Homework answers / question archive / Your audit client, Didi Restaurant Ltd

Your audit client, Didi Restaurant Ltd

Accounting

Share With

Your audit client, Didi Restaurant Ltd., operates a chain of restaurants in the Accra-Tema metropolis specializing in Ghanaian dishes. You are the audit manager in charge of the 2020 audit. You are informed by Mr. Kofi Kojo, the accounts manager of the client, that the Managing Director made payments of various sums – GHS 2.5 million, GHS 3.5 million, and GHS 4.5 million – on three-monthly occasions respectively into the bank account of the company. These amounts were later transferred to various foreign bank accounts in Nigeria, Columbia and Switzerland respectively, also on three-monthly occasions in different company names.

Mr. Kofi Kojo also informed you that the Managing Director has instructed him not to record the transactions in the accounting records as they had nothing to do with Didi business.

The annual turnover of the company had not exceeded GHS 1 million in the past three years.

Required:

Comment on the situation outlined in the case.                                              (15 marks)

2. Your firm of Chartered Accountants has been in practice for many years and has a number of clients. The following issues have emerged in relation to some of your clients:

1. Boboobo Ltd., a major client, is listed on the Stock Exchange. The audit team for this year’s audit consists of five members, of whom Jeff is the most junior. It has come to your knowledge as an audit manager for the client that Jeff has just invested in a personal pension plan that invests in all listed companies on the Stock Exchange.
2. You are the head of a team carrying out due diligence work on Papaye Ltd., a limited liability company which your client, Good Days Ltd., is considering taking over. Your second in command on the team, Jay, has confided in you that in the course of his work he has met the daughter of the Chief Executive Officer of Papaye Ltd., and he is keen to invite her on a date.
3. Your longest standing audit client is Adeyepena Ltd., which you have been involved for ten years, the last four of which as the engagement partner. During the last Christmas you went on holidays to Northern Ghana with the Managing Director on his private jet plane.
4. During the audit of Carefree Ltd., the audit manager reports to you, as the engagement partner, that the financial statements have not been completed. He suggests to you that the audit team helps to prepare the financial statements quickly so as to complete the audit in good time.

Required:

Comment on the ethical and other professional issues raised by the above matters. Your answer should outline the threat arising, the significance of the threat, any facts you have taken into account, and, if relevant, any safeguards you could apply to eliminate or mitigate the threat.