Ican 2026 Advanced Audit Assurance And Forensics Question 2

Your firm has recently been appointed as external auditors to the Velvet Bank Limited (VBL) and you are one of the staff saddled with the responsibility to prepare for the engagement. VBL was incorporated under the Companies and Allied Matters Act on August 20, 2007. It obtained a licence from the Central Bank of Nigeria to operate as a commercial bank on December 14, 2007 and commenced business, effective January 1, 2008. The bank is not listed on the Nigerian Exchange Limited. The following have been identified as some of those who have interest in the bank and its financial statements: Shareholders The shareholders’ focus is on the profit before tax, revenue and net assets of the bank, when using the financial statements. Shareholders, in making their decision as to the performance of the bank would generally review the operating income of the bank to ascertain its growth and reduction in costs, while achieving its set objectives (maintaining the profitability of the bank). They will also check the relevant investment ratios that exhibit the profitability of the bank. Regulators The regulators such as Central Bank of Nigeria and Nigerian Deposit Insurance Corporation are interested in protecting customers' deposits and ensuring that the bank meets regulatory requirements as well as growing its revenue from the disbursement of loans to customers. Other relevant statutory authorities, including Nigeria Revenue Services (NRS), Financial Reporting Council of Nigeria (FRC), Nigeria Deposit Insurance Cooperation (NDIC), the tax authorities are interested in the banks revenue growth as it translates to increased value added tax. They are also interested in improved profitability which translates to increased companies income tax and other tax responsibilities. Key ratios in the regulatory returns were identified to be the loan to deposit ratio, capital adequacy ratio and liquidity ratio. Highlights of performance December 31, 2024 December 31, 2023 Profit before tax 870,109,115 108,249,465 Revenue 18,442,124,018 11,131,048,112 Net assets 99,010,444,232 42,104,122,068 Loans 110,022,112,044 85,022,444,000.