CFAP 6

Misc.
Practice Questions
Jamshaid Akhtar (ACA)
Q. 1

You are employed as the Chief Internal Auditor of MNQ Commercial Bank Limited. Recently the Central
Bank has taken serious action against some of the banks for their failure to detect money laundering
activities.

Required:

For the guidance of the management and staff, develop a list of situations which may indicate the
involvement of money laundering activities. (10)
(ICAP Winter 2008, Q 8)
Ans. 1

Possible indications of money laundering activities in which the Bank and its customers might have
been involved include the following:

When the source of funds is difficult to pinpoint or appears inconsistent with the customer’s means or
expected behavior;

Transactions that seem to be inconsistent with a customer’s known legitimate business or personal
activities or means; unusual deviations from normal account and transaction patterns;

Situations in which it is difficult to confirm the identity of a person;

Unauthorized or improperly recorded transactions; inadequate audit trails;

Unusually large currency transactions, particularly in exchange for negotiable instruments or for the
direct purchase of funds transfer services;

Apparent structuring of currency transactions to avoid regulatory record keeping and reporting
thresholds; like carrying out many transactions below the specified limits.

Uncharacteristically premature redemption of investment vehicles, particularly with requests to remit

proceeds to apparently unrelated third parties;

The purchase of large cash value investments, soon followed by heavy borrowing against them;

Large lump-sum receipts from abroad;

Insurance policies with values that appear to be inconsistent with the buyer’s insurance needs or
apparent means;

Purchases of goods and currency at prices significantly below or above market;

Use of many different firms of auditors and advisers for associated entities and businesses;

Forming too many companies or trusts that appear to have no business purpose;

(List of Suspicious Transactions (Red Alerts) That May Be a Cause for Increased Scrutiny for Anti Money
Laundering/Combating the financing for terrorism Purposes can also be referred from ANTI-MONEY

JAMSHAID AKHTAR ACA 1

CFAP 6
LAUNDERING AND COMBATING THE FINANCING OF TERRORISM (AML/CFT) REGULATIONS. FOR
BANKS & DFIs

Q. 2

(a) You are a partner in a firm of chartered accountants, looking after the audit and advisory
services department. One of your clients has approached you for services in relation to
certification of compliance with a specific control framework, with regard to their production
process.

Required:
What are the different types of reports that you can offer to the client, clearly specifying the key
characteristics of each form of report. (08)

(b) Your manager has identified that the client should prepare a statement of compliance with the
said control framework and your firm can only issue a report on that statement.

Required:

Identify the type of assurance engagement to which the manager is referring to and the key
characteristics of such engagement. (03)
(ICAP Summer 2014, Q 5)

Ans. 2
(a) The services may be provided either as an Agreed Upon Procedures Engagement or as an
Assurance Engagement other than Audit of Historical Financial Information.
In case of Agreed Upon Procedures, the In case of assurance engagement, the report
report will contain the procedures performed may take two different forms i.e. a
and the results of such procedures in the reasonable assurance report or a limited
form of factual findings. assurance report
In a reasonable assurance report the auditor
will provide a positive assurance on the
compliance of the entity with the framework.
In the limited assurance report the auditor will
provide negative assurance on the
compliance of entity with the framework.

(b) The manager is referring to assertion based engagement, in which:

▪ the evaluation or measurement of the subject matter is performed by the responsible
party; and
▪ the subject matter information is in the form of an assertion by the responsible party
that is made available to the intended users.

JAMSHAID AKHTAR ACA 2