Question Tag: Responsibility

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  • 5 Marks

SCS – Nov 2024 – L3 – Q5c – Board Independence and Accountability in Corporate Governance

Evaluation of how the governance structure at BOGML affects board independence and accountability.

There are a number of concepts of good corporate governance that every entity, including BOGML, must strive to adhere to.

Required:
Provide an evaluation of how the existing corporate governance structure at BOGML may undermine or compromise the following key concepts of good corporate governance, with particular reference to the current composition and organisation of the board.

i) Independence
ii) Responsibility and accountability

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  • 20 Marks

AAA – May 2024 – L3 – SB – Q4 – Forensic Auditing

Discuss auditor responsibility for fraud detection, strategies for closing the expectation gap, differences between review and audit reports, and required reporting for managing fraud.

Demmy Global Limited, a growth-oriented company controlled by its Managing Director, Mr. Longe, sells mobile smartphones through sales agents on a commission basis. Phones are supplied on a sale or return basis, with sales recognized upon receipt by agents. The company’s growth appears rapid due to fraudulent practices by Mr. Longe, including:

  1. Fictitious agents responsible for 25% of revenue.
  2. Year-end dispatch of inventories to agents with post-year-end returns recorded as repurchases.
  3. Capitalization of 20% of cost of sales by falsifying purchase invoices with suppliers.
  4. Director bonuses linked to profits, encouraging uncritical acceptance of rapid growth.

The fraud was concealed by falsified records, bribery, and restrictions on auditor access to corroborate sales and verify contracts.

The external auditor is now sued by a bank that granted a loan to Demmy Global Limited based on interim financial statements reviewed by the auditor, for which a review report was issued.

Required:

  1. Discuss the extent to which an auditor is responsible for detecting fraud and error, and the external auditor’s procedure where fraud or error is suspected. (7 Marks)
  2. Advise the auditor on strategies to close the expectation gap. (5 Marks)
  3. Explain how the ‘review report’ issued by the auditor on the interim financial statements differs in terms of its level of assurance from the auditor’s report on the year-end financial statements. (2 Marks)
  4. Evaluate the circumstance and nature of the reports that would have been necessary for the auditor based on the activities of the Managing Director. (6 Marks)

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Has Case Study
  • 10 Marks

SCS – Nov 2023 – L3 – Q1a – Professional practice and codes of ethics

Understanding various models of professional accountant-client relationships and the roles of both parties.

NSL outsourced some aspects of the finance function to a professional accounting firm. A misunderstanding about the relationship that does or should exist between a professional accountant and a client led to disagreements between the accounting firm and the management team over some financial reporting issues. An attempt by management to interfere with the work of the accounting firm was firmly resisted.

Required:
State and explain THREE (3) out of the FOUR models that describe a professional accountant-client relationship, clearly indicating whether NSL or the professional accounting firm has most authority and responsibility for final decision-making.
(10 marks)

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  • 5 Marks

SCS – Nov 2024 – L3 – Q5c – Board Independence and Accountability in Corporate Governance

Evaluation of how the governance structure at BOGML affects board independence and accountability.

There are a number of concepts of good corporate governance that every entity, including BOGML, must strive to adhere to.

Required:
Provide an evaluation of how the existing corporate governance structure at BOGML may undermine or compromise the following key concepts of good corporate governance, with particular reference to the current composition and organisation of the board.

i) Independence
ii) Responsibility and accountability

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  • 20 Marks

AAA – May 2024 – L3 – SB – Q4 – Forensic Auditing

Discuss auditor responsibility for fraud detection, strategies for closing the expectation gap, differences between review and audit reports, and required reporting for managing fraud.

Demmy Global Limited, a growth-oriented company controlled by its Managing Director, Mr. Longe, sells mobile smartphones through sales agents on a commission basis. Phones are supplied on a sale or return basis, with sales recognized upon receipt by agents. The company’s growth appears rapid due to fraudulent practices by Mr. Longe, including:

  1. Fictitious agents responsible for 25% of revenue.
  2. Year-end dispatch of inventories to agents with post-year-end returns recorded as repurchases.
  3. Capitalization of 20% of cost of sales by falsifying purchase invoices with suppliers.
  4. Director bonuses linked to profits, encouraging uncritical acceptance of rapid growth.

The fraud was concealed by falsified records, bribery, and restrictions on auditor access to corroborate sales and verify contracts.

The external auditor is now sued by a bank that granted a loan to Demmy Global Limited based on interim financial statements reviewed by the auditor, for which a review report was issued.

Required:

  1. Discuss the extent to which an auditor is responsible for detecting fraud and error, and the external auditor’s procedure where fraud or error is suspected. (7 Marks)
  2. Advise the auditor on strategies to close the expectation gap. (5 Marks)
  3. Explain how the ‘review report’ issued by the auditor on the interim financial statements differs in terms of its level of assurance from the auditor’s report on the year-end financial statements. (2 Marks)
  4. Evaluate the circumstance and nature of the reports that would have been necessary for the auditor based on the activities of the Managing Director. (6 Marks)

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Has Case Study
  • 10 Marks

SCS – Nov 2023 – L3 – Q1a – Professional practice and codes of ethics

Understanding various models of professional accountant-client relationships and the roles of both parties.

NSL outsourced some aspects of the finance function to a professional accounting firm. A misunderstanding about the relationship that does or should exist between a professional accountant and a client led to disagreements between the accounting firm and the management team over some financial reporting issues. An attempt by management to interfere with the work of the accounting firm was firmly resisted.

Required:
State and explain THREE (3) out of the FOUR models that describe a professional accountant-client relationship, clearly indicating whether NSL or the professional accounting firm has most authority and responsibility for final decision-making.
(10 marks)

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