UNIVERSITY OF MANAGEMENT AND TECHNOLOGY (UNIMTECH)

School of Social Sciences

Second Semester Comprehensive Examination Dept.:
Accounting and Finance
Level: Degree Year Four (4) Session: 2019/2020
PAPER: 4 Auditing and Assurance Time: 3hrs

General Instruction: Answer FIVE (5) QUESTIONS in all, at least ONE (1) from each
section.

SECTION: A

Course: Auditing and Assurance I & II

Course Code: AFD 3221

Instruction: Answer Any One (1) Question

1) Audit exercise had become an important component of management, accounting

and finance. It is sometimes voluntary and sometimes compulsory for entities to
conduct an audit.
a. Clearly explain with specific examples the two (02) situations as stated above.

b. Assurance engagements like audit may give some creditability to the financial
statements of entities, but the process itself may have some limitations. List and
explain any four (04) of the limitations you may know.

2. What is an expectation gap? Discuss how it may exist and how can it be
narrowed

SECTION: B

Course: Advance Auditing and Assurance II

Course Code: BAF 417

Instruction: Answer Any One (1) Question

1. What is an engagement letter and what are the purposes it serves in an audit
(20 MARKS)
2. What is an external audit? Why an audit? Who can act as an auditor and what are
some of his rights? (25 MARKS)

SECTION: C

Course: Corporate Governance

Course Code: BAF 413

Instruction: Answer Any One (1) Question

QUESTION ONE

ABB Bank Ltd (ABB Ltd) is a listed company. It has been given a substantial fine by the Central
Bank for serious breaches of the banking regulations and, in the same month, the bank
reported that it had suffered large losses because of unauthorized dealings in financial
derivatives by a manager in its treasury department. The company’s reported profits for the
previous financial year were over-stated because of these losses.

The chairman of the audit committee of ABB Ltd has resigned, accepting responsibility for
failures by the committee. A newly-appointed director has been made chairman of the audit
committee. He has called a meeting with you the Finance Director. The purpose of the meeting
is to review financial reporting and internal control, with a view to making recommendations to
the board. ABB Ltd does not have a strong internal audit function and the company has been
using the same firm of external auditors since it acquired its listing 8 years ago.

REQUIRED

1a Outline the main features of two-tier board structure

b. Explain the meaning of the term “insider dealing”, and indicate the sanctions which may be
attached to this activity

c. Outline what a director’s “duty of skills and care ‘entails.

d. Summaries’ the main principles relevant to corporate governance in the public sector.
(4marks)

e. Explain the meaning of the term stakeholders providing examples of stakeholders in your
answer (3marks)

f. Outline the benefits of corporate social responsibility (CRS) for companies

 QUESTION TWO

An employee, Samico , working in the accounts office of a medium –sized company listed
on the Lincoln stock exchange was working late one evening during the week .He realized he
had left his pen in the boardroom at an earlier meeting and , given its value ,went upstairs
to look for it . As he approached the door he heard the following discussion:

“Chief Executive: I am deeply concerned that if this fall in profit figures is disclosed in the
next annual report, there will be all sorts of problems with the shareholders .We may even
lose a number of big investors.

Non-executive director. (also the cousin of the chief executive): (large sigh ) I
suppose we could always find a way of making them look better .

Chief executive: How? I can’t see it at all.

Non-executive director: well, we could then just slightly higher than last year’s figures by
including the proceeds of the sales of our toothbrush division

Chief Executive: But the sale doesn’t go through until October.

Non - executive director: No, but it will ……and it doesn’t make difference, we need the
money on the books now.

Chief Executive: But when the accounts are signed off, won’t that be fraudulent?

Non- executive director: Not really ………I don’t see why …………it’s just a manipulations of
timing rather than numbers.

Chief Executive: Ok, that sound good to me lets sort it now.

Samico heard one of them move towards the door and quickly slipped back to the stairs .He
left work and spent the evening worrying about what he should do, if anything .He decided
he would anonymously ask the company secretary how he could deal with this situation,
and bring the issue out into the open

Required.

(a) As company secretary you received a report from the employee about overheard
conversation.

Write a brief summary for board members of the corporate governance problems raised by
this employee, and weakness in the company’s corporate governance which are evident
from the conversation which was overheard.

b) Explain to the shareholders fully the types of Directors and their Role in the company.
(10 marks)

c) Explain the Board Structure in a corporate Governance