Question Tag: Assurance Service

Anything Goes Microfinance Bank Limited was incorporated in 2018 to meet the financial needs of low-level customers. The Management Accounts of 2019 revealed that the bank has a shareholders’ fund of N2.1 billion, total assets of over N5 billion, and customer deposits of N2 billion. It is the largest microfinance bank in Kito. Today, the bank continues to be the core banker for small and medium-scale enterprises and accounts for over 70% of the business turnover in Kito. It is the only indigenous microfinance bank that is fully owned by Kito shareholders. The bank directors are elected by key shareholders and represent all shareholders in both the public and private sectors.

The bank currently has a total employee establishment of over 350. With the liberalization of the economy and globalization of businesses, the bank embraced new challenges by becoming a commercial bank in 2020 and changed its name to Anything Goes Bank Limited. The change of Chief Executive Officer and the management at Anything Goes Bank Limited in early 2020 ushered in a new era where new ideas are adopted and managers reclaimed managerial responsibilities. The main objective was to come up with innovative business strategies that would ensure the bank serves its core customers effectively.

However, to reposition, the bank embarked on reviewing its corporate strategic plan, building on existing strengths, specifically addressing growth and development, information technology and business management, enhanced service delivery, profitability, and capital growth. The strategic plan for the bank has been drawn up with the theme “Managing for Value.” The strategies are based on four perspectives: people, customers, financial performance, and risk and control. The goal of the plan is to ensure that the bank meets shareholders’ expectations, provides a common language, ensures satisfaction for chosen customer segments, and fosters motivated and prepared staff. A focus on these four perspectives would result in customer satisfaction, efficient processes, and enhanced employee motivation.

To remain relevant and meet customers’ needs, the bank believes it must revisit its operating structure and expand its business. The bank aims to become a globally recognized commercial bank in Africa. Management believes a dynamic and flexible approach to strategic change and performance is essential, particularly when facing turbulence in its operating environment. A review of operations shows an increasingly complex environment with an accelerating rate of change, putting performance pressure from the government, public, and other stakeholders.

The bank is interested in early reporting but lacks the software capacity to handle current transaction volumes. Many staff members are not proficient in International Financial Reporting Standards, especially concerning complex financial instruments. A recent tax audit resulted in back duty assessment and other unresolved queries. Additionally, the bank faces issues with inefficient service delivery, public distrust in the banking sector, weak corporate governance, and rising bad loans.

The bank’s management has prepared a master plan with grand strategies, such as product development, market expansion, turnaround, and joint venture strategies. To achieve these grand strategies, functional strategies, including marketing, operations, organizational management, and financial strategies, are detailed in the master plan. However, implementation faces obstacles, including government policies, poor leadership, limited IT capacity, lack of funds, staff capability, and an inadequate corporate culture.

The bank has an audit committee, but it has not been performing optimally due to a lack of structured operations. It is also behind on some reporting requirements and has been fined by regulatory authorities. Although the bank views itself as small, it still requires an auditor to examine its accounts and express an opinion. Management is considering changing its auditors due to the transition to a commercial bank and has decided to request proposals for a new auditor appointment. Delays in attestation and assurance reporting to regulators have led to fines.

A friend of yours, whose father is a management staff member of the company and a student of accountancy, has informed you of these developments and asked for explanations to enlighten management before they send out a proposal for audit services.

Required:

a. Discuss the key features needed in an audit report which should be included in the proposal for audit services of Anything Goes Bank Limited. (10 Marks)

b. Explain the type of assurance service that the auditor of the bank should provide. (6 Marks)

c. List the duties the audit committee of the bank ought to be performing. (8 Marks)

d. Distinguish amongst audit, assurance, and attestation engagements. (6 Marks)