🇳🇬 PATRIOT ODUNARO BABATUNDE JIMOH
141 TUTORIAL QUESTIONS on
acc 412-Auditing AND investigation 1
(CONTACT PATRIOT FOR SOLUTIONS ON 08038454008)
141 TUTORIAL QUESTIONS ON ACC 412-AUDITING AND INVESTIGATION 1
TOPIC 1: AUDIT PLANNING PROCESS AND THE GENERALLY
ACCEPTED AUDIT PROCEDURES AS THE BASIS FOR
AUDIT TESTS AND QUESTIONNAIRES.
1. Define audit planning and state five (5) objectives of audit planning.
2. Explain the audit planning process.
3. Explain five (5) generally accepted audit procedures
4. Define materiality in auditing.
5. State five (5) factors that influence the determination of materiality.
6. The profit before tax of Sogbae Manufacturing Limited is N40,000,000.
Calculate the materiality level using 5% of profit before tax.
7. Define audit risk and explain its components.
8. The auditor of Ajimatanraeje Limited assessed inherent risk at 70% and control risk at 40%.
If acceptable audit risk is 5%, calculate the detection risk.
9. Distinguish between tests of control and substantive tests.
10. Explain five (5) purposes of audit questionnaires.
11. Explain analytical audit procedures.
12. Sales figures of Tewogbare Nigeria Limited were N150,000,000 in 2024 and N225,000,000 in 2025.
Calculate the percentage increase in sales.
13. State five (5) reasons why audit planning is important
TOPIC 2: PUBLIC REPORTING AND GENERALLY ACCEPTED AUDIT
PROCEDURES (GAAP).
14. Define public reporting and explain ten (10) objectives of public reporting.
15. What is the auditor’s report? State and explain four (4) types of audit opinions that may be expressed in public reporting.
16. Explain the term Generally Accepted Audit Procedures (GAAP).
17. State and explain ten (10) commonly used audit procedures under GAAP.
18. Distinguish between public reporting and internal reporting.
19. State ten (10) limitations of public reporting and GAAP.
20. An auditor is planning an audit and decides to determine materiality using profit before tax as a benchmark.
Profit before tax = N30,000,000
Materiality level = 5%
Calculate the materiality level.
21. Explain ten importance of materiality in public reporting.
22. The following information relates to Tewogbaola Manufacturing Limited:
Sales = N80,000,000
Cost of Sales = N56,000,000
Calculate the Gross Profit and Gross Profit Ratio.
23. State five (5) reasons why an auditor may use ratio analysis under GAAP.
24. Explain five (5) roles of the auditor in public reporting.
25. State and explain five (5) audit completion procedures under GAAP.
TOPIC 3: AUDIT INVESTIGATION.
26. Define audit investigation and state ten (10) objectives of audit investigation.
27. Differentiate between audit and investigation.
28. State and explain ten (10) circumstances under which audit investigation may be carried out.
29. Explain ten duties of an audit investigator.
30. List and explain five (5) techniques used in audit investigation.
31. The following information was extracted from the records of Alpha Traders Limited:
Cash balance as per Cash Book: N360,000
Actual cash counted: N285,000
Required:
(a) Calculate the cash shortage.
(b) State five possible implication of the shortage.
32. During an audit investigation, the following information was obtained:
Cost of Goods Sold: N800,000
Gross Profit Rate: 20%
Required:
(a) Calculate the expected gross profit.
(b) Calculate the expected sales revenue.
33. The bank statement balance of Beta Enterprises Ltd showed N520,000 while the cash book showed N600,000.
Additional information:
Unpresented cheques: N80,000
Required:
(a) Calculate the difference.
(b) State whether the difference is justified.
34. Gamma Stores Limited maintains a gross profit margin of 25%. During an investigation, purchases amounted to N900,000.
Required:
Calculate the expected sales figure.
35. The following balances were extracted during an investigation:
Total Debtors: N450,000
Confirmed Debtors: N410,000
Required:
(a) Calculate the unconfirmed balance.
(b) State five audit implication.
36. Explain the procedures an audit investigator would follow when fraud is suspected in an organization.
TOPIC4: THE PRINCIPLES UNDERLYING THE ACQUISITION AND
AMALGAMATION OF COMPANIES.
37. Define the following terms:
- Acquisition
- Amalgamation
- Purchase Consideration
38. State five (5) objectives of acquisition and amalgamation.
39. Explain the principle of purchase consideration and the principle of valuation of assets and liabilities in company acquisition.
40. Distinguish between acquisition and amalgamation.
41. Explain the difference between: (i) amalgamation in the nature of merger and (ii) amalgamation in the nature of purchase.
42. Semilore Limited acquires Atewolabala Limited. The agreed values of Atewolabala Limited’s assets and liabilities are:
Assets: N20,000,000
Liabilities: N8,000,000
Purchase consideration: N15,000,000
Calculate:
(a) Net assets taken over
(b) Goodwill or capital reserve
43. Explain the accounting treatment of goodwill in an acquisition.
44. Feyikogbola Limited acquires Foyegbe Limited. Payment to shareholders of Foyegbe Limited:
Cash = N5,000,000
400,000 ordinary shares of N10 each
Calculate the total purchase consideration
45. Explain the accounting methods used in acquisition and amalgamation
46. State five (5) advantages of acquisition and amalgamation.
47. Semilore Lmited’s assets and liabilities are ₦18,000,000 and ₦6,000,000 respectively. Purchase consideration by Semilanu Limited is ₦20,000,000. Calculate the goodwill or capital reserve.
TOPIC 5: FRAUD.
48. Define fraud and explain five (5) characteristics of fraud.
49. State and explain five (5) types of fraud that can occur in organizations.
50. Explain the Fraud Triangle and its components.
51. State five (5) indicators of fraud (red flags) in an organization.
52. Otisese Limited has the following information:
Cash balance per books = N200,000
Cash counted = N170,000
Payroll data:
Number of employees on payroll = 50
Actual employees verified = 48
Average monthly salary = N60,000
Required:
(a) Calculate the cash shortage.
(b) Calculate the monthly payroll fraud.
53. Alanuloluwa Limited has the following data:
Sales = N100,000,000
Cost of Sales = N75,000,000
(a) Calculate gross profit and gross profit ratio.
(b) Explain why ratio analysis is useful in detecting fraud.
54. State ten concrete factors that distinguish fraud from error in tabular form.
55. State five (5) roles of auditors in relation to fraud detection.
56. List five (5) prevention and control measures for fraud in organizations.
TOPIC 6: FORMS OF AUDIT REPORTS.
57. Define an audit report and state five objectives of an audit report.
58. List and explain five forms of audit reports.
59. Differentiate between qualified and adverse audit reports.
60. State five circumstances where a disclaimer of opinion may be issued.
61. An auditor considers 5% of net profit before tax as the materiality threshold. Sogbae Nigeria Limited has a PBT of N6,000,000. During audit, the following misstatements were discovered:
Inventory overstated by N150,000
Receivables overstated by N200,000
Accrued expenses understated by N50,000
Required:
(a) Determine the materiality amount.
(b) State whether the misstatements are material.
(c) Suggest the likely form of audit report.
62. Asese Nigeria Limited has total assets of N10,000,000. During an audit, inventory is overstated by N1,500,000 and cash understated by N200,000. Materiality benchmark is 5% of total assets.
Required:
(a) Calculate materiality.
(b) Determine whether the overstatement of inventory is material and/or
pervasive.
(c) State the type of audit report likely to be issued.
63. During an audit, the auditor cannot obtain evidence for sales for three months because the company’s records were destroyed. Other accounts are properly maintained.
Required:
State the form of audit report appropriate and justify.
64. Banuso Nigeria Limited has a net profit of N8,000,000. The auditor discovered that depreciation was understated by N1,200,000, and inventory was overstated by N600,000. Auditor uses 10% of net profit as materiality.
Required:
(a) Determine materiality.
(b) Calculate total misstatement.
(c) Suggest the likely audit report.
65. Explain the role of materiality in determining the form of audit report.
66. Ninilowo Nigeria Limited’s financial statements show some misstatements and disclosure omissions. As an audit student, explain how you would classify and report them, using examples.
TOPIC 7: THE COMPANIES AND ALLIED MATTERS ACT (1990) AND
THE AUDITORS RESPONSIBILITIES.
67. Define the following terms: (6 Marks)
- Auditor
- Audit report
- Materiality
68. State five (5) objectives of CAMA 1990 in relation to auditing.
69. Explain five (5) responsibilities of auditors under CAMA 1990.
70. Explain the difference between directors’ responsibilities and auditors’ responsibilities under CAMA 1990.
71. State five (5) powers of auditors under CAMA 1990.
72. Atewolabala Limited has a profit before tax of N12,000,000. Auditor materiality is 5% of profit. Calculate the materiality threshold.
73. The auditor assesses the following risks for Foyegbe Limited:
Inherent Risk (IR) = 70%
Control Risk (CR) = 50%
Acceptable Audit Risk (AR) = 5%
Calculate the detection risk (DR).
74. Explain the types of auditors’ reports under CAMA 1990.
75. List five (5) generally accepted audit procedures used by auditors to fulfill their responsibilities under CAMA.
76. The auditors of Asese Nigeria Limited noted the following:
Inherent Risk = 60%
Control Risk = 40%
Audit Risk (AR) = 5%
Calculate:
(a) Detection Risk (DR)
(b) Maximum tolerable misstatement if profit before tax is N15,000,000 and
materiality is 5%.
77. Explain why auditors must maintain independence under CAMA 1990.
TOPIC 8: SHAREHOLDERS, EMPLOYERS AND CREDITORS’ PROTECTIONS UNDER CAMA.
78. Define the following terms as used in CAMA:
a. Shareholder
b. Creditor
c. Employer
79. Explain five (5) rights of shareholders protected under CAMA.
80. Explain five (5) protections available to employees under CAMA.
81. Toluwalase Nigeria Limited is being liquidated and owes the following:
Employee wages = N1,800,000
Secured creditors = N3,500,000
Unsecured creditors = N2,700,000
If liquidation proceeds are N7,000,000
Calculate how much each group receives.
82. State and explain five (5) protections available to creditors under CAMA.
83. Ajimatanraeje Nigeria Limited issues new shares of N5,000,000. A shareholder owns 10% of existing shares. Calculate the pre-emption right entitlement for this shareholder.
84. Explain the role of directors in protecting stakeholders under CAMA.
85. Amuoluwa Nigeria Limited declares total dividends of N600,000. A minority shareholder owns 5% of the company’s shares. Calculate the dividend entitlement.
86.Distinguish between secured and unsecured creditors.
87. Explain why shareholders, employees, and creditors’ protections are important for corporate governance.
TOPIC 9: TAKE-OVER CODE.
88. Define the Take-Over Code and state five objectives.
89. Explain five types of takeovers.
90. State five key principles of the Take-Over Code.
91. State five advantages and five disadvantages of takeovers.
92. Banuso Nigeria Limited has:
Total Assets = N80,000,000
Total Liabilities = N30,000,000
Shares Outstanding = 2,000,000
Required: Calculate the Net Asset Value per Share (NAV).
93. Akinola Rebecca Nigeria Limited reports:
Net Profit = N12,000,000
Shares Outstanding = 600,000
Market P/E Ratio = 10
Required: Calculate the value per share using P/E ratio.
94. Olasunkanmi Ajoke Nigeria Limited reports:
Market price = N150
Premium offered = 25%
Required: Calculate the offer price and take-over premium in Naira.
95. Ameh Naomi Gift has:
Total Assets = N60,000,000
Total Liabilities = N20,000,000
Net Profit = N8,000,000
Shares Outstanding = 500,000
Market P/E = 12
Market Price = ₦150
Required:
(a) Compute Net Asset Value per Share.
(b) Compute value per share using P/E.
(c) Compute offer price if a 20% premium is offered on market price.
96. An acquirer wants to take over Adeyemi Kaosarat Nigeria Limited with Net Assets of N50,000,000. The SEC guideline suggests 10% premium over Net Asset Value is reasonable.
Required: Calculate the maximum offer price per share if there are 1,000,000 shares
97. Explain briefly the role of Securities and Exchange Commission (SEC) in regulating takeovers.
98. Sunday Michael Nigeria Limited plans to acquire another company that has both Net Asset Value per Share N100 and market price N120. As an auditor or finance student, explain how you would advise on offer price determination considering fairness and Take-Over Code.
TOPIC 10: AUDIT OF COMPUTERIZED ACCOUNTING SYSTEM.
99. Define a Computerized Accounting System (CAS).
100. State and explain five (5) objectives of auditing a computerized accounting system.
101. Explain the term “Auditing Through the Computer”.
102. Differentiate between General Controls and Application Controls in a computerized accounting system.
103. State five (5) audit risks associated with computerized accounting systems.
104. An auditor is reviewing a computerized payroll system of Akinola Rebecca Limited.
Details:
Number of employees: 150
Total gross wages per payroll records: N7,350,000
Computer-generated payroll total: N7,420,000
Required:
(a)
Calculate the payroll variance.
(b) State five possible audit implications.
105. Explain Computer Assisted Audit Techniques (CAATs).
106. State and explain five (5) examples of CAATs.
107. A computerized accounting system computes depreciation using the straight-line method.
Information:
Cost of asset: N3,200,000
Residual value: N400,000
Useful life: 7 years
Required:
(a)
Calculate annual depreciation.
(b) State five audit relevance of this test.
108. Explain the concept of “Auditing Around the Computer”.
109. State five (5) limitations of auditing a computerized accounting system.
110. An
auditor introduces test data totaling N600,000 into a computerized sales system.
The expected output is N600,000, but the system produces ₦585,000.
Required:
(a)
Calculate the difference.
(b) Explain the audit implication.
111. Write short notes on the
following:
(a) Input controls
(b) Output controls
(c) Program change controls
(d) Data backup and recovery
(e) Access controls
TOPIC 11: FINANCIAL STATEMENTS AND AUDIT OPINIONS.
112. Define financial statements and state ten (10) objectives of preparing financial statements.
113. List and explain five (5) major components of financial statements.
114. Explain the term "audit opinion" and state four (4) types of audit opinions.
115. State five (5) circumstances under which a qualified audit opinion may be issued.
116. Differentiate between an unqualified audit opinion and an adverse audit opinion.
117. The following information relates to Peace Enterprises for the year ended 31 December 2025:
Sales N800,000
Opening Inventory N120,000
Purchases N360,000
Closing Inventory N140,000
Operating Expenses N180,000
Tax N40,000
You are required to prepare a Statement of Profit or Loss.
118. From the information below, calculate the total assets and owner’s equity of Bright Ventures:
Non-current assets N500,000
Current assets N300,000
Current liabilities N250,000
119. Explain how materiality affects an auditor’s opinion using figures.
120. Explain ten (10) users of financial statements and one decision each user may make based on the statements.
121. Under what circumstances will an auditor issue a disclaimer of opinion?
TOPIC 12: SPECIAL CREDIT.
122. Define Special Credit and state five of its characteristics.
123. List and explain five types of special credit.
124. State five audit objectives of special credit.
125. Explain ten audit procedures applied to special credit
126. Awoniyi Nigeria Limited obtained a long-term loan of N6,000,000 at 12% per annum.
Required:
Calculate the annual interest payable.
127. Balogun Nigeria Limited borrowed N10,000,000 and repaid N3,500,000 during the year.
Required:
Calculate the outstanding balance.
128. Orofin Nigeria Limited issued N15,000,000 10% debentures.
Required:
Calculate the annual interest on debentures.
129. The cash price of an equipment is N4,500,000. A deposit of N1,200,000 was paid.
Required:
Calculate the outstanding hire purchase credit.
130. Abel Nigeria Limited obtained a loan of N8,000,000 repayable in four years.
Required:
State how it should be presented in the statement of financial position.
131. Explain the importance of special credit to business organizations.
TOPIC 13: ETHICAL CODE OF CONDUCT.
132. Define Ethical Code of Conduct and explain five (5) fundamental principles of professional ethics.
133. State and explain ten (10) importance of ethical code of conduct in an organization.
134. Identify and explain five (5) threats to ethical compliance.
135. Explain the role of
professional bodies in enforcing ethical code of conduct.
136. Joan Nigeria Limited’s actual profit for the year was ₦3,200,000.
Management deliberately overstated revenue by ₦800,000.
Required:
a. Calculate the reported profit.
b. State two ethical principles violated.
137. An accountant accepted a bribe of ₦250,000. As a result, the Olasunkanmi Nigeria Limited paid a regulatory fine of ₦1,500,000.
Required:
a. Calculate the net ethical loss to the organization.
b. Comment briefly on the implication.
138. The cost of annual ethical training in Akinola Nigeria Limited is
₦400,000. If Akinola Nigeria Limited is penalized ₦2,500,000 for unethical
practices:
Required:
a. Calculate the ethical savings if training had been implemented.
b. State one benefit of ethical compliance.
139. Differentiate
between ethics and code of conduct.
140. State five (5) consequences of unethical behavior.
141. List ten (10) safeguards against ethical threats.
🇳🇬 PATRIOT ODUNARO BABATUNDE JIMOH MAY ALLAH BLESS YOU ABUNDANTLY ALLAHUMO KUNFAYAKUN AMIN!
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