Wired Telecom Limited (WTL) is a telecom service provider that deals in offering

call services, mobile money, airtime, phones and related accessories. Your firm,

PMG & Co. is the auditor of WTL for the year ended 30 June, 2018.

The telecommunication sector is growing rapidly and more services are on

demand by customers. Previously, it was just calls and airtime but now banking

services are the next service on demand. Client bank accounts are now linked to

telecom numbers. Clients are able to transact with banks using their phones and

vice versa. WTL has been forced to expand rapidly to match the competitors.

The sector is also highly regulated by Uganda Communications Commission

(UCC). It is now in the spotlight like never before. WTL has to file reports with

the regulator on a monthly basis, and as and when required.

There are new taxes to be collected by WTL on behalf of government. They are

in the budget for the financial year 2018/2019. Uganda Revenue Authority

requires that these taxes are remitted on time and without fail.

The International Accounting Standard Board (IASB) has issued new accounting

standards. IFRS 15: Revenue from contracts with customers and IFRS 16: Leases

are just some of the new standards. These are key standards to WTL operations.

WTL borrowed Shs 50 billion from off-shore banks and local banks to meet the

increasing demand for both physical and software infrastructure developments

throughout the country.

There are press reports that telecom companies have been under declaring their

revenue to the Uganda Revenue Authority hence paying less tax as required by

the Income Tax Act. WTL attributes this to weak software controls and an effort

will be made to upgrade the controls.

WTL's inventory includes airtime cards, phone handsets, and data/internet

equipment. Airtime cards are now becoming obsolete as customers now prefer to

buy airtime online using mobile money. WTL has large amounts of inventory in

form of airtime cards.PMG & Co. will be required to attend the inventory count

scheduled for the week starting 1 July, 2018.

Required:

(a) Explain the business risks facing WTL. (6 marks)

(b) Suggest the interventions that can be undertaken to mitigate the risks in

(a) above.

(6 marks)

(c) Advise WTL on the effective software controls that can be put in place.

(8 marks)

(d) Describe the procedures PMG & Co. should carry out before the inventory

count at WTL.

(10 marks)

(Total 30 marks)

SECTION B

Attempt three of the four questions in this section

Question 2

BTS & Co., where you work as an audit senior is the auditor for Traders Saving

Association Limited (TSAL) for the year ended 30 June 2018. TSAL is a registered

Savings and Cooperative Society (SACCO) with over 1,000 members. BTS & Co.

has been auditing TSAL for the last 3 years. They gave a "Qualified opinion

except for" for the first two years. In 2017, they gave an "Unqualified audit

opinion". The members have expressed concern about the change of audit

opinion and desire to know why this is the case.

TSAL members have also expressed their concern why the auditors have never

communicated to them throughout their three years of audit of TSAL. ISA 260,

however, requires that the auditor determines the appropriate persons within the

organisation governance structure with whom to report relevant audit matters

concerning the organisation. BTS & Co. is, therefore, under no obligation to

communicate with all the members of TSAL. However being a socially

responsive audit which serves public interest, BTS & Co is considering a response

to concerns raised by TSAL members.

Required:

Prepare briefing notes to TSAL members:

(a) explaining the circumstances under which BTS & Co. may issue:

(i) Unqualified audit opinion. (6 marks)

(ii) Qualified opinion-except for. (6 marks)

(b) explaining the objectives the auditor seeks to achieve in determining the

appropriate persons within TSAL to communicate to during an audit.

(8 marks)

Question 3

In 2017, Uganda Revenue Authority (URA) in partnership with Uganda

Registration Services Bureau (URSB) and Kampala Capital City Authority (KCCA)

commenced a joint field operation within Kampala under the Taxpayer Register

Expansion Project (TREP). This operation was in response to the Uganda Bureau

of Statistics (UBS) report which indicated that Uganda's informal sector

contributes at least 50 per cent of the country's Gross Domestic Product (GDP)

but pays less than 20% in taxes.

This prompted URA to organize a tax clinic for Kikuubo tradersto sensitize them

about the benefits of formal business registration, their rights and obligations

with regard to payment of income taxes and trading licenses. The exercise was

seen as a move to improve value and ethics in business while reducing on the

unethical business practices amongst traders in Uganda. While addressing

traders, one of the representatives from URA, CPA John Musisi said ".....tax

compliance helps government raise revenue to meet huge public expenditure for

infrastructure and public services thus creating a favourable business

environment."

The proprietorof Mapeera Enterprises has approached you to enlighten him on

several business ethical issues talked about at the tax clinic.

Required:

(a) Prepare briefing notes:

(i) explainingto the proprietor of Mapeera Enterprisesthe meaning of

the phrase "Value and Ethics in Business''.

(2 marks)

(ii) describing the unethical business practices exhibited by traders in

Uganda. (4 marks)

(b) (i) Explainto Kikuubo traders the benefits of adhering to business

ethics. (6 marks)

(ii) Discuss the different myths about business ethics that Kikuubo

traders would encounter when trying to adhere.

(8 marks)

Question 4

Ms. Teddy Nunda is a new employee in the Finance & Accounts department of

VMC Electronics Limited, a company that deals in the sale of TVs and radios.

Teddy is an Accounts Assistant on probation. For the last three weeks, she has

had work related stress suspecting her immediate supervisor to be stealing funds

from the company. This suspicion arose after getting a variance between the

cashbook balance and the bank balance for last three consecutive months

whenever she prepared a bank reconciliation statement. The supervisor is on a

sick leave.

She wants to disclose the impropriety but fears to be victimised and still the

directors may fail to take action. She also fears making false disclosures.Besides,

her confirmation on the job depends on the supervisor's recommendations. She

has discussed the matter with her former lecturer of Business Ethics and advised

her that this amounts to void employment contracts as per the Whistleblowers

Protection Act 2010.

Required:

Using the provisions of the Whistleblowers Protection Act 2010:

(a) Describethe:

(i) circumstances under which an employee is considered to be

victimised.

(4 marks)

(ii) steps to be taken to seek redress, if victimised.

(2 marks)

(b) Explainto Teddy the:

(i) details sheshould include in the disclosure of the impropriety.

(6 marks)

(ii) consequences of making false disclosures.

(2 marks)

(iii) consequences of failure to take action on the impropriety disclosed.

(2 marks)

(c) Identify the indicators of void employment contracts at workplace like VMC

Electronics Limited.

(4 marks)

Question 5

The King Report on Corporate Governance is a ground-breaking guide for the

governance structures and operation of companies in the world today. It was

issued by the King Committee on Corporate Governance. Four reports were

issued in 1994 (King I), 2002 (King II), 2009 (King III) and 2016/2017 (King IV).

The King Report has been cited as "the most effective summary of the best

international practices in corporate governance". Arguments have been

forwarded that in the wake of financial crisis; it is now common practice to

separate the roles of Chairman of the Board and CEO.

Required:

(a) With reference to King III report on corporate governance, discuss the

principles of:

(i) Ethical leadership and corporate citizenship. (3 marks)

(ii) Accountability. (2 marks)

(iii) Governing stakeholder relationships. (4 marks)

(iv) Integrated reporting and disclosure. (3 marks)

(b) Discuss the validity of the view that calls to separate the Chairman of the

Board and CEO roles in corporations.

(8 marks)

(Total 20 marks)

SECTION C

Attempt one of the two questions in this section

Question 6

Being an entrepreneur comes with many challenges and the biggest one is how

to make the business grow. Businesses can either grow organically or externally.

As the firm grows, it will be required to withhold taxes to the government and

one of the requirements for determining tax liability is the need for financial

statements.

Required:

(a) Explain the different ways through which a business can grow.

(5 marks)

(b) Describe the different users of accounting information.

(5 marks)

Queston 7

JKL Sports sells customized T-shirts, caps and shoes. The owner of the company

could not believe what he was seeing on his computer when he discovered, a

website that was a duplicate of his site DesignAshirt.com. This confirmed that his

intellectual property, such as graphics and images, had been stolen. Despite all

this, the business was growing steadily and this created a large appetite for

cash. With financial resources stretched, the firm is more vulnerable to

unexpected expenses and uncertainties. JKL Sports has been advised to manage

the financial resources effectively to minimize the challenges of business growth.

Required:

(a) (i) Define the term "intellectual property".

(1 mark)

(ii) Explain the forms of protection a business like JKL Sports can use to

protect its intellectual property.

(4 marks)

(b) Explain how an entrepreneur can manage the financial resources as the

business grows.

(5marks)