ANSWER ALL THE QUESTIONS

Question 1 Khaki & Sons Limited (KSL) is a family business that deals in car spare parts. It is one of the largest dealers in car spare parts in Uganda. Since inception in 2001, KSL mainly imports car spare parts from Japan and sells them through its 31 outlets located in Kampala and its suburbs. 78% of KSL's employees originate from the Khaki family whereas the remaining 22% are non-family members. Based on the company advertisements that encourage only men to apply, the ratio of women to men is 1:6. The human resource manager solicits for bribes of Shs 500,000 from each non-family applicant. He also demands for sexual favours from female applicants. The non-family members raised concerns and stated that, "hard work never pays, the salary structure depends on whether you belong to the Khaki family and that there is no growth in the company". They have submitted their complaints to a Non-Governmental Organisation known as Platform for Employees (PFE). PFE has made inquiries and has established that: 1. Khaki family members are paid thrice more than the non-family members who perform the same duties. 2. The non-family members pay registration fees during the recruitment process. 3. Despite the stated reporting time, some Khaki family members report to work late and some of them absent themselves without clear explanations and no disciplinary action is taken. 4. The working conditions in KSL are not conducive; there are cases of workplace harassment such as shouting and sending warning letters to employees whenever they make mistakes, unnecessary comments about a person's ability to work. With the aim of resolving the employee issues above, PFE invited KSL management for a meeting. During the meeting, the major contentious issues discussed are discriminatory practices, workplace harassment and ethical conduct at workplace. They advised the company to hire a compliance manager to enforce the company regulations and practices. Following the meeting with PFE, KSL has hired you as their compliance manager to deal with the above issues.Question 2 Krana Led has adopted the international financial reporting standards based on the International Accounting Standards Board's conceptual framework for financial reporting. The following information was extracted from the consolidated financial statements for Krana Ltd for the year ended 31 December, 2016: Statement of profit or loss and other comprehensive income: 2016 2015 Shs 'million' Shs 'million' Profit before taxation 400 300 Taxation on profit (75) (60) Profit for the period 325 240 Other comprehensive income: Gain on revaluation of land 30 10 Total comprehensive income for the period 355 250 Profit for the year attributable to: Owners of the parent 280 210 Non-controlling interests 45 30 Profit for the year 325 240 Total comprehensive income for the year attributable to: Owners of the parent 310 220 Non-controlling interests 45 30 Total comprehensive income for the year 355 250 Statement of financial position as 31 December: 2016 2015 Shs 'million' Shs 'million' Equity share capital Shs 0.50 per share 460 200 4% non-cumulative, non-redeemable preference shares 100 100 Share premium 215 60 Retained earnings 688 570 Other equity reserves 90 60 Non-controlling interests 85 40 Total equity 1.638 1.030 Note: The earnings per share (EPS) figure reported in 2015 was Shs 0.525.During the year ended 31 December, 2016 the following changes took place to the issued share capital of Krana Ltd: 1. 100 million equity shares were issued in conjunction with the acquisition of another business. These were issued at full market price on 1 February, 2016. 2. 150 million ordinary shares were issued for cash to existing shareholders on 2 February, 2016. The issue price was Shs 1.50 per share, which represented a discount of 25% on the traded price immediately before the issue. 3. On 31 July, 2016 a bonus issue of 270 million shares was completed, capitalising Shs 135 million of retained earnings. Also on this date the preference dividends due for the year, and an equity dividend of Shs 23 million, were paid. Required: (a) Justify the need for a conceptual framework for financial reporting. (5 marks) (b) Basing on the relevant financial reporting standard (s), determine the basic EPS to be reported in the financial statements of Krana Ltd for the year ended 31 December, 2016. (10 marks) (c) On 1 April, 2016 Krana Led granted 20,000 share options to each of the 100 senior executives. The options could be exercised on 31 March, 2019 provided the executives remained with Krana Led throughout the period ending on 31 March, 2019 and provided the share price of Krana Ltd was at least Shs 160 on that date. Relevant data relating to the share options was given as follows: Date Market value of granted option Krana Led share price 1 April, 2016 Shs 84 Shs 120 31 March, 2017 Shs 90 Shs 128 On 1 April, 2016 estimates suggested that 95% of the executives would remain with Krana Ltd throughout the period. This estimate had changed to 92% on 31 March, 2017. Required: Determine the effects of the above transactions in the financial statements of Krana Ltd for the period ended 31 March, 2017. (5 marks)(d) Krana Ltd has three distinct business segments. The management has determined the net assets, turnover and profit before common costs, which are to be allocated to these segments. However, they are unsure as to how to allocate head office management expenses (which is a common cost), and whether they can exercise judgement in the allocation process. They also are uncertain as to whether the allocation of costs has to be in conformity with the accounting policies used in the preparation of the financial statements. Required: Advise the management of Krana Led on the accounting treatment of the issues raised in part (d) above. (5 marks) (Total 25 marks) Question 3 (a) Salino Led whose year ends 31 March, has a subsidiary Mesar Led, which has two classes of shares, A and B. Class A shares carry voting rights and Class B shares are issued to meet Mesar Ltd's regulatory requirements. Under the terms of Class A shareholders' agreement, each shareholder is obliged to capitalise any dividends in the form of additional investment in Class B shares. The shareholders' agreement also stipulates that Salino Ltd was to buy the Class B shares of the minority shareholders through a put option under the following conditions: (i) The minority shareholders could exercise their put options when their ownership in Class B shares exceeded the regulatory requirement; or (ii) The minority shareholders could exercise their put options every three years. The exercise price would be the original cost paid by the shareholders. In Salino Ltd's consolidated financial statements, the Class B shares owned by the minority shareholders were to be reported as a non- controlling interest. (6 marks) (b) On 1 April, 2017 Salino Led subscribed for 40 million Shs 1 loan notes in Epolon Ltd. The loan notes were issued at 90 cents and were redeemable at Shs 1-20 on 31 March, 2022 under the terms of issue. Interest was payable on 31 March in arrears at 4% of par value. This represented an effective annual rate of return for Salino Led of 9 9%. Salino Ltd's intention was to hold the loan notes until redemption. Until 30 September,2017, Epolon Led was a successful company with a good reputation for settling all its liabilities on their due dates. However, due to an event, which occurred on 30 September, 2017, three of Epolon Ltd's major customers became insolvent and this caused liquidity problems for the company. During October, 2017, Epolon Led entered into negotiations with all its creditors, including Salino Led. Salino Ltd agreed to forego the interest payments due on 31 March, 2018 and 2019, with the payments from 31 March, 2020 onwards resuming as normal. (7 marks) (c) Salino Ltd entered into a number of swap arrangements. Some of these transactions qualified for cash flow hedge accounting in accordance with IAS 39 Financial instruments: recognition and measurement. The hedges were considered to be effective. At 30 April, 2017 Salino Ltd decided to cancel the hedging relationships and had to pay compensation. The forecast hedged transactions were still expected to occur and Salino Ltd recognised the entire amount of the compensation in the statement of profit or loss. Additionally, Salino Ltd invested in a foreign entity over which it had significant influence and therefore accounted for the entity as an associate. The entity's functional currency differed from Salino Ltd's, and in the consolidated financial statements, the associate's results fluctuated with changes in the exchange rate. Salino Ltd wished to designate the investment as a hedged item in a fair value hedge in its individual and consolidated financial statements. (6 marks) (d) On 10 April, 2017 an accident at one of Salino Ltd's warehouses damaged a consignment of inventory. This inventory had been manufactured prior to 31 March, 2017 at a total cost of Shs 80 million. The net realisable value of the inventory prior to the damage was estimated at Shs 960 million. Because of the damage, Salino Ltd was required to spend a further Shs 150 million on repairing and re-packaging the inventory. The inventory was sold on 15 May, 2017 for Shs 900 million. Any adjustment in respect of this event would be regarded by Salino Ltd as material. (6 marks) Required: Advise Salino Led on the accounting treatment in each of the above cases drawing on relevant financial reporting standards. (Total 25 marks)Question 4 (a) You are the newly appointed financial controller at Kubiri Led, a listed company that prepares its financial statements in accordance with International Financial Reporting Standards (IFRSs). The directors of Kubiri Ltd have been reviewing the International Integrated Reporting Council's (IIRC) Framework for Integrated Reporting. The directors believe that the International Accounting Standards Board's (IASB) IFRS's are already extensive and provide stakeholders with a comprehensive understanding of an entity's financial position and performance for any financial reporting period. They are concerned that any additional disclosures could be excessive and obscure the most useful information within a set of financial statements. They are, therefore, unsure as to the interaction between the IIRC's framework and the work of the IASB. Required: Write a memo to the board of Kubiri Ltd: (i) detailing the role of the IASB. (8 marks) (ii) discussing the key components of the IIRC's framework used to assess the financial viability of an entity. (8 marks) (ii) commenting on the directors' views in regard to the relevance of the IIRC Framework. (4 marks) (b) Kubiri Led is a leading supplier of cosmetic products in the region and although it has maintained its domestic and regional markets, it is not attracting new customers. Its share price has not increased whilst that of its competitors has seen a rise of between 12% and 25% over the last five years. Additionally, the company has recently received a significant amount of adverse publicity because of its lack of documented environmental policies and procedures and is to be investigated by regulators from the various countries with a stake in it. Kubiri Led has never felt the need to promote socially responsible policies and practices or make positive contributions to society because it has always maintained its market share. Required: Present a presentation for the directors of Kubiri Led on the possible benefits of producing separate environmental and social reports. (5 marks) (Total 25 marks)Question 5 Geeta Ltd, a limited company that was incorporated in 1999, operates in the construction industry and prepares financial statements to 30 September each year. The financial statements for the year ended 30 September, 2016 are yet to be authorised for issue. The following information was relevant to these financial statements: 1. On 1 October, 2001 Geeta Led purchased a large property for Shs 200 million and immediately leased it out to Mulo Ltd on an operating lease basis, at annual rentals of Shs 20 million. On 30 September, 2015 the fair value of the property was Shs 260 million. Under the terms of the lease, Mulo Ltd would be able to cancel the lease by giving six months' notice in writing to Geeta Ltd. Mulo Led gave this notice on 30 September, 2015 and vacated the property on 31 March, 2016. On 31 March, 2016 the fair value of the property was Shs 290 million. On 1 April, 2016 Geeta Ltd immediately began to convert the property into ten separate flats of equal size which Geeta Ltd intended to sell in the ordinary course of its business. Geeta Ltd spent a total of Shs 60 million on this conversion project between 31 March and 30 September, 2016. The project was incomplete at 30 September, 2016 and the directors of Geeta Led estimated that they would need to spend a further Shs 40 million to complete the project, after which each flat would be sold for Shs 50 million. Geeta Led adopted the fair value model to measure property. (7 marks) 2. On 1 April, 2016 Geeta Ltd renewed its licence to extract murram that was needed as part of its construction work. The cost of renewal of the licence was Shs 20 million and the license was for a five-year period starting on 1 April, 2016. There was no active market for this type of license; however, the directors of Geeta Ltd estimate that at 30 September, 2016 the fair value less cost to sale of the licence was at Shs 17.5 million. They further estimate that over the remaining 54 months of its duration, the license would generate net cash flows for Geeta Ltd with a net present value at 30 September, 2016 of Shs 18.5 million. (6 marks) 3. Geeta Ltd committed itself before its year end of 30 September, 2016 to a plan of action to sell a subsidiary, Zimbi Ltd. The sale was expected to be completed on 1 July, 2017 and the financial statements of the group were signed on 15 December, 2016. The subsidiary had net assets at the year end of Shs 370 million and the carrying amount of related goodwill is Shs 90 million. Zimbi Ltd has made a loss of Shs 100 million from 1 October, 2015 to 15 December, 2016 and is expected to make a further loss up tothe date of sale of Shs 150 million. Geeta Ltd was at 15 December, 2016 negotiating the consideration for the sale of Zimbi Led but no contract has been signed or public announcement made as of that date. Geeta Ltd expected to receive Shs 450 million for the company after selling costs. The value-in-use of Zimbi Ltd at 15 December, 2016 was estimated at Shs 390 million. (6 marks) 4. The directors of Geeta Led intended to diversify the company's portfolio into the insurance sector. However, they learnt that the International Accounting Standards Board (IASB) was close to finalising new accounting requirements for insurance contracts. The new standard (IFRS 17 - Insurance Contracts) would replace IFRS 4: Insurance Contracts, from 1 January 2021. The directors would like to know how the new standard is likely to affect them. (6 marks) Required: (a) Discuss how transactions 1 - 3 above would be reported in the financial statements of Geeta Ltd using relevant financial reporting standards. (b) Evaluate the need for IFRS 17 from the point of view of the IASB and the other stakeholders. (Total 25 marks)Question 1 (a) The Head of Finance of Kyengera Municipal Council has prepared the following trial balance as at 30 June, 2016: Code Details Shs '000' Shs '000' 111106 Local service tax 16,720 113101 Land fees 86,030 114505 Business licenses 182,139 114506 Liquor licenses 39,336 114508 Other licenses 92,133 133104 LG unconditional grants 1,256,444 133342 Compensation for graduated tax 816,068 133327 Conditional transfers for PAF monitoring 1,008,573 133326 Conditional transfers for LGDP 197,603 133105 LG equalisation grants 2,350,038 142214 Market charges 100,000 010100 Administration 1, 159,762 020100 Finance 780,105 030100 Statutory bodies 489,727 040100 Production 800,310 050100 Health 255,485 060100 Education 5,750 070100 Works 3,000,759 080100 Natural resources 21,600 090100 Community-based services 263,243 100100 Planning unit 48,800 110100 Internal audit 73,398 263208 Transfers to treasury 97,000 415006 Retention on road works 838,195 314201 Petroleum products 81,300 312000 Property plant & equipment - cost 10,913,621 428000 Accumulated depreciation 30 June, 2015 3,070,869 321602 Trade receivables 278,657 321501 Administrative advances 20,000 321102 Revenue accounts 65,000 321103 Expenditure accounts 39,122 321104 Project accounts 13,000 415005 Withholding tax payable 41,265 511201 Revenue reserves 468,473 512101 Capital reserves = 7,842,753 Total 18,406.639 18,406.639Additional information: 1. Market fees amounting to Shs 115 million remained outstanding at the end of the year. 2. A physical stock count carried out by the board of survey at the end of the year showed unconsumed supplies valued at Shs 27 million that had been procured for use by the finance department. 3. Council, in consultation with the Auditor General, authorised the writing off of land fees due amounting to Shs 20 million. 4. The board of survey report indicated a cash surplus of Shs 1.6 million from one of the project accounts. 5. An advance of Shs 6 million was given to Mr. Kintu (municipal engineer) to buy culverts for force account operations. However, he died in a road accident before accounting for the funds, and it was confirmed that the work was not yet done. By the end of the year, Council had passed a resolution to write off the advance. 6. At the beginning of the financial year, Council received a grader as a grant from the Ministry of Local Government. It was ascertained that the price of a similar grader on the market was Shs 700 million. 7. On 5 January, 2016 Council purchased furniture at Shs 10 million for the Chief Administrative Officer's office and paid the supplier by electronic funds transfer (EFT). The furniture was financed internally from Council's revenue reserves. 8. It is Council's policy to depreciate all its property, plant & equipment at 10% using the reducing balance method. 9. All depreciation costs for the year are allocated to the finance department. 10. The capital reserves account is amortised annually to the statement of financial performance with an amount equal to the annual depreciation charge for the year. 11. Council prepares its financial statements on accrual basis as required by the Local Government Financial and Accounting Manual, 2007. Required: Prepare for Kyengera Municipal Council for the year ended 30 June, 2016 a statement of: (i) financial performance. (12 marks) (wi) financial position as at 30 June, 2016. (13 marks) (b) The Head of Finance of Buylisa District Local Government has organised a one-day workshop for all accounts and finance staff in the district. The workshop is expected to be attended by about 30 staff from sub-counties, town councils and health units within the district. The focus of the workshop is to train staff on the main books of account maintained bylocal governments in order to strengthen public financial management and accountability. This followed the recent audit conducted by the Office of the Auditor General indicating accountability and financial reporting problems by different administrative units within the district. You are the senior accountant of the district and will be the key facilitator/ presenter for the day. Required: Write an illustrative report suitable for distribution to all staff attending the workshop in which you discuss the following elements: Preparation of abstracts and their linkage to the ledgers. (10 marks) (Wi) Recording of grants from central government and other government units. (5 marks) (c) You are the accountant in Ministry of Works and Transport. You have been asked to prepare a set of notes for a colleague who is new in the accounts department of the ministry, having previously worked only in the private sector. Required: Prepare a briefing note in which you discuss: (i) "fund accounting' and 'budgetary accounting' and their applicability to financial reporting in Uganda. (ii) the specific initiatives being undertaken by government to improve budget implementation, monitoring and reporting. (10 marks) (Total 50 marks)Required: (a) (1) Explain the discrimination practices at KSL. (4 marks) Advise on how to deal with the discrimination allegations received by your office. (6 marks) (b) (i) Explain the procedures of dealing with workplace harassment. (8 marks) (ii) Discuss the effects of workplace harassment to KSL. (4 marks) Discuss the importance of ethical behaviour at KSL. (8 marks) (Total 30 marks) SECTION B Attempt three of the four questions in this section Question 2 Tasha Uganda Limited (TUL) produces soft drinks. The company was established over 10 years ago by the Tashobya family with two shareholders. TUL has been recognised as a good employer ever since. The company employs over 250 people in its five branches in various parts of the country. The company has a long history of supporting sporting events as part of its stated commitment to promote healthy lifestyles. TUL has a corporate social responsibility commitment to behave ethically while helping to improve the quality of life for the public and society generally. A portion of TUL's profits are also allocated to a number of local charitable causes annually. TUL uses local raw materials such as passion fruits which are grown in the localities where the factories are located. This has guaranteed income to several thousand farmers and their dependants.TUL's market share has grown by 60% compared to what it was at its inception in 2007. Customers are inclined to purchase products from companies that exhibit concern for the public. On 20 September, 2017, the Revenue Authority (RA) recognized and rewarded TUL for being the most compliant and one of largest taxpayers in the region for the year 2016-2017.Question 2 (a) The Public Procurement and Disposal of Public Assets (PPDA) Act, 2003 as amended, requires a procuring and disposing entity not to enter into a contract until the accounting officer confirms, in writing, that the required funds have been committed for the proposed contract. Required: With reference to the PPDA Act, 2003 and PPDA regulations, 2014: (i) Examine the relevance of a signed contract to the parties. (5 marks) (Wi) Discuss the factors that may determine the choice of contract for a procurement and disposal unit. (5 marks) (b) A Procurement and disposal unit may, in accordance with regulations made under the PPDA Act, 2003 as amended Sec 95A, undertake the works using the force account mechanism. Required: Examine the meaning of 'force account mechanism'. (2 marks) (ii) Advise on the responsibility of the supervisor under force account. (5 marks) (iii) Discuss how a procuring and disposing entity may procure consultancy services. (8 marks) (Total 25 marks) Question 3 (a) "The magnitude of financial impropriety unearthed in various Government Agencies in 2012 were alarming.. and as a result, it has been necessary for review and strengthening of controls in public financial management and accountability systems." (Keith Muhakanizi, 2014 National Consultative Budget conference FY2014/ 2015). Required: Discuss the major reforms the government of Uganda is undertaking to improve wage bill and payroll management. (10 marks) (b) The Government of Uganda in the financial year 2013/ 14 introduced the concept of the treasury single account (TSA) in line with international best practice for public financial management.Required: Discuss the objectives of the TSA. (2 marks) (c) In order to improve the formulation of the national budget, the Government of Uganda has been upgrading the output budgeting tool (OBT) to enhance its functionality and coverage. However, of recent, there are attempts to shift to programme-based budgeting (PBB) approach. Required: Assess the likely benefits and challenges of implementing the PBB approach. (13 marks) (Total 25 marks) Question 4 (a) Discuss the disclosure requirements of International Public Sector Accounting Standard (IPSAS) 19: Provisions, Contingent Liabilities and Contingent Assets. (6 marks) (b) After a function in April 2015, two people were seriously incapacitated, believably as a result of electric shock from faulty electric wiring around the conference hall of the Ministry of Tourism. Legal proceedings are ongoing seeking compensation from the ministry, but it (ministry) denies liability. Up to the date of authorisation of the financial statements for the year ended 30 June, 2015 for issue, the ministry's lawyers advised that it was probable that the ministry would not be found liable. However, when the ministry prepared the financial statements for the year to 30 June, 2016 its lawyers advised that, owing to developments in the case, it had become probable that the ministry would be found liable. Required: Analyse and advise the ministry on the contingent liability for the two financial years ending 30 June, 2015 and 30 June, 2016. (4 marks) (c) Three years ago, the administration department in the Ministry of Agriculture purchased a new desktop computer at a cost of Shs 4.8 million. The department estimated that the useful life of the computer would be 4 years and that it would use 80% of its central processing capacity. Within a few months after acquisition, the computer reached its targeted usage of 80% but during the current year usage declined to 20%. The decline is attributed to the introduction of modern laptop computers which have larger processing capacity and therefore the department no longer requires the use of the desktop computer. A similar computer is availableon the market at a price of Shs 900,000 that can provide the remaining service potential of the desktop computer. Required: Determine, for the ministry, the impairment loss on the desktop computer. (4 marks) (d) In accordance with International Public Sector Accounting Standard (IPSAS) 6: Consolidated and Separate Financial Statements, an entity combines the financial statements of the controlling entity and its controlled entities line by line by accumulating together like items of assets, liabilities, net assets/ equity, revenue and expenses. Required: (i) Advise on the steps an entity should follow to ensure that the consolidated financial statements present financial information about an economic entity as that of a single entity. (6 marks) (ii) Discuss the disclosures required in consolidated financial statements in accordance with the relevant IPSAS. (5 marks) (Total 25 marks) Question 5 (a) The budget of Government is a statement of the revenues the Government expects to collect in a financial year, and how it plans to spend those revenues. The national budget is guided by the Poverty Eradication Action Plan (PEAP) Uganda's national development framework and medium-term planning tool since 1997. The PEAP was revised and independently evaluated in June 2008 and replaced by the National Development Plan (NDP). The NDP is a comprehensive plan that articulates clearly the planned strategic interventions of all sectors of the economy. In the planning framework, the NDP is implemented in order to realise the Vision of 2040. Required: In accordance with the Budget Act, 2001 discuss the functions of the parliamentary budget office in the national budgeting process in Uganda. (4 marks) (b) The key objective of commitment control is to manage the initial incurrence of obligations, rather than the subsequent cash payments, in order to enforce expenditure ceilings and avoid expenditure arrears.Required: Evaluate the preconditions for successful implementation of commitment controls. (6 marks) (c) Medium-term Expenditure Frameworks (MTEFs) are receiving renewed attention in the context of the formulation of Poverty Reduction Strategy Papers (PRSPs). Conceptually, MTEFs are the ideal tool for translating PRSPs into public expenditure programmes within a coherent multi-year macroeconomic and fiscal framework. You have been selected to provide technical support in budgeting to a newly created Mutande District Local Government and enable it come up with draft annual revenue and expenditure estimates within the stipulated timeframe. Required: Write a report to the District Accounting Officer highlighting the relevance of each of the following in budgeting: Medium-term Expenditure Framework (MTEF). Cash limit and accounting warrant. 1033 Local Government Council. Virements and Reallocations. (15 marks) (Total 25 marks)Required: (a) Analyse the different stakeholders of TUL and their interests. (8 marks) (b) Relate the concept of public interest to TUL. (2 marks) (c) Justify the importance of corporate social responsibility at TUL. (10 marks) (Total 20 marks) Question 3 ISA 230: Audit documentation states that the objective of the auditor is to prepare documentation that provides sufficient and appropriate record of the basis for the auditor's report and evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements. Required: (a) Explain the purpose of audit documentation. (10 marks) (b) Identify the qualities that should consist of good audit work papers. (5 marks) (c) Explain the information contained in a permanent audit file. (5 marks) (Total 20 marks) Question 4 You are the audit supervisor in Kikuubo & Co. Your firm has been appointed as the auditors of Cago Industries Ltd for the year ended 30 June, 2017. You have been assigned to lead a team comprising one senior auditor and three newly recruited auditors who do not have hands on experience in audit field work. As the supervisor, you must ensure that the team operates robustly within a well organised audit plan. Required: (a) Explain to your team the importance of audit planning. (5 marks) (b) Highlight the matters to consider in preparation of an audit plan. (12 marks) (c) Explain to the team why the auditor must maintain professional skepticism throughout the audit. (3 marks) (Total 20 marks)Question 5 TX Vocational training college (TVTC) has been in operation for over 10 years. The college offers certificates, diplomas and degrees in catering, carpentry, art and design and business administration. There courses range from one year to three years. About a year ago, a consultant advised the college to computerise their activities to enable them realise the benefits of the modern technology. The college carries out online registration, students can access there results online, it maintains students databases, they use computerised accounting system and of late they are offering online classes to upcountry students. Your firm, DK & Co., recently recruited an audit senior from another firm. His recruitment coincided with the engagement to carry out the audit of TVTC. You assigned him to lead the team. He has recommended the use of Computer Assisted Audit Techniques (CAATs) to assist in the collection of audit evidence from computerized systems. You are not convinced about the appropriateness of CAATs in this particular assignment. Required: (a) Explain to the audit senior the advantages and disadvantages of the use of CAATs in performing the audit of TVTC. (10 marks) (b) Explain the limitations of using electronic data processing methods in a business like TVTC. (10 marks) (Total 20 marks)Question 6 The growth of a business can provide the entrepreneur with more power to influence a firm's performance. But as the firm grows, it changes. These changes introduce a number of managerial challenges for the entrepreneur; challenges with which they may be unfamiliar and ill-equipped to handle. The key to successful domestic and international entrepreneurship is to develop an idea that has a market with a need for the product or service idea conceived. The idea from process needs to be thought of in terms of satisfying a specific market need. What is deemed to be "profitable" varies by the product/service idea and particularly whether the idea is an industrial product or a consumer product. This is best accomplished through the development of an "Opportunity Assessment Plan". Required: (a) Explain the challenges faced by an entrepreneur as a result of growth and expansion of the business venture. (6 marks) (b) Describe the contents of each of the sections of an Opportunity Assessment Plan. (4 marks) (Total 10 marks) Question 7 A business unit has primary responsibility towards its shareholders. The company owes a legal obligation to its shareholders along with other investors who invest money in bonds and debentures of the company. Shareholders who are the owners of business should be provided with correct information about the company to enable them give a true and fair position of the company to enable them to decide about further investments. Required: (a) Justify the need for record keeping by an entrepreneur. (6 marks) (b) Explain the responsibilities of a business towards the shareholders. (4 marks) (Total 10 marks)Question 1 The following draft financial statements for the year ended 31 March, 2017 were prepared by Wanok Manufacturing Led (WML), which was incorporated in Uganda many years ago. Besides manufacturing, the company also has a wide portfolio of investments in other entities operating in the Great Lakes region of East Africa. Statements of profit or loss and other comprehensive income WML Muna Ltd Batong Ltd Shs '000' Shs '000' Shs '000' Revenue 6,523, 400 2,443,800 846,800 Cost of sales (4,419,000) (1.942,800) (488,800) Gross profit 2,104,400 501,000 358,000 Other income 100,000 Selling & distribution expenses (712,400) (99,600) Administrative expenses (286,400) (152,200) (35,200) Other expenses (365,000) (69,800) (24,800) Finance costs (45,000) (3,600) (Z,200) Profit before tax 793,600 175,800 290,800 Tax expense (179,800) (45,800) (24,600) Profit for the year 613,800 130,000 266,200 Total comprehensive income for the year 613,800 130,000 266,200 Statements of financial position as at 31 March WML Muna Led Batong Ltd Shs '000' Shs '000' Shs '000' Assets: Non-current assets: Property plant & equipment 6,643,200 857,800 1,235,400 Investment in Muna Ltd 2,050,000 Investment in Batong Ltd 800,000 9,493,200 857,800 1,235,400 Current assets: Inventories 739,200 176,200 5,400 Trade receivables 2,018,200 680,200 112,800 Prepayments 600 1,400 Cash 740,400 36,800 35,000 3,498,400 894.600 153,200 Total assets 12.991.600 1.752.400 1.388.600WML Muna Ltd Batong Ltd Shs '000' Shs '000' Shs '000' Equity & liabilities: Issued share capital 1,680,000 1,091,000 600,000 Share premium 380,000 Share option reserve 40,000 Retained earnings 6,947,400 508,800 384,600 3% cumulative irredeemable preference shares 400,000 Revaluation surplus 1,712,000 Total equity 11,159,400 1,599,800 984,600 Non-current liabilities: Provisions greater than 1 year 100,000 Other non-current liabilities 343.000 62.200 312.600 443,000 62,200 312,600 Current liabilities: Provisions less than 1 year 80,000 Other current liabilities 1,309,200 90.400 91,400 1,389,200 90,400 91,400 Total equity & liabilities 12,991.600 1,752,400 1,388.600 Notes: 1. WML purchased all of the ordinary share capital in Muna Ltd on 1 April, 2014 for Shs 2,050 million. At this time Muna Led had retained earnings of Shs 545,400,000. The fair value of Muna Ltd's identifiable net assets on the date of acquisition was the same as their book value. An impairment review was carried out on 31 March, 2017 and it was agreed that the goodwill on acquisition of Muna Ltd be impaired by 20%. 2. WML acquired 40% of the ordinary share capital of Batong Ltd on 30 June, 2016. The fair values of Batong Led's identifiable net assets on this date were the same as their book value. An impairment review was carried out on 31 March, 2017 and it was agreed that the goodwill on acquisition of Batong Ltd be impaired by 10%. 3. On 1 March, 2017 WML agreed to a sale of its finished products for Shs 560 million to Goma City Council (GCC). This was a forward purchase agreement by GCC and the goods would not be delivered until 1 May, 2017. The agreement also allowed GCC the right to cancel the order at any time up to 15 April, 2017 with no penalty. However, this would only happen if WML's sales price fell by 15 April, 2017. The sale was recorded in sales and accounts receivable but no adjustment was made to inventory. 4. During the year an employee was injured while operating a machine and has taken legal action against WML. The case is currently outstanding, butit is expected to be settled within a few weeks following the year end. Discussions with lawyers indicated that the employee was likely to be successful. The damages payable were estimated at Shs 60 million based on related cases in the past. 5. During the year ended 31 March, 2017 WML sold goods to Muna Ltd for Shs 400 million. WML makes a profit of 25% on the selling price. At year end Muna Led had sold all the goods to third parties. 6. In March, 2017 the directors of Muna Led proposed a dividend of Shs 8 million, which the shareholders were expected to approve. No account was taken of this dividend in the financial statements of WML and Muna Ltd. 7. The Directors of WML were considering an overseas investment in the near future. They were, however, not fully aware of the regulatory reporting requirements in relation to exchange rate differences. Required: (a) With reference to relevant financial reporting standards, advise the management of WML whether there is need to consolidate the financial statements above. (5 marks) (b) Prepare a memorandum for the directors of WML advising them on the required accounting treatment in regard to issues identified in notes (3, 4, 5, and 6) and their impact on the consolidated financial statements of WML for the year ended 31 March, 2017. (7 marks) (c) Prepare the consolidated statements of profit or loss and other comprehensive income and of financial position of WML for the year ended 31 March, 2017. Include all the workings as far as the information allows. (35 marks) (d) Prepare a memo for the directors of WML which advising them on the correct accounting treatment of the issues raised in note 7 above. (3 marks) (Total 50 marks)