Level: Level 2

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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.

Question

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

Notes:

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.
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)

Answer

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Tags: Cash Flow, Financing Activities, Investing Activities, Operating Activities, Revaluation Surplus, Working Capital
Level: Level 2

Topic: Statement of Cash Flows (IAS 7)

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.

Question

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:

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.
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.
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.
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.
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.
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:

A consolidated statement of financial position as at December 31, 2017. (20 Marks)
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)

Answer

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Tags: Acquisition, Consolidated Statement, Equity Method, Financial Position, Impairment, Joint Venture, Non-Controlling Interest
Level: Level 2

Topic: Consolidated Financial Statements (IFRS 10)

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

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

Question

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:

A bad debt of N120,000, written off in the 2020 assessment year, was recovered in October 2021.
N20,000 was spent to recover this debt.
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)

Answer

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Tags: Assessable Profits, Back-Duty Investigation, Business Cessation, Tax adjustment, Terminal Profit
Level: Level 2

Topic: Tax Administration and Enforcement

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

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

Question

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)

Answer

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Tags: Federal Inland Revenue Service, Tax Returns, WHT Compliance, WHT Schedule, Withholding Tax
Level: Level 2

Topic: Tax Administration and Enforcement

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

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

Question

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)

Answer

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Tags: Customs and Excise Management Act, Federal Ministry of Finance, Nigeria Customs Service, Revenue Generation
Level: Level 2

Topic: Tax Administration and Enforcement

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

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

Question

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)

Answer

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Tags: Contracts, Electronic Documents, Exemptions, Money Transfer Levy, Stamp Duties
Level: Level 2

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.

Question

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:

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

Answer

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Tags: Allowable expenses, Beneficiaries Income, Settlement Trust, Tax computation, Trustees Income
Level: Level 2

Topic: Taxation of Trusts and Estates

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.

Question

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)

Answer

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Tags: Government Roles, National Tax Policy, Revenue Agency Duties, Tax Administration, Taxpayer Responsibilities
Level: Level 2

Topic: Tax Administration and Enforcement

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.

Question

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)

Answer

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Tags: Joint Tax Board, Local Government Taxes, Nigeria Tax Administration, State Board of Internal Revenue, Tax Collection
Level: Level 2

Topic: Tax Administration and Enforcement

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.

Question

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:

Income overstated:
- June 30, 2015: N250,000
- September 30, 2016: N280,000
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)

Answer

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Tags: Accounting Year-End, Adjusted Profits, Assessable Profits, Revenue Practice, Tax law
Level: Level 2

Topic: Tax Administration and Enforcement

MGE – Nov 2014 – L2 – Q2 – Strategic Planning Process

Elements of a corporate mission statement to reflect values, customer focus, and ethical operations.

Question

In January 2014, Mr. Uzodike Okoh, the Managing Director of DEF Oil Mills Limited, constituted a Strategic Planning Committee to coordinate the development of a five-year strategic plan for the company. This is the first time a formal strategic plan is being attempted in the company.

After several meetings of the Strategic Planning Committee, Mr. Ibrahim Edoro, the Chairman of the Strategic Planning Committee, presented what he described as a road map to actualize the objectives of the company. Several sub-committees were constituted to work on different aspects of the strategic plan.

Mrs. Edwards is the Chairperson of the sub-committee assigned to articulate and draw up the mission statement of the company. The Chairman of the Strategic Planning Committee took particular interest in the work of this sub-committee because, according to him, an appropriate mission statement would set the tone of the strategic plan, galvanise energies of the entire workforce, and set a clear direction for the company.

At the first meeting of the mission statement’s sub-committee, Mrs. Edwards distributed working papers, which included the history of the company. Speeches delivered by the pioneer Managing Director on different occasions and mission statements of similar companies were also provided.

The next meeting of the sub-committee was a brainstorming session in which participants were asked to identify the key elements that should be incorporated into the mission statement of the company.

Required:

As a member of the sub-committee on mission statement, identify and explain any FIVE elements which may be incorporated into the mission statement of the company.
(20 Marks)

Answer

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Tags: Corporate Image, Corporate Strategy, Mission Statement, Stakeholders, Strategic Planning
Level: Level 2

Topic: Strategic Planning Process

MGE – Nov 2014 – L2 – Q1 – Corporate Governance

Ethical and governance issues in appointing auditors with familial ties to company management.

Question

ROC Company Plc. manufactures aluminium (stainless) household equipment. Its plant is located by Alobe river, which is the source of water for the community. The company currently has the largest share of the market on the West African Coast and plans to expand its operations to East African and South African markets.

At the 26th Annual General Meeting (AGM), shareholders approved the appointment of Adeola & Partners as External Auditors to the company. The Managing Partner of Adeola & Partners, Sir Segun Adeola, is a nephew of the Managing Director of ROC Company Plc. The appointment of Adeola & Partners as External Auditors to ROC Company was facilitated by the Managing Director, who did not disclose his relationship with Sir Segun Adeola to the company’s board.

At a recent board meeting, the Managing Director of ROC expressed concern that so much resources were expended towards satisfying the interest of the community at the expense of the company’s shareholders. According to him, shareholders are the primary stakeholders of the company, and their interest should be given the highest priority. He further opined that although other stakeholders are important to the company but only to the extent that ROC needs them. Consequently, the board resolved that henceforth, the company should not spend more than 0.5% of its Profit After Tax (PAT) on other stakeholders.

At the peak of the company’s production cycle, one of its underground waste tanks ruptured, and a large quantity of chemical waste leaked into Alobe river. This led to the destruction of aquatic life and contamination of neighbouring farmlands. This catastrophic event devastated the community as many farmers and fishermen lost their sources of livelihood. The community’s major source of drinking water was also contaminated.

The leadership of Alobe River Community Association approached the management of ROC Company Plc. and requested them to pay huge sums as compensation to the affected people and also to construct ten bore holes for the community. The management, however, informed the community leaders that based on the resolution of their board, expenditure on the issue would be limited to only 0.5% of profit after tax at the end of the year, which was projected to be far less than the amount of compensation demanded by the community. As a result, all discussions with the leadership of the community broke down.

The youths of the community responded with a sit-in protest, leading to a blockade of the company’s gate and disruption of its operations. The board of the company is now seeking immediate and amicable resolution of this problem.

While this was going on, the company suffered a major fire outbreak in its second factory, destroying its main furnace, machines and a large quantity of its finished goods. Some of the workers were severely burnt while attempting to put out the fire at the factory’s major warehouse. This event culminated in production shutdown at the second factory and temporary disengagement of several skilled workers as well as some casual staff. Fortunately, the company is covered by comprehensive fire and workers compensation insurance policies with Nagode Risk and Life Assurance Plc.

Required:
a. As a Strategic Risk Consultant of ROC Company Plc. you are to evaluate the adequacy of the risk management processes, including its information and communication systems. (8 Marks)

b. Evaluate the company’s residual risks in contrast to the management’s risk appetite. (7 Marks)

c. Using the stakeholders theory, evaluate the Managing Director’s position. Are there other stakeholders important to the company? (9 Marks)

d. Identify and discuss the ethical issues involved in the scenario described above. (6 Marks)

Answer:

Answer

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Tags: Auditor Independence, Corporate Governance, Ethical Issues, Risk Management, Stakeholder Theory
Level: Level 2

Topic: Corporate Governance

PSAF – Nov 2014 – L2 – Q7 – Public Sector Reforms

Advising on investment projects based on expected returns and understanding cost-benefit analysis features in public project appraisal.

Question

a. Mr. Make-No-Mistake has N200,000 which he decides to invest if he can secure an assurance that the investment will earn at least 10% p.a. He is considering three projects:

Project A: Will earn N218,000 at the end of the 1st year.
Project B: Will earn N250,000 at the end of the 2nd year.
Project C: Will earn N140,000 at the end of 1st year and another N100,000 at the end of 2nd year.

If none of the projects is undertaken, Mr. Make-No-Mistake will invest his N200,000 in something else that will earn him 10% p.a.

You are required to assess and advise Mr. Make-No-Mistake on which of the projects he should undertake. (12 Marks)

b. Identify THREE main features of Cost-Benefit Analysis in public project appraisal. (3 Marks)

Answer

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Tags: Cost-benefit analysis, Investment Assessment, Project evaluation, Public Project Appraisal
Level: Level 2

Topic: Public Sector Reforms

PSAF – Nov 2014 – L2 – Q6 – Public Sector Reforms

Comparison of domestic vs. external public debts and proposing debt restructuring for Nigeria.

Question

Nigeria has contracted a number of debts obligations from both domestic and external sources.

a. What comparisons can you make between domestic and external public debts?
(9 Marks)

b. Formulate a debt restructuring method as a strategy for debts management in Nigeria.
(6 Marks)

Answer

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Tags: Debt Restructuring, Domestic Debt, External Debt, Financial management, Public Debt, Treasury Management
Level: Level 2

Topic: Public Sector Reforms

PSAF – Nov 2014 – L2 – Q5 – Fiscal Policy and Public Finance

Market Failure, Public Goods, Economic Intervention, Developing Economies, Nigeria, Government Intervention

Question

The need for governmental intervention in the economy is justified on the basis of market failure and public goods provision.”

Required:

a. Explain the concept of market failure and public goods. (5 Marks)

b. What conclusions can you draw from the foregoing statement in the context of a developing nation like Nigeria? (10 Marks)

Answer

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Topic: Fiscal Policy and Public Finance

PSAF – Nov 2014 – L2 – Q4 – Public Sector Financial Statements

Explanation of reporting vs. authorization dates, and types of events after reporting date with treatment examples.

Question

The General National Communication Commission (GNCC) is the sub-regulatory body in the Communications industry. It is mandatory for the Board of GNCC to submit its Report/Financial statements to the Ministry of Communication before publication in accordance with IPSAS 14 (Events after the reporting date). The events occurring after the reporting date could be favourable and/or unfavourable.

You are required to:

a. Distinguish between the reporting date and authorization date of the financial statements, giving examples. (4 Marks)

b. Explain briefly the differences between Adjusting and Non-Adjusting events after the reporting date, giving TWO examples of each. (8 Marks)

c. Identify the events (occurring after the reporting date) in the following situations and explain briefly the treatment of each:

i. General National Communication Commission carries its inventories at the lower of cost and net realizable value. At 31 December 2013, the cost of inventory determined under the First In, First Out (FIFO) method as reported in its financial statement for the year ended was N5 million. Due to severe recession and negative economic trends, the inventory could not be sold in January 2014. On 10 February, GNCC entered into an agreement to sell the entire inventory for N3 million. (2 Marks)

ii. The statutory audit of GNCC for the year ended 31 December 2012 was completed on 28 February 2013. The Financial Statement was signed by the Chief Executive Officer on 8 March 2013 and approved on 10 April 2013. The following events have since occurred:

A special equipment costing N605,000 purchased on 1 September, 2012
was destroyed by fire on 31 December, 2012. GNCC had booked a
receivable of N508,000 from the insurance company in respect of this
claim. On completion of investigation by the insurance company, it was
discovered that the fire broke out due to negligence on the part of a
machine operator. Consequently, the insurance company repudiated
liability.

iii. A debtor owing N900,000 filed for bankruptcy on January 15, 2013. The financial statements had included an allowance for doubtful debts relating to this debtor for N60,000 only. (2 Marks)

Answer

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Tags: Adjusting Events, Financial Statement Authorization, IPSAS 14, Non-adjusting Events, Reporting Date
Level: Level 2

Topic: Public Sector Financial Statements

PSAF – Nov 2014 – L2 – Q3 – Public Sector Audit

Explanation of financial fraud types and calculation of revenue loss within EFCC operations.

Question

Fraud is described as an intentional act involving deception to obtain an unjust or illegal advantage. It involves the presentation of a statement or representation made recklessly or without the belief in the truth or suppression of facts.

The Economic and Financial Crime Commission (EFCC) is a criminal investigation organisation in charge of investigating financial crimes involving politicians, economic saboteurs, and electoral fraudsters. EFCC’s “modus operandi” is such that any suspect or ‘accused’ must deposit all his money and other belongings with the exhibit section headed by Mr. Oripipe, a cashier, who is expected to pay all cash receipts collected by him to the Banking officer. The banking officer issues a revenue receipt to the Cashier.

Mrs. Innocent, the resident auditor, conducted a physical cash survey and discovered that the total amount on the duplicate receipt book with the banking officer is N4,550,000, which does not agree with the actual cash paid in. It was suspected that the organisation has been defrauded.

The following information relates to the deposits collected from January to December 2013:

Cash from Honourable Talaka: N12,500
Cash from a container with five suitcases, each containing N250,000: N1,250,000
Cash recovered from Anine, a criminal that raided Ifako bank: N4,000,000
Cash sales of impounded lace: N425,000
Five boxes containing consumable items earlier disposed of for N16,000, mistakenly kept in Mr. Oripipe’s drawer, were later discovered by the auditor.
On investigation, it was discovered that the banking officer was illegally removing N500 from every N2,500 paid to him by the cashier.

Required:

a. Explain briefly FOUR types of financial fraud. (4 Marks)

b. Prepare the correct statement of deposits from detainees as it should be in Mr. Oripipe’s records and identify the shortfall due to his negligence. (10 Marks)

c. Calculate the amount of cash lost by the government as a result of the fraud. (6 Marks)

Answer

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Tags: Cash Handling, EFCC Operations, Financial Control, Fraud Detection, Fraud Prevention, Public Sector Audit
Level: Level 2

Topic: Public Sector Auditing

PSAF – Nov 2014 – L2 – Q2 – The Budgeting Process in the Public Sector

Examination of government budgeting purposes, budget types, and factors affecting budget implementation in Nigeria.

Question

In all Government units, the executive arm prepares the budget and submits the same to the legislative arm for review, modifications, and approval. The approved budget serves as a basis for the activities of that government unit for the fiscal year under focus.

Required:

a. Explain any TWO main purposes which a government budget serves. (2 Marks)
b. Explain any THREE basic features of each of the following budget concepts:

i. Performance budgeting. (6 Marks)
ii. Zero-based budgeting. (6 Marks)

c. Nigeria is said to be low in budget implementation. Discuss any THREE key factors that negate efficient and effective budget implementation in the Nigerian public sector. (6 Marks)

Answer

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Tags: Budget Efficiency, Budget Implementation, Government Budget, Nigerian Public Sector, Performance Budgeting, Zero-Based Budgeting
Level: Level 2

Topic: The Budgeting Process in the Public Sector

PSAF – Nov 2014 – L2 – Q1 – Government Revenue

Calculation and distribution of revenue collected by Olakoma Federation across federal, state, and local levels.

Question

Eboda State is one of the 30 states in the Olakoma Federation. The Federation has a population of 120 million people with 700 local government councils and a land mass of 300,000 sq kilometers.

Eboda State has a population of 12 million, 25 local government councils, and a land mass of 30,000 sq kilometers.

The following transactions took place in the Office of the Accountant-General of Olakoma Federation during the year ended December 31, 2013:

Revenue Source	Amount (N’ Million)
Crude oil sale	350,000
Domestic oil receipts	445,000
Miscellaneous oil receipts	105,000
Royalty on crude oil	101,000
Royalty on gas	95,000
Rentals on oil field	87,000
Gas flared penalty	77,000
Petroleum profit tax	650,000
Companies income tax	500,000
Other non-oil taxes	225,000
Import duties	255,000
Export duties	125,000
Excise duties	320,000
Custom penalty charge	115,000
Custom fees account	120,000
Common external tariff levy	100,000
Court fees	30,000
PAYE of armed forces	55,000
7% Port levy	25,000
Value Added Tax (VAT)	700,000

Additional Information:

The Olakoma Customs Service is entitled to 7% cost of collection on all revenues collected, while the Federal Inland Revenue Service is entitled to 4% of non-oil revenue.
The sharing formula for the Federation Account and VAT is as follows:

Category Federation Account VAT

Federal Government 52.68% 15%

State Governments 26.72% 50%

Local Governments 20.60% 35%
A 13% derivation is paid to oil-producing states, based on oil and gas-related income.
The sharing ratio in (ii) above is based on the following criteria:

Category State Local Government

Equity 40% 40%

Population 30% 30%

Land Mass 20% 20%

Internally Generated Revenue Effort 10% 10%
The total internally generated revenue effort of the 30 states and 700 local government councils amounted to N500 billion and N300 billion, respectively.
The total internally generated revenue effort of Eboda State and its 25 local governments amounted to N50 billion and N20 billion, respectively. Eboda State is not one of the oil-producing states.
All revenues due to all local governments in each state are paid to the State Joint Local Government Account. This account is entitled to 10% of the Internally Generated Revenue (IGR) of the state.

Category	Federation Account	VAT
Federal Government	52.68%	15%
State Governments	26.72%	50%
Local Governments	20.60%	35%

Category	State	Local Government
Equity	40%	40%
Population	30%	30%
Land Mass	20%	20%
Internally Generated Revenue Effort	10%	10%

Required:

a. State the differences between the Federation Account and the Consolidated Revenue Account. (4 Marks)

b. Calculate:

i. Olakoma Custom Service’s cost of collection. (3 Marks)
ii. Federal Inland Revenue Service’s cost of collection. (2 Marks)
iii. The 13% derivation paid to oil-producing states. (3 Marks)

c. Calculate the amount to be credited to:

i. Consolidated Revenue Fund of Olakoma Federal Government. (6 Marks)
ii. Eboda State Consolidated Revenue Fund Account. (6 Marks)
iii. State Joint Local Government Account. (6 Marks)

(Show workings)

Answer

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Tags: Allocation Formulas, Consolidated Revenue Fund, Cost of Collection, Federation Account, Government Revenue, Revenue Allocation, State Revenue
Level: Level 2

Topic: Government Revenue

AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

Question

You are the internal auditor of Moovy Magic Limited, which runs a chain of video rental stores.

The company guarantees that if a video is not available for rental, the customer will get a free rental when that video comes back into inventory. It is not possible for customers to pre-book videos. The company purchases a number of copies of each video, taking the above policy into account, but has no way of monitoring whether their procurement strategy is effective. Procurement decisions are made and auctioned locally, and no central budgets are produced.

You have been asked by the directors to review the procurement and other strategies of the company.

Required:

Identify and explain the potential business risks arising from the above procurement and other strategies. Suggest controls and strategies that the management of Moovy Magic could instigate to mitigate those business risks. (9 Marks)

Answer

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Tags: Business Risks, Internal Controls, Mitigation Strategies, Procurement, Video Rental
Level: Level 2

Topic: Risk Assessment and Internal Control
Series: MAY 2016

Level: Level 2

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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.

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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.

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

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

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

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

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

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

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

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

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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.

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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.

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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.

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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.

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MGE – Nov 2014 – L2 – Q2 – Strategic Planning Process

Elements of a corporate mission statement to reflect values, customer focus, and ethical operations.

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MGE – Nov 2014 – L2 – Q1 – Corporate Governance

Ethical and governance issues in appointing auditors with familial ties to company management.

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PSAF – Nov 2014 – L2 – Q7 – Public Sector Reforms

Advising on investment projects based on expected returns and understanding cost-benefit analysis features in public project appraisal.

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PSAF – Nov 2014 – L2 – Q6 – Public Sector Reforms

Comparison of domestic vs. external public debts and proposing debt restructuring for Nigeria.

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PSAF – Nov 2014 – L2 – Q5 – Fiscal Policy and Public Finance

Market Failure, Public Goods, Economic Intervention, Developing Economies, Nigeria, Government Intervention

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PSAF – Nov 2014 – L2 – Q4 – Public Sector Financial Statements

Explanation of reporting vs. authorization dates, and types of events after reporting date with treatment examples.

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PSAF – Nov 2014 – L2 – Q3 – Public Sector Audit

Explanation of financial fraud types and calculation of revenue loss within EFCC operations.

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PSAF – Nov 2014 – L2 – Q2 – The Budgeting Process in the Public Sector

Examination of government budgeting purposes, budget types, and factors affecting budget implementation in Nigeria.

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PSAF – Nov 2014 – L2 – Q1 – Government Revenue

Calculation and distribution of revenue collected by Olakoma Federation across federal, state, and local levels.

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AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control

Identify business risks for Moovy Magic’s procurement and suggest control strategies.

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