Due diligence – NBC Institute

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

Question

Piton Drilling and Engineering Services Limited was established in 2001 by Andrew and Cole. The company provides consultancy, engineering, and training services in borehole drilling, power generation, and environmental engineering services under drilling, training, and laboratories divisions. The largest division is drilling, contributing more than 60% of income, while training and laboratory services contribute over 30%.

Piton Drilling & Engineering Services Limited saw an opportunity to combine business operations with Valemu Limited, a small engineering company with three members. Valemu Limited has a strong presence in the riverine areas and commenced operations about two years ago.

The issue of the business combination was brought to the attention of Peter, the Engagement Partner for the audit of Piton Drilling and Engineering Services Limited. He suggested that Andrew and Cole should perform due diligence on the operations of Valemu Limited, regardless of the fact that they are in similar business operations. He explained that this exercise would reduce the risk of failure of the merged entity, as both quantitative and qualitative information would be available about the operations of the entity before deciding on signing the agreement.

The due diligence should cover financial viability and long-term sustainability of the merged entity. Peter made reference to a situation where a large department store was forced to wind down its operations after a business combination when it was discovered that the merged entity was highly indebted to the bank, and most of its assets had been pledged as collateral for loans.

Some staff of your firm have already been assigned to the audit engagement. You informed them that the audit would be delayed because a due diligence exercise is being carried out on the operations of the entity Piton Drilling and Engineering Services Limited intends to merge with. One of the inquisitive staff, who is tired of staying in the office, came up to you with a question: why couldn’t the audit and the due diligence review serve the same purpose?

Required:

(a) Differentiate between due diligence report and external audit report. (3 Marks)

(b) Discuss the items you feel should be investigated or reported on in the due diligence exercise to make it of value to Piton Drilling and Engineering Services Limited. (7 Marks)

(d) Highlight the format of the due diligence report. (7 Marks)

Answer

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Tags: Business combination, Due diligence, External audit, Financial Viability, Report Formats
Level: Level 3

Topic: Assurance Engagements

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

Question

Write short notes on the following:

(a) Public Accounts Committee
(3 Marks)

(b) Value-for-Money Audit
(3 Marks)

(d) Due Diligence
(3 Marks)

(e) Due Process
(3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Alarm, Due diligence, Due Process, Public Accounts Committee, Value for Money Audit
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2011

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

Question

Palm Oil Processing Company Ltd is a palm oil processing company founded in 2001. The processing is done at five different locations within the West Akim District of the Eastern Region. The company is facing a problem of the supply of palm fruits (the raw material of the company). To ensure regular supply of palm fruits, Palm Oil Processing Co. Ltd. approached the Directors of Ayensu Palm Plantations Ltd. to acquire their company. The Directors of Palm Oil Processing Company approached Western Auditors, a firm of Chartered Accountants, to conduct a due diligence review on Ayensu Palm Plantation Ltd.

Required:
As audit manager of Western Auditors:

i) Identify FIVE (5) practical examples of due diligence assignments and which one(s) would be relevant to Ayensu Palm Plantation Ltd. (5 marks)

ii) Explain FIVE (5) issues you would include in your due diligence review inquiries on Ayensu Palm Plantations Ltd. (5 marks)

Answer

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Tags: Acquisition, Due diligence, Financial review
Level: Level 3

Topic: Audit-related services
Series: NOV 2018

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

Question

i) The quality control standard for firms, ISQC 1: Quality control for firms that perform audits and reviews of financial statements and other assurance services engagements sets out standards and guidance that helps firms to comply with ethical, professional and legal requirements in the performance of audit and other professional assignments for the public.
Required:
At the firm level, recommend the elements that should be included in an audit firm’s system of Quality Control. (5 marks)

ii) You are a partner in Nii and Nana Associates, a firm of Chartered Accountants. You have just been nominated for the audit of Wine and Dine Ltd., a catering company in the twin-city. The company and its officers are not known to the firm. The company has just been incorporated and has not previously had an audit. You are about ready to accept the nomination.
Required:
Discuss why it is important for auditors to carry out procedures before accepting nomination for appointments. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor appointment, Due diligence, Ethical considerations, ISQC 1, Quality control
Level: Level 3

Topic: Practice management, Professional responsibility and liability
Series: MAY 2018

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

Question

Dzinpa & Associate, a firm of Chartered Accountants, in which you are a partner, has the following issues emerged in relation to two of its clients:

i) Good Life Insurance Company Limited is a major client and is listed on the Ghana Stock Exchange. The audit of this client has just started with an audit team of six members, of which Sally is the most junior. Sally has invested in a personal pension plan in a company whose investment portfolio is in all the listed companies on the Ghana Stock Exchange.

ii) You are the head of a team carrying out due diligence on Dumsor Ltd., a limited liability company which your client, Solar Electricals, is considering taking over. David, your second in command on the team, has confided in you that in the course of his work he has met the daughter of the Finance Director of Dumsor Ltd., and he intends to invite her on a date.

Required:
Comment on the ethical and other professional issues raised in the above matters.
(Note: Your answer should outline the threat arising, the significance of the threat, any factors you have taken into account, and if relevant, any safeguards you could apply to eliminate or mitigate the threat.) (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Independence, Conflict of Interest, Due diligence, Ethical Issues, Professional Conduct
Level: Level 3

Topic: Professional responsibility and liability, Rules of professional conduct
Series: MAY 2018

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

Question

Required:

(a) Differentiate between due diligence report and external audit report. (3 Marks)

(b) Discuss the items you feel should be investigated or reported on in the due diligence exercise to make it of value to Piton Drilling and Engineering Services Limited. (7 Marks)

(d) Highlight the format of the due diligence report. (7 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Business combination, Due diligence, External audit, Financial Viability, Report Formats
Level: Level 3

Topic: Assurance Engagements

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

Question

Write short notes on the following:

(a) Public Accounts Committee
(3 Marks)

(b) Value-for-Money Audit
(3 Marks)

(d) Due Diligence
(3 Marks)

(e) Due Process
(3 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Alarm, Due diligence, Due Process, Public Accounts Committee, Value for Money Audit
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2011

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

Question

Required:
As audit manager of Western Auditors:

i) Identify FIVE (5) practical examples of due diligence assignments and which one(s) would be relevant to Ayensu Palm Plantation Ltd. (5 marks)

ii) Explain FIVE (5) issues you would include in your due diligence review inquiries on Ayensu Palm Plantations Ltd. (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acquisition, Due diligence, Financial review
Level: Level 3

Topic: Audit-related services
Series: NOV 2018

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor appointment, Due diligence, Ethical considerations, ISQC 1, Quality control
Level: Level 3

Topic: Practice management, Professional responsibility and liability
Series: MAY 2018

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

Question

Dzinpa & Associate, a firm of Chartered Accountants, in which you are a partner, has the following issues emerged in relation to two of its clients:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Auditor Independence, Conflict of Interest, Due diligence, Ethical Issues, Professional Conduct
Level: Level 3

Topic: Professional responsibility and liability, Rules of professional conduct
Series: MAY 2018

Question Tag: Due diligence

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AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

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AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

You're reporting an error for "AAA – May 2023 – L3 – Q4 – Assurance Engagements"

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance"

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

You're reporting an error for "AAA – Nov 2018 – L3 – Q5a – Audit-related services"

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

You're reporting an error for "AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability"

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

You're reporting an error for "AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability"

AAA – May 2023 – L3 – Q4 – Assurance Engagements

Differentiate between due diligence and audit reports, discuss key items for due diligence, evaluate professional firm benefits, and highlight the due diligence report format.

You're reporting an error for "AAA – May 2023 – L3 – Q4 – Assurance Engagements"

AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance

Explores the functions and significance of various committees and concepts in governance, including the Public Accounts Committee and due diligence.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q6 – Internal Audit and Corporate Governance"

AAA – Nov 2018 – L3 – Q5a – Audit-related services

Identification and explanation of due diligence assignments relevant to an acquisition.

You're reporting an error for "AAA – Nov 2018 – L3 – Q5a – Audit-related services"

AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability

Discusses quality control standards for audit firms and the importance of procedures before accepting audit appointments.

You're reporting an error for "AAA – May 2018 – L3 – Q2b – Practice management, Professional responsibility and liability"

AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability

Comment on the ethical and professional issues in two cases related to audit client engagements.

You're reporting an error for "AAA – May 2018 – L3 – Q2a – Rules of professional conduct, Professional responsibility and liability"

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