 2017. As at year-end December 31, 2017, 75% of these items are unsold.

Accounts for all companies are made up to December 31 annually.

Required:

Prepare for Adegaga Laboratories Plc:

  1. A consolidated statement of financial position as at December 31, 2017. (20 Marks)
  2. On January 1, 2018, AdeLabs acquired an additional 10% of the equity shares of Bodegas. The purchase consideration for this additional acquisition was N52,500,000.

    i. Briefly explain how this additional acquisition will impact the preparation of AdeLabs’ consolidated financial statements for the year ended December 31, 2017. (4 Marks)

    ii. Calculate the adjustment that will be required to be made to AdeLabs’ statement of financial position as a result of this acquisition. (6 Marks)

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  • 15 Marks

TAX – Nov 2023 – L2 – Q7 – Tax Administration and Enforcement

Reasons for business cessation, computation of net terminal adjusted profit, and assessable profits

Raposa Nigeria Limited, a company located in Sambisa Forest, Kutunwegi State of Nigeria, commenced operations on November 1, 2017. The accounting year-end was September 30. Due to government policy restricting rice importation, the business’s going concern was threatened, leading the Board of Directors to decide to cease operations on December 31, 2022.

The adjusted profits for the relevant periods are as follows:

Period Adjusted Profit (N)
Period to September 30, 2019 2,100,000
Year ended September 30, 2020 2,400,000
Year ended September 30, 2021 3,640,000
Year ended September 30, 2022 6,300,000
Period to December 31, 2022 500,000

Additional Information:

  1. A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
  2. N20,000 was spent to recover this debt.
  3. An expenditure of N350,000 incurred in the 2020 assessment year was accounted for in the profit or loss but was not paid until August 2022.

Upon cessation, the revenue authority planned a back-duty investigation and informed the taxpayer accordingly. As a tax consultant, you are invited to determine the assessable profits for the relevant periods from the commencement of trade to business cessation.

Required: a. State THREE reasons why a business may cease trading. (3 Marks)
b. Compute net terminal adjusted profit. (6 Marks)
c. Compute assessable profits for all the relevant years of assessment. (6 Marks)

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  • 15 Marks

TAX – Nov 2023 – L2 – Q6b – Tax Administration and Enforcement

Explain five key contents required in a Withholding Tax returns/payment schedule.

It is expected that a schedule of Withholding Tax (WHT) payable should be prepared by applying the correct WHT rate on each transaction/payment made during the month. Thereafter, a cheque for the amount due to the Federal Inland Revenue Service is raised and forwarded together with the WHT schedule to one of the approved collecting banks for processing.

Required:
Explain FIVE contents of a WHT returns/payment schedule. (10 Marks)

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  • 15 Marks

TAX – Nov 2023 – L2 – Q6a – Tax Administration and Enforcement

Explain the functions and powers of the Nigerian Customs Service Board.

The Nigeria Customs Service (NCS) is one of the major revenue-generating agencies for the Federal Government of Nigeria. The establishment of the Nigerian Customs Service Board, which is under the control of the Federal Ministry of Finance, is contained in section 1 of the Nigerian Customs Service Board Act Cap.C45 LFN 2004 (as amended). The Board is responsible for the administration of the Customs and Excise Management Act.

Required:
Explain the functions and powers of the Board. (5 Marks)

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  • 15 Marks

TAX – Nov 2023 – L2 – Q5 – Tax Administration and Enforcement

Explain stamp duty exemptions, electronic document receipt, duties on contracts, and electronic money transfer levies.

Stamp duties are duties basically on instruments (defined to include written document). Stamp duties are governed by Stamp Duties Act Cap. S8 LFN 2004 (as amended), which provides for the levying of duties on certain matters specified in the Act, effective April 1, 1993.

a. Explain THREE instruments exempted from stamp duties. (3 Marks)
b. Describe when electronic documents are considered received in Nigeria. (3 Marks)
c. Discuss duty on contracts. (3 Marks)
d. Explain the electronic money transfer levy. (6 Marks)

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  • 20 Marks

TAX – Nov 2023 – L2 – Q4 – Taxation of Trusts and Estates

Compute the net income assessable in the hands of trustees and assessable income of each beneficiary.

The records of the two trustees of Olalomi Children Settlement created in favor of the three children—Olami, Olambe, and Olaide—revealed the following as of December 31, 2020:

Income Type Amount (N)
Rental income (gross) 398,900
Trading income 210,000
Dividend (gross) 196,000
Profit on sale of non-current assets 600,000

Additional Information:

  1. The interest received was from Gbogbo-Ero Commercial Bank Limited.
  2. Other allowable expenses amounted to N23,000.
  3. Each beneficiary was entitled to a quarter of the net distributable income.
  4. Fixed annuity to the beneficiaries was N42,000 (gross) to be shared equally.
  5. Trustee’s remuneration per trust deed was fixed at N25,000 each, plus 2.5% of the total computed income.
  6. Discretionary payments were made to Olami (N10,000), Olambe (N34,000), and Olaide (N29,000).
  7. Agreed capital allowance was N87,600.
  8. Administrative and other expenses amounted to N106,000.

Required: a. Compute the net income assessable in the hands of the trustees. (14 Marks)
b. Compute the assessable income in the hands of each beneficiary. (6 Marks)

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  • 9 Marks

TAX – Nov 2023 – L2 – Q3b – Tax Administration and Enforcement

Explain the roles and responsibilities of government, taxpayers, and revenue agencies in Nigeria’s National Tax Policy.

In line with the provisions of the revised National Tax Policy (NTP) in 2017, explain the roles and responsibilities of the following stakeholders:

i. The government (3 Marks)
ii. The taxpayers (3 Marks)
iii. Revenue agencies (3 Marks)

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  • 11 Marks

TAX – Nov 2023 – L2 – Q3a – Tax Administration and Enforcement

Describe the composition and functions of Nigeria’s tax administration bodies, including the Joint Tax Board and State Board of Internal Revenue.

a. Tax administration in Nigeria involves the practical interpretations and application of the tax laws. The bodies charged with the administration of tax in Nigeria are the Federal, State, and Local Governments. The tax authorities of these tiers of government derive their power from Federal laws.

i. State the composition of the Joint Tax Board. (3 Marks)

ii. Outline FOUR functions of the State Board of Internal Revenue. (3 Marks)

iii. State FIVE levies and taxes collectible by the Local Government Revenue Committee. (5 Marks)

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  • 20 Marks

TAX – Nov 2023 – L2 – Q2 – Tax Administration and Enforcement

Discuss the tax law provisions for a change in accounting year end, revenue practice, and compute assessable profits.

Forward Nigeria Limited, a Nigerian manufacturing company, has been operating for several years with an accounting year-end on June 30. The company recently decided to change its year-end to September 30. The adjusted profits for the relevant periods are as follows:

Period Adjusted Profit (N)
Year ended June 30, 2014 2,700,000
Year ended June 30, 2015 3,300,000
Period ended September 30, 2015 1,500,000
Year ended September 30, 2016 4,200,000
Year ended September 30, 2017 3,600,000

Additional Information:

  1. Income overstated:
    • June 30, 2015: N250,000
    • September 30, 2016: N280,000
  2. Expenditure understated:
    • June 30, 2014: N160,000
    • September 30, 2017: N150,000

Required: a. Explain the tax law provisions for a business changing its accounting year-end. (5 Marks)

b. Describe the Revenue practice related to these provisions. (3 Marks)

c. Compute the assessable profits for all affected years of assessment, considering the tax law and Revenue practice. (12 Marks)

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  • 2 Marks

FR – Nov 2022 – L2 – Q6c – Limitations of EPS

Identify three limitations of EPS as an indicator of performance.

EPS is probably the single most important indicator of an entity’s performance.
Required:
State THREE of the limitations of EPS.

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  • 9 Marks

FR – Nov 2022 – L2 – Q7a – Conceptual Framework Purposes

Short Summary: Summarize the six primary purposes of IASB's Conceptual Framework in international standards development.

Briefly explain SIX purposes of the Conceptual Framework of the International Accounting Standard Board (IASB). (9 Marks)

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  • 6 Marks

FR – Nov 2022 – L2 – Q7b – Business Model Test

Explain the steps in applying the Business Model Test under IFRS 9.

b. Explain the basic steps in the application of the Business Model Test in IFRS 9. (6 Marks)

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  • 30 Marks

AA – Nov 2022 – L2 – Q1 – Audit Opinion and Standards

Explores the auditor's opinion, ISA 200 objectives, audit scope, and regulatory roles in auditing standards compliance.

In an accountancy class on “Audit Opinion in International Standards on Auditing”, Ado, a lecturer at ICAN University, was explaining to the students that the end product of external audit work is the auditor‟s opinion expressed on the financial statements. He stated that a general purpose financial statement was in compliance with the financial reporting framework designed to meet the common financial information needs of a wide variety of users.

The role of audit is to provide a high level of assurance to the users of the financial statements and that it is necessary for users to have confidence that consistent auditing standards have been applied to the audits of financial statements of companies. He went further to explain that the overall objectives of the independent auditor is to ensure that the conduct of an audit is in accordance with International Standards on Auditing. He concluded that the auditor‟s report shall include a section with the heading “Opinion” as stated below
Opinion
We have audited the financial statements of Inajit Plc set out on pages XXX to XXXX which comprise the statement of financial position as at year end date, and the statement of profit or loss and other comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, the notes to the financial statements, including a summary of significant accounting policies. In our opinion, the financial statements give a true and fair view of financial position of Inajit Plc as at year end date, and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards and the requirements of the Companies and Allied Matters Act 2020 and Financial Reporting Council Act,2011. At the end of the lecture a student in the class came to you for further explanation on the topic.
Required:
a. State the objectives of the independent auditor as stated in International Standards on Auditing. (5 Marks)
b. Outline what ISA 200 requires the auditor to do in relation to the audit of financial statements. (10 Marks)
c. Explain the scope of audit as described in the independent auditor’s report. (5 Marks)
d. Highlight the role of regulatory bodies in ensuring that audits are carried out in line with standards. (10 Marks)

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  • 20 Marks

AA – Nov 2022 – L2 – Q2a – Audit Documentation Requirements

Overview of audit documentation requirements per ISA 230, including reasons and required contents.

The International Standards on Auditing (ISA) 230 deals with the auditor’s responsibility to prepare audit documentation for an audit of financial statements.

Required:
a. State FIVE reasons for preparing audit documentation. (5 Marks)
b. Highlight the requirements of ISA 230 on audit documentation. (3 Marks)
c. State FIVE contents each of current and permanent files. (10 Marks)
d. Explain who owns audit working papers and why. (2 Marks)

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  • 20 Marks

AA – Nov 2022 – L2 – Q3 – Terms of Audit Engagement

Covers engagement letters, contents, benefits, and ISA 210 requirements for auditor appointment.

ISA 210, Agreeing the Terms of Audit Engagements, requires that the auditor needs to agree the terms of audit engagement prior to commencement of work.

Required:
a. What is an engagement letter? (2 Marks)
b. Highlight EIGHT major items expected to be found in a typical audit engagement letter. (8 Marks)
c. State FIVE advantages of an engagement letter. (5 Marks)
d. State FIVE requirements of ISA 210 with respect to the preconditions for accepting appointment as an auditor. (5 Marks)

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  • 20 Marks

AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities

Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.

You are part of an audit team engaged on the audit of an engineering company which has a substantial amount of plant and machinery in its books. While reviewing the accounts, you also observed that there were some current assets and liabilities that may require external confirmations.

Required:

a. How would you establish the amount and level of audit evidence required for the current assets and liabilities? (5 Marks)

b. State which procedures will be applied to generate audit evidence in the following scenarios:

i. Confirming the accuracy of figures in the trade receivables account
ii. Confirming that the plant and machinery purchased in the year is actually in use during the year
iii. Ascertaining that the change in performance is in line with expectations
iv. Confirming the accuracy of the total receivable figures in the statement of financial position
v. Confirming contingent liability as to legal fees (5 Marks)

c. State the audit procedures you would take concerning the disposal of plant and machinery. (5 Marks)

d. State the requirements of ISA 505 concerning maintaining control over the external confirmation requests of current assets and liabilities. (5 Marks)

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  • 15 Marks

AA – Nov 2022 – L2 – Q5 – Internal Audit Necessity

Explanation on internal audit necessity, maintaining independence, and internal audit limitations.

In the apex bank‟s regulatory supervisory report to Dutse Bank Limited, the management has been directed to ensure institution of an Internal Audit Unit. Prior to this time, the bank believed that internal audit staff might be colluding with other staff to suppress information on fraudulent transactions and as such the desired result might not be achieved. Apart from this, it was considered that savings could be made from transport, hotel and other allowances to be paid to staff when on official assignments. The independent auditor had earlier mentioned the need for this in the audit report but management was of the view that it is acceptable to cross-train employees in different departments to be able to audit departments other than their own. In the opinion of management, this
will provide a more independent and unbiased view through checks and balances. The audit function they perform through multitasking will best add value to the progress of the organisation. It is also the belief of management that the basic processes of both accounting and auditing are similar. The two systems use essentially the same procedures and techniques of bookkeeping, computation and analysis. To them, accounting and auditing strive to ensure that the financial statements and records provide a fair reflection of the actual financial position of an organisation. Both activities are inter-related and go hand in hand, especially in setting up processes in the organisation, hence, there is no need for any Internal Audit Unit or duplication of efforts.
As the independent auditor of the bank, you were shown the regulatory supervisory report and you have been asked to make presentation to the Board of Directors on the necessity for the Internal Audit Unit in the bank.
Required:

a. Explain the need for the internal audit functions in an organisation. (5 Marks)
b. State the various measures that can be taken to protect the independence of internal auditors. (5 Marks)
c. Explain the weaknesses and limitations of internal audit. (5 Marks)

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  • 15 Marks

AA – Nov 2022 – L2 – Q6 – Audit Opinion in Financial Statements

Describe contents of audit opinion in financial statements as presented to an audit committee.

When prompted on a question at the presentation meeting to the audit committee of AMIRAH Plc, the Partner of OIO professional services stated that the end result of the statutory audit is general purpose financial statements on which audit opinion will be expressed. He explained that the auditor shall express an unmodified opinion when the auditor concludes his work, based on the audit
evidence obtained, that the financial statements as a whole are free from material misstatement and that the financial statements are prepared, in all
material respects, in accordance with the applicable financial reporting framework. However, if the external auditor is unable to obtain sufficient and appropriate audit evidence to conclude that the financial statements as a whole
are free from material misstatement, the auditor shall modify the opinion in the auditor’s report. In summary, the auditor’s opinion is a certification that accompanies financial statements after the examination of the books of accounts.
You are the manager in the firm and a member of the audit committee has requested for more explanation on the presentation by the partner.
Required:
a. Explain general purpose financial statements. (5 Marks)
b. Highlight to an audit committee member, the contents of audit opinion in financial statements. (10 Marks)

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  • 15 Marks

AA – Nov 2022 – L2 – Q7 – Audit Planning and Procedures Level: Level 2

This question covers audit planning considerations, benefits of planning, spreading audit work, and final audit procedures.

In order to ensure that an audit is carried out effectively and efficiently, the work needs to be planned, controlled and recorded at each stage of the program.
Required:
a. What matters must be taken into consideration when planning an audit? (3 Marks)
b. What are the benefits of adequate audit planning? (3 Marks)
c. What are the key benefits that would arise from spreading the audit work across interim and final audits? (4 Marks)
d. State FIVE audit procedures that are carried out at the final audit stage. (5 Marks)

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