Financial Controls – NBC Institute

AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

Question

Giant Club has been in existence for about 6 years. The club membership comprises of eminent individuals in society and has a certificate of registration under the relevant laws. It has an approximate enrollment of 1,000 members. The club’s funding is supported by membership fees, parking fees, rental fees, voluntary donations, and income from endowment investments.

The club has been named as a beneficiary under the wills of two deceased members. Collection on the proceeds of the estate is made subsequent to the balance sheet date. Collections from the will receivable in the amount of N6,200,000 have been recorded based on the available information from the estate administrators. During the 2020 financial year, the club was committed to giving scholarships to seven students in various higher institutions. Accordingly, the club has agreed to pay these individuals regular pocket money in addition to providing medical coverage as needed. Since it is a non-for-profit organisation (NFPO), the club has not been conducting an independent statutory audit of the financial statements since inception. However, the club has been appointing its officers as and when due every two years.

The new Treasurer, who is a professional accountant, took over the control of the treasury and his review revealed that:

There was no periodic review of inventory items and background check on vendors/suppliers;
There were calls from vendors stating they haven’t been paid when records show payments have been made;
There were cases of cash takings not banked;
No control over cheque lodgments and reconciliation of the bank account;
No background check for those who handled money;
The computers used for transactions did not have protective passwords;
No evidence that the organisation sent acknowledgements to contributors with a record of such acknowledgements kept on file;
When new members were admitted and they made yearly subscription payments, the club did not issue pre-numbered tickets, which could then be compared to funds deposited;
When cheques were issued, supporting documentation of expenses and approvals at the time of signing cheques were not available; and
Requests for reimbursement were not checked for arithmetical accuracy and reasonableness before approval.

The new management of Giant Club has just appointed your firm as the external auditor, and you have been selected as the senior in charge of the audit.

Required:

a. Discuss the activities you will carry out when performing the audit of the Club. (10 Marks)

b. Evaluate the key audit areas that you will focus on to get enough audit evidence on this type of audit.

(5 Marks)

c. Determine other factors that should be of concern in this type of audit. (5 Marks)
(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Controls, Internal Control Weaknesses, Key Audit Areas, Not-for-Profit Organization
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2023

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Question

Greater Tomorrow Foundation (GTF) was established with the aim of providing support to children from disadvantaged backgrounds who wish to participate in sports, such as tennis, athletics, and football. It has benefited the country, with some beneficiaries representing the nation in international competitions.

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

Cash collected by volunteers from the public.
Direct donations from generous individuals.

Certain donations specify that the principal amount cannot be spent, with income generated (interest) allocated to specific activities, like providing sports equipment (e.g., footballs, boots, rackets, sportswear, etc.).

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Approach, Compliance, Control Environment, Donations, Financial Controls, Inherent Risk, Non-profit
Level: Level 2

Topic: Audit of Public Sector Entities

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

Question

As the Chief Finance Manager of a company, design an internal control for the company with respect to:
i) Cheque payments (10 marks)
ii) Bank reconciliation (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bank Reconciliation, Cheque Payments, Financial Controls, Internal Control
Level: Level 2

Topic: Audit and Assurance Risk Environment
Series: MAY 2017

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

Question

The Financial Administration Regulation (FAR) 2004 L.I 1802 provided for various financial controls over the management of public funds.

Required:
Explain the controls provided by the FAR under the following areas:
i) Signing a blank document
ii) Security of signatures
iii) Use of indelible ink and prohibition of alterations
iv) Amendment of figures
v) Fraction of reporting currency

Answer

Find Related Questions by Tags, levels, etc.

Tags: Document Security, FAR 2004, Financial Controls, Public Fund Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2018

AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

Question

The new Treasurer, who is a professional accountant, took over the control of the treasury and his review revealed that:

There was no periodic review of inventory items and background check on vendors/suppliers;
There were calls from vendors stating they haven’t been paid when records show payments have been made;
There were cases of cash takings not banked;
No control over cheque lodgments and reconciliation of the bank account;
No background check for those who handled money;
The computers used for transactions did not have protective passwords;
No evidence that the organisation sent acknowledgements to contributors with a record of such acknowledgements kept on file;
When new members were admitted and they made yearly subscription payments, the club did not issue pre-numbered tickets, which could then be compared to funds deposited;
When cheques were issued, supporting documentation of expenses and approvals at the time of signing cheques were not available; and
Requests for reimbursement were not checked for arithmetical accuracy and reasonableness before approval.

The new management of Giant Club has just appointed your firm as the external auditor, and you have been selected as the senior in charge of the audit.

Required:

a. Discuss the activities you will carry out when performing the audit of the Club. (10 Marks)

b. Evaluate the key audit areas that you will focus on to get enough audit evidence on this type of audit.

(5 Marks)

c. Determine other factors that should be of concern in this type of audit. (5 Marks)
(Total 20 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Financial Controls, Internal Control Weaknesses, Key Audit Areas, Not-for-Profit Organization
Level: Level 3

Topic: Internal Audit and Corporate Governance
Series: NOV 2023

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

Question

GTF has a constitution detailing how income can be spent and limits administrative expenditure to one-eighth of its income annually.

GTF’s income comes solely from voluntary donations, including:

Cash collected by volunteers from the public.
Direct donations from generous individuals.

Required:

a. Explain FIVE areas of inherent risk in Greater Tomorrow Foundation (GTF) and explain the effect of each risk on the audit approach. (10 Marks)

b. Explain FIVE reasons why the control environment may be weak in GTF. (10 Marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Approach, Compliance, Control Environment, Donations, Financial Controls, Inherent Risk, Non-profit
Level: Level 2

Topic: Audit of Public Sector Entities

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

Question

As the Chief Finance Manager of a company, design an internal control for the company with respect to:
i) Cheque payments (10 marks)
ii) Bank reconciliation (5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Bank Reconciliation, Cheque Payments, Financial Controls, Internal Control
Level: Level 2

Topic: Audit and Assurance Risk Environment
Series: MAY 2017

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

Question

The Financial Administration Regulation (FAR) 2004 L.I 1802 provided for various financial controls over the management of public funds.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Document Security, FAR 2004, Financial Controls, Public Fund Management
Level: Level 2

Topic: Public sector fiscal planning and budgeting
Series: MAY 2018

Question Tag: Financial Controls

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AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

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AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

You're reporting an error for "AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance"

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

You're reporting an error for "AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities"

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

You're reporting an error for "AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment"

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

You're reporting an error for "PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting"

AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance

Discuss audit activities, key focus areas, and factors of concern in auditing Giant Club.

You're reporting an error for "AAA – Nov 2023 – L3 – SB – Q3 – Internal Audit and Corporate Governance"

AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities

Identify inherent risks in a non-profit organization and assess control environment weaknesses impacting audit approach.

You're reporting an error for "AA – Nov 2023 – L2 – Q4 – Audit of Public Sector Entities"

AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment

Design of internal control systems for cheque payments and bank reconciliation.

You're reporting an error for "AA – May 2017 – L2 – Q2c – Audit and Assurance Risk Environment"

PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting

Explain financial controls provided by the Financial Administration Regulation (FAR) 2004 over the management of public funds.

You're reporting an error for "PSAF – May 2018 – L2 – Q3c – Public sector fiscal planning and budgeting"

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