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Question 1 Mpomu Suppliers Limited (MSL) is one of Uganda's biggest agro-processing company, specialising in maize flour, beans, and wheat flour. In 2020, the Ministry of Disaster, awarded a Shs 1.9 billion contract to MSL to supply COVID relief food to hard hit families. The beneficiaries included: small business owners who earn hand to mouth, the aged, sick, and breast feeding mothers. The food packages for each beneficiary contained 6 kg of maize flour and 3 kg of beans per person. Additionally, each lactating mother and the sick was given 2 kg of powdered milk and 2 kg of sugar. The quality of the foodstuffs provided, particularly posho and beans, was found to be substandard. During a quality verification exercise, undertaken by the Quality Standards Board (QSB), it was discovered that the food contained soil particles, sandy particles, and other physical impurities. This resulted in the arrest of ministry officials, who were accused of bribery and conspiring with MSL's managing director, Mr Fredrick Mpomuza, by procuring substandard food at inflated prices. The officers are being held by the Criminal Investigations Department (CID), and preliminary investigations show that the government will lose about Shs 500 million. "..there is clear evidence that during the evaluation stage, the credible suppliers who offered lower prices were rejected by the Procurement Committee, and they instead took MSL who offered higher prices," a CID spokeswoman said. Fredrick refuted the charges in a press release, saying, "...these are malicious fabrications on various social media sites and should be ignored and treated with the contempt they deserve." This is not the first time Fredrick and his companies have been accused of fraudulent practices. In Rwanda, he is also being investigated for money laundering. He is accused of conspiring with Rwandan bank officials to steal USD 480,000 from the bank accounts of 2 Sudanese individuals. The bank employees, who were the masterminds of the scheme, never verified Fredrick's biometrics before approving the money withdrawal, which they then shared amongst themselves. Embezzlement, causing financial loss, forgery, conspiracy to defraud, and money laundering allegations are still pending before Rwanda's High court. If convicted, Fredrick faces a sentence of 5 to 10 years in jail. You work as an auditor at Miny & Co., Certified Public Accountants. The partner has forwarded to you an email from the Institute of Certified Public Accountants of Uganda (ICPAU), urging all audit firms to offer pro-bono services to small andmedium enterprises, for a period of one year as they recover from the effects of COVID-19. This will be done in public interest. At the same time, the MSL Board chairperson, Haji Yusuf Kalemba, has approached you for professional guidance on how the above matters can be resolved without affecting the reputation of MSL. Required: (a) Demonstrate how Fredrick would have applied the ethical theories in resolving the challenges he is facing in Uganda and Rwanda. (8 marks) (b) Explain the: (i) various vices practiced by the Procurement Committee while awarding contracts to bidders. (3 marks) (ii) rules of defences against bribery scams that Fredrick can follow to mitigate the negative publicity. (3 marks) (c) Examine the: (i) money laundering typologies Fredrick and bank officials used to defraud banks in Rwanda. (5 marks) (ii) matters Fredrick can include in an anti-money laundering program at MSL. (3 marks) (d) Advise on the evaluation criteria that practicing accountants can base on while serving in public interest. (4 marks) (e) Discuss the role played by the following in fighting corruption: (i) CID (2 marks) (ii) ICPAU (2 marks) (Total 30 marks)Question 2 One-Tek Telecom Limited (OTT) is a leading telecommunication company, incorporated in 2010, with over 2 million customers countrywide. This great performance in the sector was attributed to the strict compliance with the Organization of Economic Cooperation and Development (OECD) principles of corporate governance and the agency theory to ensure that the proceedings of the board meetings are standardized in terms of organization, regulation, and personnel. However, in 2020, OTT began having disputes with her competitor, Optic Telcom Limited (OTL), over allegations of insider trading. Since both companies are listed on Kampala Securities Exchange, OTT accuses OTL's Chief Executive Officer (CEO) of divulging confidential information about OTT's acquisition plan of a local internet service provider, which had been made public before it materialized. The matter is before the National Communications Commission (NCC) for arbitration. You are a board member at OTT and the other members have entrusted you with this matter, including writing a brief to NCC on how OTT has observed the principles of corporate governance to ethically do business in Uganda. Required: In your briefing notes to NCC: (a) Discuss the: (i) OECD principles of corporate governance exhibited by OTT. (8 marks) (ii) key responsibilities of non-executive directors (NEDs) to fostering corporate governance at OTT. (4 marks) (b) Explain your understanding of the: (i) term "Insider trading" and its consequences to the telecom industry where OTT operates. (4 marks) (ii) agency theory and the problems it resolves in OTT. (4 marks) (Total 20 marks)Question 3 Zabu Minerals Limited (ZML) deals in the mining of gold in Mubene district. During the year ended 31 December 2021, ZML received a government grant worth Shs 4 billion towards the acquisition of mining machinery, provided that ZML complies with the environmental, health and safety regulations. The machinery has a useful life of 10 years, and the mining license of ZML has 5 years to expire. A material disagreement has ensued between ZML's finance director and Bruno & Associates (Bruno), Certified Public Accountant. Bruno is the auditor responsible for the audit of ZML's financial statements for the year ended 31 December, 2021. The authorisation of the audited financial statements has been delayed due to a disagreement on the recognition and measurement of the government grant and the mining license. If the disagreement is resolved, Bruno will be in a position to give an appropriate modified opinion on the financial statements. You work at Bruno as an audit senior and you were head of the engagement team. The managing practitioner has instructed you to resolve the matter of disagreement. ZML prepares financial statements that comply with the International Financial Reporting Standards (IFRSs) and the Mining Act. Required: Write a memo to the managing practitioner: (a) Discussing: (i) Bruno's rights when carrying out the audit engagement at ZML. (5 marks) (ii) the matters the audit team considered while establishing an audit strategy at ZML. (5 marks) (b) Explaining the: (i) types of modified opinions Bruno can express on ZML's financial statements. (4 marks) (ii) circumstances under which Bruno shall modify his opinion on the financial statements of ZML. (6 marks) (Total 20 marks)Question 4 Makumbi Machinery Limited (MML) sells tractors, planters, and other agricultural equipment in Uganda. Most of MML's operations are automated since less human capital is required in this sector. MML also offers a one year warranty on all equipment sold that involves free repair services. Internal audit reports indicate that some customers were not offered warranties since they were not aware of the sales terms. The net warranty provision of Shs 170 million was recognised in the financial statements for the year ended 31 December 2021. Your audit firm, Ruki & Co. Certified Public Accountants, is in charge of MML's final audit for the year ended 31 December 2021 and you are completing a review of the management accounts to guide in the audit execution. Required: (a) Discuss the: (i) ways in which the internal audit reports can assist Ruki & Co. when executing the audit engagement at MML. (5 marks) (ii) control activities which may be relevant to Ruki & Co. when planning the final audit at MML. (4 marks) (b) Examine the: (i) general IT controls you would expect in MML's operations. (8 marks) (ii) audit procedures you would carry out regarding the warranty provisions in MML's financial statements. (3 marks) (Total 20 marks)Question 5 You work at Maxim & Partners, Certified Public Accountants, and the audit firm is responsible for the audit of Nubian Uganda Limited (NUL) for the year ended 31 December 2021. NUL deals in the sale of fuel lubricants through its outlets across the country. The audit engagement partner has sent John (an auditor at Maxim & Partners) an email below: Dear John, As you prepare to review the working papers of the engagement team, NUL's accountant has disclosed to me that NUL outsources the debt collection function to Mutwe Consultants Ltd (MCL). During the year, MCL's offices were burnt and all accounting records destroyed. This information is material in determining the value of NUL's trade receivables.... I advise you to carryout 100% vouching on trade receivables' documents to reduce on the sampling risk which may create more audit risks. Thank you Required: Taking John's role, write briefing notes to the entire engagement team: (a) Discussing the: (i) matters they should consider while vouching the trade receivable documents. (5 marks) (ii) audit tests they should perform on the verification of trade receivables. (6 marks) (b) Explaining the: (i) factors that will influence the reliability of audit evidence Maxim & Partners will obtain regarding NUL's trade receivables. (6 marks) (ii) term sampling risk and the types of errors it creates. (3 marks) (Total 20 marks)Question 6 Divine General Hardware (DGH) is a company that sells construction materials. The company started small in 2017, but it has since grown into a multibillion- dollar enterprise with branches throughout Uganda and exports building materials to neighbouring countries. DGH has its own fleet of vehicles used for transporting goods to customers. Last year, DGH established a plant to produce some of the products. It imports its raw materials from South Africa and China. Despite its rapid expansion, DGH is confronted with a number of challenges and risks, which has caused management anxiety. Required: Explain to the management of DGH the: (a) challenges that DGH is likely to face as it grows. (5 marks) (b) types of insurance that DGH should take to effectively manage the business. (5 marks) (Total 10 marks) Question 7 Since childhood, Joseph has always dreamt of becoming a successful entrepreneur. He expected to start the business after graduation but failed to raise the start-up capital. Currently, Joseph is employed as a cashier in a super market in Kampala, but his heart is in business. Despite his interest in business, he lacks knowledge of how to start a business. Required: As a business consultant explain to Joseph the: (a) problems faced by entrepreneurs in selecting new business ventures. (5 marks) (b) internal sources of capital available to an entrepreneur to start business. (5 marks) (Total 10 marks)