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AAA – May 2023 – L3 – Q3 – Risk Management in Audits

Evaluate risks in PK Industries' scenario, discuss related party risk assessment per ISA 550, and provide audit guidelines based on ISA 600.

Messrs PK Industries Limited was incorporated and operates its business in Nigeria. The company has existed over the years. During most of this period, it imported some major components from China. Imports usually take some time to arrive after necessary forms have been completed and submitted to the bank.

Two of the directors have two other companies that supply fuel and other local resources needed by the company. The company’s directors are aware of this but prefer to do their business rather than patronize other suppliers.

In the last few years, the turnover of the company fluctuated between ₦500 million and ₦1 billion. The two other companies owned by the two directors are currently trading on loans granted by the company.

Following what was considered to be an increasingly harsh economic environment and high cost of power supply, the company registered a subsidiary company with a production outfit in Ghana while still maintaining its head office operations in Nigeria. Part of the raw materials needed in Ghana are procured in Nigeria and transported to Ghana through hired trailers. This process is being used until a suitable supplier is found in Ghana.

The company decided to hold the next Annual General Meeting (AGM) in the company’s premises in Ghana, with all the directors/shareholders traveling to Ghana on a direct flight from Abuja to Accra at the company’s expense. It was decided that this was an opportunity to evaluate the Ghanaian environment for further business decisions.

The audit of the Nigerian company and its Ghanaian company were done by different firms.

Required:

(a) Evaluate the risks involved in the scenario above. (5 Marks)

(b) Discuss the risk assessment procedures that the auditor of Messrs PK Industries Limited needs to adopt as required by ISA 550. (11 Marks)

(c) Prepare the key guidelines to the audit in accordance with ISA 600. (4 Marks)

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AAA – Nov 2018 – L3 – Q2 – Regulatory Investigations and Disciplinary Actions

Assessment of joint audit advantages, agenda setup, and addressing regulatory issues in audit planning

Yusuf Olatunji & Co., (Chartered Accountants) have been auditors to XBC Bank Limited. There has been some regulatory and compliance issues for which the bank was sanctioned and paid penalties to both the Central Bank of Nigeria and the Financial Reporting Council of Nigeria. At the board of directors meeting to consider the last annual report audited by the firm, some of the problems caused by the auditors were raised. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm. To achieve their objective, a bigger firm that has international affiliation was considered to take a leading position in a joint audit arrangement and to ensure appropriate compliance.

Your firm has been approached for the appointment. A meeting was scheduled between your firm, Yusuf Olatunji & Co., and the executive management of the bank. In preparation for the meeting, you are informed that you will address the meeting on the advantages and disadvantages of joint audit, being an area some members of the management team have expressed concerns.

After the meeting, your firm was subsequently appointed, and the necessary formalities were properly followed. Your partner has directed that you liaise with Yusuf Olatunji & Co. to obtain the necessary materials for the preparation of the audit and that you review your firm’s audit manual with respect to the concerns of management on joint audit.

Your assessment of the documents obtained from the other auditor revealed the following, amongst others:

  1. Part of the penalty was on improper disclosure relating to a material property, plant, and equipment (PPE) acquired during the previous year and a substantial loan above the limit authorised for a sector of the economy;
  2. The classification of unresolved transactions as debit balances in the statement of financial position, resulting in an increase in operating profit and the payment of higher taxes than projected;
  3. The IT operations of the bank had weak controls such that it was possible for some staff to over-ride some of them;
  4. The net current assets have continued to fall and, in the preceding year, have fallen below industry average despite an increase in gross earnings.

Required:

a. Evaluate the advantages and disadvantages of joint audit. (8 Marks)

b. Prepare an agenda for the scheduled meeting between the two audit firms. (4 Marks)

c. Develop the appropriate audit approach to address each of the issues identified from the review of the documents obtained from Yusuf Olatunji & Co. (8 Marks)

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AAA – Nov 2017 – L3 – Q2 – Group Audits

Assess business risks for Chuks Zaka Limited post-acquisition, evaluate financial statement risks, and outline audit considerations.

Chuks Roberts Plc (CRP) operates as an auto-parts manufacturing company in Nigeria with headquarters in Lagos. CRP plans to manufacture drones for parcel distribution across Africa and has acquired Zaka Roberts Limited (ZRL), a South African company based in Johannesburg, to bring this plan to fruition.

Zaka previously specialized in manufacturing computer-controlled equipment for laboratories and other industries in Africa and the Middle East. The company was owned by five directors/shareholders who accepted CRP’s offer on February 1, 2016, to purchase Zaka’s manufacturing equipment, technology (patent-protected), Cape Town factory, and Johannesburg head office for US$450 million, representing 75% of Zaka’s value.

Effective March 31, 2016, Zaka ceased manufacturing, making most employees redundant except for a select few in marketing, accounts, and administration, with one month’s notice. The restructured entity, now named Chuks Zaka Limited (CZL), will operate as a marketing arm selling CRP’s drones in the South African region, with CRP holding a 55% stake.

Your firm has been CRP’s external auditor and is now engaged to audit CZL.

Required:
a. Analyse and evaluate the business risks that would be assessed by the management of CZL. (6 Marks)
b. Analyse and evaluate the business risks that would be assessed by the directors of CRP.

(6 Marks)
c. Assess and advise on the financial statements’ risks to be considered in planning the audit of CZL for the year ended December 31, 2016.

(8 Marks)

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AA – May 2021 – L2 – Q1 – Regulatory Framework for Auditing

Analysis of audit risks and control objectives in a joint audit and compliance scenario.

Chukwuemeka & Co. (Chartered Accountants) has been auditors to GED Manufacturing Nigeria Plc. There have been some regulatory and compliance issues for which the company was sanctioned and paid penalties to the Financial Reporting Council of Nigeria.

At the board of directors meeting to consider the last annual report audited by the firm, some of the previous problems caused by the auditors were raised and discussed. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm.

To achieve their objective, a bigger firm that has international affiliation was considered to take a leading role in a joint audit arrangement and to ensure appropriate compliance. Your firm has been approached for the appointment. A meeting was scheduled between your firm, Chukwuemeka & Co., and the executive management of GED Manufacturing Nigeria Plc.

After the meeting, your firm was subsequently appointed, and the necessary formalities were properly followed. Your partner has directed that you liaise with Chukwuemeka & Co. to obtain the necessary materials for the preparation of the audit and that you review the prior year working papers to understand the issues. Your assessment of the documents obtained from the other auditor revealed the following, amongst others:

(i) The work done on the process of dispatch of goods and invoicing was not considered sufficient and appropriate.

(ii) The IT operations of the company had weak controls such that it was possible for some staff to override some of the existing controls.

Required:

a. Explain the risks inherent in the dispatch of goods and invoicing. (10 Marks)

b. Discuss the control objectives and principal controls that are relevant to the process of dispatch of goods and invoicing. (10 Marks)

c. Explain the limitations of a joint audit. (5 Marks)

d. Discuss the benefits of audit carried out by an internationally affiliated audit firm. (10 Marks)

e. Explain briefly the importance of audit working papers. (5 Marks)

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AA – May 2024 – L2 – SA – Q1 – Auditing in a Computerized Environment

This question examines audit risks, controls, and auditor considerations when auditing an online banking system like FinPay Financial Solutions Limited.

FINPAY FINANCIAL SOLUTIONS LIMITED

FinPay, an innovative payment service bank, operates from its office on Lagos Island, overseeing all financial transactions, customer interactions, and relationships nationwide. The bank streamlines its processes for customer convenience, embracing the digital age.

Customers’ bank accounts are linked to their GSM phone numbers, with the initial zero removed. All banking operations, from account creation and deposits to withdrawals and account closure, are conducted seamlessly through the bank’s mobile App, which can be easily downloaded from popular App stores.

Access to the bank’s mobile App is allowed using an account number and a private six-digit PIN. A prospective customer completes the onboarding process by uploading scanned passport photos, ID card, utility bill, alongside providing other essential personal information, like name, NIN, telephone number, email address, and residential address.

To facilitate transactions, a four-digit PIN linked to the customer’s debit card is activated at Automated Teller Machines (ATMs). Additionally, customers can leverage USSD codes for payments. Customers are required to use their registered phone numbers on their smartphones when transacting businesses with the bank.

In the event of a declined transaction, swift resolution is a priority. Debits are promptly reversed, ensuring customer satisfaction. Customers can report issues directly through the mobile App or via email, and FinPay’s responsive support team resolves matters without necessitating a visit to the bank’s physical office. This efficiency cements FinPay’s reputation as a leading online bank in Nigeria.

FinPay expedites the delivery of debit cards to customers, ensuring they reach their designated addresses within 48 hours of account creation. Furthermore, a proactive follow-up call is made just 24 hours after opening an account, enhancing the overall customer experience.

With a focus on catering for tech-savvy Nigerian youths, FinPay is steadily expanding its customer base. The bank even offers small, easily accessible loans over a six-month period, further attracting and retaining a young clientele. Some customers instruct FinPay to pay monthly DStv subscriptions or send amounts to third parties on a regular basis by activating a prompt on the mobile App.

For added convenience, FinPay features a responsive chatbot, named Bobo. Customers can engage with Bobo through the bank’s mobile App, website, and social media channels, providing another layer of support and accessibility. This comprehensive approach positions FinPay as a forward-thinking financial institution at the forefront of digital banking in Nigeria.


Required:

a. Highlight four benefits an online system offers to FinPay and its customers. (8 Marks)

b. Identify and explain five General controls and five Application controls embedded in FinPay’s system. (10 Marks)

c. Explain three areas the auditors will give special considerations because of the audit risks associated with the online real-time system that dominates FinPay’s operations. (12 Marks)

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AA – May 2018 – L2 – Q5 – Auditing in a Computerized Environment

Discusses controls and potential problems in Electronic Data Interchange (EDI) systems.

Electronic Data Interchange (EDI) systems allow electronic transmission of business documents, such as purchase orders, invoices, payroll information, etc.

Required: a. Explain FOUR major controls to be put in place to minimize the risks inherent in EDI systems. (8 Marks) b. Discuss THREE features of EDI Systems that may create additional problems for the auditor. (7 Marks)

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AA – Nov 2023 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Identify and explain five risks that should be considered when planning an audit for Akanji Ltd.

Your firm has been appointed as Auditor for Akanji Ltd for the year ended 31 December 2022. Akanji Ltd designs, manufactures, and retails traditional fabrics. In trying to understand Akanji Ltd’s business, you observed the following:

  • Inventory is held at the warehouse and at retail shops in three different locations.
  • Customers place orders online and review the designs before sales are made.
  • There was a sharp fall in revenue due to the influx of “pirated fabric” and the directors are uncertain whether this trend will stop.
  • One retail shop was closed during the year and the premises are still available for sale.
  • The Internal Auditor was dismissed in the course of the year and is pursuing a claim for unfair dismissal. The Finance Director currently doubles as the Internal Auditor.
  • The Managing Director is due to retire next year and is likely to request repayment of loans he advanced to the business. Negotiations with the bank in respect of a loan to repay the Managing Director have started.

Required:
Identify and explain FIVE (5) risks arising from the above that should be considered when planning the audit of Akanji Ltd.
(10 marks)

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AA – May 2021 – L2 – Q3 – Audit and Assurance Evidence

Identify substantive tests using audit software, potential problems with audit software, and explain auditing around the computer.

Expert Ltd (Expert) is a wholesaler of furniture (such as chairs, tables, and cupboards). Expert buys the furniture from six major manufacturers and sells them to over 1,000 customers ranging from large retail chain stores to smaller owner-controlled businesses. The receivables balance includes customers owing up to GHȼ200,000 to smaller balances of about GHȼ20,000, all with different due dates for payments and credit limits. All information is stored on Expert’s computer systems, although previous audits have adopted an ‘audit around the computer’ approach.

You are the Audit Senior in charge of the audit of the receivables balance. For the first time with this client, you have decided to use audit software to assist with the audit of the receivables balance. IT staff at Expert are happy to help you, the Auditor. However, they cannot confirm the completeness of systems documentation and warn that the systems have very old operating systems, limiting file compatibility with modern programs.

To limit the possibility of damage to Expert’s computer files, a copy of the files will be provided by Expert’s IT staff for the Auditor to use with their own audit software.

Required:
a) State SIX (6) substantive tests that should be carried out using audit software on the receivables balance of Expert Ltd. (9 marks)

b) Identify FOUR (4) potential problems of using audit software at Expert Ltd. For each problem, explain how it can be resolved. (8 marks)

c) Explain the concept of “auditing around the computer” and discuss why this increases audit risk for the Auditor. (3 marks)

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AA – Nov 2021 – L2 – Q2a – Audit and Assurance Risk Environment

Explains audit risks auditors should consider when gathering evidence in the healthcare sector.

Hamosa Manu Hospital (HMH) is one of the government hospitals in Ghana where healthcare is free due to the National Health Insurance Scheme, as taxpayers fund healthcare by contributing an indirect tax of 2.5% on consumption.

All purchase requisition forms for medical supplies are forwarded to a centralized procurement department. Upon receipt, the procurement team will research the lowest price from suppliers and raise a purchase order. This is then passed to the Procurement Manager, who authorizes all orders. The small procurement team receives in excess of 300 forms a day.

Due to the government’s announcement of free Covid-19 testing in public hospitals, the hospital has invested heavily in new equipment, which, although very expensive, has meant that more testing could be performed and patient recovery rates would be faster. Currently, there is a shortage of appropriately trained medical staff. As a result, a capital expenditure committee has been established, made up of senior managers, and they plan and authorize any significant capital expenditure items.

Required:
Explain audit risks that auditors of HMH should consider during evidence gathering.

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AA – Nov 2018 – L2 – Q3a, b & c – Audit and Assurance Risk Environment

Identifies audit risks at International Training Center and outlines appropriate auditor responses.

International Training Center (ITC) is a large company limited by shares that operates a network of teaching centers in countries across West Africa. The Company was incorporated under the requirements of the Companies Act, 1963 (Act 179), on 19 January 1990 and domiciled in Ghana. Students who register with the Center pay 30% during initial registration and the remaining 70% over the course period. You are the senior Associate of Add Consult. ITC is a new client, and you are currently planning the audit with the audit manager to audit the company for the year ended 31 December 2017.

You have been provided with the following planning notes from the audit partner following his meeting with the Finance Director.

  • ITC purchases stationery from a supplier in China, and these goods are shipped to the company’s central warehouse. The goods are usually in transit for a fortnight, and the company correctly records the goods when received. ITC does not undertake a year-end inventory count but carries out monthly continuous (perpetual) inventory counts, and any errors identified are adjusted in the inventory system for that month.
  • During the year, the directors of the Company have each been paid a significant bonus, and they have included this in wages and salaries expenses. Separate disclosure of the bonus is required by the Companies Act.
  • ITC has a policy of revaluing its land and buildings, and this year has updated the valuations of all land and buildings.
  • During the year, the company introduced a bonus-based scheme on sales for its salespersons. The bonus target was based on increasing the number of students signing up for 6-month courses by the school for individuals running accountancy examinations. This has been successful, and revenue has increased by 25%, especially in the last few months of the year. The level of receivables is considerably higher than last year, and there are concerns about the creditworthiness of some students.

Required:
a. Describe FIVE (5) audit risks, and explain the auditor’s response to each risk, in planning the audit of International Training Center. (10 marks)

b. Identify FIVE (5) audit procedures Add Consult should perform in order to place reliance on the continuous (perpetual) counts for year-end inventory. (5 marks)

c. Describe substantive procedures Add Consult should perform to confirm the directors’ bonus payments included in the financial statements. (5 marks)

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AAA – May 2023 – L3 – Q3 – Risk Management in Audits

Evaluate risks in PK Industries' scenario, discuss related party risk assessment per ISA 550, and provide audit guidelines based on ISA 600.

Messrs PK Industries Limited was incorporated and operates its business in Nigeria. The company has existed over the years. During most of this period, it imported some major components from China. Imports usually take some time to arrive after necessary forms have been completed and submitted to the bank.

Two of the directors have two other companies that supply fuel and other local resources needed by the company. The company’s directors are aware of this but prefer to do their business rather than patronize other suppliers.

In the last few years, the turnover of the company fluctuated between ₦500 million and ₦1 billion. The two other companies owned by the two directors are currently trading on loans granted by the company.

Following what was considered to be an increasingly harsh economic environment and high cost of power supply, the company registered a subsidiary company with a production outfit in Ghana while still maintaining its head office operations in Nigeria. Part of the raw materials needed in Ghana are procured in Nigeria and transported to Ghana through hired trailers. This process is being used until a suitable supplier is found in Ghana.

The company decided to hold the next Annual General Meeting (AGM) in the company’s premises in Ghana, with all the directors/shareholders traveling to Ghana on a direct flight from Abuja to Accra at the company’s expense. It was decided that this was an opportunity to evaluate the Ghanaian environment for further business decisions.

The audit of the Nigerian company and its Ghanaian company were done by different firms.

Required:

(a) Evaluate the risks involved in the scenario above. (5 Marks)

(b) Discuss the risk assessment procedures that the auditor of Messrs PK Industries Limited needs to adopt as required by ISA 550. (11 Marks)

(c) Prepare the key guidelines to the audit in accordance with ISA 600. (4 Marks)

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AAA – Nov 2018 – L3 – Q2 – Regulatory Investigations and Disciplinary Actions

Assessment of joint audit advantages, agenda setup, and addressing regulatory issues in audit planning

Yusuf Olatunji & Co., (Chartered Accountants) have been auditors to XBC Bank Limited. There has been some regulatory and compliance issues for which the bank was sanctioned and paid penalties to both the Central Bank of Nigeria and the Financial Reporting Council of Nigeria. At the board of directors meeting to consider the last annual report audited by the firm, some of the problems caused by the auditors were raised. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm. To achieve their objective, a bigger firm that has international affiliation was considered to take a leading position in a joint audit arrangement and to ensure appropriate compliance.

Your firm has been approached for the appointment. A meeting was scheduled between your firm, Yusuf Olatunji & Co., and the executive management of the bank. In preparation for the meeting, you are informed that you will address the meeting on the advantages and disadvantages of joint audit, being an area some members of the management team have expressed concerns.

After the meeting, your firm was subsequently appointed, and the necessary formalities were properly followed. Your partner has directed that you liaise with Yusuf Olatunji & Co. to obtain the necessary materials for the preparation of the audit and that you review your firm’s audit manual with respect to the concerns of management on joint audit.

Your assessment of the documents obtained from the other auditor revealed the following, amongst others:

  1. Part of the penalty was on improper disclosure relating to a material property, plant, and equipment (PPE) acquired during the previous year and a substantial loan above the limit authorised for a sector of the economy;
  2. The classification of unresolved transactions as debit balances in the statement of financial position, resulting in an increase in operating profit and the payment of higher taxes than projected;
  3. The IT operations of the bank had weak controls such that it was possible for some staff to over-ride some of them;
  4. The net current assets have continued to fall and, in the preceding year, have fallen below industry average despite an increase in gross earnings.

Required:

a. Evaluate the advantages and disadvantages of joint audit. (8 Marks)

b. Prepare an agenda for the scheduled meeting between the two audit firms. (4 Marks)

c. Develop the appropriate audit approach to address each of the issues identified from the review of the documents obtained from Yusuf Olatunji & Co. (8 Marks)

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AAA – Nov 2017 – L3 – Q2 – Group Audits

Assess business risks for Chuks Zaka Limited post-acquisition, evaluate financial statement risks, and outline audit considerations.

Chuks Roberts Plc (CRP) operates as an auto-parts manufacturing company in Nigeria with headquarters in Lagos. CRP plans to manufacture drones for parcel distribution across Africa and has acquired Zaka Roberts Limited (ZRL), a South African company based in Johannesburg, to bring this plan to fruition.

Zaka previously specialized in manufacturing computer-controlled equipment for laboratories and other industries in Africa and the Middle East. The company was owned by five directors/shareholders who accepted CRP’s offer on February 1, 2016, to purchase Zaka’s manufacturing equipment, technology (patent-protected), Cape Town factory, and Johannesburg head office for US$450 million, representing 75% of Zaka’s value.

Effective March 31, 2016, Zaka ceased manufacturing, making most employees redundant except for a select few in marketing, accounts, and administration, with one month’s notice. The restructured entity, now named Chuks Zaka Limited (CZL), will operate as a marketing arm selling CRP’s drones in the South African region, with CRP holding a 55% stake.

Your firm has been CRP’s external auditor and is now engaged to audit CZL.

Required:
a. Analyse and evaluate the business risks that would be assessed by the management of CZL. (6 Marks)
b. Analyse and evaluate the business risks that would be assessed by the directors of CRP.

(6 Marks)
c. Assess and advise on the financial statements’ risks to be considered in planning the audit of CZL for the year ended December 31, 2016.

(8 Marks)

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AA – May 2021 – L2 – Q1 – Regulatory Framework for Auditing

Analysis of audit risks and control objectives in a joint audit and compliance scenario.

Chukwuemeka & Co. (Chartered Accountants) has been auditors to GED Manufacturing Nigeria Plc. There have been some regulatory and compliance issues for which the company was sanctioned and paid penalties to the Financial Reporting Council of Nigeria.

At the board of directors meeting to consider the last annual report audited by the firm, some of the previous problems caused by the auditors were raised and discussed. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm.

To achieve their objective, a bigger firm that has international affiliation was considered to take a leading role in a joint audit arrangement and to ensure appropriate compliance. Your firm has been approached for the appointment. A meeting was scheduled between your firm, Chukwuemeka & Co., and the executive management of GED Manufacturing Nigeria Plc.

After the meeting, your firm was subsequently appointed, and the necessary formalities were properly followed. Your partner has directed that you liaise with Chukwuemeka & Co. to obtain the necessary materials for the preparation of the audit and that you review the prior year working papers to understand the issues. Your assessment of the documents obtained from the other auditor revealed the following, amongst others:

(i) The work done on the process of dispatch of goods and invoicing was not considered sufficient and appropriate.

(ii) The IT operations of the company had weak controls such that it was possible for some staff to override some of the existing controls.

Required:

a. Explain the risks inherent in the dispatch of goods and invoicing. (10 Marks)

b. Discuss the control objectives and principal controls that are relevant to the process of dispatch of goods and invoicing. (10 Marks)

c. Explain the limitations of a joint audit. (5 Marks)

d. Discuss the benefits of audit carried out by an internationally affiliated audit firm. (10 Marks)

e. Explain briefly the importance of audit working papers. (5 Marks)

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AA – May 2024 – L2 – SA – Q1 – Auditing in a Computerized Environment

This question examines audit risks, controls, and auditor considerations when auditing an online banking system like FinPay Financial Solutions Limited.

FINPAY FINANCIAL SOLUTIONS LIMITED

FinPay, an innovative payment service bank, operates from its office on Lagos Island, overseeing all financial transactions, customer interactions, and relationships nationwide. The bank streamlines its processes for customer convenience, embracing the digital age.

Customers’ bank accounts are linked to their GSM phone numbers, with the initial zero removed. All banking operations, from account creation and deposits to withdrawals and account closure, are conducted seamlessly through the bank’s mobile App, which can be easily downloaded from popular App stores.

Access to the bank’s mobile App is allowed using an account number and a private six-digit PIN. A prospective customer completes the onboarding process by uploading scanned passport photos, ID card, utility bill, alongside providing other essential personal information, like name, NIN, telephone number, email address, and residential address.

To facilitate transactions, a four-digit PIN linked to the customer’s debit card is activated at Automated Teller Machines (ATMs). Additionally, customers can leverage USSD codes for payments. Customers are required to use their registered phone numbers on their smartphones when transacting businesses with the bank.

In the event of a declined transaction, swift resolution is a priority. Debits are promptly reversed, ensuring customer satisfaction. Customers can report issues directly through the mobile App or via email, and FinPay’s responsive support team resolves matters without necessitating a visit to the bank’s physical office. This efficiency cements FinPay’s reputation as a leading online bank in Nigeria.

FinPay expedites the delivery of debit cards to customers, ensuring they reach their designated addresses within 48 hours of account creation. Furthermore, a proactive follow-up call is made just 24 hours after opening an account, enhancing the overall customer experience.

With a focus on catering for tech-savvy Nigerian youths, FinPay is steadily expanding its customer base. The bank even offers small, easily accessible loans over a six-month period, further attracting and retaining a young clientele. Some customers instruct FinPay to pay monthly DStv subscriptions or send amounts to third parties on a regular basis by activating a prompt on the mobile App.

For added convenience, FinPay features a responsive chatbot, named Bobo. Customers can engage with Bobo through the bank’s mobile App, website, and social media channels, providing another layer of support and accessibility. This comprehensive approach positions FinPay as a forward-thinking financial institution at the forefront of digital banking in Nigeria.


Required:

a. Highlight four benefits an online system offers to FinPay and its customers. (8 Marks)

b. Identify and explain five General controls and five Application controls embedded in FinPay’s system. (10 Marks)

c. Explain three areas the auditors will give special considerations because of the audit risks associated with the online real-time system that dominates FinPay’s operations. (12 Marks)

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AA – May 2018 – L2 – Q5 – Auditing in a Computerized Environment

Discusses controls and potential problems in Electronic Data Interchange (EDI) systems.

Electronic Data Interchange (EDI) systems allow electronic transmission of business documents, such as purchase orders, invoices, payroll information, etc.

Required: a. Explain FOUR major controls to be put in place to minimize the risks inherent in EDI systems. (8 Marks) b. Discuss THREE features of EDI Systems that may create additional problems for the auditor. (7 Marks)

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AA – Nov 2023 – L2 – Q1b – Planning and Approach for Audit and Assurance Engagements

Identify and explain five risks that should be considered when planning an audit for Akanji Ltd.

Your firm has been appointed as Auditor for Akanji Ltd for the year ended 31 December 2022. Akanji Ltd designs, manufactures, and retails traditional fabrics. In trying to understand Akanji Ltd’s business, you observed the following:

  • Inventory is held at the warehouse and at retail shops in three different locations.
  • Customers place orders online and review the designs before sales are made.
  • There was a sharp fall in revenue due to the influx of “pirated fabric” and the directors are uncertain whether this trend will stop.
  • One retail shop was closed during the year and the premises are still available for sale.
  • The Internal Auditor was dismissed in the course of the year and is pursuing a claim for unfair dismissal. The Finance Director currently doubles as the Internal Auditor.
  • The Managing Director is due to retire next year and is likely to request repayment of loans he advanced to the business. Negotiations with the bank in respect of a loan to repay the Managing Director have started.

Required:
Identify and explain FIVE (5) risks arising from the above that should be considered when planning the audit of Akanji Ltd.
(10 marks)

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AA – May 2021 – L2 – Q3 – Audit and Assurance Evidence

Identify substantive tests using audit software, potential problems with audit software, and explain auditing around the computer.

Expert Ltd (Expert) is a wholesaler of furniture (such as chairs, tables, and cupboards). Expert buys the furniture from six major manufacturers and sells them to over 1,000 customers ranging from large retail chain stores to smaller owner-controlled businesses. The receivables balance includes customers owing up to GHȼ200,000 to smaller balances of about GHȼ20,000, all with different due dates for payments and credit limits. All information is stored on Expert’s computer systems, although previous audits have adopted an ‘audit around the computer’ approach.

You are the Audit Senior in charge of the audit of the receivables balance. For the first time with this client, you have decided to use audit software to assist with the audit of the receivables balance. IT staff at Expert are happy to help you, the Auditor. However, they cannot confirm the completeness of systems documentation and warn that the systems have very old operating systems, limiting file compatibility with modern programs.

To limit the possibility of damage to Expert’s computer files, a copy of the files will be provided by Expert’s IT staff for the Auditor to use with their own audit software.

Required:
a) State SIX (6) substantive tests that should be carried out using audit software on the receivables balance of Expert Ltd. (9 marks)

b) Identify FOUR (4) potential problems of using audit software at Expert Ltd. For each problem, explain how it can be resolved. (8 marks)

c) Explain the concept of “auditing around the computer” and discuss why this increases audit risk for the Auditor. (3 marks)

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AA – Nov 2021 – L2 – Q2a – Audit and Assurance Risk Environment

Explains audit risks auditors should consider when gathering evidence in the healthcare sector.

Hamosa Manu Hospital (HMH) is one of the government hospitals in Ghana where healthcare is free due to the National Health Insurance Scheme, as taxpayers fund healthcare by contributing an indirect tax of 2.5% on consumption.

All purchase requisition forms for medical supplies are forwarded to a centralized procurement department. Upon receipt, the procurement team will research the lowest price from suppliers and raise a purchase order. This is then passed to the Procurement Manager, who authorizes all orders. The small procurement team receives in excess of 300 forms a day.

Due to the government’s announcement of free Covid-19 testing in public hospitals, the hospital has invested heavily in new equipment, which, although very expensive, has meant that more testing could be performed and patient recovery rates would be faster. Currently, there is a shortage of appropriately trained medical staff. As a result, a capital expenditure committee has been established, made up of senior managers, and they plan and authorize any significant capital expenditure items.

Required:
Explain audit risks that auditors of HMH should consider during evidence gathering.

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AA – Nov 2018 – L2 – Q3a, b & c – Audit and Assurance Risk Environment

Identifies audit risks at International Training Center and outlines appropriate auditor responses.

International Training Center (ITC) is a large company limited by shares that operates a network of teaching centers in countries across West Africa. The Company was incorporated under the requirements of the Companies Act, 1963 (Act 179), on 19 January 1990 and domiciled in Ghana. Students who register with the Center pay 30% during initial registration and the remaining 70% over the course period. You are the senior Associate of Add Consult. ITC is a new client, and you are currently planning the audit with the audit manager to audit the company for the year ended 31 December 2017.

You have been provided with the following planning notes from the audit partner following his meeting with the Finance Director.

  • ITC purchases stationery from a supplier in China, and these goods are shipped to the company’s central warehouse. The goods are usually in transit for a fortnight, and the company correctly records the goods when received. ITC does not undertake a year-end inventory count but carries out monthly continuous (perpetual) inventory counts, and any errors identified are adjusted in the inventory system for that month.
  • During the year, the directors of the Company have each been paid a significant bonus, and they have included this in wages and salaries expenses. Separate disclosure of the bonus is required by the Companies Act.
  • ITC has a policy of revaluing its land and buildings, and this year has updated the valuations of all land and buildings.
  • During the year, the company introduced a bonus-based scheme on sales for its salespersons. The bonus target was based on increasing the number of students signing up for 6-month courses by the school for individuals running accountancy examinations. This has been successful, and revenue has increased by 25%, especially in the last few months of the year. The level of receivables is considerably higher than last year, and there are concerns about the creditworthiness of some students.

Required:
a. Describe FIVE (5) audit risks, and explain the auditor’s response to each risk, in planning the audit of International Training Center. (10 marks)

b. Identify FIVE (5) audit procedures Add Consult should perform in order to place reliance on the continuous (perpetual) counts for year-end inventory. (5 marks)

c. Describe substantive procedures Add Consult should perform to confirm the directors’ bonus payments included in the financial statements. (5 marks)

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