Topic: Audit of Specialized Industries

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  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

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  • 1 Marks

AAA – Nov 2013 – L3 – AII – Q7 – Audit of Specialized Industries

Addresses the accounting practices of farmers and incomplete record-keeping.

Farmers usually operate as …………………, in which case they keep incomplete records.

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  • 1 Marks

AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

Regarding the audit of a non-life insurance company, which of the following reserves may NOT be reviewed?
A. Reserve for unexpired risks
B. Reserve for outstanding claims
C. Contingent reserve
D. External reserve
E. Statutory reserve

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q5 – Audit of Specialized Industries

This question explores the challenges faced in auditing a teaching hospital and the peculiarities of auditing farm accounts.

You are the audit manager of Kunle Segun & Co (Chartered Accountants) which has been appointed as auditors to St. Anne’s Teaching Hospital and Agrocom Farms Limited.

Required:
a. State FIVE problems associated with the audit of a Teaching Hospital. (10 Marks)

b. List the types of farms and explain the peculiar characteristics associated with the audit of farm accounts. (5 Marks)
(Total 15 Marks)

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  • 1 Marks

AAA – Nov 2012 – L3 – SA – Q7 – Audit of Specialized Industries

Identifying non-relevant procedures in the audit of a life insurance company.

In the audit of an insurance company carrying out life business, which of the following is NOT relevant?

A. Providing a general reserve which shall be equal to net liabilities on policies in force at the time of actuarial valuation and an additional amount equal to 25% of net premium for every year between actuarial valuation dates.
B. Providing a contingency reserve equal to 1% of gross premium or 10% of profit whichever is greater and which is accumulated until it attains the amount of minimum paid up capital.
C. Providing a margin of solvency which shall not be less than 15% of the gross premium received, less re-insurance premium paid or 15% of the paid-up capital whichever is higher.
D. Separation of funds into Individual Life, Group Life, Health Insurance etc., showing each class.
E. Profit determination only by actuarial valuation of the liabilities and comparing this with available assets.

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q2 – Audit of Specialized Industries

Focuses on the key provision auditors should prioritize in insurance company audits.

In conducting the audit of an insurance company, to which ONE of the following should the auditor pay special attention?

  • A. Provision for depreciation
  • B. Provision for unearned interest
  • C. Provision for loan losses
  • D. Provision for outstanding claims
  • E. Provision for general reserve

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  • 20 Marks

AAA – Nov 2020 – L3 – Q3 – Audit of Specialized Industries

Audit planning, risk assessment, internal control, audit evidence, and reporting in a not-for-profit organization.

Question:
You are the Audit Manager at HWO, an audit firm. HWO has secured the audit of SIGMA For Africa, a not-for-profit organization. You have been assigned the audit of SIGMA For Africa. An extract of the unaudited financial statements is as follows:

SIGMA For Africa Statement of Financial Position
As at 31 December

Furthermore, you were assigned an audit senior. Based on preliminary discussions with your audit senior, you noted that the senior had no prior experience with audits of not-for-profit entities.

Required:
To help your audit senior understand how to audit a not-for-profit organization, prepare a presentation note summarizing the key considerations in the audit for the following areas:

a. Planning (4 Marks)
b. Risk analysis (4 Marks)
c. Internal control (4 Marks)
d. Audit evidence (4 Marks)
e. Reporting (4 Marks)

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  • 15 Marks

AAA – Nov 2013 – L3 – SB – Q3 – Audit of Specialized Industries

Identify seven key audit concerns in the extractive industry, focusing on labor issues, community impact, and compliance with regulations.

XYL Limited has been granted a license to operate in the extractive industry in the middle belt of the country, where there is an abundant mineral resource called Topaz. This mineral is in great demand in the manufacturing industries of Western Europe.

Due to the need for heavy equipment requiring intensive capital outlay, indigenous companies could not invest in the sector. Moreover, the technical expertise required in mining this product is not locally available.

The company was not only granted the license but also granted a pioneer status. The local community where operations take place supply the necessary labor, both skilled and unskilled. After a year, the workers’ union found out that they were paid far less than what the company is paying in similar operations in nearby countries. As a result of labor union activities, many workers were retrenched, and the company started making use of locals who had just completed secondary school education. Union activities were proscribed.

Being an extractive industry, the local people were affected as they could no longer carry out their economic activities as before.

Your firm has just been appointed as auditors of XYL Limited after three years of operation.

You are required to:

Explain SEVEN areas of concern that would be of interest to you as auditor and provide reasons for their importance. (15 Marks)

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  • 1 Marks

AAA – Nov 2013 – L3 – AII – Q7 – Audit of Specialized Industries

Addresses the accounting practices of farmers and incomplete record-keeping.

Farmers usually operate as …………………, in which case they keep incomplete records.

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  • 1 Marks

AAA – Nov 2013 – L3 – A – Q20 – Audit of Specialized Industries

This question tests knowledge of reserves that may or may not be reviewed during the audit of a non-life insurance company.

Regarding the audit of a non-life insurance company, which of the following reserves may NOT be reviewed?
A. Reserve for unexpired risks
B. Reserve for outstanding claims
C. Contingent reserve
D. External reserve
E. Statutory reserve

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  • 15 Marks

AAA – Nov 2012 – L3 – SB – Q5 – Audit of Specialized Industries

This question explores the challenges faced in auditing a teaching hospital and the peculiarities of auditing farm accounts.

You are the audit manager of Kunle Segun & Co (Chartered Accountants) which has been appointed as auditors to St. Anne’s Teaching Hospital and Agrocom Farms Limited.

Required:
a. State FIVE problems associated with the audit of a Teaching Hospital. (10 Marks)

b. List the types of farms and explain the peculiar characteristics associated with the audit of farm accounts. (5 Marks)
(Total 15 Marks)

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  • 1 Marks

AAA – Nov 2012 – L3 – SA – Q7 – Audit of Specialized Industries

Identifying non-relevant procedures in the audit of a life insurance company.

In the audit of an insurance company carrying out life business, which of the following is NOT relevant?

A. Providing a general reserve which shall be equal to net liabilities on policies in force at the time of actuarial valuation and an additional amount equal to 25% of net premium for every year between actuarial valuation dates.
B. Providing a contingency reserve equal to 1% of gross premium or 10% of profit whichever is greater and which is accumulated until it attains the amount of minimum paid up capital.
C. Providing a margin of solvency which shall not be less than 15% of the gross premium received, less re-insurance premium paid or 15% of the paid-up capital whichever is higher.
D. Separation of funds into Individual Life, Group Life, Health Insurance etc., showing each class.
E. Profit determination only by actuarial valuation of the liabilities and comparing this with available assets.

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  • 1 Marks

AAA – Nov 2011 – L3 – SA – Q2 – Audit of Specialized Industries

Focuses on the key provision auditors should prioritize in insurance company audits.

In conducting the audit of an insurance company, to which ONE of the following should the auditor pay special attention?

  • A. Provision for depreciation
  • B. Provision for unearned interest
  • C. Provision for loan losses
  • D. Provision for outstanding claims
  • E. Provision for general reserve

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  • 20 Marks

AAA – Nov 2020 – L3 – Q3 – Audit of Specialized Industries

Audit planning, risk assessment, internal control, audit evidence, and reporting in a not-for-profit organization.

Question:
You are the Audit Manager at HWO, an audit firm. HWO has secured the audit of SIGMA For Africa, a not-for-profit organization. You have been assigned the audit of SIGMA For Africa. An extract of the unaudited financial statements is as follows:

SIGMA For Africa Statement of Financial Position
As at 31 December

Furthermore, you were assigned an audit senior. Based on preliminary discussions with your audit senior, you noted that the senior had no prior experience with audits of not-for-profit entities.

Required:
To help your audit senior understand how to audit a not-for-profit organization, prepare a presentation note summarizing the key considerations in the audit for the following areas:

a. Planning (4 Marks)
b. Risk analysis (4 Marks)
c. Internal control (4 Marks)
d. Audit evidence (4 Marks)
e. Reporting (4 Marks)

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