You are an Audit Manager in the firm UPSY Chartered Accountants, a firm in public practice registered with the Institute of Chartered Accountants (Ghana). Bank of Ghana has appointed your firm to investigate the reasons for the failure of Duapapa Microfinance Limited and your investigation has revealed the following as some of the reasons for the failure: 

(i) The board of directors of the company is made up only of Dr. and Mrs. Wisdom Duapa-Bosompim. 

(ii) The failure of the Bank of Ghana to examine or detect the non-submission of the fidelity returns submitted to it by the company and monitor the company adequately. 

(iii) The auditors have been the auditors of the company since its incorporation over ten years ago. 

(iv) The failure of the auditors of the company to spot and question some dubious accounting treatments adopted by the company. This is partly due to the fact that the consulting arm of the audit firm has been performing all the consultancy work needed by the company since its incorporation and particularly at the time of its application for the microfinance operating permit from the Bank of Ghana. The due diligence on the last audited financial statement revealed the following, among others: The balance on the company’s main operating bank account in the trial balance submitted to the auditors showed that the company had a cash balance of GH¢600.22 million which agrees with the bank reconciliation statement. The cash balance on the bank statement was GH¢400.11 million. 

The reconciling items on the Bank Reconciliation Statements were too many and some had been outstanding in the monthly bank reconciliation statements for as long as five years. Further investigation, however, revealed that the actual cash balance on the bank account and the cash in the bank was GH¢400.11 million on the date of the financial statements. The auditors requested and received a Bank Confirmation from the company’s bank which agreed with the balance in the bank statement. The bank confirmation sent to the auditors was detected to be fake and did not come from the bank. The actual confirmation from the bank by post was intercepted by the company and this has been going on for the past five years.

Required: For points (i) to (iv) above, state for each point, show what would contribute to the failure of the company, and make ONE recommendation to ensure that this would not reoccur in Duapapa Microfinance Ltd.