Series: NOV 2011

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AAA – Nov 2012 – L3 – SA – Q16 – Review of Subsequent Events and Going Concern Assumptions

Identifying the appropriate signatories for a Letter of Representation.

Question

The Letter of representation is normally signed by:

A. Managing Director and Chairman of the Board
B. Managing Director and Company Secretary
C. Managing Director and Finance Director
D. Chairman of the Board and Finance Director
E. Chairman of Audit Committee and the Managing Director

Answer

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Tags: Audit Documentation, Audit Procedure, Letter of Representation, Signatories
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

AAA – Nov 2012 – L3 – SA – Q15 – Audit of IT Systems and Data Analytics

Key focus areas for IT Auditors in a risk-based audit program.

Question

While developing a risk-based audit program, the Information Technology Auditor most likely will focus on:

A. Strategic controls
B. Critical IT applications
C. Operation control
D. Business strategy
E. Business process

Answer

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Tags: Audit Focus, Critical Applications, IT Audit, IT Systems, Risk-Based Audit
Level: Level 3

Topic: Audit of IT Systems and Data Analytics
Series: NOV 2011

AAA – Nov 2012 – L3 – SA – Q9 – Regulatory Framework and Professional Standards

Identifying an invalid statement about the benefits and use of IFRS.

Question

Which of the statements listed below about IFRS is invalid?

A. Multinational should benefit from a number of cost savings when using IFRS
B. Companies that wish to reach a wider group of investors will find financial statements based on IFRS acceptable in all major markets
C. Using IFRS will make it easier, though more expensive, to have secondary listing in other countries of the world
D. Using the same accounting basis provides greater comparability between companies which will lead to more efficient investment
E. The original standard setter between (1973-2000) was International Accounting Standard Committee (IASC)

Answer

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Tags: Accounting Standards, Financial Reporting, IFRS, International Standards
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2011

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

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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 2011 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Identifies going concern symptoms, audit procedures for evaluating going concern, and factors to assess continuation potential.

Question

When a company is experiencing going concern problems, it may exhibit various financial and non-financial symptoms.

Required:

(a) State FIVE financial and FIVE non-financial going concern symptoms.
(5 Marks)

(b) State the audit procedures you would adopt as an auditor to determine whether a client company is experiencing going concern problems.
(6 Marks)

(c) What other factors would you consider in assessing if the company can continue despite the going concern issues?
(4 Marks)

Answer

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Tags: Audit Procedures, Financial Stability, Financial Symptoms, Going Concern, Non-Financial Symptoms, Risk Assessment
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
Series: NOV 2011

AAA – Nov 2011 – L3 – SB – Q4 – Ethical Issues in Auditing

Clarifies auditor's statutory responsibilities, provisions in CAMA to reduce the communication gap, and controls for addressing performance gaps.

Question

The role of auditors is commonly misconceived. Many people argue that the auditor is expected to detect all frauds and irregularities in a client’s business. Others believe that the auditor should act more like a court of justice where truth is defended. In fact, the auditor’s responsibilities, powers, and duties are defined by statutes, ethics, and auditing standards.

Required:

(a) What are the provisions available in the Companies and Allied Matters Act Cap C20 LFN, 2004, which seek to reduce the communication gap between the auditor and the shareholders?
(7 Marks)

(b) Explain EIGHT controls available to address the problem of the performance gap.
(8 Marks)

Answer

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Tags: Audit Controls, Auditor Responsibilities, Communication Gap, Companies and Allied Matters Act, Performance Gap
Level: Level 3

Topic: Ethical Issues in Auditing
Series: NOV 2011

AAA – Nov 2011 – L3 – SB – Q3 – Audit of Corporate Governance

Key objectives and structures within corporate governance, focusing on the audit committee's role and board actions affecting governance.

Question

(a) Outline the main objective of corporate governance.
(3 Marks)

(b) One of the tools of corporate governance in Nigeria is the establishment of the Audit Committee under Section 359 (6) of Companies and Allied Matters Act Cap C20 LFN, 2004. What are the composition and functions of an Audit Committee?
(6 Marks)

(c) State SIX instances when the corporate governance of a public company may be compromised by the Board of Directors.
(6 Marks)

Answer

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Tags: Audit Committee, Board of Directors, CAMA, Corporate Accountability, Corporate Governance, Governance Standards
Level: Level 3

Topic: Audit of Corporate Governance
Series: NOV 2011

AAA – Nov 2011 – L3 – SB – Q2 – Regulatory Framework and Professional Standards

Overview and impact of the Sarbanes-Oxley Act on corporate accountability and self-regulation.

Question

The Sarbanes-Oxley Act of 2002, enacted in the United States to guide and regulate the work of accountants and auditors, raised issues about the culture of self-regulation in the accounting profession.

You are required to:

(a) State the reason for its enactment and issues covered therein.
(2 Marks)

(b) State its main provisions that relate to corporate accountability.
(8 Marks)

Answer

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Tags: Corporate Accountability, Corporate Scandals, Public Companies, Sarbanes-Oxley Act, Self-regulation
Level: Level 3

Topic: Regulatory Framework and Professional Standards
Series: NOV 2011

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

Question

Fela Idaewor is the auditor for Matty Co. Ltd, a rapidly expanding retail business based in Lekki. This is her first year as the audit manager. During her engagement planning, she observed multiple risk factors, such as the company’s strong interest in maintaining earnings and share prices, unrealistic financial forecasts, and high reliance on debt financing for expansion. Additionally, there were strong indications that fraud might have been committed by top management.

Required
(a) What should Idaewor do about the possibility of fraud at the planning stage? (7 Marks)
(b) What documentation is required for identifying risk factors? (5 Marks)
(c) If Idaewor has evidence suggesting fraud, what are her communication responsibilities to management? (3 Marks)

Answer

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Tags: Audit Planning, Fraud Detection, Management Communication, Professional Skepticism, Risk Factors
Level: Level 3

Topic: Application of Audit and Assurance Principles
Series: NOV 2011

AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

Question

An assignment in which the practitioner expresses a conclusion designed to enhance the degree of confidence of the intended users other than the responsible party about the outcome of the evaluation or measurement of a subject matter is…………………………

Answer

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Tags: Assurance Engagement, Confidence Enhancement, Evaluation, Measurement
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q5 – Accounting Treatment for Bad and Doubtful Debts

This question asks for the valuation and reporting of debentures on the balance sheet.

Question

On 1 July 2010, Union Conglomerate Ltd issued 20,000 8% Debentures at N97.50. The security is redeemable in five years’ time. The interest on the Debentures is payable bi-annually on 30 June and 31 December. On 31 December 2010, the Company’s year-end date, the Debentures were quoted on the Nigerian Stock Exchange for N96.00.

The company accountant has suggested each of the following as possible valuation bases for reporting the Debentures liability on the Balance Sheet as at 31 December 2010:
(i) Face value of the Debentures.
(ii) Face value of the Debenture plus interest payment for five years.
(iii) Market value on the Balance Sheet as at the year end.

Required:
(a) Determine the face value of the Debentures and the proceeds accruing to the company. (2 marks)
(b) Determine the amount and explain the nature of the differences between the face value and the market value of the Debentures on 1 July 2010. (4 marks)
(c) Distinguish between nominal and effective rates of interest. (3 marks)
(d) Determine the nominal interest payable on the Debentures for the year ended 31 December 2010. (2 marks)
(e) State arguments for or against each of the suggested alternatives for reporting the Debentures liability on the Balance Sheet as at 31 December 2010. (4 marks)

Answer

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Tags: Debentures, Financial Reporting
Level: Level 1

Topic: Bad and Doubtful Debts
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q4 – Partnership Accounts

This question addresses the partnership agreement terms and dispute resolution between partners.

Question

Segun and Sola went into partnership on 1 January 2009. The partnership agreement specifies that both partners should maintain Capital Accounts without Current Accounts. Each partner will be entitled to salary of N240,000 per annum and interest of 10% on capital at the end of the year. Profits and losses are to be shared equally after salaries and interest on capital have been taken into account.
Sola introduced capital of N1,000,000 on 1 January 2009 and N200,000 on 1 January 2010. He withdrew N360,000 from the business in 2009 and N480,000 in 2010.
Segun introduced capital of N400,000 on 1 January 2009. He withdrew N105,000 from the business in 2009 and N161,200 in 2010. The partnership did not keep proper books of accounts in 2009 and 2010.

However, the assets and liabilities of the partnership for the two years ended 31
December 2010 are as follows:

You are required to
Prepare in vertical format, the comparative Balance Sheets and Capital Accounts of the partners at the end of 2009 and 2010 based on the above information.

Answer

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Tags: Partnership Accounting, Partnership Agreement
Level: Level 1

Topic: Partnership Accounts (Including Profit Sharing, Capital and Current Accounts)
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q3 – Accounts of Not-for-Profit Entities

This question requires the preparation of financial statements for a non-profit entity.

Question

The Balance Sheet of Paramount Youth Centre as at 31 December 2009 is shown as follows:
Balance Sheet as at 31 December 2009:

The following transactions took place during the period 1 January 2010 to 31 December 2010:

Receipts:
Subscriptions (10,000 members @ N1,600 each) N16,000
Donations N1,600
Sale of tickets for annual dinner N10,800
Payments:
Electricity N4,000
Expenses for annual dinner N6,200
New games equipment N3,200
Cleaners’ wages N2,080
Repairs and renewals N1,660
Motor van repairs N2,520

Notes:

An electricity bill of N900,000 was owed at 31 December 2010.
Depreciation should be calculated at 10% of cost of the assets.

You are required to prepare:
(a) The Receipts and Payments Account. (4 ½ Marks)
(b) The Income and Expenditure Account and Balance Sheet as at 31 December 2010. (10 ½ Marks)

Answer

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Tags: Financial Statements, Non-Profit Organizations
Level: Level 1

Topic: Accounts of Not-for-Profit Entities
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q2c – Regulatory Environment of Accounting

This question asks about the different types of construction contract pricing.

Question

Write short notes on the different types of construction contract pricing

Answer

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Tags: Construction Contracts, Pricing
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q2a – Regulatory Environment of Accounting

This question asks for the SAS relating to construction contracts.

Question

Which Statement of Accounting Standard (SAS) is on Construction Contract?

Answer

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Tags: Construction Contracts, SAS
Level: Level 1

Topic: Regulatory Environment of Accounting
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q1c – Scope and Purpose of Accounting

This question asks for the contributions of IASC to the development of accounting.

Question

Write short notes on the contributions of the International Accounting Standards Committee (IASC) to the development of accounting.

Answer

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Tags: IASC Contributions, International Accounting Standards
Level: Level 1

Topic: Scope and Purpose of Accounting
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q1b – Scope and Purpose of Accounting

This question asks for the contributions of IFAC to the development of accounting.

Question

Write short notes on the contributions of the International Federation of Accountants (IFAC) to the development of accounting.

Answer

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Tags: IFAC Contributions, International Federation of Accountants
Level: Level 1

Topic: Scope and Purpose of Accounting
Series: NOV 2011

FA – Nov 2011 – L1 – SB – Q1a – Scope and Purpose of Accounting

This question asks for the contributions of the African Accounting Council (AAC) to the development of accounting.

Question

Write short notes on the contributions of the African Accounting Council (AAC) to the development of accounting.

Answer

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Tags: African Accounting Council, International Accounting
Level: Level 1

Topic: Scope and Purpose of Accounting
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q20 – Control Accounts

This question asks for another name for the Debtors Control Ledger Account.

Question

Another name for Debtors Control Ledger Account is?

Answer

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Tags: Control Accounts, Sales Ledger
Level: Level 1

Topic: Control Accounts
Series: NOV 2011

FA – Nov 2011 – L1 – SA – Q19 – Virtual Accounting: Digitisation

This question asks about the software used by every user for a specific operation.

Question

The computer software used by every user for a specific operation is called?

Answer

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Tags: Application Software, Software Systems
Level: Level 1

Topic: Virtual Accounting: Digitisation
Series: NOV 2011

Series: NOV 2011

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AAA – Nov 2012 – L3 – SA – Q16 – Review of Subsequent Events and Going Concern Assumptions

Identifying the appropriate signatories for a Letter of Representation.

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AAA – Nov 2012 – L3 – SA – Q15 – Audit of IT Systems and Data Analytics

Key focus areas for IT Auditors in a risk-based audit program.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q15 – Audit of IT Systems and Data Analytics"

AAA – Nov 2012 – L3 – SA – Q9 – Regulatory Framework and Professional Standards

Identifying an invalid statement about the benefits and use of IFRS.

You're reporting an error for "AAA – Nov 2012 – L3 – SA – Q9 – Regulatory Framework and Professional Standards"

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 2011 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions

Identifies going concern symptoms, audit procedures for evaluating going concern, and factors to assess continuation potential.

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AAA – Nov 2011 – L3 – SB – Q4 – Ethical Issues in Auditing

Clarifies auditor's statutory responsibilities, provisions in CAMA to reduce the communication gap, and controls for addressing performance gaps.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q4 – Ethical Issues in Auditing"

AAA – Nov 2011 – L3 – SB – Q3 – Audit of Corporate Governance

Key objectives and structures within corporate governance, focusing on the audit committee's role and board actions affecting governance.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q3 – Audit of Corporate Governance"

AAA – Nov 2011 – L3 – SB – Q2 – Regulatory Framework and Professional Standards

Overview and impact of the Sarbanes-Oxley Act on corporate accountability and self-regulation.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q2 – Regulatory Framework and Professional Standards"

AAA – Nov 2011 – L3 – SB – Q1 – Application of Audit and Assurance Principles

Evaluate the steps for identifying and responding to fraud risk during audit planning.

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AAA – Nov 2011 – L3 – SAII – Q20 – Assurance Engagements

Definition of an assurance engagement's objective in providing confidence to users.

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FA – Nov 2011 – L1 – SB – Q5 – Accounting Treatment for Bad and Doubtful Debts

This question asks for the valuation and reporting of debentures on the balance sheet.

You're reporting an error for "FA – Nov 2011 – L1 – SB – Q5 – Accounting Treatment for Bad and Doubtful Debts"

FA – Nov 2011 – L1 – SB – Q4 – Partnership Accounts

This question addresses the partnership agreement terms and dispute resolution between partners.

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FA – Nov 2011 – L1 – SB – Q3 – Accounts of Not-for-Profit Entities

This question requires the preparation of financial statements for a non-profit entity.

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FA – Nov 2011 – L1 – SB – Q2c – Regulatory Environment of Accounting

This question asks about the different types of construction contract pricing.

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FA – Nov 2011 – L1 – SB – Q2a – Regulatory Environment of Accounting

This question asks for the SAS relating to construction contracts.

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FA – Nov 2011 – L1 – SB – Q1c – Scope and Purpose of Accounting

This question asks for the contributions of IASC to the development of accounting.

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FA – Nov 2011 – L1 – SB – Q1b – Scope and Purpose of Accounting

This question asks for the contributions of IFAC to the development of accounting.

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FA – Nov 2011 – L1 – SB – Q1a – Scope and Purpose of Accounting

This question asks for the contributions of the African Accounting Council (AAC) to the development of accounting.

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FA – Nov 2011 – L1 – SA – Q20 – Control Accounts

This question asks for another name for the Debtors Control Ledger Account.

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FA – Nov 2011 – L1 – SA – Q19 – Virtual Accounting: Digitisation

This question asks about the software used by every user for a specific operation.

You're reporting an error for "FA – Nov 2011 – L1 – SA – Q19 – Virtual Accounting: Digitisation"

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