Advanced Business Reporting (SL1) Mock Exam (Governance, Audit & Ethics)
Instructions to candidates
- Time allowed: Reading and planning – 10 minutes
Writing – 1 hour and 10 minutes
- Total: 100 marks
- Answer all questions.
- This paper consists of two sections.
Section 2: 1 question – (Common pre-seen case based)
The examination will be conducted as an open book examination only following publications of CA Sri Lanka will be permitted
- Sri Lanka Auditing Standards 2020
- Sri Lanka Auditing Standards & Sri Lanka Standard on Quality Control 1 (2020 Edition – Volume 01)
- Sri Lanka audit pronouncements and Sri Lanka Related Services pronouncement (2020 Edition – Volume 02)
- Code of Ethics 2016
- Code of Best Practice on Corporate Governance 2017
- A Guide to Corporate Governance in Small and Medium Enterprises 2019
Note- The purpose of this paper is to provide students with an opportunity to answer mock exam questions weight given is not the same as the actual weight applicable in the exam and this paper is limited only to Part B of ABR syllabus.
Section 2: Based on Common Pre-seen
Considering the challenges faced by CBE both from internal issues and the risks arising from COVID 19 pandemic, Manilal summoned a board meeting to make certain strategic decisions which can reshape the future of CBE. Lalith decided to sell his stake and Manilal agree to onboard Chinese investor as it could provide opportunities to access to new markets and to learn best in class global practices. Board also decided to pursue the proposal of Jagath to list the company on the Diri Savi Board. Further to previous suggestion by chairman it was decided to obtain the services of a senior management consultant to resolve the GOVERNANCE AND FINANCIAL ISSUES faced by the college.
Chinse investor has recommended to reconstitute the board with new members from diverse background who can independently challenge the decisions of likeminded personalities. Consultant has made his preliminary observations on board governance and one key observation is the difficulty to differentiate the role of management of CBE from governance.
You are the senior management consultant appointed to resolve the GOVERNANCE AND FINANCIAL ISSUES faced by the college you are expected to do a presentation to the board explaining how the current board has failed to discharge PERFORMANCE AND CONFORMANCE role of the board 1. Explain the difference between governance and management (2 Marks)
2. Explain four main governance role of the board and outline CURRENT ISSUES faced by the Board in relation to its governance roles (10 Marks)
One key recommendation of the consultant in reconstituting the board is to improve board diversity.
1. Explain the meaning of board diversity and four advantages of having a diverse board (3 Marks)
2. Advice Manilal of the governance issues arising from by the dual role played by him (5Marks)
Audit of Financial Year ended 31 March 2021
Perera & Company has been the auditor of CBE for the last 10 years and Mr Viraj Perera is the engagement partner and Mr Kasun Jayawardene is the manager appointed for the audit of financial year ended 31 March 2021.
During the initial audit planning meeting with the management, Kasun explained that a risk-based audit approach will be adopted during the year to draw particular attention to the current risks landscape. This approach also takes into account the effectiveness of control environment and other components of internal controls using COSO framework.
Assume you are the audit manager appointed for the audit of CBE 1. Explain the business risk approach to identify risk of material misstatements in financial statements. (3 Marks)
2. Outline 3 business risks and related risk of material misstatements arising from business risks (9 Marks)
3. Using the principles of COSO, evaluate four internal control deficiencies relating to the internal control system of CBE with your key recommendations to address such deficiencies. (8 Marks)