You are the audit manager of Kyrgyz Accountants LLC. Your firm was requested to provide assistance to Good Governance OSC, a listed company, which was planning to improve its corporate governance in accordance with international codes and the best practices. Kyrgyz Accountants LLC were asked for the advice regarding the changes needed in Good Governance OSC to achieve appropriate improvements in corporate governance.

The Company the Internal Audit department, which was established two years ago and reported to Audit Committee. In addition, 50% of the internal auditorss workload was spent on assisting with resolving accounting issues due to lack of staff in the accounting department.

(7) Good Governance OSC currently has a governance structure that consists of a CEO, who acts as both Chairman and CEO, together with 3 executive directors and 1 non-executive director. What would you recommend in order for the Company to comply with the best practice corporate governance?

A. Removing the non-executive director as he/she is unlikely to have much knowledge of the business due to a lack of day to day involvement.

B. Separating the roles of Chairman and CEO.

C. Separating the roles of Chairman and CEO and recruiting 2 additional non-executive directors.

D. No action is needed as the company is already compliant.

(8) The Good Governance OSC is considering outsourcing its Internal Audit department because the Company believed it was costly to have internal audit function. Which of the following will not be an advantage for the company when outsourcing its internal audit function?

A. Reduction in costs

B. Access to wider range of specialist skills

C. Improved availability of the internal audit team

D. Improved independence of internal audit function

(9) What would you recommend changing in the current internal audit function of the Good Governance?

A. No action is needed as the internal audit function already corresponds to the best practices

B. Internal auditors should report to the CFO as CFO understands internal controls and is best to timely implement any recommendations of internal auditors.

C. Internal auditors should not execute any operational duties to ensure independence and minimize self-review threat

D. Good Governance should cease internal audit function as companies are not required to establish and maintain an internal audit function.

(10) The Good Governance asks which committees should be in place in order to improve Corporate Governance and be in compliance with the best practices. Which of the committees you would recommend establishing for the Good Governance?

A. Corporate Social Responsibility Committee, Audit committee, Remuneration Committee

B. Remuneration Committee, Controls Committee, Nomination Committee

C. Audit committee, Remuneration Committee, Nomination Committee

D. Remuneration Committee, Nomination Committee, Financial Reporting Committee

(11) The Audit Committee of the Good Governance is established to supervise external auditors and internal audit function. However the Company is not sure, whether the audit committees functions were properly determined. Please advice, which of the following are appropriate functions to be delivered by the audit committees?

(i) Planning the annual external audit

(ii) Reviewing the effectiveness of internal financial controls

(iii) Reviewing and monitoring the external auditors independence

(iv) Processing year end journal adjustments to the financial statements

A. i and ii

B. i and iii

C. ii and iv

D. ii and iii

(12) Which of the following events should be recorded and disclosed in the financial statements of the audited entity as an event after the reporting period?

A. Detection after the reporting date of a significant error in accounting, which leads to a distortion of the financial statements for the reporting period;

B. Termination of a substantial part of the core business, if this could not have been foreseen at the reporting date;

C. An accident resulting in the destruction of a substantial part of the assets of the audited entity;

D. All of the above.

(13) What audit evidence is the most reliable:

A. External evidence from the supplier;

B. Internal evidence obtained from the entity;

C. Internal evidence obtained by the auditor.

D. External correspondence from the supplier;

(14) In what cases should the auditor inform the management of the client about the facts of fraud?

A. In cases where the auditor suspects fraud or discovered fraud, regardless of their materiality;

B. In cases where the auditor suspects fraud or has discovered material fraud;

C. In cases where the auditor has discovered material fraud;

D. All of the above.

(15) The auditor needs to be present during the stock count of inventory:

A. In case if the value of Inventory is significant for the audited financial statements;

B. In any case, since the annual financial statements are to be confirmed through the stock count, and the prerequisite for its preparation is mandatory stock count at the end of the year;

C. If the weak point of the clients internal control system is assurance of control over the inventory safety;

D. All of the above.