ICAN 2021 Audit and Assurance | Mixed

Chukwuemeka & Co. (Chartered Accountants) has been auditors to GED Manufacturing Nigeria Plc. There have been some regulatory and compliance issues for which the company was sanctioned and paid penalties to the Financial Reporting Council of Nigeria. At the board of directors meeting to consider the last annual report audited by the firm, some of the previous problems caused by the auditors were raised and discussed. Following the reoccurrence of such issues, it was proposed that another audit firm be engaged in addition to the present firm. To achieve their objective, a bigger firm that has international affiliation was considered to take a leading role in a joint audit arrangement and to ensure appropriate compliance. Your firm has been approached for the appointment. A meeting was scheduled between your firm, Chukwuemeka & Co. and the executive management of GED Manufacturing Nigeria Plc. After the meeting, your firm was subsequently appointed and the necessary formalities were properly followed. Your partner has directed that you liaise with Chukwuemeka & Co, to obtain the necessary materials for the preparation of the audit and that you review the prior year working papers to obtain an understanding of the issues. Your assessment of the documents obtained from the other auditor revealed the following, amongst others: (i) The work done on the process of dispatch of goods and invoicing was not considered sufficient and appropriate; and (ii) The IT operations of the company had weak controls such that it was possible for some staff to over-ride some of the existing controls.

Your partner invited you and other colleagues to a pre-audit meeting and informed you that the audit of Why Worry Agro Chemical Company Limited will soon commence. He stated that based on experience, the internal control system is not reliable. Therefore, it will be a transaction-based audit approach which will involve high level of substantive testing. He further informed the engagement team that arrangements will be made for a brainstorming session on risk assessment and how to address the risk, using relevant audit assertions. The internal specialists on information technology and tax were invited to the meeting and you have two new audit trainees attached to you on the audit. As the proposed audit senior personnel on the audit team,

The partners of Integrity Professional Services have just obtained their practicing licenses from the Institute. The professional service firm has decided to engage in audit, taxation and consulting services. The firm has secured the approval of shareholders of some companies to be their auditors. In view of the development, interested candidates have been invited to submit applications for appointment as audit seniors in the firm. You were shortlisted for an interview:

A regulatory review was conducted on SINAPE Microfinance Bank Limited in September, 2018. During the course of the review, numerous findings and recommendations were made in respect of the bank's ongoing compliance with various internal and external regulations, policies and guidelines. It was noted from the reports generated that processing systems, internal controls over financial accounting and financial reporting were not in order. The review of the bank's process and procedures for transaction recognition was far from satisfactory. Furthermore, there were instances of management's override of controls in the financial reporting process. The regulator required the bank to appoint a reputable firm of chartered accountants to perform a review of the internal control system and make a comprehensive recommendation. Your firm has been appointed by the bank to perform the internal control reviews and as part of the exercise, a brainstorming forum has been arranged. You have been nominated to make a presentation at the brainstorming forum.

JAK Professional Services is a member firm of James Candle International in Cayman Islands. The member firm's practice review exercise has just been concluded. As part of the global firm, practice reviews are done yearly on selected engagement files where member firms review one another. Some of the issues included in the review notes raised on JAK Professional Services audit files are as follows: (i) Lack of sufficient and appropriate audit evidence regarding audit of cash and bank as well as inventory balances. This was partly due to the fact that no evidence existed in the file regarding physical cash and inventory count which were material; (ii) No proper documentation of confirmation replies received from banks, receivables and solicitors; (iii) No cash flow working documentation to show how the figures on the cash flow statements in the financial statements were arrived at; (iv) Improper documentation of how expected credit loss on financial instruments in the financial statements were arrived at; and (v) Figures in the financial statements could not be traced to the respective working papers. As an experienced auditor, some of the trainees were not impressed about the report and have approached you for clarification.

Wakaso Nigeria Limited has experienced serious labour turnover which has affected the business of the company in the last twelve months. The most frustrating issue was the resignation of a well-tested Financial Controller of the company close to year-end. Wakaso management is noted for timely financial reporting and rendering of tax returns due to the efficiency and effectiveness of the Financial Controller who was also involved in the preparation of tax computations. The company has been finding it difficult to quickly recruit a new Financial Controller that will match the technical ability of the former accountant. The Managing Director of the company has invited the company's external auditors to a meeting, intimating them of the plan to employ their services to complete the write-up of the books of accounts and management account pending when they employ a good chartered accountant to handle the financial operations of the company. The company's management, in order to ensure timely reporting, has also informed the auditors that to save time and meet cost of operations, the firm's staff will be accommodated in a five star hotel with mouth-watering offer of payment in lieu of feeding as recommended by the audit partner. In addition, the previous year's audit fee will be doubled and an additional twenty percent payment made if the management accounts and audit work could be completed within three weeks. The partner of the firm has rejected the offers on the grounds of possible threat to independence. The Managing Director complained to you, as his brother, lamenting that accountants are not good business men and uncooperative.