QUESTION ONE

a. 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. Apenkwa Co. is into production of consumable goods. Apenkwa has 20 wholesalers and 73 retailers for which goods are sold to. During the year ended 31st December, 2018, all the 12,503 consumable goods produced were sold. Selling price for one good is GHC 100 (that is GHC 1,250,300 for total sales value) but only GHC 1,200,300 is shown in the cash book account.

Required:

As an auditor of your firm, state the audit work you would carry out to obtain audit evidence in reference to above case.

b. In-Charge Ltd is a multinational mining group which involved in different operations. You have been appointed as Auditor to express your opinion on the drafted financial statements for the year ended 31st May, 2019. The draft financial statements for the year ended 31 March 2019 show the following:

Income statement Extracts 2019 (draft) GHmillion

Cost of sales (i) (10.50)

Operating expenses (ii) (15.00)

Statement of Financial Position extracts

Fixed Assets (ii) & (iii) 20.00 Additional Information You inquired from management and the following were revealed to you.

i. Cost of sales includes purchase of furniture costing GH 500,000 during the year

ii. Operating expenses included the payment for next years electricity bills amounting GH 300,000

iii. Some of the fixed assets presented in the financial statement were acquired 15 years ago.

Required As an auditor of In-charge Ltd, consider the use of assertion level with regards to the information above to obtain audit evidence by paying attention to footnotes (i) to (iii).

c. Management in todays corporate world has developed a habit of acting on their own interest rather than maximizing the interest or wealth of the shareholders. This has made the need for Independent Audit greater in Todays Society than it was in 50 years ago. Mr. Ama Yaw, an investor, in his opinion sees Auditor as an Insurer or a Guarantor of the correctness of the financial statements because they rely only on audited Financial Statements in making investment decisions.

Required:

Comment on the Opinion of Mr. Ama Yaw d. Differentiate between forecast and projection in relation to Prospective financial information. QUESTION TWO a. Your audit firm, Oliver Twist& Co. has just taken on a new client, Abuakwa Ltd (Abuakwa), a very successful health club that provides gym and fitness services. The Company operates a chain of fitness centers with wide range of workout equipment, solarium rooms, fitness sessions, nutritional planning, changing rooms, and locker facilities. You have just been informed that your firm has received an invitation to tender for the audit of the company that owns Gyms Ltd., a major competitor of Abuakwa. The Managing Director of Abuakwa, Virgil, is an old college friend of your audit manager and it was through her connection that your firm was able to tender for its audit. You have been assigned as senior auditor for Abuakwa.

On a recent visit to your office, Virgil stated that she would like to extend an offer that all staff of Oliver Twist & Co. would be eligible for a special membership rate, which is 50% of standard membership rates and that entitles the member to 75% off special classes. She proposed that you sit on the board of directors at Abuakwa as a non-executive director. Additionally, she proposed that your firm confirm, as part of the audit, the figures on an insurance claim to be submitted in respect of damage caused by a burst water pipe. The pipe burst during a spell of cold weather in the main gym area prior to the year end.

Required:

In the context of the above scenario: Evaluate FIVE (5) ethical threats (real or perceived) which may affect the independence of your firms audit of Abuakwa;

b. An Auditor should obtain sufficient appropriate audit evidence to be able to draw reasonable conclusion on which to base the audit opinion. In gathering such evidence, Auditor should exercise Professional Skepticism, defined in ISA 200.

Required:

i. What is professional Skepticism?

ii. At what stage of the audit is professional skepticism necessary?

iii. What effect will exercising professional Skepticism have on the following

1. Obtaining Sufficient Audit Evidence

2. Obtaining Appropriate Audit Evidence

iv. What can a firm do to enhance awareness of professional Skepticism to help obtain sufficient appropriate audit evidence?

QUESTION THREE a. You are the partner responsible for the audit of ABC Co, for the year ended 30th April, 2014. The final audit has been completed and you have asked the audit manager to draft the audit report. The manager is aware that there is guidance for auditors relating to audit report in ISA 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditors Report. The manager has asked for your assistance in this matter.

Required:

i. Define an Emphasis of Matter paragraph and explain, providing examples, the use of such a paragraph.

ii. Define an Other Matter paragraph and explain, providing examples, the use of such a paragraph. b. Internal Controls are simply good business practices which form an integral part of any organizations financial and business policies. Abuakwa Company limited has established internal controls which are operating effectively. The company prepares reconciliation account and exceptional reports every week. Though, they are weak in taking disciplinary actions but have been able to implement segregation of certain key duties and exercise custodian functions in all their activities.

Required:

Explain the types of Controls which are operating effectively in Abuakwa Limited.

c. 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 realised 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. d. You are the auditor of Banku Ltd. While conducting the audit of the company for the year ended 31 December 2017, you wanted to refer to the minutes book but the Board of Directors refused to give these books to you.

Required: Discuss the implications of the directors action.