Ican 2023 Advanced Audit And Assurance Question 5

Vigo Microfinance Bank Limited was incorporated on July 1, 2014, as a public limited company under the Companies and Allied Matters Act. The bank obtained Microfinance banking licence from the Central Bank on August 5, 2015 to operate on a nationwide basis and commenced business operation on September 5, 2015. The bank’s principal business is to provide microfinance banking and related services to the poor and underserved segment of the society with a view to alleviating poverty under the Microfinance Institutions Ordinance. In 2019, the bank decided to convert to a commercial bank and commenced business operation on August 10, 2019 after final approval from the regulator. As at December 31, 2019, the bank had five branches (2016:24) at the Federal Capital and other four major geo-political zones in the country. With the new commercial banking licence, the bank employed the services of F.K. George Professional Services to audit its financial statements. As part of the activities to be carried out on the initial engagement, the external auditors began a review of the books of account of the predecessor auditor and the following issues emanated, among others: i. Some property, plant and equipment in the books of account and in prior year financial statements had negative net carrying amounts; ii. The basis for impairment included in prior year financial statements regarding loans and advances could not be established from the working papers; iii. There was a material amount of pre-operating expenses that was included in receivables schedules of which could not be satisfactorily provided; iv. The audit work performed on interest income in the prior year was not supported by sufficient appropriate audit evidence; v. Details of outstanding tax liabilities could not be provided as the amount in the financial statements was the figure supplied to the external auditor by the tax consultant. It was discovered that the figures were not subjected to review by the former external auditor; vi. There was no satisfactory explanation on nil balances included in prior year financial statements on contingent liabilities as there were no evidence that request for confirmation were made from all solicitors of the bank; and vii. Details of contraventions included in the examiner’s report were not considered for disclosures in the financial statements. The Central Bank is requesting for the financial statements of the bank and management is worried that there is a delay in the release of the financial statements by the new external auditors despite several notifications and reminders. The Chief Finance Officer of the bank complained to you as a member of the engagement team about the delay in concluding the audit. He could not see the reason why your firm should be concerned about prior period financial statements issues when your firm was not the one that expressed opinion on it. Added to this, the responsibility for the financial statements rest on the board of directors.