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

AAA – Nov 2011 – L3 – SA – Q19 – Use of Experts in Audits

Identifies an unnecessary factor when considering reliance on a specialist’s work in audits.

Question

All the following are necessary when the auditor is considering whether to rely on the work of a specialist EXCEPT:

A. The independence of the specialist
B. The experience of the specialist
C. The fees charged by the specialist
D. The specialist’s relationship with the client
E. Compatibility of the data in preparing the financial statement

Answer

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Tags: Audit evidence, Expert Reliance, Financial Reporting, Independence, Specialist
Level: Level 3

Topic: Use of Experts in Audits
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

Question

Which ONE of the following is NOT an example of assurance engagement?

A. Reports for lenders and other investors
B. Reports on environmental performance
C. Reports and statement of accounting policies
D. Reports on corporate social responsibility performance
E. A private audit

Answer

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Tags: Assurance Engagement, Corporate Responsibility, Financial Reporting, Reporting Standards
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q17 – Audit Reporting

Identifies the technique involving ratios and statistical analysis to obtain audit evidence.

Question

The computation of ratios and trends and the use of statistical formula to obtain audit evidence is:

A. Hot review
B. Audit sampling
C. Substantive test
D. Analytical review
E. Audit review

Answer

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Tags: Analytical review, Audit evidence, Ratio Analysis, Statistical Techniques, Substantive Testing
Level: Level 3

Topic: Audit Reporting
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q16 – Audit of IT Systems and Data Analytics

Identifies an option that is not a Computer Assisted Audit Technique (CAAT).

Question

Which ONE of the following is NOT an example of Computer Assisted Audit Technique?

A. Read only memory
B. System control and review file
C. Integrated test facilities
D. Snapshot
E. Mapping

Answer

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Tags: Audit Techniques, Audit Tools, CAATs, Data Analytics, IT Systems
Level: Level 3

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

AAA – Nov 2011 – L3 – SA – Q15 – Quality Control in Audit Firms

Identifies an action that does not contribute to quality control in audits by professional bodies.

Question

Quality control in audit is maintained by professional accountancy bodies through all the following EXCEPT:

A. Publishing of auditing standards
B. Publishing of accounting standards
C. Encouraging members to be computer literate
D. Publishing code of conduct for members
E. Establishment of public practice sector

Answer

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Tags: Audit Standards, Professional Conduct, Public Practice, Quality control
Level: Level 3

Topic: Quality Control in Audit Firms
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q14 – Regulatory Investigations and Disciplinary Actions

Identifies a sanction not applicable for ICAN members' misconduct.

Question

Which ONE of the following sanctions may NOT be imposed by The Institute of Chartered Accountants of Nigeria on its members for misconduct?

A. Reprimand
B. Suspension from membership
C. Expulsion from membership
D. Sealing off practice office
E. Payment of costs

Answer

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Tags: Disciplinary Actions, ICAN, Member Misconduct, Professional Ethics, Sanctions
Level: Level 3

Topic: Regulatory Investigations and Disciplinary Actions
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q13 – Public Sector Audits

Identifies an item that does not impact public sector audits in Nigeria.

Question

Which ONE of the following does NOT affect public sector audit?

A. Financial regulation
B. The 1999 Constitution of the Federal Republic of Nigeria (as amended)
C. Statement of Accounting Standard
D. Treasury and circular letters
E. Finance Act

Answer

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Tags: Financial Reporting Standards, Government Accountability, Public Sector Audit, Regulations
Level: Level 3

Topic: Public sector audit
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q12 – Audit of IT Systems and Data Analytics

Identifies the appropriate method for transitioning from a manual to a computer-based accounting system.

Question

The method most appropriate for a company to change from a manual-based system to a computer-based accounting system is:

A. Direct change over
B. Parallel change over
C. Vertical change over
D. Phased change over
E. Pilot change over

Answer

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Tags: Accounting Systems, Change Management, IT Audit, System Transition
Level: Level 3

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

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

Question

The accountants’ report in a prospectus may not contain ONE of the following items:

A. Summarised balance sheet of the company for the last five years
B. Evaluation of quoted and unquoted investments
C. Principal accounting policies
D. Movement in share premium account
E. Particulars of preliminary expenses

Answer

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Tags: Accountants' Report, Disclosure Requirements, Financial Reporting, Prospectus
Level: Level 3

Topic: Assurance Engagements
Series: NOV 2011

AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

Question

Which ONE of the following may not necessarily be a symptom of a going concern problem?

A. Redemption of debentures
B. Dividends in arrears
C. Existence of long overdue debtors
D. Heavy dependence on short-term funds for long-term needs
E. Excessive reliance on a supplier or customer

Answer

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Tags: Audit Assessment, Financial Indicators, Going Concern, Risk Factors
Level: Level 3

Topic: Review of Subsequent Events and Going Concern Assumptions
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.

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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.

You're reporting an error for "AAA – Nov 2011 – L3 – SB – Q5 – Review of Subsequent Events and Going Concern Assumptions"

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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AAA – Nov 2011 – L3 – SA – Q19 – Use of Experts in Audits

Identifies an unnecessary factor when considering reliance on a specialist’s work in audits.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q19 – Use of Experts in Audits"

AAA – Nov 2011 – L3 – SA – Q18 – Assurance Engagements

Identifies an engagement type that does not qualify as an assurance engagement.

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AAA – Nov 2011 – L3 – SA – Q17 – Audit Reporting

Identifies the technique involving ratios and statistical analysis to obtain audit evidence.

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AAA – Nov 2011 – L3 – SA – Q16 – Audit of IT Systems and Data Analytics

Identifies an option that is not a Computer Assisted Audit Technique (CAAT).

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AAA – Nov 2011 – L3 – SA – Q15 – Quality Control in Audit Firms

Identifies an action that does not contribute to quality control in audits by professional bodies.

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AAA – Nov 2011 – L3 – SA – Q14 – Regulatory Investigations and Disciplinary Actions

Identifies a sanction not applicable for ICAN members' misconduct.

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AAA – Nov 2011 – L3 – SA – Q13 – Public Sector Audits

Identifies an item that does not impact public sector audits in Nigeria.

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AAA – Nov 2011 – L3 – SA – Q12 – Audit of IT Systems and Data Analytics

Identifies the appropriate method for transitioning from a manual to a computer-based accounting system.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q12 – Audit of IT Systems and Data Analytics"

AAA – Nov 2011 – L3 – SA – Q11 – Assurance Engagements

Identifies an item that may be excluded from an accountant’s report in a prospectus.

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AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions

Identifies a factor that may not indicate a going concern issue.

You're reporting an error for "AAA – Nov 2011 – L3 – SA – Q10 – Review of Subsequent Events and Going Concern Assumptions"

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