QUESTION 2 Ghana Quality Authority (GOA) is an autonomous agency of government responsible for ensuring high quality standards of foods, drugs and other consumables in the country. The govering council of GOA, in its recent meeting. las considered its financial statements for approval for publication. Unfortunately, the financial statements were tor to pieces by the board members for the reasons that it lacks quality and cannot fly in the face of the International Public Sector Accounting Standards (IPSAS). The Council Chairman was surprised that the financial statements are not accompanied by detail notes to the accounts. Looking at the face of the financial statements. I can say that it is not prepared on accrual basis", the Chairman stresses. The Board anonymously rejected the financial statements and instructed the Director of Finance to resubmit proper financial statements within two weeks. else he will be shown the door The Beard takes the view that the financial statement is not reflective of the transactions and events that occurred during the year. For example, it was found that the internally generated funds (IGFs) of Authority reported was too low, GH 15,000,000 but the Director of Finance defends IGFs are disclosed only when cash is received and it is low because revenue from testing are mostly received in artears". The compensation for employees shown in the financial statement is only GHc20,000,000, which is not reflective of the rising employee pays due to promotions and new recruitment. Goods and Services was GHc8.000.000 and this is also found to be under disclosed as several bills were outstanding at the end of that year. Surprisingly, all the capital expenditures for the year have been expensed in the year therefore resulting in a huge operational deficit. The assets acquired during the year mounted to GH 35.000.000 and average useful life of the assets acquired during the year was 5 years. The GoG subvention received for the year amounted to GH 29,000,000 and this was duly disclosed The badget statement of the year showed the following variances GHE000 Compensation for employees (10,000) Goods and Services (2.710) Capital expenditure 15,000 IGF (2.000) GOG subvention 19.000) The Director of Finance, after the meeting, retrieved the following additional information which was not considered in the initial financial statements 0) A pharmaceutical company, a major client of GQA, has paid quality assurance fees of GH43,000,000 for services to be provided to them in the following year, 2021, 11) Testing fees amounting to GH49,000,000 was conducted during the year but the clients are yet to pay the balances Government promises to release further GH4,000,000 before the end of the year but could not keep the promise. iv) Donation of Testing Equipment by DASA to the GOA was valued at GH1,200,000. The testing equipment has not been disclosed in the capital expenditure of the year The salaries of employees appointed on November 2020 remained unpaid. The anal pay for each employee is GHc36,000,000 vi) Salary advanced of GH800,000 was granted to employees during the year. Inventory of consumables conting GH890,000 has net replacement cost of GH920,000 at the end of the year Vin Utilities consumed during the year without settling the bill amounted to GHC600.000 Required: a) Using an appropriate framework for assessing the quality of financial information, discussed four (4) likely characteristics of the financial statements which caused the Board to "tear it into pieces". (8 marks) b) The Chairman of the Board concluded that the financial statements were not prepared on accrual basis merely based on facial observation. Discuss two (2) pointers to the basis of accounting applied to the preparation of financial statements, without disclosures in the notes