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Yaa Baby acquired shares in Adom Ltd as follows:
| Date | Transaction | No. of shares | Share price | Value (GH¢) |
|---|---|---|---|---|
| 01/02/19 | Bought 1,000 shares | 1,000 | 2.00 | 2,000 |
| 01/03/19 | Bought 1,500 shares | 1,500 | 2.50 | 3,750 |
| 01/06/20 | Bought 2,000 shares | 2,000 | 3.00 | 6,000 |
| 01/04/21 | Bought 1,750 shares | 1,750 | 4.00 | 7,000 |
| 01/12/21 | Received rights issue (1 share for every 10 shares) | 625 | 1.50 | 937.50 |
| 31/12/21 | Sold 3,800 shares | 6.00 | 22,800 |
Required:
Compute the capital gain on the realization and the tax payable. (5 marks)
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The provisions of the Income Tax Act, 2015 (Act 896) require a resident person who pays an amount for works or the supply of goods and services to another resident or non-resident person with a source in Ghana to withhold tax from the payment at the rate specified under Paragraph 8 of the First Schedule of the Act and pay same to the Commissioner-General.
Required:
Explain with examples the following:
i) Final withholding tax. (2.5 marks)
ii) Withholding tax on account. (2.5 marks)
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Find Related Questions by Tags, levels, etc.
Find Related Questions by Tags, levels, etc.
A Nigerian investor (Niger Ltd) in Ghana has the following information relating to its business:
| Year | Revaluation Reserves (GH¢) | Share Capital (GH¢) | Retained Earnings (GH¢) |
|---|---|---|---|
| 2021 | 250,000 | 1,000,000 | 1,200,000 |
| 2020 | 100,000 | 600,000 | 1,350,000 |
Required:
With relevant computations, comment on the tax implication of the transfer from Retained Earnings to Share Capital. (8 marks)
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Abotsi has been in employment at Asempa Ltd since 1 August 2019 as Finance Manager on a salary scale of GH¢32,000 by GH¢8,000 to GH¢48,000.
His service conditions include the following:
i) Responsibility allowance of 18% of basic salary
ii) Utilities allowance per annum of 10% of basic salary
iii) Risk allowance of 20% on basic salary and car maintenance allowance of 5% of basic salary
iv) Leave allowance of GH¢1,900 per annum
v) Medical allowance per annum of GH¢3,500
vi) Meals allowance of GH¢700 per month
vii) Two house helps on GH¢500 wages per month each. The amount is paid to Abotsi in cash directly by the company
viii) Bonus of 25% of annual basic salary
ix) Annual Overtime allowance of GH¢18,000
x) Unaccountable entertainment allowance of GH¢2,000 a year
xi) Provision of a well-furnished bungalow in respect of which he pays GH¢400 per month as rent by way of deduction at source
xii) Provision of a vehicle with driver and fuel for both official and private purposes
xiii) Special retirement package by way of a provident fund of which he contributes 9% of his basic salary, while the company contributes 11%. (The scheme is approved by the regulatory body)
xiv) Social Security and National Insurance Trust contribution of 5.5% and the employer contributes 13% of basic salary
xv) On 1 January 2021, he was given a car loan of GH¢20,000 to purchase a car for his mother at a simple interest rate of 15% per annum. The institution gives similar facilities to other customers at the rate of 28% but the statutory rate (Bank of Ghana rate) is 25%. The loan is to be paid within the period of 24 months
xvi) He is married to Abotsiwaa and Abotsimaa who are unemployed and contribute little or no financial support to their husband. Their responsibilities are limited to the management of the house
xvii) He has six (6) children, four (4) of whom are in Silicon Valley International School, Accra-Ghana, while the rest are working
xviii) He is also responsible for the upkeep of four (4) aged relatives of his
xix) He is currently pursuing MPHIL in Finance at UPSA where he incurred GH¢25,000 by way of educational expenses in 2021
xx) He is a director of Adwoa Mansa Ltd and receives a director’s emolument of GH¢24,450 (net of taxes)
xxi) He received a dividend of GH¢20,000 (net of taxes) from the Afia Manu Bank. The dividend was taxed at 8%.
Required:
Calculate his chargeable income for the 2021 Year of Assessment. (20 marks)
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Mr. John Romeski worked for Aligidon Company Ltd for 25 years and retired at the age of 60. In the last 3 years of his working life, he earned annual salary as follows:
| Year | Annual Salary (GH¢) |
|---|---|
| 58th | 93,000 |
| 59th | 96,000 |
| 60th | 99,000 |
He has 300 months’ contribution to his credit.
Required:
Assuming he retired under the National Pension Act, 2008 (Act 766), compute his pension benefit and his monthly pension pay. (5 marks)
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Section (33) of the Value Added Tax Act, 2013 (Act 870) states that; “Except as otherwise provided in this Act or Regulations, a taxable supply is a supply of goods or services made by a taxable person for consideration, other than an exempt supply, in the course of, or as part of taxable activity carried on by that taxable person”.
Required:
State THREE (3) activities that do not constitute supply of goods or services under the Value Added Tax Act, 2013 (Act 870). (5 marks)
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As the Audit Manager for Grep & Co., you are currently overseeing the audit of Kellwin Ltd., a company operating in the food processing industry. The audit for the financial year ended 31 October 2023 is nearing completion. However, several issues have been brought to your attention by the audit team, requiring your review and further action.
a) Goodwill Impairment
Kellwin Ltd. acquired a subsidiary, Fresh Foods Plc, on 1 November 2021. The purchase consideration for the acquisition was GH¢18 million. The goodwill arising on the acquisition was recognized at GH¢3 million in Kellwin Ltd.’s consolidated financial statements for the year ended 31 October 2022. The directors have conducted an impairment review of goodwill and have concluded that no impairment is necessary, with the carrying amount of goodwill remaining at GH¢3 million as at 31 October 2023. The directors have explained that the recoverable amount of the cash-generating unit (CGU) to which the goodwill has been allocated exceeds the carrying amount. (8 marks)
b) Accounting Policies
During the audit, it was identified that Kellwin Ltd. changed its accounting policy for recognizing revenue from contracts with customers. Previously, revenue was recognized when goods were delivered to customers. However, from 1 January 2023, the company started recognizing revenue when the goods were dispatched from the warehouse. This change was applied retrospectively, and the comparative figures in the financial statements were restated. The impact of this change is an increase in revenue by GH¢1.5 million for the year ended 31 October 2023. The directors have justified the change by stating that it provides more relevant information to users of the financial statements. (6 marks)
c) Auditor’s Opinion and Going Concern
Kellwin Ltd. has experienced significant financial difficulties during the year due to adverse economic conditions. As a result, the company has incurred a net loss of GH¢2 million and has breached its loan covenants. The directors have initiated discussions with the company’s bank to secure a waiver of the covenant breaches and to obtain additional funding. The financial statements have been prepared on a going concern basis, and the directors are confident that they will secure the necessary funding. However, the negotiations with the bank are still ongoing, and there is significant uncertainty regarding the company’s ability to continue as a going concern. (6 marks)
Required:
i) Assess the risk of material misstatement in relation to each of the issues described above.
ii) For each issue, state the audit procedures that should be performed to address the risks identified.
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You are the Manager responsible for the audit of Rail Expert Plc, a listed entity whose principal activity is the operation of a regional railway network. The audit for the year ended 28 February 2021 is the first year your firm is auditing Rail Expert Plc. The draft financial statements received from your client indicated a total asset of GH¢58 million and a profit before tax of GH¢7.4 million. The detailed audit fieldwork has started, and the audit supervisor has brought the following matters to your attention in relation to the testing of key accounting estimates:
a) Cash-settled share-based payment scheme
On 1 March 2020, Rail Expert Plc granted 550,000 share appreciation rights to 55 executives and senior employees of the company, with each eligible member of staff receiving 10,000 of the rights. The fair value of the rights was estimated on 28 February 2020 by an external expert using an options pricing model at GH¢4.50 each. Rail Expert Plc prides itself on good employee relations, and the senior management team has estimated that all 55 staff will qualify for the rights when they vest three years after the granting of the rights on 1 March 2020. The company recognized an expense of GH¢825,000 with its associated liability in the draft accounts. (7 marks)
b) Regulatory penalties
Rail Expert Plc has been subject to a review by the national railways regulator following a complaint from a member of staff with safety concerns. The regulator identified breaches in safety regulations and issued a penalty notice on 30 September 2020. Rail Expert Plc has appealed against the initial penalty payable. Negotiations with the regulator are still ongoing, and the amount payable has not yet been finalized. Rail Expert Plc currently estimates that the total penalty payable as a result of the breach will be GH¢1.3 million, which it expects to repay in equal annual installments over the next ten years, with the first payment falling due on 1 March 2021. The company’s draft statement of profit or loss for the current year recognizes an expense of GH¢1.3 million, and the draft statement of financial position includes a liability for the same amount. (7 marks)
c) Property development
Rail Expert Plc owns an industrial property which it has historically used as a maintenance depot for its engines and carriages. The company has an accounting policy of revaluing its properties to fair value, and at the interim audit, it was noted that the depot was recorded at a carrying amount of GH¢2.5 million in the non-current asset register. During the first week of the audit fieldwork, the audit supervisor identified a year-end journal which has uplifted the depot to a fair value of GH¢4.9 million in this year’s statement of financial position as at 28 February 2021. Management has advised that this represents the estimated sales value of the building following Rail Expert Plc’s plan to develop the building as a residential property. The client has confirmed that the property is suitable for conversion into residential apartments at an estimated cost of GH¢1.2 million and has negotiated secured finance for the development with their bank. The development will be subject to the payment of fees to the local council’s building regulator of GH¢173,000. (6 marks)
Required:
Evaluate the client’s accounting treatments above and state THREE (3) audit procedures you will undertake when auditing each of the transactions.
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You are the Audit Manager in Peptom Partners, a firm of Chartered Accountants. Your role includes performing post-issuance audit quality reviews. You have been tasked to review the audit work performed on Kaaklo Plc for the financial year ended 31 January 2021. The following information was gathered from your review of the audit file:
Audit team and fees
Kaaklo Plc is a listed company operating in the construction industry. The company complies with corporate governance regulations and has an audit committee. Kaaklo Plc has been an audit client of Peptom Partners for eight years, and Kofi Sika has been the Audit Engagement Partner during this time. Kaaklo Plc’s auditor’s report was signed by Kofi Sika and issued last week. The report contained an unmodified opinion.
Peptom Partners requires its staff to record each hour they spend working on each client in the firm’s time management system.
From reviewing the time records relating to the audit of Kaaklo Plc, you identified that Kofi Sika and the other audit team members recorded the following hours on the audit:
Total time spent on audit: 173 hours
It is apparent from your review that almost all the detailed review of the audit working papers was completed by Mabel, who has evidenced her review by stating ‘final review’ on each page of the audit file. She has recently been promoted to the position of Audit Manager.
You are also aware that Kofi Sika booked a total of 40 hours to Kaaklo Plc in respect of non-audit work performed. The only information you can find in the file is that the non-audit work related to a ‘special investigation,’ and that Kofi Sika confirms that it does not create a threat to auditor objectivity. The total fee charged for the audit was GH¢250,000 and the fee for the ‘special investigation’ was GH¢890,000.
Going concern
From reviewing the audit working papers, you are aware that Kaaklo Plc’s ability to continue operating into the foreseeable future was identified as a significant audit risk at the planning stage of the audit due to low profit margins or losses being made on many of the company’s construction contracts and increasing economic uncertainty. The company typically has 20 contracts ongoing at any time.
Most of the audit work on going concern was performed by Mary Lamptey, an audit assistant who has just written her last professional exam and is not yet qualified. The majority of the audit work performed on the going concern focused on a review of five major contracts to determine their profitability. The management of Kaaklo Plc identified the major contracts for review and provided Mary with forecasts indicating that the contracts would have little impact on profit. Mary confirmed that the assumptions used in the forecasts agreed to assumptions used in previous years and concluded that the contracts which she had reviewed support the going concern status of the company. Having reviewed these major contracts, Mary concluded that there is no significant uncertainty over Kaaklo Plc operating into the foreseeable future.
Required:
Comment on the quality of the planning and performance of the audit of Kaaklo Plc. (10 marks)
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“Professional Skepticism is an essential concept in auditing practice and theory. It has been identified in almost all existing auditing standards. However, the way it should be characterised is still unclear” according to Maciej Ciolek (2017).
Required:
i) Explain the term Professional Skepticism within the context of the auditing profession. (2.5 marks)
ii) Discuss THREE (3) areas of audit that are complex, subjective or highly judgmental where Professional Skepticism may be important. (7.5 marks)
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Marketing experts have suggested that businesses, particularly service organizations that desire to have efficient and effective performance and gain competitive advantage, should adopt and apply all the 7 Ps of the marketing mix.
Required:
Explain FIVE (5) of these Ps.
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You recently submitted a memorandum to the Operations Sub-Committee of the Board of Directors of your company recommending the installation and implementation of a Management Information Systems (MIS) package in order to enhance operational efficiency.
In response, the Committee has requested you to outline the conditions to be fulfilled before the package could be successfully implemented.
Required:
Explain FIVE (5) factors to be considered before the implementation of the MIS package.
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Find Related Questions by Tags, levels, etc.
Recruitment and Selection are two main functions performed by the Human Resources Department to fulfill the human resource needs of the organization.
Required:
Differentiate between these TWO (2) functions and outline THREE (3) activities for each of these functions.
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Charles Handy (in his book Gods of Management) suggested that there are four categories of corporate culture that can be applied to the successful operations of every organization.
Required:
Elaborate on the FOUR (4) categories of corporate culture.
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Business organizations are established with all the key functional areas to work interactively for the achievement of their short and long-term objectives.
Required:
Explain FIVE (5) ways the production function coordinates its activities with the other functional areas to achieve these objectives.
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