AUDIT
3.1 The Management is responsible for maintaining proper accounting records
and preparing financial statements, which give a true and fair view of the
state of affairs and the results of the operations of the Company. You are
also responsible for making available to us when required all the
Company’s accounting records and related information.
3.2 We as Auditors have the responsibility to report to the Shareholders
whether in our opinion the financial statements give a true and fair view of
the state of the Company’s affairs at the end of the financial year.
In arriving at our opinion, we are required to consider the following
matters, and to report on any in respect of which we are not satisfied;
a) whether proper accounting records have been kept by the
management;
b) whether the financial statements as produced are in agreement
with the accounting records and returns;
c) whether we have obtained all the information and explanations
which we require for the purposes of our audit;
d) whether the accounts comply with other relevant international
accounting standard requirements.
3.3 We have a professional responsibility to report if the financial statements
do not comply, in any material respect, with International Financial
Reporting Standards (IFRS)/Ghana Accounting Standard or whether in
our opinion the non-compliance is justified in the circumstances.
3.4 Our audit will be conducted in accordance with International Standards on Auditing. Furthermore, it will be conducted in such a manner, as we
consider necessary to fulfill our responsibility and will include such tests of
transactions and of the existence and ownership of fixed assets as we
consider necessary. We shall also look at the accounting system to
assess its adequacy as a basis for the preparation of the financial
statements and to establish whether proper accounting records have been
maintained.
We shall expect to obtain such relevant and reliable evidence, as we
consider sufficient to enable us draw reasonable conclusions therefrom.
The nature and extent of our tests will vary according to our assessment
of the Company’s accounting system and, where we wish to place reliance
on it, the system of internal control, and may cover any aspects of the
Company’s operations.
We shall report to you any significant weaknesses which came to our
attention during the course of our work and our observations on the
Company’s accounting systems which came to our notice and which we
think should be brought to your attention.
3.5 As part of our normal audit procedures, we shall request you to provide
written confirmation of oral representations, which we have received, from
you during the course of the audit.
3.6 In order to assist us with the examination of your financial statements, we
shall request sight of all documents or statements, including the
management’s report which are due to be issued with the financial
statements.
3.7 The responsibility for the prevention and detection of irregularities and
fraud rests with management. However, we shall endeavour to plan our
audit so that we have a reasonable expectation of detecting material
misstatements in the financial statements or accounting records resulting
from irregularities or fraud, but our examination shall not be relied upon to
disclose irregularities and frauds which may exist.
4.0 OUR AUDIT WORK PLAN
4.1 General
The audit approach, methodology and work plan we intend to use is
proactive, cost effective, ensures quality services and meets reporting
deadlines. The audit will be carried out in accordance with International Standards of Auditing. The scope of our audit will be based on the
following five-phase technique.
• Planning and Risk Assessment
• System Review and Evaluation of the System of Internal Control
including governance and internal audit.
• Performing Audit Procedures:
– Tests of controls
– Substantive testing
• Review of compliance with Applicable Laws and Regulations
• Completion Procedures, Audit Reports/Opinion/Management Letter
4.2 Detailed Audit Procedures
The following activities will be undertaken to achieve the scope of your
expectation.
4.2.1 Planning the Audit
4.2.2 Preliminary Planning
In undertaking the assignment, the auditor will perform a preliminary
planning of the engagement. We would review the Board Minutes, files,
budgets, reports and performance reports. This would enable us update
our knowledge on the operations and financial systems of the Company
and, engage discussions with the management of the Company to obtain
additional information and knowledge sufficient to enable us to identify and
understand the events, transactions, and practices that, in our judgement,
may have a significant effect on the audit engagement and reports.
The understanding we obtain at this stage will enable us to:
• recognize the detailed structure in place within the Company and
identify the processes used to plan, supervise, control and manage the
Company’ s activities and accounting process, including the processes
for identifying, analyzing, and management risks, and the information
and communication systems.
• evaluate the acceptability of the accounting systems, procedures and
practices used in the preparation of the reports.
• provide a basis for our assessment of problematic areas and specific
areas.
• develop an effective and efficient audit plan that is tailored to the
characteristics of , and problems associated with the audit.
4.2.3 How we obtain this Information
In order to obtain this information, we will perform the following activities:
• hold discussions with management of the Company
• review documents and guidelines ferrules and regulations
• review budgets, planned programme of activities for the year
• review reports, accounts and other documents of the Company
4.2.4 Understand the Accounting Process
• We will obtain an understanding of the Company’s accounting
processes, sufficient to enable us to identify specific problems
associated with it and to develop an appropriate audit plan.
• We will obtain and document the understanding of the accounting and
internal control systems sufficient to plan the audit and develop an
effective audit approach.
• We will at this stage assess the adequacy of the accounting records
and identify internal accounting control weaknesses.
4.2.5 Develop Audit Plan
Two fundamental principles underlie;
• Our audit work is concentrated on areas with a greater risk of material
misstatement.
• When assessing risk, we take into account the internal controls that
management have implemented.
The advantages of a risk based approach are that it reduces work in low
risk areas and, thereby is designed to improve efficiency and lead to a
cost effective audit.
Based on our understanding of the key controls which management has in
place to mitigate risks we will determine whether to pursue a controls
testing approach or substantive approach.
• If we propose to rely on controls, and reduce the extent of our
substantive work, we will test those controls by evaluating the
strengths and weaknesses of the internal control system, including the
internal audit department. This will include an assessment of the
potential for management override and the checks and balances that
exist in order to guard against this. Attention will be paid to any areas
of special weaknesses in the systems and to the adequacy of internal
control procedures over those aspects of the Company’s business
where there is specific risk of increased fraud or error.
4.2.6 Perform Audit Plan
We will prepare audit programs based on the audit plan above. The
programs will cover, among other things:
• Tests of controls
• Substantive Analytical Procedures
• Tests of Details
• Evaluation of Results of Substantive Tests, and
• Financial Statements Review
4.2.7 Accounting System and Internal Controls
• Examine Board minutes, Budgets, planned activity programmes,
Accounting Manual and other documents in relation to the operations
of the Company during the year under review, to understand what is
expected.
• Record the system and internal controls in relation to internal checks,
approvals for payment accounting and reporting requirements of the
Company.
• Perform a „walk through‟ tests of the systems and ensure its
effectiveness.
• Evaluate the adequacy of the system to ensure that it provides the
appropriate capacity for full accountability of the Company’s finances.
• Comment on the weaknesses and make recommendations for
improvement.
4.2.8 Computerized Accounting System
• We propose to carry out an overview of the Company’s IT Strategy
with emphasis on its effects on the current systems and procedures.
• We would review the existing accounting manual to ascertain whether
it has incorporated all IT related systems and procedures.
• To achieve the above, we would pay attention to the following :
a. systems in place for the timely execution of daily operations
b. systems security
c. Housekeeping
d. User training
4.2.9 Management ’s Risk Assessment Process
We will consider the following:
• Existence of business – wide objectives providing sufficiently broad
statements and guidance that are specific to the organization.
• Relevance of objectives to all significant business.
• Thoroughness and evidence of the risk analysis process, including :
➢ procedures in place to identify and evaluate the organization’s
strengths in a timely manner considering both internal and external
sources of information
➢ procedures to identify changes that have taken or will take place in
any material conditions affecting the organization
➢ consideration of the likelihood of risks crystalizing and the
significance of the consequent financial impact on the company
➢ the establishment of provisions for the allocation of resources
available for control and the setting and communicating of clear
control objectives
➢ assignment and review of the adequacy of insurance coverage and
other steps to mitigate risk.
4.2.10 The Role of Internal Audit
We will assess the role of Internal Audit and consider the following points
of focus:
• The independence of the internal audit function within the Company
and its reporting relationships
• The goals and objectives of the internal audit functions, including a
formal charter, mission statement or corporate directive
• Internal audit’s responsibilities regarding testing and evaluating the
Company’s internal control
• Internal audit’s use of standards developed by professional internal
audit association
• The assignments undertaken by the internal audit and the types of
reports and recommendations generated
• The importance given by the company to addressing issues raised in
internal audit reports
• Limitations on internal audit’s access to records or scope of activities,
including emerging new businesses or processes.
4.2.11 Review of Compliance with Applicable Laws and Regulations
• Under the Terms of Reference, we will interact with key officials of the
company. We will review relevant files of the Company including
records relating to its incorporation, Board minutes and other Company
Secretarial matters. We will obtain records of major transactions the
Company have been involved during the last three years.
• We will request information on the Company from relevant statutory
and regulating bodies. Further interaction with the Company officers to
provide general information regarding legal matters affecting the
company.
In addition to the above:
The Team will assess the Management of the Company’s awareness of
Compliance with Laws and Regulations.
• The extent to which management has in place procedures to identify
applicable laws and regulations and monitor compliance.
• Adherence to monitoring and compliance requirements imposed by
covenants, legislative and regulatory bodies
• The extent to which a code of conduct is developed and employees
are properly trained in and understand its provisions
• The availability of appropriate legal advice
• The extent of any complaints from stakeholders, customers, suppliers
or other third parties.
4.3 Test of Transactions and Balances (Profit and Loss Account)
4.3.1 Income
Objective
• Income relating to subsequent periods are excluded from current
periods reported income
• All income earned by the Company are included
• Income relating to the period under audit are included in the current’s
period reported income
• Income are reported in accordance with GAAP or other applicable
basis of accounting.
Methodology
To achieve the above objectives our programme will be drawn to ascertain
the following:
• Interest is charged on all Loans and Advances
• All interest/other income
• Interest is charged at current approved rates
• Income earned after the period end is excluded from current period
4.3.2 Operating Expenses
Objective
Our objective for reported operating expenses are to satisfy ourselves
that:
• Reported operating expresses represent transactions that have
transpired and pertain to the Company
• Expenses relating to subsequent periods are excluded from the current
periods other expenses
• Expenses relating to the period under audit are included in the periods
reported expenses and
• Such transactions are recorded in accordance with GAAP or other
applicable basis of accounting.
Methodology
To achieve the above objectives our programme will be drawn to ascertain
the following:
• Reported expenses are properly supported and represent goods or
services supplied to the Company
• Charges are posted to the correct account
• All goods received or services provided to the Company after the
period end are excluded from the current period’s operating expenses
• Procurement procedures is based on sound commercial practices
including competition and tender procedures which will ensure that
reasonable prices were obtained and there were adequate controls of
quantities and quality received
• Salaries are reasonable in accordance with approved rates and
supported by appropriate payroll records.
4.3.3 Test of Transactions and Balances (Balance Sheet)
4.3.3.1Cash and other Liquid Assets
Objectives
The objective of the audit of cash and other liquid assets is to obtain
sufficient audit evidence that the following principles or assertions are
valid.
Existence Liquid assets represent cash in hand, deposits held at
other banks or valid items held pending collection
Authorization Bank relationships, bank reconciliation and entries
made to liquid assets accounts are appropriately
authorized.
Valuation Liquid Assets reflect all events and circumstances
that affect their underlying valuations including
changes in foreign exchange rates in accordance with
applicable accounting principles.
Disclosure All liquid assets are appropriately and completely
recorded in the underlying financial records. Liquid
assets are properly accumulated in the underlying
financial records. Liquid assets are not over or under
stated by improper recognition of inter company
transfer.
Methodology
To achieve the above objectives our programme will be drawn to ascertain
the following:
• There is bank reconciliation for all banking balances
• Bank confirmation has been obtained for all bank balances
• All other liquid assets (deposits should really be readily convertible into
cash without loss)
• Any balances in foreign currency are translated at the exchange rate
ruling at the reporting date.
• There is cash certificate covering all cash on hand.
4.3.3.2 Investments
Objectives
These include the following:
• Bills discounted (including treasury bills)
• Government Securities
• Equity holding in companies
• Preference shares
• Company loans Stock
Our principal audit objectives are to determine whether:
• the system of control can be relied upon to safeguard the assets.
Whether there is proper authorization for transactions in securities and
whether the accounting records are accurate and reliable;
• payments and receipts in respect of securities transactions are
properly recorded in the accounting records;
• the correct amount of income from securities is received that any gains
or losses on disposal are properly accounted for and that the balances
at the end of the period are accurately stated;
• securities in the dealing investment and bills department portfolios are
properly segregated;
• appropriate basis of accounting have been adopted;
• appropriate bases of valuation have been used;
• all disclosure requirements and other relevant regulations have been
met and
• legal requirements have been met.
Methodology
To achieve the above objectives our programme will be drawn to ascertain
the following:
• dealing assets are stated at market value at the year end;
• bills discounted are shown at nominal value less any unauthorized
discount;
• securities with fixed redemption dates purchased with intention of
being held to maturity are valued at actual cost less the investment for
accrued interest and plus (or minus) the total amortization of the
discount(or premium in respect of that investment to date;
• securities without fixed redemption dates which are purchased with the
intention of being held to maturity are stated at the lower of cost and
market value.
4.3.3.3 Loans and Advances
Objectives
Our audit objectives in respect of loans and their related income are:
• to check that payments receipts and accounts have been correctly
recorded during the year;
• to verify the existence of loans at the balance sheet date;
• to ascertain their recoverability and value at the balance sheet date;
• to ensure adequate provision is made for impairment
• to ensure that the presentation in the financial statements complies
with statutory requirements and industry guidance and is true and fair.
Methodology
To achieve these objectives, our programme will be drawn to ascertain the
following:
• all loan balances agree with the underlying records
• loan balances agree with confirmation documents
• secured loans are covered by adequate security
• all loan income are properly calculated and recorded
• Loans or Advances are adequately guaranteed.
4.3.3.4 Tangible Fixed Assets
Objectives
Our audit objectives for reported tangible fixed assets are to satisfy
ourselves that :
• tangible fixed assets represent valid assets of the client
• there are no unreported tangible fixed assets
• tangible fixed assets are recorded at an appropriate carrying amount
• tangible fixed assets are reported in accordance with GAAP or other
applicable basis of accounting Methodology
To achieve these objectives our program will be drawn to ascertain the
following:
• additions to assets account are valid
• disposals and scrapings of assets are properly authorized and
recorded
• assets owned are periodically compared with the accounting records
• procedures are followed to ensure all capital expenditure is identified
• profit/(loss) on disposals of fixed assets are correctly recorded.
4.3.3.5 Creditors and Accruals
Objectives
Our audit objectives for reported period end creditors and accruals are to
satisfy ourselves that:
• reported amounts represent valued liabilities of the Company as at the
period end;
• there are no unreported/understated liabilities;
• creditors and accruals are reported in accordance with GAAP or other
applicable basis of accounting.
Methodology
Our programmes will be drawn to ascertain the following:
• liabilities are recorded only upon proof or receipts of goods and
services
• liabilities incurred are properly recorded
• supplier statements are regularly recorded and reconciling items are
properly dealt with
• creditors are reconciled to control accounts on a regular basis
• all unpaid liabilities incurred in the period and income received in
advance are accrued for.
4.3.3.6 Debtors and Prepayments
Objectives
Our audit objectives for reported period and debtors and prepayments are
to satisfy ourselves that:
• reported amounts represent valid claims against parties indicated
• an appropriate allowance has been made for doubtful accounts and
irrecoverable inter company balances
• debtors and prepayments are reported in accordance with GAAP or
other applicable basis of accounting.
Methodology
Our programme will be drawn to ascertain the following:
• recorded debtors arise from services provided
• collections made are deposited intact and properly credited
• debtors are recorded to control accounts on a regular basis
• prepayments represent goods or services receivable in the next period
or income receivable in the period.
4.3.3.7 Stocks
Objectives
Our audit objectives for reported period and stocks are to satisfy ourselves
that:
• stock quantities have been properly determined
• stock movements are recorded in the correct period (cut-off)
• stocks are reported at the lower of cost and net realizable value or
other appropriate basis
• stocks are reported in accordance with GAAP or other applicable basis
of accounting.
Methodology
To achieve the above objectives our programme will be drawn to ascertain
the following:
• purchased materials are recorded as additions to stock
• material removed from stocks are recorded
• regular physical counts of stock and/or an annual stock-take are made
and reconciled to stock records
• stock movements are recorded in the correct period.
4.3.3.8 Commitments and Contingent Liabilities
a. Ascertain an d verify the existence and value of
– contingent liabilities
– capital commitments
– lease commitments
b. Check for completeness to the letter from Attorneys, minutes of
management meetings, Bank certificate etc.
c. Obtain management representation on contingencies and
commitments.
4.3.3.9 Loans/Long-term Liabilities
• Identify all loan agreement terms and the necessary guidelines to
determine which of those if not observed could have direct and
material effect on the financial statements.
• Assess for each material requirements the risks that material noncompliance could occur. This includes consideration and assessment
of the internal controls in place to assure compliance with agreement
terms.
• Design audit procedures to test for errors, irregularities that provide
reasonable assurance of detecting both un-intentional and intentional
instances of non-compliance with loan agreement terms that could
have an indirect and material effect on the financial statements.
• Determine if payment have been made in accordance with the
agreement terms and the necessary guidelines.
• Determine if funds have been expended for purposes not authorized or
not in accordance with applicable agreement terms.
• Identify any costs not considered appropriate.
4.4 Financial Statements and Report
a. Prepare the financial statements in accordance with International
Financial Reporting Standards/Ghana Accounting Standards.
b. Ensure that the accounts are in agreement with the books of the
Company.
c. Ensure that adequate opinion is formed on the Financial
Statements and Reports.
d. Issue management letters on Head Office and the branches,
commenting on our findings.
e. Issue a Long Form Report to management highlighting our
comments and observation on:
• reliability of the Company’s accounting system
• financial performance of the Company during the review period
• financial ratios, including liquidity, capital adequacy, and
working capital ratios
• adequacy of provision made
• adjustments made to the accounting originally submitted to us
for audit
• details of our audit work performed
• results of the audit work undertaken
• effectiveness and timeliness of remedial action taken by
management of the bank to address issues raised by the
internal audit
• our compliance with the manual of auditing for External Auditors
• matters affecting compliance and
• other pertinent issues that need to be brought to the attention of
the Board of Directors.