Topic: Audit-related services

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  • 15 Marks

AA – Nov 2014 – L2 – Q6 – Audit-Related Services

Outline the benefits of auditing partnership accounts, key audit considerations, and substantive procedures for partnership-owned schools.

The audit of the accounts of a partnership is not statutorily required, but it is clear that various benefits would accrue to the firm if its accounts are voluntarily audited.

Required:

a. State FOUR reasons which may necessitate the audit of the accounts of a partnership. (4 Marks)

b. State FIVE important issues that you, as an auditor, would look into while auditing the books of a partnership. (5 Marks)

c. Suggest SIX substantive procedures that might be performed on the receipts of a school owned by a partnership. (6 Marks)

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  • 15 Marks

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

One essential feature of analytical procedures in auditing is ‘comparison’. The auditor will calculate key relationships between figures (non-financial figures as well as financial figures) and then make comparisons.

You are required to:

  1. (a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
  2. (b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
  3. (c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

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  • 10 Marks

AAA – July 2023 – L3 – Q1a – The audit approach | Audit-related services Planning |

Discuss five factors to consider before developing an audit proposal for a multinational company facing financial challenges.

Your firm has been approached to tender for an audit assignment by STK Ghana Ltd. The company is a multinational with its headquarters in Europe. STK Ghana Ltd is a manufacturing company that has operated in Ghana since 2010 and has made steady profits over the years. However, over the past few years, the company’s profits have been dwindling, and the group director in charge of Anglophone West Africa subsidiaries has charged the company to reduce its costs.

In a meeting with the country manager, you ascertained the following information:

  • Several creditors are pursuing the company for payment of their outstanding debt, including the previous auditor who is being owed for the past three years of audit work. The company has negotiated a payment plan for all its creditors.
  • Staff wages have been frozen, staff morale is very low, and several have left.
  • The company’s liquidity challenges commenced when the license of Glow Savings and Loans was revoked as part of the banking sector crisis with STK Ghana Ltd funds exceeding GH¢1 million locked up in short and long-term investments.

In the Terms of Reference (TOR) for the audit engagement, you are required to provide timelines for the overall audit and a financial proposal that is competitive. Upon receiving the TOR, a debate ensued among the partners on the relevance of submitting a proposal in response to the TOR.

Required:
Discuss FIVE (5) factors to be considered prior to developing a proposal for submission. (10 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5b – Audit-related services | Assurance services

Discuss how audit software can be used to audit revenue and trade receivables and evaluate the extent of reliance on internal auditor's use of embedded software.

Mike Developers’ Audit Manager is of the view that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with Mike Developers’ Finance Director, and this approach has been agreed as a feasible one. Furthermore, the Finance Director has asked the internal audit team to investigate the possibility of installing embedded software to help the external auditors in their work.

Required:

i) Describe, giving examples, how audit software, in general, could assist the audit firm in their audit of revenue and trade receivables. (6 marks)

ii) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software. (4 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q5a – Audit-related services | Practice management

Compare and contrast the audit of completed financial statements with the review of interim financial statements, focusing on key differences and similarities.

Your audit firm has been the statutory auditors for Apenkwa Co. Ltd. for the last three years. The company prepares its financial statements to December 31 each year. Due to the size of the company, it has been the practice of the client to prepare interim financial information to June 30 every year. At the request of the client, you have been reviewing the interim financial information each year it is prepared.

Required:

Compare and contrast the audit of completed financial statements and the review of interim financial statements. (10 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

The number of international non-governmental organizations (charitable organizations) is increasing in Ghana, and your firm Zumah and Co. Chartered Accountants (a small firm) is contemplating entering that segment of the audit market. Your managing partner has asked you as an audit senior to conduct research on the audit of such entities to enable the firm to start bidding for jobs from those entities.

Required:

Write a memo to the engagement partner detailing the characteristics of such audit clients, what the firm needs to do, and the audit organization that your firm may need to join to enhance your chances of securing engagements to audit such entities.

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  • 10 Marks

AAA – May 2016 – L3 – Q4b – Audit-related services | Planning

Suggest procedures for reviewing interim financial information for a company.

Dabiasem Insurance Company Ltd. prepares its annual financial statements to 31st December each year. Due to the magnitude of the transactions, interim financial statements for each half year are prepared at the end of June every year. This is done to facilitate the early completion and audit of the annual financial statements. Nhwehwem & Associates are the independent financial statement auditors of Dabiasem Insurance Co. Ltd. This year’s interim financial information has been prepared and is ready for review.

You are the audit senior of the auditing firm and the head of the audit team to carry out the review of the interim financial information.

Required:
Suggest the procedures you would use to carry out the review of the interim financial information.

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5b – Current Issues, Audit-related Services

Discuss the financial reporting implications of a restructuring and recommend auditor actions if financial statements are not amended.

You are the manager responsible for the audit of Obeyeyie Co. Ltd (OCL), a manufacturing company with a year ended 31 December 2018. The audit work has been completed and reviewed and you are due to issue the audit report in three days. The draft audit opinion is unmodified. The financial statements show revenue for the year ended 31 December 2018 of GH¢ 15 million, net profit of GH¢ 3 million, and total assets at the year-end are GH¢ 80 million.

The finance director of OCL e-mailed you this morning in addition to a WhatsApp message to tell you about the announcement yesterday of a significant restructuring of OCL, which will take place over the next six months. The restructuring will involve the closure of a factory and its relocation to another part of the country. There will be some redundancies and the estimated cost of closure is GH¢ 250,000. The financial statements have not been amended in respect of this matter.

Required:

i) Comment on the financial reporting implications, and advise the further audit procedures to be performed. (6 marks)

ii) Recommend the actions to be taken by the auditor if the financial statements are not amended. (4 marks)

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5a – Current Issues, Audit-related Services

Outline the purposes of a cyber security policy and explain what a cyber security audit is intended to achieve.

Recently one of your clients in the financial service sector has had its ICT system hacked and large sums of depositors’ funds stolen. He called and informed you about what happened. You intimated to him that his company needs a cyber security policy and cyber security audit. He requested a briefing on the issue.

Required:

i) Outline the purposes of a cyber security policy.

(5 marks)

ii) Explain cyber security audit and what it is intended to achieve.

(5 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q2b – Audit evidence | Audit-related services

Recommend the composition of an audit committee for a company preparing to list and describe its responsibilities.

b)

Ghana Sugar Company Limited, a private company, has been in operation for many years. Owing to a rising need to raise additional capital, the shareholders have passed a resolution to convert the company into a public company and list it on the Ghana Stock Exchange. You have been contracted to help the Directors to carry the resolution through. During your preliminary discussion with the Directors, you realized that they were not very conversant with the listing rules of the Ghana Stock Exchange, and you drew their attention to the establishment of an Audit Committee as a condition for listing on the Ghana Stock Exchange.

The Directors agreed to discuss the establishment of the Audit Committee at the next emergency meeting and invited you to be present.

Required: Recommend the composition of the audit committee and describe its responsibilities to the Directors. (10 marks)

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  • 15 Marks

AA – Nov 2014 – L2 – Q6 – Audit-Related Services

Outline the benefits of auditing partnership accounts, key audit considerations, and substantive procedures for partnership-owned schools.

The audit of the accounts of a partnership is not statutorily required, but it is clear that various benefits would accrue to the firm if its accounts are voluntarily audited.

Required:

a. State FOUR reasons which may necessitate the audit of the accounts of a partnership. (4 Marks)

b. State FIVE important issues that you, as an auditor, would look into while auditing the books of a partnership. (5 Marks)

c. Suggest SIX substantive procedures that might be performed on the receipts of a school owned by a partnership. (6 Marks)

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  • 15 Marks

AA – May 2017 – L2 – SC – Q7 – Audit-related services

Examination of analytical comparisons, precautions in substantive testing, and limitations of ratio analysis in auditing.

One essential feature of analytical procedures in auditing is ‘comparison’. The auditor will calculate key relationships between figures (non-financial figures as well as financial figures) and then make comparisons.

You are required to:

  1. (a) Identify FOUR areas of comparison when using analytical procedures and explain their purpose. You could tabulate your answers. (8 Marks)
  2. (b) List FOUR precautionary steps the Auditor is required to take before using analytical procedures in substantive testing. (4 Marks)
  3. (c) Describe THREE limitations of ratio analysis in its use in substantive testing. (3 Marks)

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  • 10 Marks

AAA – July 2023 – L3 – Q1a – The audit approach | Audit-related services Planning |

Discuss five factors to consider before developing an audit proposal for a multinational company facing financial challenges.

Your firm has been approached to tender for an audit assignment by STK Ghana Ltd. The company is a multinational with its headquarters in Europe. STK Ghana Ltd is a manufacturing company that has operated in Ghana since 2010 and has made steady profits over the years. However, over the past few years, the company’s profits have been dwindling, and the group director in charge of Anglophone West Africa subsidiaries has charged the company to reduce its costs.

In a meeting with the country manager, you ascertained the following information:

  • Several creditors are pursuing the company for payment of their outstanding debt, including the previous auditor who is being owed for the past three years of audit work. The company has negotiated a payment plan for all its creditors.
  • Staff wages have been frozen, staff morale is very low, and several have left.
  • The company’s liquidity challenges commenced when the license of Glow Savings and Loans was revoked as part of the banking sector crisis with STK Ghana Ltd funds exceeding GH¢1 million locked up in short and long-term investments.

In the Terms of Reference (TOR) for the audit engagement, you are required to provide timelines for the overall audit and a financial proposal that is competitive. Upon receiving the TOR, a debate ensued among the partners on the relevance of submitting a proposal in response to the TOR.

Required:
Discuss FIVE (5) factors to be considered prior to developing a proposal for submission. (10 marks)

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  • 10 Marks

AAA – May 2021 – L3 – Q5b – Audit-related services | Assurance services

Discuss how audit software can be used to audit revenue and trade receivables and evaluate the extent of reliance on internal auditor's use of embedded software.

Mike Developers’ Audit Manager is of the view that audit software can be used effectively in the audit of revenue and trade receivables. He has discussed this with the firm’s computer audit department and with Mike Developers’ Finance Director, and this approach has been agreed as a feasible one. Furthermore, the Finance Director has asked the internal audit team to investigate the possibility of installing embedded software to help the external auditors in their work.

Required:

i) Describe, giving examples, how audit software, in general, could assist the audit firm in their audit of revenue and trade receivables. (6 marks)

ii) Discuss the extent to which the external auditor could rely on the results of the internal auditor’s use of embedded software. (4 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q5a – Audit-related services | Practice management

Compare and contrast the audit of completed financial statements with the review of interim financial statements, focusing on key differences and similarities.

Your audit firm has been the statutory auditors for Apenkwa Co. Ltd. for the last three years. The company prepares its financial statements to December 31 each year. Due to the size of the company, it has been the practice of the client to prepare interim financial information to June 30 every year. At the request of the client, you have been reviewing the interim financial information each year it is prepared.

Required:

Compare and contrast the audit of completed financial statements and the review of interim financial statements. (10 marks)

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  • 10 Marks

AAA – May 2017 – L3 – Q3b – Assurance services | Audit-related services

Discuss the characteristics of auditing International Non-Governmental Organizations (INGOs) and the steps required for a small audit firm to enter this market.

The number of international non-governmental organizations (charitable organizations) is increasing in Ghana, and your firm Zumah and Co. Chartered Accountants (a small firm) is contemplating entering that segment of the audit market. Your managing partner has asked you as an audit senior to conduct research on the audit of such entities to enable the firm to start bidding for jobs from those entities.

Required:

Write a memo to the engagement partner detailing the characteristics of such audit clients, what the firm needs to do, and the audit organization that your firm may need to join to enhance your chances of securing engagements to audit such entities.

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  • 10 Marks

AAA – May 2016 – L3 – Q4b – Audit-related services | Planning

Suggest procedures for reviewing interim financial information for a company.

Dabiasem Insurance Company Ltd. prepares its annual financial statements to 31st December each year. Due to the magnitude of the transactions, interim financial statements for each half year are prepared at the end of June every year. This is done to facilitate the early completion and audit of the annual financial statements. Nhwehwem & Associates are the independent financial statement auditors of Dabiasem Insurance Co. Ltd. This year’s interim financial information has been prepared and is ready for review.

You are the audit senior of the auditing firm and the head of the audit team to carry out the review of the interim financial information.

Required:
Suggest the procedures you would use to carry out the review of the interim financial information.

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5b – Current Issues, Audit-related Services

Discuss the financial reporting implications of a restructuring and recommend auditor actions if financial statements are not amended.

You are the manager responsible for the audit of Obeyeyie Co. Ltd (OCL), a manufacturing company with a year ended 31 December 2018. The audit work has been completed and reviewed and you are due to issue the audit report in three days. The draft audit opinion is unmodified. The financial statements show revenue for the year ended 31 December 2018 of GH¢ 15 million, net profit of GH¢ 3 million, and total assets at the year-end are GH¢ 80 million.

The finance director of OCL e-mailed you this morning in addition to a WhatsApp message to tell you about the announcement yesterday of a significant restructuring of OCL, which will take place over the next six months. The restructuring will involve the closure of a factory and its relocation to another part of the country. There will be some redundancies and the estimated cost of closure is GH¢ 250,000. The financial statements have not been amended in respect of this matter.

Required:

i) Comment on the financial reporting implications, and advise the further audit procedures to be performed. (6 marks)

ii) Recommend the actions to be taken by the auditor if the financial statements are not amended. (4 marks)

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  • 10 Marks

AAA – Nov 2019 – L3 – Q5a – Current Issues, Audit-related Services

Outline the purposes of a cyber security policy and explain what a cyber security audit is intended to achieve.

Recently one of your clients in the financial service sector has had its ICT system hacked and large sums of depositors’ funds stolen. He called and informed you about what happened. You intimated to him that his company needs a cyber security policy and cyber security audit. He requested a briefing on the issue.

Required:

i) Outline the purposes of a cyber security policy.

(5 marks)

ii) Explain cyber security audit and what it is intended to achieve.

(5 marks)

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  • 10 Marks

AAA – Nov 2016 – L3 – Q2b – Audit evidence | Audit-related services

Recommend the composition of an audit committee for a company preparing to list and describe its responsibilities.

b)

Ghana Sugar Company Limited, a private company, has been in operation for many years. Owing to a rising need to raise additional capital, the shareholders have passed a resolution to convert the company into a public company and list it on the Ghana Stock Exchange. You have been contracted to help the Directors to carry the resolution through. During your preliminary discussion with the Directors, you realized that they were not very conversant with the listing rules of the Ghana Stock Exchange, and you drew their attention to the establishment of an Audit Committee as a condition for listing on the Ghana Stock Exchange.

The Directors agreed to discuss the establishment of the Audit Committee at the next emergency meeting and invited you to be present.

Required: Recommend the composition of the audit committee and describe its responsibilities to the Directors. (10 marks)

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