Topic: The audit approach

Search 500 + past questions and counting.

  • Filter by Professional Bodies

  • Filter by Subject

  • Filter by Series

  • Filter by Topics

  • Filter by Levels

  • 20 Marks

AAA – July 2023 – L3 – Q3 – The audit approach | Audit evidence | Reporting

Evaluate quality control issues and their implications for audit completion, including actions to be taken.

The audit of Nkwa Ltd’s financial statements for the year ended 30 November 2022 is nearing completion, and the auditor’s report is due to be signed next week. Nkwa Ltd manufactures parts and components for the aviation industry. You are conducting an engagement quality control review on the audit of Nkwa Ltd, which is a listed entity and a significant new client of your firm. The draft financial statements recognize revenue of GH¢8.7 million, assets of GH¢15.2 million, and profit before tax of GH¢1.8 million.

You have identified the following issues as a result of your review:

a) The planned audit approach to trade payables was to place reliance on purchasing controls and keep substantive tests to a minimum. During control testing on trade payables, from a random statistical sample, the audit team identified three purchase orders that had not been authorized by the procurement manager. On review of the supporting documentation, the audit team concluded that the items were legitimate business purchases and therefore decided that no additional procedures were required. (4 marks)

b) Following a review of petty cash transactions, the audit assistant identified that the petty cashier paid for taxi fares for personal, non-business journeys with a total value of GH¢175. Following discussions with the Audit Assistant, you have ascertained that he did not report the matter as the amount is immaterial. The audit assistant also commented that the petty cashier is his brother, and that he did not want to get him into trouble. (6 marks)

c) Cut-off testing on revenue has identified two goods despatch notes, dated 2 December 2022, for items sent to Chinn Co, with a combined sales value of GH¢17,880, which had been included in revenue for the year ended 30 November 2022. The client’s financial controller, David Mount, has explained that Chinn Co does not order on a regular basis from Nkwa Ltd. In the absence of a regular payment history with Chinn Co, and in order to minimize the receivables collection period from this particular customer, the sales invoice was raised and sent to the customer on the same day that the sales order was received. The average time period between the receipt of an order and despatching the goods to the customer is approximately one to two weeks. The audit working papers have concluded that no further investigation is necessary. (6 marks)

d) The Finance Director, Leslie Gray, has not completed the tax computation for the year ended 30 November 2022. He has recently asked the audit assistant to compute the company’s tax payable for the year on the basis that as a newly qualified chartered accountant, the audit assistant was more up to date with recent changes in tax legislation. (4 marks)

Required:
Evaluate the quality control issues and the implications for the completion of the audit, including any further actions that should be taken by your audit firm. Your answer should include the matters to be communicated to management and those charged with governance in relation to the audit of Nkwa Ltd.

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – July 2023 – L3 – Q3 – The audit approach | Audit evidence | Reporting"

  • 20 Marks

AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning

Discuss matters to consider before accepting a review engagement and recommend procedures for examining a cash flow forecast.

Eebuks Ltd is a retailer of academic textbooks that sells through its own network of bookshops and online through its website. The revenue from the website includes both cash sales and sales on credit to educational institutions. The company has provided historical analysis from its trade receivables ledger indicating that for sales made on credit, 25% payment is received in the month of sale, 70% after 30 days, and the remainder are irrecoverable debts.

You are a Manager in Makafui & Associates, a firm of Chartered Accountants offering a range of services from audit to non-audit for its clients. On 1 July 2023, your firm was asked by Eebuks Ltd, a company that is not an audit client of your firm, to consider a potential engagement to review and provide an assurance report on Prospective Financial Information. Makafui & Associates has already conducted specific client identification procedures in line with money laundering regulations with satisfactory results.

Additionally, Eebuks Ltd has approached your firm to obtain an independent assurance opinion on its cash flow forecast, which is being prepared for its bankers in support of an application for an increase in its existing overdraft facility.

Required:

a) In line with ISAE 3400: The Examination of Prospective Financial Information, discuss FIVE (5) matters to be considered by Makafui & Associates before accepting the engagement to review and report on Eebuks Ltd’s Prospective Financial Information. (10 marks)

b) Assuming Makafui & Associates accepts the engagement, recommend EIGHT (8) procedures to be performed in respect of Eebuks Ltd’s cash flow forecast. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – July 2023 – L3 – Q2 – Assurance services | The audit approach | Planning"

  • 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)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – July 2023 – L3 – Q1a – The audit approach | Audit-related services Planning |"

  • 4 Marks

AAA – Dec 2023 – L3 – Q5B – Audit Approach

Discuss the audit strategy BLA should adopt for a small company and an investment company.

Brotherlink & Associates (BLA) has been appointed as Auditors of Kontiba Ltd and Bambi
Ltd. Kontiba Ltd is a small company and Bambi Ltd is an investment company whose assets
and liabilities are substantial in relation to its transactions.
Required:
Discuss the audit strategy/approach BLA should adopt in auditing both companies.
(4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Dec 2023 – L3 – Q5B – Audit Approach"

  • 10 Marks

AAA – Dec 2023 – L3 – Q1b – Practice Management | The Audit Approach, Quality Control

Review the quality of the audit performed for Kaaklo Plc, identifying issues related to audit planning, performance, and ethical considerations.

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:

  • Kofi Sika – Audit Engagement Partner: 2 hours
  • Coffie – Senior Audit Manager: 6 hours
  • Mabel – Audit Manager: 35 hours
  • Six Audit Assistants: 130 hours

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)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Dec 2023 – L3 – Q1b – Practice Management | The Audit Approach, Quality Control"

  • 10 Marks

AAA – Nov 2020 – L3 – Q5b – The Audit Approach

Identify and comment on the implications of findings related to quality control policies and procedures during an audit engagement.

You are a Partner in Green & Co., a firm of Chartered Accountants, with specific responsibility for the quality of audits. Green & Co. was appointed auditor of Cleanup Co, a provider of waste management services, in July 2019. You have just visited the audit team at the head office of Cleanup Co. The audit team comprises an audit manager, an audit senior, and two audit trainees.

During your visit, a review of the audit working papers revealed the following:

i) On the audit planning checklist, the audit senior has crossed through the analytical procedures section and written ‘not applicable – new client’. The audit planning checklist has not been signed off as having been reviewed.

ii) The audit manager last visited Cleanup Co.’s office when the final audit commenced two weeks ago on 1 August. The audit senior has since completed the audit of tangible non-current assets (including property and service equipment) which amount to GH¢ 600,000 as at 30 June 2019 (2018 – GH¢ 600,000). The audit manager spends most of his time working from Green & Co’s office and is currently allocated to three other assignments as well as Cleanup Co.’s audit.

iii) At 30 June 2019, trade receivables amounted to GH¢ 2.1 million (2018 – GH¢ 900,000). One of the trainees has just finished sending out requests for direct confirmation of customers’ balances as at the end of the reporting period.

iv) The other trainee has been assigned the audit of the consumable supplies, which includes inventory amounting to GH¢ 88,000 (2018 – GH¢ 53,000). The trainee has carried out tests of controls over the perpetual inventory records and confirmed the ‘roll-back’ of a sample of current quantities to book quantities as at the year end.

v) The audit manager has noted the following matter for your attention. The financial statements as at 30 June 2018 disclosed, as unquantifiable, a contingent liability for pending litigation. However, the audit manager has seen a letter confirming that the matter was settled out of court for GH¢ 450,000 on 14 September 2018. The auditor’s report on the financial statements for the year ended 30 June 2018 was unmodified and signed on 19 September 2018. The audit manager believes that management of Cleanup Co. is not aware of the error and has not brought it to their attention.

Required:
Identify and comment on the implications of these findings for Green & Co’s quality control policies and procedures. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2020 – L3 – Q5b – The Audit Approach"

  • 2 Marks

AAA – Nov 2020 – L3 – Q2c – The Audit Approach

Discuss two problems in implementing quality control procedures in a small firm of Chartered Accountants and recommend solutions.

Discuss TWO (2) problems that you may face in implementing quality control procedures in a small firm of Chartered Accountants and recommend how these problems may be overcome. (2 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2020 – L3 – Q2c – The Audit Approach"

  • 10 Marks

AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability

Evaluate five risk considerations and issues before accepting an engagement from Phobia Foods Ltd, focusing on financial position, client expectations, and fee structure.

You have been recently promoted as the Ethics Partner in Famous Chartered Accountants, a licensed audit firm. At your first visit to the Managing Partner, he informs you of an appointment by Phobia Foods Ltd (PFL), and gives you a file to go through. You open the file and find a copy of an e-mail from the Managing Director of PFL, extracts which read as follows:

From: Managing Director, Phobia Foods Ltd.
To: Managing Partner, Famous Chartered Accountants
Subject: Evaluation of Business Expansion Plan and Associated Items

Congratulations on your offer of appointment as auditor cum advisor of our company. As discussed in our earlier meeting, Phobia Foods Ltd (PFL) would like to open three more outlets, two in Sunyani and one in Sogakope. The necessary financing will be obtained through a new bank loan and the rescheduling of the payments of the existing loan, which is technically in default.

Your appointment and fees
Your audit fee will be GH¢16,000 for the year ended 30 June 2018.Your fee for evaluation of our expansion plan and advisory services in relation to obtaining a bank loan will be GH¢9,000. For advisory services and business efficiency and strategic decisions, your fee will be GH¢3,400 per month for the next two years.

Shareholders and key management issues
Five founding directors, each with equal shares, incorporated PFL which commenced trading in 2009. I still maintain my original 20% holding.

Audit and accounts 2016-2018
Ofosu-Mensah & Associates., a firm of licensed auditors audited the accounts for the years ended 30 June 2016 to 30 June 2018 inclusive. The audit of PFL for the year ended 30 June 2018 was signed off on 16 November 2018 with an unqualified opinion, notwithstanding that qualified opinions had been published on the previous two years’ accounts. The shareholders of PFL approved your firm’s appointment at the annual general meeting held on 15 April 2019 for the year ended 30 June 2019.

The funds raised by the new bank loan will be used for expansion of the business. Your firm is also expected to advise the company on the application for the new bank loan and the rescheduling of repayments of the existing loan in default.

Yours sincerely,
Managing Director.

Required:

Evaluate FIVE (5) risk considerations and issues for Famous Chartered Accountants that should be identified prior to accepting this engagement. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2020 – L3 – Q1b – The audit approach | Practice management | Professional responsibility and liability"

  • 20 Marks

AAA – May 2021 – L3 – Q3 – Reporting | The audit approach

Evaluate the appropriateness of draft auditor’s reports for two clients and discuss the use of emphasis of matter and other matter paragraphs in audit reports.

You have recently been promoted to Senior Manager of Life Matters and Associates, a firm of Chartered Accountants. As part of your job description, you are to handle two clients in a given month. Below are some issues you will be faced with during the audit of these clients. The financial year-end for each client is 30 September 2020.

You are reviewing the Audit Senior’s draft auditor’s reports for the two clients, Factory Co Ltd and Toys Co Ltd.

Toy Co Ltd

The Audit Senior suggests that Toys Co Ltd’s audit opinion should not be qualified but should include an emphasis of matter paragraph after the audit opinion to highlight the situation below:

In October 2020, a legal claim was filed against Toys Co Ltd by a toy retailer. The suit was from a customer who slipped on a greasy step outside one of the retail outlets. The matter has been fully disclosed as a material contingent liability in the notes to the financial statements. Audit working papers also provided sufficient evidence that no provision is necessary as Toys Co Ltd’s lawyers have stated in writing that the likelihood of the claim succeeding is remote. The amount of the claim is fixed and is adequately covered by cash resources.

Factory Co Ltd

Factory Co Ltd, a listed company, permanently closed several branches in May 2020, with all closure costs finalised and paid in August 2020. The said branches all produced the same items, which contributed 10% of Factory Co Ltd’s total revenue for the year ended 30 September 2020 (2019 – 23%). The closure has been discussed accurately and fully in the Chairman’s statement and Directors’ Report. However, the closure was not stated in the notes to the financial statements nor separately disclosed on the financial statements.

The audit senior has proposed an unmodified audit opinion for Factory Co Ltd as the matter has been fully addressed in the Chairman’s statement and Directors’ Report.

Required:

a) Evaluate whether the Audit Senior’s draft auditor’s report is appropriate, and where you disagree, recommend the amendment necessary to the draft auditor’s report of:

i) Toy Co Ltd (4 marks)

ii) Factory Co Ltd (6 marks)

b) Assuming the auditors of Life Matters and Associates are contemplating whether to use an emphasis of matter paragraph and other matter paragraph in the audit report, explain both options and the situations when each is relevant. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – May 2021 – L3 – Q3 – Reporting | The audit approach"

  • 10 Marks

AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing

Draft a report on the factors influencing the external auditor’s reliance on the work of internal auditors according to ISA 610.

Your audit client, Asuoyeboa Ltd, has recently hired an Internal Auditor to deal with increased regulatory requirements. Afrakoma, the CEO of Asuoyeboa Ltd, has indicated that she believes the presence of the Internal Auditor will dramatically reduce the work that your audit firm will have to perform. She anticipates that this will have an impact on the audit fee.

Required:

Draft a report indicating factors that will influence the extent to which the external auditors will rely on the Internal Auditors’ work as per the requirements imposed by ISA 610: Using the Work of Internal Auditors. (10 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – May 2021 – L3 – Q1b – The audit approach | Internal audit and outsourcing"

  • 10 Marks

AAA – Mar 2024 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability, The audit approach

Evaluation of ethical threats impacting audit independence and advice on mitigating actions.

You are an audit manager of Afari & Partners and have been assigned to the audit of Jericho Plant Company Ltd (Jericho Plant), which has been an audit client for 6 years and specialises in manufacturing fertilizers in Ghana.

The company was introduced to the firm by Mr. Lartey 6 years ago when he was a Commissioner at the Ghana Revenue Authority (GRA). Mr. Lartey is not a member of the Institute of Chartered Accountants, Ghana. However, since his retirement from GRA, last year, he joined the firm as a tax partner to provide tax consultancy services. He has good relations with the client as his daughter is married to the son of the CEO for Jericho Plant.

Mr. Andani, who has been the audit engagement partner for Jericho Plant for the past 6 years, has recently been rotated off the audit engagement. The current audit partner, Mr. Nti, has suggested that in order to maintain a close relationship with Jericho Plant, Mr. Lartey should undertake the role of an engagement quality reviewer this year. In addition, Jericho Plant has requested that Mr. Andani assist them by attending their audit committee meetings, as a non-executive director has recently left the company.

Jericho Plant has also asked Mr. Lartey and the other partners at Afari & Partners to help them in recruiting a new non-executive director.

Fees paid by Jericho Plant form 35% of the firm’s total fee income (both audit and non-audit fees) and the partners have anticipated that the fees for this year would be greater than last year. Since joining as a tax partner, Mr. Lartey has been aggressive in generating revenue for the tax department and does not keep records of his work. He argues that the most important issue is for the firm to generate revenue, which he does. Some of the clients have complained about the cash collected by Mr. Lartey as part of his consultancy services.

The audit manager for Jericho Plant last year has just announced that he is leaving Afari & Partners to join Jericho Plant as the financial controller.

Required:

Using the information above

i) Evaluate FOUR (4) ethical threats which may affect the independence of Afari & Partners. (6 marks)

ii) For each threat, advise on how it might be mitigated to an acceptable level. (4 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Mar 2024 – L3 – Q1a – Rules of professional conduct, Professional responsibility and liability, The audit approach"

  • 10 Marks

AAA – Nov 2018 – L3 – Q3b – Audit approach, Government external audit and public accountability

Discussing the importance of environmental issues in an audit and how to carry out an environmental audit.

Eco-Essence is a limited liability company set up to produce water and pharmaceutical products. Currently, it produces only sachet water. It has all the necessary certifications for production, including that of the Food and Drug Authority (FDA), Environmental Protection Agency, and District Assembly. The company operates from a quasi-residential area. Of late, the residents of the area have been complaining of an increase in the noise levels from the plant, pollution as a result of the sachet water rubbers, wastewater from the plant making some part of the community marshy, and deterioration of the quality of the roads due to the weight of heavy-duty vehicles.

Required:
i) Briefly outline why environmental issues are important to you in the audit of Eco-Essence. (3 marks)

ii) Discuss how you will carry out an environmental audit on Eco-Essence. (7 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2018 – L3 – Q3b – Audit approach, Government external audit and public accountability"

  • 12 Marks

AAA – Nov 2018 – L3 – Q1a – The audit approach, Planning

Analytical review and risk assessment based on the draft statement of profit or loss for Black Gold Co. Ltd

 

Your audit firm, Beauties Consult, is going to audit for the first time the financial statements of Black Gold Co. Ltd. for the year ended 31 December, 2017. Black Gold Co. Ltd. operates a chain of fuel filling stations in the Greater Accra, Ashanti and Western Regions of Ghana. Customers pay cash for the main products – premium, diesel, and kerosene.

According to its directors, the company has had a “challenging” year and is renegotiating its bank overdraft facility with its bankers. The Statement of Profit or Loss for the year ended 31 December, 2016, is shown below together with the draft Statement of Profit or Loss for the year ended 31 December, 2017.

Required:
As head of the audit team, you are carrying out risk assessment at the planning stage. Perform an analytical review of the draft statement of profit or loss to identify possible risk areas requiring further audit work and provide the necessary risk responses. (12 marks)

 

 

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2018 – L3 – Q1a – The audit approach, Planning"

  • 10 Marks

AAA – May 2018 – L3 – Q5a – The audit approach, Planning

Identifying and managing business risks facing Citilink Airlines, including leasing, service suspension, and onboard services.

Citilink Airlines was given an exclusive right by the Ministry of Aviation (MOA) to provide twice weekly direct flights between Accra and Johannesburg. The introduction of this service has been well advertised as ‘efficient and timely’ in national newspapers. The journey time between Accra and Johannesburg is expected to be significantly reduced, so as to encourage tourism and business development opportunities in Johannesburg. Citilink Airlines operates a refurbished 35-year-old aircraft which is leased from an international airline and registered with the MOA. The MOA requires that engines be overhauled every two years. Engine overhauls are expected to put the aircraft out of commission for several weeks. The aircraft is configured to carry 15 First Class, 50 Business Class, and 76 Economy Class passengers. The aircraft has a package to reserve holding capacity for Johannesburg’s numerous horticultural growers (e.g., cocoa, cashew, and fruits) and general cargo.

The six-hour journey offers an in-flight movie, a meal, hot and cold drinks, and tax-free shopping. All meals are prepared in Accra under a contract with an airport catering company. Passengers are invited to complete a ‘satisfaction’ questionnaire which is included with the in-flight entertainment and shopping guide. Responses received show that passengers are generally least satisfied with the quality of the food – especially on the Johannesburg to Accra flight. Citilink Airlines employs ten full-time cabin crew attendants who are trained in air-stewardship including passenger safety in the event of an accident and illness. Flight personnel (the captain and co-pilots) are provided under a contract with the international airline from which the aircraft is leased. At the end of each flight, the captain completes a timesheet detailing the crew and actual flight time. Citilink Airlines was incorporated in South Africa, whose capital town is Johannesburg on March 1, 2017, and now operates in Ghana whose capital town is Accra. Ticket sales are made by Citilink Airlines and travel agents in South Africa and Ghana. On a number of occasions, Economy seating has been over-booked. Customers who have been affected by this have been accommodated in Business Class as there is much less demand for this, and even less for First Class. Ticket prices for each class depend on many factors, for example, whether the tickets are refundable/non-refundable, exchangeable/non-exchangeable, single or return, mid-week or weekend, and the time of booking. Citilink’s insurance cover includes passenger liability, freight/baggage, and compensation insurance. Premiums for passenger liability insurance are determined on the basis of passenger miles flown.

Required:
i) Identify and explain FIVE business risks facing Citilink Airlines. (5 marks)
ii) Describe how the risks identified in (a) could be managed and maintained at an acceptable level by Citilink Airlines. (5 marks)

(Note. Assume it is 31 December 2017)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – May 2018 – L3 – Q5a – The audit approach, Planning"

  • 10 Marks

AAA – May 2018 – L3 – Q3a – The audit approach, Audit evidence, Reporting

Discusses the auditor’s responsibilities in relation to laws and regulations, non-compliance issues, and policies for prevention and detection of non-compliance.

a) At a final meeting with the client, DMS Ltd, one of the Audit Partners of DTR & Co Chartered Accountants had an argument with the Finance Director of DMS Ltd on an issue that borders on compliance with a relevant law. The Environmental Protection Authority had sanctioned DMS Ltd for environmental regulation breaches for the year 2016. The Finance Director was of the view that the external auditors are to be blamed for negligently failing to plan their audit to detect such non-compliance with environmental regulations.

Required:
i) Explain the responsibility of external auditors in considering laws and regulations in an audit of financial statements. (2 marks)

ii) Explain the issue of non-compliance in relation to laws and regulations in an audit. (2 marks)

iii) Explain the policies and procedures which may be implemented to assist management in the prevention and detection of non-compliance with laws and regulations. (6 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – May 2018 – L3 – Q3a – The audit approach, Audit evidence, Reporting"

  • 8 Marks

AAA – May 2019 – L3 – Q1b – The audit approach, Audit evidence, Reporting

Evaluate the treatment of a property classified as held for sale, considering depreciation and subsequent remedial work.

Abuakwa acquired a property in April 2018 at a cost of GH¢2.64 million. The property was not in a good state of repair, but Abuakwa needed an office space for critical administration functions in a central location and moved some staff in immediately. In January 2019, more suitable accommodation became available for the staff who were quickly relocated. A decision was taken to sell the property. Hence, it was decided not to provide any depreciation on the property in respect of the year under review.

However, significant remedial work was needed before the sale could be completed. This was commenced in early February 2019. The cost of this work is being expensed as ‘Repairs and Maintenance’ as incurred.

The property has a reserve price of at least GH¢4.2 million at a public auction scheduled for 30 June 2019. The property is classified as ‘Held for Sale’ at the year-end under IFRS 5: Non-current Assets held for Sale and Discontinued Operations at a value of GH¢4.2 million, and a gain of GH¢1.56 million has been recognised in the draft Consolidated Statement of Profit or Loss and Other Comprehensive Income.

(8 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – May 2019 – L3 – Q1b – The audit approach, Audit evidence, Reporting"

  • 8 Marks

Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin

Analyze the impact of a significant explosion on financial statements, assess contingent liabilities, and determine appropriate audit evidence.

Abuakwa Ltd (Abuakwa) is a multinational mining group that is involved in different operations. The draft financial statements for the year ended 31 March 2019 show the following:

Financial Statement Extracts 2019 (draft) 2018 (audited)
Revenue GH¢30.60 million GH¢28.08 million
Profit before tax GH¢3.12 million GH¢3.00 million
Total net assets GH¢29.76 million GH¢27.24 million

You are the manager responsible for the audit for the year ended 31 March 2019. You have just visited the client’s premises to review the audit team’s work to date. The audit senior has drafted the following “points for the attention of the manager”.

a) On 12 March 2019, an explosion occurred in one of Abuakwa’s premises, destroying about one quarter of the premises. Luckily, the explosion happened at night when the premises were empty, and there were no injuries to any persons. Structural engineers and surveyors are currently assessing the stability of the remainder of the premises, and it is, as yet, unclear whether they can be repaired or will need to be demolished and rebuilt in their entirety.

In the last few days, notifications have been received from the owners of four nearby businesses claiming that the structural integrity of their premises may have been compromised by the impact of the explosion.

They also advised that structural engineers are currently assessing their premises to ensure they are still safe. These business owners have formally notified Abuakwa that if their premises were adversely affected by the explosion, they will claim an “appropriate and justifiable” level of compensation from Abuakwa.

Abuakwa’s insurers have been informed but at this point are refusing to comment on the situation until, they say, all the facts are clear in relation to the explosion and its effects.

(8 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "Title: AAA – May 2019 – L3 – Q1a – The audit approach, Audit evidence, Reportin"

  • 20 Marks

AAA – Nov 2015 – L3 – Q4 – The audit approach, Audit evidence, Planning, Professional responsibility and liability

his question addresses the specific considerations for initial audit engagements and evaluates the audit risks in planning the audit of a newly listed company.

You are a manager in the audit department of Yao Asaglo & Co, a firm of Chartered Certified Accountants, and you have just been assigned to the audit of High-Tec Limited, a new audit client of your firm, with a financial year ended 31 May 2015. High-Tec Limited, has just been listed on the Ghana Stock Exchange (GSE). It is an e-commerce facilitator and has grown rapidly in the last few years.

High-Tec Limited was formed ten years ago by Ms. Ama Tawiah, a graduate in e-commerce from Ashesi University. The company designs, develops software for e-commerce with high security features which have won industry awards. In the last two years, the company invested GHS400m in creating new software to appeal to a large number of multinational companies, and sales are now made in over 10 countries. The software is developed in this country, but the manufacture of the security features, for the obvious reason, takes place overseas.

The software is largely sold through retail outlets, but approximately 30% of High-Tec Limited’s revenue is generated through sales made on the company’s website.

In some countries, High-Tec Limited’s products are distributed under a franchise agreement which gives the franchise holder the exclusive right to sell the products in that country. The cost of each franchise to the distributor depends on the estimated sales in the country to which it relates, and the franchise lasts for an average of five years. The income which High-Tec Limited receives from the sale of a franchise is deferred over the period of the franchise. At 31 May 2015, the total amount of deferred income recognized in High-Tec Limited’s statement of financial position is GHS72 million.

As part of a five-year strategic plan, High-Tec Limited obtained a GSE listing in December 2014. The listing and related share issue raised a significant amount of finance, and many shares are held by institutional investors. Ama Tawiah retains a 20% equity shareholding, and a further 10% of the company’s shares are held by her family members.

Despite being listed, the company does not have an internal audit department, and there is only one non-executive director on the board.

a) Comment on the matters that you should consider specific to initial audit engagement when developing the audit strategy for High-Tec Limited. (6 marks)

b) Evaluate the audit risks to be considered in planning the audit of High-Tec Limited. (14 marks)

Login or create a free account to see answers

Login
Register

Find Related Questions by Tags, levels, etc.

Report an error
Report an error

You're reporting an error for "AAA – Nov 2015 – L3 – Q4 – The audit approach, Audit evidence, Planning, Professional responsibility and liability"

Elevate your professional expertise across key business domains with our comprehensive training programs

Our offerings

Contact Info

  • +233203701923
    +233543919232
  • info@nbcinstitute.com

Customer

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope
error: Content is protected !!
Oops!

This feature is only available in selected plans.

Click here to view all plans

Click on the login button below to login if you’re already subscribed to a plan or click on the upgrade button below to upgrade your current plan.

Login
Upgrade Plan

If you’re not subscribed to a plan, click on the button below to choose a plan

Subscribe to a plan