THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA)

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1 THE INSTITUTE OF CHARTERED ACCOUNTANTS (GHANA) NOVEMBER 2011 EXAMINATIONS (PROFESSIONAL) PART 4 ADVANCED AUDIT AND PROFESSIONAL ETHICS (Paper 4.2) Attempt ALL Questions TIME ALLOWED: Reading & Planning - 15 Minutes Workings - 3 Hours Page 1 of 5

2 QUESTION 1 The preparation of financial statements must follow the requirements of statutes and financial reporting standards. Financial reporting standards require that the financial statements should be prepared in accordance with acceptable cost conventions, accounting concepts and accounting bases (accounting policies). Requited to: A true and fair view implies that financial statements are prepared with due recognition of the fundamental accounting concepts which are the basic assumptions that underline the periodic preparation of financial statements. Show the auditor s assessment of the client s correct use of the four most widely used accounting concepts in the preparation of the financial statements such that they give a true and fair view. Differentiate between Accounting Bases and Accounting Policies. You have been recently engaged as the Internal Auditor of Bibini Ltd, a listed company. Your letter of appointment stated that you would report to the Audit Committee of the Board of Directors. Outline the functions that the Audit Committee should perform. QUESTION 2 The auditor obtains and evaluates audit evidence to obtain reasonable assurance about whether the financial statements give a true and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting framework. The concept of reasonable assurance acknowledges that there is a risk that the audit opinion is inappropriate. The risk that the auditor expresses an inappropriate opinion when the financial statements are materially misstated is known as Audit Risk. Identify and describe the components of Audit Risk in the performance of an audit engagement. Page 2 of 5

3 As a Professional Accountant in public practice you have been approached by the management of Nobles Ltd for an assurance engagement to evaluate and express conclusion on the implementation and operation of its internal controls to an intended user Mboborwa Investors Ltd. Identify the two (2) types of Assurance Engagements practitioners are permitted to perform under the International Framework for Assurance Engagement. What are the elements of an Assurance Engagement? QUESTION 3 Adebayeo Consult, a firm of Chartered Accountants, is the principal auditor of Ababio Holding Company Ltd which has four subsidiaries operating in different parts of the country. This year s audit is nearing completion and the principal auditor has not been able to visit the subsidiaries. The principal auditor therefore has to rely on the work of the other auditors of the subsidiaries so that he can issue his audit report on the group accounts. Identify the main matters that the principal auditor should consider before relying on the accounts audited by the other auditors. Your audit team is carrying out the audit of a client s financial statements for the year ended 30 June As a team leader you are examining the balance sheet items and you come up to the item: Stated capital GHS16 million. From the notes to the financial statements, the composition of the Stated Capital was: 5,000,000 Ordinary shares of no par value GHS10m 2,000,000 six-pesewas Preference Shares of no par value GHS5m Transfer from Surplus GHS1m. What verification procedures would you carry out to obtain and evaluate the audit evidence on the balance on Stated Capital? Page 3 of 5

4 QUESTION 4 Papa Nii & Co, an old firm of Chartered Accountants, has recently taken on new clients whose accounting systems are computerized. Some even operate in an e-commerce environment. The Senior Partner is therefore contemplating the acquisition of Audit Software to facilitate the audit of such client s accounts. He has contacted a friend who is an IT specialist on the matter and while he (the friend) praised the idea, he also cautioned on the possible existence of computer related fraud. Identify five (5) uses of audit software. Name and describe five (5) well known classes of computer crimes. (5 marks) (5 marks) The audit of Adeyepena Ltd, a trading company, has just been completed by your audit team. Upon review of the audit work the Senior Partner realised that the audit team could not observe the counting of physical stocks as at 31 December 2010, since that date was prior to the time the audit firm was initially engaged as auditors of the company. Furthermore, due to the nature of the company s records, the audit team was unable to satisfy themselves as to the stock quantities by other audit procedures. Draft an appropriate audit report on the client s audit for the Senior Partner s consideration. QUESTION 5 Mr. Damatu, a very outgoing citizen who is contesting for his constituency parliamentary seat on the ticket of the Nyafunyafu Party, has filed his tax returns with the revenue authority. The Commissioner for Domestic Tax suspects that complete and accurate returns of income have not been made by the tax payer. As an accountant, you have been appointed by the Commissioner to undertake an investigation into this case. Outline the detailed procedures that you would carry out in this assignment. Define Forensic Audit. Page 4 of 5

5 The Accountant is required by the Code of Ethics for Professional Accountants to observe and comply with the ethical requirements of his profession. However, the compliance with the fundamental principles of ethics may potentially be threatened by a broad range of circumstances. Identify and explain five (5) categories that these threats may fall into. Page 5 of 5

APPENDIX A. Financial Statements. City of Toronto Sinking Funds December 31, 2016

APPENDIX A. Financial Statements. City of Toronto Sinking Funds December 31, 2016 APPENDIX A Financial Statements City of Toronto Sinking Funds December 31, 2016 DRAFT July @@, 2017 Independent Auditor s Report To the Members of Council of City of Toronto We have audited the accompanying