pathfinder - The Institute of Chartered Accountants of Nigeria

PATHFINDERTABLE OF CONTENTSSUBJECTSPAGESCOSTING AND QUANTITATIVE TECHNIQUES 4 - 29AUDIT AND ASSURANCE 30 - 52TAXATION 53 – 79BUSINESS COMMUNICATION AND RESEARCH METHODOLOGY 80 - 103INTERMEDIATE EXAMINATION - NOVEMBER 20103

PATHFINDER5. To which of the following should an internal auditor be responsible?A. Managing DirectorB. Chief AccountantC. Financial ControllerD. General Manager FinanceE. Top Management6. Policy decision on profitability is NOT made usingA. comparison of total profit to unit profit.B. percentage of profit to sales.C. labour turnover ratio.D. stock turnover ratio.E. contribution related to key factor.7. “Added Value” or “Value Added” can be defined asA. sales value less the cost of purchased materials.B. sales value less the cost of purchased materials and services.C. sales value less the labour and materials costs.D. sales value less fixed and variable costs.E. sales value less material cost only.8. Choose ONE of the following that cannot be apportioned on the basis of floorarea:A. Rates.B. Rent.C. Security.D. Lighting.E. Cleaning.9. Causes of discrepancies between actual stocks and recorded stocks EXCLUDEA. non-receipt of goods in time to store.B. errors of incorrect recording and calculation.C. under or over issues not noted.D. shrinkage, pilferage, evaporation, losses due to breaking bulk.E. loss or non-use of Good Received Notes,(GRN).INTERMEDIATE EXAMINATION - NOVEMBER 20105

PATHFINDER10. First in First out (FIFO) characteristics do NOT include ONE of the following:A. It is an actual cost system.B. It renders cost comparison easy.C. Oldest items are issued out first.D. Unrealized profits do not exist.E. Stock valuation is based on recently acquired materials.11. Which of the following is a cost driver?A. An item of production overheadB. Any cost incurred by the vehicle driverC. A common cost which is shared over cost centresD. Any cost relating to transportE. An activity which generates cost12. The following data relates to stock item SSR: Ordering cost is N40 per order,stockholding cost is 24% per unit per annum and annual demand is 12,000 atN100 per unit. What is the economic order quantity?A. 500 unitsB. 400 unitsC. 200 unitsD. 220 unitsE. 250 units13. What is the area which does not contravene any of the constraints in a typicallinear programming problem called?A. Optimum areaB. Acceptable regionC. Critical regionD. Feasible regionE. Rejection regionINTERMEDIATE EXAMINATION - NOVEMBER 20106

PATHFINDER14. In the Simplex Method, the inequalities in the constraints are re-written asequations by introducingA. extra constraints.B. slack variables.C. minimum error.D. a constant.E. dummies.15. An activity has 9 weeks and 13 weeks time estimates with probabilities of 0.6and 0.4 respectively. What is the expected time for the activity in weeks?A. 22.0B. 23.0C. 10.6D. 11.5E. 11.016. What is the estimated time of an activity with optimistic, pessimistic and mostlikely times of 6 weeks, 24 weeks and 15 weeks respectively?A. 15weeksB. 90 weeksC. 45 weeksD. 7.5 weeksE. 30 weeksINTERMEDIATE EXAMINATION - NOVEMBER 20107

PATHFINDER1 19 912030 0 ES5TLSTX312141417. In the diagram above, what is the value of the earliest starting time X?A. 12B. 14C. 16D. 21E. 28ABCD18. Which of the following is correct in relation to Part of Activity-on-Arrow Networkdiagram shown above?A. A and C must finish before B can startB. A and C must finish before D can startC. A only must finish before D can startD. C only must finish before B can startE. C only must finish before D can startINTERMEDIATE EXAMINATION - NOVEMBER 20108

PATHFINDER19. A critical path is made of activities A, B and C. The optimistic O, pessimistic Pand most likely M estimates (in weeks) are given in the table below.ACTIVITY OPTIMISTIC TIME(weeks)MOST LIKELY TIME(weeks)PESSIMISTIC TIME(weeks)A 5.6 7.5 15.5B 3.5 5.5 8.5C 4.0 7.0 11.0Assume normal distribution, calculate the Standard Deviation (SD) of thefinished event.A. 4.778.B. 3.65.C. 2.1859.D. 1.9105.E. 0.78.20. In an activity-on-arrow network diagram, the last head event has earliest starttime and latest finish time of 28 months each. What is the duration of thecritical path of the network?A. 28 monthsB. 56 weeksC. 14 monthsD. 1monthE . 0 monthPART II SHORT-ANSWER QUESTIONS (20 Marks)1. Budgeted overhead for cost centre divided by budgeted units of absorptionbasis is called ………………2. In contract costing, the value of work done which is not yet recognized in theprofit and loss account is shown in the balance sheet as …………………3. The introduction of an incentive scheme will be worthwhile provided that theincreased output can be sold at a price which is in excess of the ………………..INTERMEDIATE EXAMINATION - NOVEMBER 20109

PATHFINDER4. The formula for allocating non-manufacturing overhead based on the ability ofthe products to bear such costs is given as ……………………..5. The file of all individual accounts supporting the total control account is calledthe ……….6. The only two major types of variances are price and………………7. Machine breakdown or lack of materials or tools gives rise to………………variance.8. A situation where variances outside pre-determined limits are investigated andnecessary action taken can be said to be an extension of the use of……………………9. In the balance sheet method of preparing a cash forecast, where the asset sidetotal is lower than the liability side total reveals a ………………………10. In a Zero Based Budgeting System, the document that forms its foundation iscalled……….11. The expense which should be allowed for the level of activity achieved is called…………12. In a break-even chart, the space between the sales line and the total cost line iscalled ……………13. The probability of throwing a total of 9 with two fair dice is ……………..14. If the probability of an event is 0.6, then the probability of its complement is............15. The relationship between Laspeyre‟s index I L , Paasche‟s index I P and Fisher‟sindex I F is represented by ………………………16. The corrected price of a commodity as a percentage of the price in the baseperiod is referred to as ……………..INTERMEDIATE EXAMINATION - NOVEMBER 201010

PATHFINDER17. In transportation problem, slack variables stand for ……………resources.18. The sum of floats of activities on the critical path is…………………19. An activity that does not consume time or resources is a/an …………………20. A path through the network with same earliest start times and latest start timesis the......SECTION B ATTEMPT ANY FOUR QUESTIONS (60 Marks)QUESTION 1a. In a manufacturing process, state any five essentials of material control that arerequired prior to actual use in production.(5 Marks)b. Storekeeping can make substantial contribution to efficient operation. State anyfive activities involved in storekeeping.(5 Marks)c. “Material Requirement Planning (MRP) is aimed at maintaining smoothproduction flows”. Explain what it entails and the requirements for theoperation of the system.(5 Marks)(Total 15 Marks)QUESTION 2Goke Limited is a construction company that has just won the construction of 2kmdrainage and 1km road projects titled projects 101 and 204 respectively fromDagbolu Local Government with effect from January. Details of data relating toproject 101 which was over 80% completed as at December are as follows:N‟ 000Material delivered directly to site 1,750Materials from the company 670Plants purchased 1,500Plants taken to site (cost N4.5m) 2,700415INTERMEDIATE EXAMINATION - NOVEMBER 201011

PATHFINDERMaterials on site as at end of the yearMaterials transferred to project 204 855Site wages paid 1,070Sub –contract costs 850Fuel and diesel 400Other expenses 340Insurance paid 180Cost of work certified 4,750Value of work certified 5,200Progress payment 4,680The contract sum is N7.5 million and estimated cost to completion is put at N960,000.Depreciation is calculated at 20% per annum on cost, site wages unpaid as at dateamounted to N250,000 while insurance paid was for a period of 2 years due to thediscount offered. 10% of work certified is retained by the Local Government.Required:Prepare the contract account for project 101 and show whether profit can be taken.Show balance sheet entries.(Total 15 Marks)QUESTION 3Ogbuefi Limited produces three products, all of which use the same machine withavailable 55,000 hours per period. The standard costs of the products per unit are:Bak1 Bak II Bak IIIMaximum demand(units) 3,000 5,000 3,500Direct labour N N N-processing(N 7.50/hr) 30 45 45-finishing(N 4.50/hr) 18 9 18Variable overhead 42 36 32Total variable cost 130 140 140Selling price 200 250 225Price of complimentaryProduct 185 215 200Fixed cost for the period is N650,000INTERMEDIATE EXAMINATION - NOVEMBER 201012

PATHFINDERRequired:(a) Calculate the deficiency in machine hours for the next period. (4 Marks)(b) What is the most appropriate production sequence for the products?(5 Marks)(c) Determine which product(s) and quantity (if any) that should first bebought out.(4 Marks)(d) Calculate the net profit of Ogbuefi Limited.(2 Marks)(Total 15 Marks)QUESTION 4There are 160 agents of TOLU INSURANCE PLC selling motor (M), home (H) and life (L)insurance policies to their customers at Ikeja. In the last month of the last quarter, 42of the agents sold only motor policy, 30 agents sold only home policy and 24 agentssold life policy only while 18 agents did not sell any policy. 22 of the agents sold bothmotor and home policies, 16 sold both home and life policies while 20 sold both motorand life policies.Required:(a)(b)Draw the Euler-Venn diagram for the insurance company with the given dataclearly indicated.(4 Marks)Determine the number of agents who sold:(i) at least one of the three policies.(2 Marks)(ii) all the policies(3 Marks)(iii) each of the policies(6 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201013

PATHFINDERQUESTION 5The table below shows the prices and sales of five commodities for 2004 and 2009:2004 2009Commodity Price (N) Quantity ( kg) Price (N) Quantity (kg)Rice A 5000 55 8000 55Beans B 4000 97 7000 97Sugar C 300 22 700 22Salt D 250 25 750 20Garri E 1000 50 1800 60Use 2004 as the base year to calculate the(a) Laspeyre‟s index number (6 Marks)(b) Marshal and Edgeworth‟s index number. (9 Marks)(Total 15 Marks)QUESTION 6The weekly cost of production C(q) (N`000) and unit price p(q) (N`000) of a specialcapsule are respectively expressed as C(q) = 200 + 46q + q 2 ; p(q) = 200 – q (For q < 200) where q is the number of kilogrammes of capsule produced and sold.Required:(a)(b)(c)Obtain expressions for marginal revenue, marginal cost and marginal profit.(5 Marks)Determine the production level and price that will maximise profit using theinformation in (a) above;(5 Marks)Determine the price elasticity of demand at the production level thatmaximises profit. Comment on your result.(5 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201014

PATHFINDERSOLUTIONS TO SECTION APART I MULTIPLE CHOICE QUESTIONS1. B1. A2. B3. A4. E5. C6. B7. C8. A9. B10. E11. C12. D13. B14. C15. A16. E17. A18. C19. AINTERMEDIATE EXAMINATION - NOVEMBER 201015

PATHFINDERWORKINGS12. EOQ =2CO D 212,00040 200CC 10024Where CO = cost of orderingCC = carrying cost , andD = annual demand15. Expected time = (9 × 0.6) + (13 × 0.4) = 5.4 + 5.2 = 10.6 (C)6 24 4(15)16. Estimated time = 15617. EST = max of { 9 + 12 = 21, 14 + 14 = 28 }EST of X = 28(A)(E)19.SD tp t06 215.5 5.6 6 2 8.5 3.5 6 22114 6 2.1859(C)Examiners‟ ReportThe questions test a sizeable proportion of the syllabus.All candidates attempted this part of the paper.Performance was average as about half of the candidates scored 50% and above.Candidates will do better in future if they cover adequately the entire syllabusINTERMEDIATE EXAMINATION - NOVEMBER 201016

PATHFINDERPART II SHORT-ANSWER QUESTIONS1. overhead absorption rate2. work in progress3. costs of production4. estimated non-manufacturing overheadestimated manufacturing costs5. subsidiary ledger6. volume7. idle time8. management by exception9. bank overdraft position10. decision package11. flexible budget allowance12. angle of incidence13. 1/914. 0.415. If Ip Ic16. Price index17. unused18. zero19. dummy activity20. critical pathINTERMEDIATE EXAMINATION - NOVEMBER 201017

PATHFINDERWORKINGS13. Sample space for totals1 2 3 4 5 61 2 3 4 5 6 72 3 4 5 6 7 83 4 5 6 7 8 9*4 5 6 7 8 9* 105 6 7 8 9* 10 116 7 8 9* 10 11 12Pr{9}=4 361914. Let A be the eventP(A c ) = 1 – P(A)= 1 – 0.6= 0.4EXAMINERS‟ REPORTThe questions cover a good proportion of the syllabus.attempted the questions.Almost all the candidatesPerformance was poor. Less than 20% of the candidates scored 50% and above.Candidates were, in most cases, unable to recall simple costing and QT terminologies.Improved performance will be achieved if candidates prepare harder and better forsubsequent examinations.INTERMEDIATE EXAMINATION - NOVEMBER 201018

PATHFINDER(i)(ii)Maximizing the efficiency in timing of orders for raw materials or partsthat are placed with suppliers.Efficient scheduling of the manufacture and assembly of the finalproduct.The operation of a material requirement planning requires the following:(i)(ii)(iii)(iv)A master production schedule showing the quantities and timingrequired for the finished product.A bill of material which shows the breakdown of each finished productinto sub-assemblies, components and raw materials.An inventory file containing the balance on hand, scheduled receipts andnumbers already allocated for each material.A parts manufacturing and purchasing file containing lead times of allpurchased items and lead times and production sequences of all subassembliesand components produced internally.EXAMINERS‟ REPORTThe question tests candidates‟ knowledge of:Essentials of materials and production controlStorekeeping functionsMaterial Requirement PlanningAbout 95% of the candidates attempted this question.Performance was below average as 30% of the candidates who attempted the questionscored 50% and above.Major shortcomings include the following:Candidates lacked understanding of the requirements of the question.Many candidates confused storekeeping functions with valuation of storematerials.MRP (Materials Requirement Planning) was taken in many instances asMaterials Requisition Notes.INTERMEDIATE EXAMINATION - NOVEMBER 201020

PATHFINDERIt is recommended that:Candidates should endeavour to cover all aspects of the syllabus diligently.Speculation as to areas of concentration should be discouraged amongcandidates as much as possible.QUESTION 2GOKE LIMITEDPROJECT 101N‟000 N‟000Material direct to site 1,750 Material c/d 415Material from store 670 Material transferred 855Plant depreciation 300 Insurance c/d 90Plant depreciation 900 W.I. P c/d 600Wages 1,070 Cost of work certified 4,750Wages accrued 250Sub-contact costs 850Fuel & Diesel 400Other expenses 340Insurance 1806,710 6,710Cost of work certified 4,750 Value of work certified 5,200Profit for the year 4505,200 5,200Material b/d 415 Wages 250Insurance b/d 90W.I.P b/d 600Before any profit can be taken for the year it is necessary to estimate the overallproject outcomeN‟000 N‟000Contract value 7,500Cost to date 5,350*Future cost 960 6,310Expected overall profit 1,190INTERMEDIATE EXAMINATION - NOVEMBER 201021

PATHFINDERFrom the above, the profit taken in the account is reasonable.*Cost to date = Total cost – material c/d – insurance c/d – material transferred= 6,710 – 415 -855 – 90 = 5,350Balance sheet extractN‟000StockMaterial on site 415W.I.P 600DebtorsAmount recoverable on contract 520PrepaymentInsurance 90LiabilitiesWages accrued 250EXAMINERS‟ REPORTThe question tests candidates‟ knowledge of Contract Costing and Accounts.About 80% of the candidates attempted the question.Performance was very poor as less than 10% of the candidates who attempted thisquestion scored 50% and above.Major pitfalls were as follows: Inability to display understanding of posting in Contract Accounts. Many candidates could not comment on the reasonableness of the notionalprofit taken. A good number of the candidates were unable to display the Balance SheetExtracts.It is recommended that candidates should improve on the quality of their preparationand tuition for future examinations.INTERMEDIATE EXAMINATION - NOVEMBER 201022

PATHFINDERQUESTION 3OGBUEFI LIMITED(a)Computation of Deficiency in Machine HoursBak I Bak II Bak III TotalHours Hours Hours HoursProcessing hrs/unit 4 6 6Finishing hrs/unit 4 2 4Total hrs/unit 8 8 10Maximum Demand (units) 3,000 5,000 3,500Maximum hrs required 24,000 40,000 35,000 99,000Available Hours (55,000)Deficiency in Machine Hours 44,000(b)Determination of most appropriate production sequenceBak I Bak II Bak IIIN N NSelling price/unit 200 250 225Total variable cost/unit 130 140 140Contribution per unit 70 110 85Required Machine hour/unit 8 8 10Contribution per machineHour N8.75 N13.75 N8.50Ranking: 2 nd 1 st 3 rdSequence:BAK II – 1 st to be considered for production.BAK I – 2 nd to be considered for production.BAK III – 3 rd to be considered for production.(c)Determination of units of products that should first be bought out.Machine hours Available: 55,000Maximum UnitsMachineHoursMachineHoursProductionbased onRequired Available HoursAvailableINTERMEDIATE EXAMINATION - NOVEMBER 201023

PATHFINDER40,000 15,000 5,000BAK II – 5,000BAK I – 3,000 15,000 - 1,875BAK III – 3,5000 - - -BAK III will not be produced.BAK I will be bought out first because only 1,875 units were produced out of 3,000units demanded.(d) Computation of Net Profit:Maximum UnitsMachineHoursMachineHoursProductionbased onRequired Available HoursAvailableBAK II – 5,000 40,000 15,000 5,000BAK I – 3,000 15,000 - 1,875BAK III – 3,5000 - - -EXAMINERS‟ REPORTThe question tests candidates‟ ability to make informed business managementdecision using Marginal Costing Approach.Question appears very unpopular among candidates. About 15% of the candidatesattempted the question.Performance was very poor as only about 20% of the candidates who attempted thequestion scored 30% and above.Major shortcomings noticed were as follows: Candidates exhibited insufficient familiarity with decision making scenarios. Inability to recognize relevant costs in decision making situations.It is recommended that: Candidates should read and digest costing topics on decision making.Candidates should increase the length of time spent on preparation, improve onquality of texts and tuition.INTERMEDIATE EXAMINATION - NOVEMBER 201024

PATHFINDERQUESTION 4(a)Euler-Venn diagramM42H22-x3020-xx16-x2418L(b) (i) The total number of agents = 160No. of agents who did not sell any policy =18No. of agents who sold at least only the three policies = yi.e. y = 160 – 18 = 142 agents(ii) Let x = no of agents who sold all the policiesThen,42 + (22 – x) + 30 + (16 – x ) + 24 + (20 – x) + x = 142i.e. 154 – 2x = 1422x = 154 – 1422x = 12x = 6 agents(iii) No. of agents who sold motor policy = 42 + (22 – x) + x + (20 – x)= 84 – x = 84 – 6 = 78i.e. 78 agentsNo. of agents who sold home policy = (22 – x) + 30 + x + (16 – x)= 68 – x = 68 – 6 = 62i.e. 62 agentsINTERMEDIATE EXAMINATION - NOVEMBER 201025

PATHFINDERNo. of agents who sold life policy = (20 – x) + x + (16 – x) + 24= 60 – x = 60 – 6 = 54i.e. 54 agentsEXAMINERS‟ REPORTThe question tests Set Theory with application to business environment.Topic appeared very popular among candidates as about 95% of the candidatesattempted the question.Performance was well above average. About 50% of the candidates who attempted thequestion scored 50% and above.Major pitfalls came in the following areas: Inability to appreciate and interprete the requirements of the question. Many candidates could not draw the Venn Diagram.QUESTION 5(a)Laspeyre‟s index number,I L PQ100 P Q01001P 1 Q 0 P 0 Q 0440,000 275,000679,000 388,00015,400 6,60018,750 6,25090,000 50,0001,243,150 725,850IL1,243,150100 171.27%725,850(b)Marshal and Edgeworth‟s index numberI m p ( Q1 P ( Q000 Q1) 100 Q ) 11INTERMEDIATE EXAMINATION - NOVEMBER 201026

PATHFINDERP 0 Q 0 P 1 Q 1 Q 0 + Q 1 P 1 (Q 0 + Q 1 ) P 0 (Q 0 + Q 1 )5,000 55 8,000 55 110 880,000 550,0004,000 97 7,000 97 194 1,358,000 776,000300 22 700 22 44 30,800 13,200250 25 750 20 45 33,750 11,2501,000 50 1,800 60 110 198,000 110,0002,500,550 1,460,450EXAMINERS‟ REPORTIm2,500,550100 171.22%1,460,450The question tests candidates understanding and application of Index Numbers.Topic appears very familiar with candidates as about 95% of them attempted thisquestion.Performance was well above average. About 50% of the candidates who attempted thequestion scored 50% and above.Inadequacy came from the following: Many candidates could not describe the right formulae required for solving theproblem. Inability to identify the base year required for the calculation.It is recommended that: Candidates should improve on their preparation. Strive to master relevant formulae.INTERMEDIATE EXAMINATION - NOVEMBER 201027

PATHFINDERQUESTION 6(a)C( q) 200 46q qP(q) 200 q22Revenue q P(q) 200q q R(q)dR d2Marginal Revenue, MR = (200q q )dq dq 200 2qMarginal cost, MC = dC = 46 + 2qdqMarginal profit = d (R –C)ddqddq(200q q(200q q22dq= 200 - 2q – 46 – 2q= 154 – 4q) (200 46q q 200 46q q2)2)(b) (i)For maximum profit, MC=MRi.e 46 2q 200 2q 4q154154 q 438.5Unit production price = 200 – q = 200 - 38.5 =161.5Actual price of a unit = N161,500(c)The price elasticity of demand,dpP = 200 – q ; 1dq 200 q 200 q e d 1 q q p 1e d q dp dq At maximum profit, q = 38.5INTERMEDIATE EXAMINATION - NOVEMBER 201028

PATHFINDEREXAMINERS‟ REPORT200 38.5 e d 4.194838.5e d1 that the demand is elastic.The question tests candidates understanding and application of Revenue and Costfunctions.About 60% of the candidates attempted the question.Performance was fair. About 40% of the candidates who attempted the question scored40% and above.A major pitfall was inability of the candidates to understand the requirements of thequestion.It is recommended that: Candidates should improve on the quality of tuition and texts for futureexamination. Increase the amount of time spent on preparing for future examination.INTERMEDIATE EXAMINATION - NOVEMBER 201029

PATHFINDERICAN/102/P/3EXAMINATION NO………………………...THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIAINTERMEDIATE EXAMINATION – NOVEMBER 2010AUDIT AND ASSURANCETime Allowed – 3 hoursSECTION A Attempt All QuestionsPART IMULTIPLE CHOICE QUESTIONS (20 Marks)1. ONE of the major attributes of good audit evidence isA. narrative.B. easy to obtain.C. competence.D. physical existence.E. reliability.2. The following are risks associated with automating the business environmentEXCEPTA. Privacy violation.B. Computer virus.C. Authorised access to information and data.D. Hardware failure.E. Data loss.3. Which of the following is NOT a means of third party confirmation?A. Bank confirmation letterB. Valuation reports from expertsC. Debtors‟ circularizationD. Management representation letterE. Solicitors‟ letterINTERMEDIATE EXAMINATION - NOVEMBER 201030

PATHFINDER4. ONE of the following may NOT be a criterion for assessing the internal auditfunction:A. Qualities of the directors.B. Technical competence of staff.C. Availability of resources.D. Due professional care.E. Supervision.5. Insurance Act 2003 states that no insurer shall practice insurance business inNigeria unless the insurer has and maintains while carrying on that business apaid up share capital of the following amount EXCEPTA. Life insurance business not less than N150,000,000.00.B. Non-Life insurance business not less than N150,000,000.00.C. General insurance business not less than N200,000,000.00.D. Composite insurance business not less than N350,000,000.00.E. Re-insurance business not less than N350,000,000.00.6. According to Banks and Other Financial Institutions Act CAP B3 LFN 2004, thequalification of the approved auditor of a bank includes the following EXCEPTA. Membership of one of the professional bodies recognized in Nigeria.B. Approval by the Central Bank of Nigeria.C. Approval by the Chartered Institute of Bankers.D. Must be resident in Nigeria.E. Carrying on Professional practice in Nigeria as an accountant andauditor.7. The functions of the Audit Committee are as follows EXCEPTA. Reducing illegal activities and preventing fraudulent financial reporting.B. Strengthening the role of non-executive directors with a view toprotecting them from being misled by management.C. Increasing the credibility of audited financial statements.D. Helping the Board of Directors in meeting their responsibilities andreinforce the auditor‟s responsibility.E. Confirming the appointment of the external auditor.INTERMEDIATE EXAMINATION - NOVEMBER 201031

PATHFINDER8. Statements which state how the basic procedures contained in standards are to beapplied are described asA. auditing procedures.B. Guidelines.C. statutory procedures.D. accounting standards.E. professional pronouncements.9. Which of the following is in the broad category of information in the AuditPlanning Memorandum?A. Audit engagement letter.B. Audit working papers.C. Background of the client.D. List of overseas suppliers.E. Directors service contracts.10. The letter prepared by the auditor for the client company at the auditors‟instance setting out description and definition of certain contingentresponsibilities isA. representation letter.B. solicitors‟ letter.C. confirmation letter.D. management letter.E. circularization letter.11. The concern of auditors regarding compliance with corporate governance codesinvolvesA. occurrence.B. completeness.C. confirmation of claims in annual report.D. cut-off procedure.E. classification testing.INTERMEDIATE EXAMINATION - NOVEMBER 201032

PATHFINDER12. The auditor, in carrying out his assignment, ensures that the following are inorder EXCEPTA. consistency of the application of accounting policies.B. compliance with legal requirements.C. reliability of the opening balances.D. preparation of the chairman‟s statements.E. appropriateness of the comparative figures included in the account.13. Auditing standards differ from auditing procedures in that procedures relate toA. measurement of performance.B. audit principles and practices.C. acts to be performed.D. audit programmes.E. audit judgments.14. The primary objective of the examination of financial statements by anapproved auditor of a bank is the expression of independent opinion onA. the competence of management in accounting matters which is impliedby whether the opinion is qualified or not.B. the conformity of the financial statements with the books of account .C. the conformity of the financial statements with auditing standards.D. the fairness with which the financial statements present the operationalresults.E. the conformity of the financial statements with accounting standards andbanking operational standards.15. The primary responsibility for the adequacy of disclosure in the financialstatements of a limited liability company rests with theA. partner assigned to the audit engagement.B. audit manager in charge of the field work.C. management of the company.D. Securities and Exchange Commission.E. Corporate Affairs Commission.INTERMEDIATE EXAMINATION - NOVEMBER 201033

PATHFINDER16. Due professional care requiresA. a critical review of work done at every level of supervision.B. the examination of all corroborating evidence available.C. the exercise of error free judgment.D. a study and review of the internal controls.E. exercising professional care as judged by peer reviewers.17. Which of the following best describes the reason why an independent auditorreports on financial statements?A. A management fraud may exist and is more likely to bedetected by independent auditorsB. Different interests may exist between the company preparing thestatements and the persons using the statementsC. A misstatement of account balances may exist and is generally correctedas the result of the independent auditor‟s workD. Poorly designed internal control may existE. Comply with the generally accepted standards of field work18. The independent audit is important to users of financial statements because itA. determines the future stewardship of the management of the companywhose financial statements are audited.B. measures financial and business data in the financial statements.C. communicates financial and business data in the financial statements.D. involves the objective examination of, and reporting on financialstatements prepared by management.E. reports on the accuracy of all information in the financial statements.INTERMEDIATE EXAMINATION - NOVEMBER 201034

PATHFINDER19. Statutory Auditing can best be described asA. a branch of accounting.B. statutory function that attests to the results of financial informationprovided by management in their stewardship function.C. a professional activity that measures and communicates financial andbusiness data.D. a regulatory function that prevents the issuance of improper financialinformation.E. a discipline that reviews the economic activities in the economy.20. What is the responsibility of the incoming Auditor with respect tocommunicating with the retiring Auditor in connection with the client?A. The incoming Auditor has no responsibility to contact the retiring auditorB. The incoming Auditor should obtain written clearance from the retiringauditorC. The incoming Auditor should contact the retiring Auditor withoutobtaining permission from the prospective clientD. The incoming Auditor need not contact the retiring Auditor if he is awareof all available relevant informationE. The incoming Auditor has no obligation to inform the retiring Auditor inso far as he is competent to do the assignmentINTERMEDIATE EXAMINATION - NOVEMBER 201035

PATHFINDERPART II SHORT-ANSWER QUESTIONS (20 MARKS)1. A person that has the ability to control or exercise significant influence over the otherparty is described as……………………2. Audit risk is assessed during the …………………3. Pension Reform Act 2004, provides that pension funds and assets shall only be heldby……………….4. If an auditor or client cannot trace transactions from its inception to the finaldestination in the accounting records, then the process lacks ………………………5. Forensic accounting involves investigative accounting and ………………….6. Revenue or expense items that are unusual in nature and of infrequent occurrenceare called ………………7. The risk that the auditor expects to be present in spite of controls is known as ………..8. State a type of statutory document that is usually found in the permanent auditfile.9. The process of dividing a population into sub-populations each of which is a group ofsampling units which have similar characteristics is known as ………….10. Establishing authority limits for making payments is a type of …………….…11. Risk assessment has two main components: risk identification and ……………….12. A collection of data that is accessible and used by a number of different users fordifferent purposes is known as ……………13. In a computer environment, manual authorisation of input documentation is a form of……………14. Periodically the directors render accounts of their stewardship to shareholders. Theseaccounts of stewardship are referred to as ………………………………………INTERMEDIATE EXAMINATION - NOVEMBER 201036

PATHFINDER15. Section 29 of Banks and Other Financial Institutions Act CAP B3 LFN 2004 provides thatevery bank shall appoint annually a person referred to as “approved auditor” andsuch auditor shall be approved by …………………16. Where Accounting Standards or guidelines issued in Nigeria conflict with internationalstandards or guidelines, the Nigerian Standards or guideline will……………………………………..17. Loss of a major market is an indicator of problem of threat to……………………..18. State the fundamental means of communication between the auditors and themanagement.19. The audit approach that can be applied in a small charitable organisation is………………………….20. In addition to the characteristics of reliability and credibility of information providedby the traditional auditing function, Assurance services also report on the………………………. and timeliness of the information.SECTION B – ATTEMPT ANY FOUR QUESTIONS (60 MARKS)QUESTION 1a. What is a “Computer Audit Program”? (3 Marks)b. Describe three applications of such a program in connection (6 Marks)with verification of assets.c. Mention six uses to which a computer audit programme can be appliedin the audit of a company.(6 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201037

PATHFINDERQUESTION 2“The technique of internal control assessment takes on full significance in the contextof audit of large companies. In the case of smaller companies, the audit objectives areunchanged, but the absence of normal internal control criteria will often necessitate adifferent approach to the audit work.”Required:-(a) Comment briefly on the above statement (3 Marks)(b) State SIX principal arguments in favour of abolishing audit requirementsfor small companies.(12 Marks)(Total 15 Marks)QUESTION 3Under the current global economic meltdown, an auditor is expected to take positivesteps to confirm that the client‟s company is still a going concern.Required:a. List TEN financial symptoms of going concern problems of an enterprise.(5 Marks)b. Outline the management‟s mitigation plans to ameliorate the financial threatsof going concern status of an enterprise.(5 Marks)c. List TEN other (non-financial) symptoms that may raise problems about thegoing concern status of an enterprise.(5 Marks)(Total 15 Marks)QUESTION 4Write short notes on the following:a. Database management system (DBMS) (3 Marks)b. Operating system (3 Marks)c. Utilities and service programs (3 Marks)d. Translators (3 Marks)e. Control programs (3 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201038

PATHFINDERQUESTION 5Auditing of computer information system should be piloted by trained informationsystems auditors to prevent avoidable losses and calamities.You are required to explain briefly:a) The reasons for carrying out information systems audit. (5 Marks)b) The auditor‟s role in Information Technology controlsimplementation(5 Marks)c) The Information Technology Application Controls. (5 Marks)(Total 15 Marks)QUESTION 6A system of accounting will not succeed completely and accurately in processing alltransactions unless internal controls are built into the system.You are required to state:a) FIVE purposes of such internal controls. (5 Marks)b) FIVE inherent limitations that may inhibit the achievement of the internalcontrol objectives.(5 Marks)c) FIVE functions of the Board of Directors regarding the best practices expected inCorporate Governance.(5 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201039

PATHFINDERSOLUTIONS TO SECTON APART I MULTIPLE – CHOICE QUESTIONS1. E2. A3. D4. A5. B6. C7. E8. B9. C10. A11. C12 D13 C14 D15 C16 A17 B18 D19 B20 BTutorial16. A is the correct option because all other options are subset of A.EXAMINERS‟ REPORTThe requirements of the questions are various and they cover many areas of thesyllabus. All candidates attempted questions and recorded about 65% pass which isan indication that they understood the requirements of the questions.Candidates should put in more efforts with a view to improving their performance infuture.INTERMEDIATE EXAMINATION - NOVEMBER 201040

PATHFINDERPART II SHORT ANSWER QUESTIONS1. Related party2. Planning Phase of the Audit3. Pension Fund Custodians4. Audit Trail5. Litigation Support6. Extraordinary items7. Inherent Risk8. Memorandum and Articles of Association/Partnership agreement/trust deed/association‟s constitution9. Stratification10. Accounting and organisational controls11. Risk evaluation12. Database13. Input Control14. Financial statements15. Central Bank of Nigeria16. Prevail17. Going concern18. Management letter, Letter of weakness, Internal Control Memorandum,Domestic Report, Letter of Recommendation, Constructive Service Letter19. Vouching approach, Substantive approach20. RelevanceINTERMEDIATE EXAMINATION - NOVEMBER 201041

PATHFINDERTutorials16. The adoption of International Financial Reporting Standard (IFRS) will prevailover the local standard.EXAMINERS‟ REPORTThe requirements of the questions are various, covering many areas of the syllabus.All candidates attempted the questions. The general performance level was about 55%pass. There is, however, room for better performance.SOLUTIONS TO SECTION BQUESTION 1a. A computer audit program is a software package which is also referred to asenquiry and interrogation program. It is used for reading and interrogatingcomputer based files. This program enables a wide variety of information to beextracted from computer files in a format significant for the purpose of the user. Itis necessary for details of the hardware, e.g. capacity of computer memory to betaken into account as well as details of the layout of data fields used in themaster files prior to the utilization of the computer audit program.b. In connection with the verification of assets, the computer audit program may beused as follows:(i)(ii)(iii)Debtors: Information can be extracted from debtors‟ files so as to providestratification according to size of amount, age, and balances whichexceed credit limits (“exception reporting”)Stock: The computer audit program will provide an analysis of stockaccording to age, materiality of individual items, items classified asdefective or obsolete and also stockholding and ordering statusFixed Assets Register: Information can be extracted from this register togive details of fixed assets movements during the current accountingperiod, i.e. acquisitions and disposals. It will also highlight changes, ifINTERMEDIATE EXAMINATION - NOVEMBER 201042

PATHFINDERany, in depreciation rates on individual plant and equipment and assets onwhich no depreciation has been charged at all. It also includes basic data onindividual fixed assets.c. Uses of Computer Audit Programs in the audit of a company include:i. Selection of representative or randomly chosen transactions or items foraudit tests e.g. items number 30 and every 10 th item thereafter.ii.iii.iv.Scrutiny of files and selection of exceptional items for examination e.g.all wages payments over N1,000 or all stock lines worth more thanN100,000 in total.Comparison of two files and printing out differences e.g. payrolls at twoselected dates and periods.Preparation of exceptional reports e.g. overdue debts.v. Stratification of data with a view to examining only material items e. g.stock lines or debtors.vi.vii.Verifying data such as stock or fixed assets at the interim stage andcomparing the examined file with the year end file so that only changeditems need be examined at the final audit.Comparison of files at succeeding year ends to identify changes in thecomposition of stock.EXAMINERS‟ REPORTThe question is in three parts and its requirements are direct and straight to the point.The candidates‟ attempt at the question was about 75%. Out of this percentage only20% scored pass mark.The major shortcoming is poor understanding of the requirements of the questionespecially in parts (a) and (b). Candidates are advised to improve their studies oncomputer and other IT applications.INTERMEDIATE EXAMINATION - NOVEMBER 201043

PATHFINDERQUESTION 2(a)The application of auditing standards to the audit of small companies managedand owned substantially by the same people is a subject which the AuditingPractices Committee is aware of.A fundamental question in this context is whether the value derived from theaudit of such company is commensurate with the cost of carrying it out.From the point of view of the proprietor there is clearly an advantage in havingaccounts properly prepared but the additional advantage of having themaudited is marginal, unless there is a dire need to do so. The same applies tothe other shareholders who are usually small in number and closely connectedwith the proprietor.The creditors derive same benefits, but, since accounts are often filed manymonths after a company‟s year end, those providing credit more often resort totrade sources for more up-to-date information on the company‟s creditworthiness.(b)(i)(ii)(iii)(iv)Some of the arguments in favour of abolishing audit requirements for smallcompanies are:Proprietors of such companies tend to require financial services (accountingservices, tax advice) from professional accountants, and regard the audit aspectof the work as part of the price of incorporation, but of no added value.Since the shareholders and directors are the same people, there is somethingludicrous about the spectacle of “directors” supplying information to theauditors so that the latter is then in a position to report back to them (themembers).There is no legal requirement for outside interests to be served by the auditorand in any case, such outsiders make no contribution to the audit fee.Many outside interests such as banks are well protected by personal guaranteesfrom directors and charges against company assets. They are, therefore, notdependent on the audit for protection.INTERMEDIATE EXAMINATION - NOVEMBER 201044

PATHFINDER(v)(vi)Creditors are able to make little use of the audit since the accounts and auditreport are filed many months after credit is given and such accounts, even iffully understood, would provide little indication of the risks involved.The cost of satisfying legal and regulatory requirements associated with theaudit and past audit process may be disproportional to any related valuederivable.EXAMINERS‟ REPORTThe question is in two parts. Part (a) tests candidates‟ knowledge on the approach toaudit work for smaller companies as against that for large companies and the internalcontrol assessment technique to be used. Part (b) requires the candidates to state thearguments in favour of abolishing audit requirements for smaller companies. Over80% of the candidates attempted the question. The candidates misunderstood therequirements of the question especially part (b) and this contributed to their poorperformance.Candidates are advised to read and interpret questions very well before attemptingthem.INTERMEDIATE EXAMINATION - NOVEMBER 201045

PATHFINDERQUESTION 3a. Financial symptoms of going concern problems includei. Adverse or negative current ratio or trend;ii. Dependence on short finance for long term needs;iii. High gearing ratio;iv. Dividends, tax and other statutory deductions in arrears;v. Excess of stocks and debtors;vi. Exceeding overdraft limitsvii. Recurring operating losses;viii. Default on loan interest or principal repayment;ix. Potential loss on long term contract;x. Under capitalization particularly where there is deficiency of sharecapital and reserves.xi. Major rescheduling of debtsxii. Substantial sales of fixed assets not expected to be replacedxiii. Denial of normal terms of trade credit by suppliersb. The above symptoms can be mitigated by addressing alternative means ofgenerating adequate cashflow.i. Disposal of assets without adversely affecting operationsii. Postponing the replacement of assets without adversely affectingoperations;iii. Lease assets rather than outright purchaseiv. Rolling over existing loan facilitiesv. Rescheduling debtsvi. Additional capital by way of rights issuec. Other symptoms that raise problems about going concern of an enterpriseinclude:i. Loss of key management staff;ii. Prolonged industrial action;iii. Loss of key franchise or patent;iv. Loss of principal supplier or customer;v. Substantial dependence on one or certain project or product;vi. Continuous use of obsolete machines;INTERMEDIATE EXAMINATION - NOVEMBER 201046

PATHFINDERvii. Natural disaster;viii. Government legislations;ix. Legal Disputes;x. Ban on importation of relevant raw materials or major products.EXAMINERS‟ REPORTThe question is in three parts, part (a) tests financial symptoms of going concernproblems, part (b) is on managements‟ mitigation plans and part (c) other symptomsof going concern problems.The question was attempted by about 90% of the candidates and about 40% of themscored pass mark. The commonest pitfall was the inability of the candidates todifferentiate between financial symptoms and other (non-financial) symptoms.Candidates are advised to understand the requirements of the questions beforeattempting it.QUESTION 4(a)Database Management System (DBMS)A database is an organized collection of structured data, stored with minimumduplication of data items so as to provide a consistent and controlled pool ofdata which is common to users of the system.DBMS is a software system which constructs expands and maintains the data.DBMS provides the following:The interface between the user and the data in the baseSecurity for the data in the baseProtects data against unauthorized accessSafeguards data against corruptionProvides recovery and restart facilities after a hardware or software failureINTERMEDIATE EXAMINATION - NOVEMBER 201047

PATHFINDER(b)Operating SystemThis is a suite of programs which takes over the operations of the computerwithout human intervention by an operator. The following are the functions ofthe operating system:Scheduling and loading of jobs to provide for continuous processingControl over selection and operation of input/output devices and filehandlingProvision of complete record of all that happens during processing in form ofa log(c)Utilities and Service ProgramsThese are system programs that provide useful service to the computer users byproviding facilities for performing common task of routine nature. Theseprograms include Sort Editor, File Copying, Dumping, File Maintenance etc.(d)TranslatorsThis is a program that converts written statements in one language intostatements in another language. There are three types of these programs,namely: Assemblers, Compliers and Interpreters.(e)Control ProgramThis is a program used by computer to monitor and control operations withoutthe need for continual intervention by the users.EXAMINERS‟ REPORTThe question is in five parts and test candidates‟ knowledge in the area of computerbasedaccounting systems.About 60% of the candidates attempted the question and the percentage that passedwas above 20%.INTERMEDIATE EXAMINATION - NOVEMBER 201048

PATHFINDERCandidates shied away from the question. Their lack of knowledge of this part is“unpardonable”. Candidates are advised to consolidate their knowledge in this areaof the syllabus.QUESTION 5(a)Reasons for carrying out computer information system auditThe observable trend is that there are innumerable risks associated withcomputerised business environment.The auditor would ensure that adequate controls are instituted to mitigate theinnumerable risks associated with the computerised environment as analysedbelow:i. Prevention of data loss or other kinds of disasters with a view tomaintaining the integrity of data.ii.iii.iv.Malicious destruction of electronic informationEnsuring that valuable information is not stolen.Mitigating the risk of hacking by malicious agents.v. Preventing espionage activitiesvi.vii.viii.Ensuring that computer viruses and worms are curtailed.Preventing unauthorized access to information and data.Preventing computer fraud, abuse and privacy violations.(b)Auditors‟ role in Information Technology controls implementation includes thefollowing:(i)(ii)(iii)Serving as specialists in the Information Technology Strategy Committee,to offer advice on matters concerning Information Technology controls.Auditors should be members of Information Technology steeringcommittee as key advisors.Auditors should ascertain the management framework for InformationTechnology governance, e.g. Control Objective for InformationTechnology (COBIT), Committee of Sponsoring Organisation (COSO).INTERMEDIATE EXAMINATION - NOVEMBER 201049

PATHFINDER(iv) Auditors should get involved in the business plan development. Thestrategic alignment need to make this imperative.(v)Auditors should evaluate Information Technology business processes,ensuring that the process fits with the organization‟s culture andstructure, and the management of risk effectively.(c) Information Technology Application Controls are controls performedautomatically by the system. They include:i. Completeness checks – controls that ensure all records are processedfrom initiation to completionii.iii.iv.Validity checks – controls that ensure only valid data are input orprocessedIdentification – controls that ensure all users are uniquely and irrefutablyidentifiedAuthentication - controls that provide an authentication mechanism inthe application systemv. Authorisation – controls that ensure only approved business users haveaccess to the application systemvi.vii.viii.Problem management – controls that ensure all application systems arerecorded and managed in a timely mannerChange management – controls that ensure all changes on productionenvironment are implemented with preserved data integrity.Input controls – controls that ensure integrity of data fed from upstreamsources into the application system.INTERMEDIATE EXAMINATION - NOVEMBER 201050

PATHFINDEREXAMINERS‟ REPORTThe requirements of this question which is in three parts (a) to (c) relate to knowledgeof Information Technology in auditing. About 80% attempted the question but about30% of them demonstrated understanding of the requirements of the question. Parts(a) and (b) were poorly answered whereas they earn more marks in part (c) which wascorrectly interpreted. The candidates‟ main undoing was lack of proper understandingof the question. This area of the syllabus is treated in the ICAN Audit and Assurancestudy pack. Candidates should endeavour to cover all the areas of the syllabus.QUESTION 6(a)The purposes of internal controls in a business environment includes ensuringthat:(i)(ii)(iii)(iv)(v)(vi)(vii)transactions are executed in accordance with proper, general or specificauthorization.all transactions are promptly recorded at the correct amounts, in theappropriate accounts and in the proper accounting periods, so as topermit preparation of financial statements in accordance with relevantlegislations and applicable accounting standards.access to assets are in accordance with proper authorization.recorded physical assets are compared with the existing physical assetsat reasonable intervals and appropriate action taken to reconcile anydifferences.policies decided on and adopted by management are consistentlyfollowed by those responsible for implementing them.expensive assets are properly secured and safeguarded to prevent misuseand misappropriation.errors and irregularities are avoided.(b)The following limitations may inhibit the achievement of the internal controlobjectives:(i)(ii)The cost of an internal control is not disproportionate to the potential losswhich may result from its absenceMost systematic internal controls tend to be directed at routinetransactions rather than non-routine transactionsINTERMEDIATE EXAMINATION - NOVEMBER 201051

PATHFINDER(iii)(iv)(v)(vi)(vii)The potential for human error due to carelessness, distraction, mistakesof judgment and misunderstanding of instructionsThe possibility of circumvention of internal controls through collusionwith parties outside or inside the entityThe possibility that a person responsible for exercising authority oninternal control could abuse that responsibility, for example byoverriding internal controlThe possibility that procedures may become inadequate due to changesin conditions or that compliance with procedures may deteriorate overtime.Pressure expected from within and outside the organization caninfluence the integrity and competence of staff.(c)Concerning Corporate Governance, the functions of the Board include:(i) Strategic planning(ii) Selection, performance appraisal and compensation of seniorexecutives.(iii) Succession planning(iv) Communication with shareholders(v) Ensuring the integrity of financial controls and reports(vi) Ensuring that ethical standards are maintained and that the company ororganization complies with the laws of the land.EXAMINERS‟ REPORTThe question is in three parts (a) to (c).Part (a) and (b) test candidates on internal controls while part (c) tests on CorporateGovernance.About 80% of the candidates attempted the question and about 50% of them scoredpass mark.The commonest pitfall in answering the question is substituting “internal auditor‟sfunctions” for “purposes of internal control”. Candidates are advised to prepareadequately for the examination.INTERMEDIATE EXAMINATION - NOVEMBER 201052

PATHFINDERICAN/102/P/2EXAMINATION NO...................................THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIAINTERMEDIATE EXAMINATION – NOVEMBER 2010TAXATIONTime allowed – 3 hoursSECTION A: Attempt All QuestionsPART I: MULTIPLE-CHOICE QUESTIONS(20 Marks)1. What are the relevant years during which the right to elect by the tax payer isexercised under commencement rules?A. 1 st and 2 nd years of assessmentB. 1 st and 3 rd years of assessmentC. 1 st and 4 th years of assessmentD. 2 nd and 3 rd years of assessmentE. 3 rd and 4 th years of assessment.2. What are the two types of loss reliefs?A. Adjusted loss relief and company loss reliefB. Current year loss relief and permanent loss reliefC. Terminal loss relief and ultimate loss reliefD. Current year loss relief and last year loss reliefE. Current year loss relief and carry forward loss relief.3. In which year of assessment can initial allowance be claimed?A. 1 st year of assessmentB. 2 nd year of assessmentC. 3 rd year of assessmentD. 4 th year of assessmentE. All the years of assessment.INTERMEDIATE EXAMINATION - NOVEMBER 201053

PATHFINDER4. Which is the relevant tax authority for unincorporated entities, individuals andbody of individuals?A. Local Government Joint Revenue CommitteeB. State Internal Revenue ServiceC. Federal Inland Revenue ServiceD. Federal Ministry of FinanceE. Joint State Revenue Committee.5. What is the time limit for filing self assessment returns by corporateorganizations?A. Six months before the accounting year -endB. One year after the accounting year- endC. One year before the accounting year- endD. Six months after the accounting year -endE. 3 months after the accounting year- end.6. What is the time limit allowed for payment of undisputed tax liabilities from thedate of notice of assessment?A. 60 daysB. 120 daysC. 180 daysD. 360 daysE. 90 days.7. Which of the following does restriction on carry forward of losses apply?A. Agricultural companiesB. Insurance companiesC. IndividualsD. Manufacturing companiesE. Trading organizations.INTERMEDIATE EXAMINATION - NOVEMBER 201054

PATHFINDER8. What is the term used when the tax payer seeks to minimize his tax liabilitieswithin the tax law?A. Tax allowanceB. Tax shiftingC. Tax avoidanceD. Tax incidenceE. Tax evasion.9. In absolute referencing, $G10 meansA. that the row is absolute and the column is relative.B. absolute reference to cell G10.C. that the column is absolute while the row is relative.D. that cell G10 could not be regarded as absolute.E. that cell G10 could be varied.10. Using an excel spreadsheet, what is the formula for calculating the monthly taxpayable by an employee, given the following information?A B C1 Taxable Income Annual Liability Monthly Deduction2 232,564 40,141.00 3,345A. A/BB. =A+B-CC. B/12D. B2/12E. =B2/12.INTERMEDIATE EXAMINATION - NOVEMBER 201055

PATHFINDER11. If the calculated tax is lower than the statutory minimum tax, the difference isA. subtracted from the Statutory minimum tax.B. payable in addition to the calculated tax.C. carried back to the first preceding taxable year.D. carried back to the third preceding taxable year.E. carried back to the 2 nd preceding taxable year.12. “Child” in respect to settlements, trusts, and estates includes all the followingEXCEPTA. step child.B. adopted child.C. illegitimate child.D. own child.E. brother.13. A person appointed by a Will or Codicil of a deceased person to administer hisestate after his death is called ……….A a trustee.B a beneficiary.C an investor.D an administrator.E an executor.14. What is the time limit within which a tax payer must appeal after theadjudication by a Commissioner for Stamp duties?A. 7 daysB. 14 daysC. 21 daysD. 28 daysE. 30 daysINTERMEDIATE EXAMINATION - NOVEMBER 201056

PATHFINDER15. Which of the following constitutes challenges to computer applications inTaxation?A. Low level IT literacy among revenue officials.B. Cost of computer acquisition.C. Resistance to change.D. Computer fraud.E. Speed and improved efficiency on the part of tax administrators.16. Which of the following is the relevant tax authority responsible for withholdingtax relating to enterprises?A. Federal Board of Inland RevenueB. State Board of Internal RevenueC. Federal Inland Revenue ServiceD. Federal Inland Revenue Service BoardE. Joint Tax Board.17. Which of the following does not suffer withholding tax?A. DividendB. RentC. SalaryD. FeesE. Contracts.18. Duties charged on legal documents are calledA. excise duties.B. instrument duties.C. stamp duties.D. input duties.E. sharp duties.19. Income derived from employment, business, profession or vocation is calledA. gross income.B. earned income.C. net income.D. unearned income.E. estimated income.INTERMEDIATE EXAMINATION - NOVEMBER 201057

PATHFINDER20. The means by which the taxpayer seeks to minimize his tax liability throughlegal acts is known asA. tax allowance.B. tax shifting.C. tax avoidance.D. tax evasion.E. tax payment.PART II: SHORT ANSWER QUESTIONS1. Education tax is chargeable on ………………………2. A person who receives or is entitled to receive benefits from an annuity under aSettlement or Trust is -------------3. Who is responsible for the day-to-day administration of the secretariat of theEducation Trust Fund?4. When interacting with Spreadsheet, $AA$3 represents ………………reference.5. The currency in which withholding tax is to be deducted and paid to therelevant authority is the ………………….6. What is the document required before a Qualifying Capital Ex penditure aboveN500,000 is allowed by the relevant tax authority?7. Who appoints members of the Education Tax Fund Board of Trustees?8. In the year a partner resigns from a partnership, what is the basis of assessingthe remaining partners?9. A computer simulation program that simulates a paper worksheet iscalled……….10. It is a general rule that ad valorem duty is not paid more than ……INTERMEDIATE EXAMINATION - NOVEMBER 201058

PATHFINDERSECTION B: ATTEMPT ANY FOUR QUESTIONSQUESTION 1Samuel, Bako and Chukwu have been trading for many years under the name of SBC &Co, sharing profits and losses in the ratio 2:2:3 respectively. From its records, youascertained that the firm recorded adjusted loss of N630,000 for the year ended 31December 2002.You are provided with the following information:SamuelNBakoNChukwuNSalaries 210,000 240,000 450,000Interest on capital 36,000 48,000 36,000Bonus 18,000 12,000 30,000Depreciation for the year was N340,000.Additional information:(i) Samuel has a life policy on himself with a capital sum of N480,000 and annualpremium of N4,800.(ii) Bako is unmarried while Chukwu has two children, aged 9 and 11 years.(iii) Samuel received N150,000 as gratuity from his former employment in publicservice.(iv) Samuel is married with five children and two dependant relatives. He spendsN3,000 annually on the dependant relatives.Required(a) Compute each partner‟s assessable income.(7 marks)(b) Compute Samuel‟s income tax for the relevant year of assessment. (8 marks)(Total 15 marks)INTERMEDIATE EXAMINATION - NOVEMBER 201060

PATHFINDERQUESTION 2(a)Zeem Limited is a manufacturing company which commenced business on1 June 2003 the adjusted profits for the relevant years of assessment are asfollows:NPeriod ended 31/12/2003 21,000Year ended 31/12/2004 72,000Year ended 31/12/2005 54,000Year ended 31/12/2006 28,800Required:Assuming the company took advantage of the option open to it to minimize its taxliability, compute the assessable profits for all relevant years of assessment.(8 marks)(b)Abdulahi Nigeria Limited had been preparing its accounts to 30 June every yearuntil year 2000 when a decision was taken that accounts for 6 months shouldbe prepared to 31 December 2000 and thereafter, yearly.Adjusted ProfitsNYear ended 30 June 2000 240,000Period ended 31 December 2000 180,000Year ended 31 December 2001 280,000Year ended 31 December 2002 320,000You are required to compute the assessments for the relevant years ofassessment.(7 marks)(Total 15 marks)INTERMEDIATE EXAMINATION - NOVEMBER 201061

PATHFINDERQUESTION 3Mr. James makes up his accounts to 30 September every year. Below is the account forthe year ended 30 September 2008:NNGross Profit 455,000Less: Rent 26,000Bad debts 18,000Repairs to Building 3,000Donations 5,000Preliminary expenses 3,000Legal and Professional fees 6,000Loss on disposal of vehicle 3,000Depreciation 8,000Other allowable expenses 150,000 (222,000)Net Profit N233,000You are provided with the following information:(i)(ii)The gross profit included N165,000 which was a profit on sale of fixed assets.Donations include purchase of new furniture of N1,300 donated to the IrawoSocial Club.(iii) Legal and professional fees comprise of: NRenewal of Short term lease 1,200Renewal of Long lease 3,000Cost of Tax Appeal 1,800(iv) Bad debt included a general provision for bad and doubtful debts of N7,500Required:(a) Compute the adjusted profit for the relevant year of assessment (7Marks)(b) Write short notes on:(i) Badges of trade; and(4 Marks)(ii) Foreign employment(4 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201062

PATHFINDERQUESTION 4(a)Creating a „View‟ in Microsoft Excel Spreadsheet will enable the user to viewonly the rows and columns that are relevant to the user. You are the TaxConsultant of Eko Limited and have just prepared the P.A.Y.E. of the company.Explain the steps necessary to:(i) Create a general “View” that contains only specific rows and columns(5 Marks)(ii) Create a specific “View” of the file(5 Marks)(b.)State any FIVE contents/particulars of Notice of Appeal to a Tax Appeal TribunalQUESTION 5(5 Marks)(Total 15 Marks)(a)(b)In the preparation of your tax report with Excel Spreadsheet, you are requiredto:(i) Explain a worksheet;(3 Marks)(ii) List and explain FOUR characteristics of formatting(4 Marks)XYZ BANK PLC has been trading for many years. As part of its income for theyear ended 31 December 2008, the interest on Agricultural Loan, included inthe accounts, amounted to N15million. The breakdown of the interest incomebased on the terms of the loan is as stated hereunder:Repayment Period Moratorium Period Interest Rate Loan InterestN5 years 24 months 15% 7,500,0003 years 18 months 18% 2,400,0002 years 18 months 14% 2,100,0003 years 18 months 35% 3,000,00015,000,000Base lending rate is 18%.You are required to compute the interest rate exempted from tax (8 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201063

PATHFINDERQUESTION 6SOULINE Company Limited engaged you as its tax Consultant with the mandate ofensuring computation of its tax liabilities and prompt remittance of same.The company needed your advice on payment of VAT. The following are the figuresrelating to transactions for the month of February 2010NPurchase of Plant 700,000Purchase of Trucks 400,000Purchase of Excavator 1,500,000Bought chipping materials 60,000Bought loads of cement 80,000Bought loads of sand 50,000Part payment received 2,900,000Additional payment received 1,600,000You were informed that the company paid VAT on its purchases or bought items.Required:(a) Compute the VAT payable for the month of February 2010. (10 Marks)(b) When must the VAT due be paid to the tax office? (10 Marks)(Total 15 Marks)INTERMEDIATE EXAMINATION - NOVEMBER 201064

PATHFINDERTAX RATES1. CAPITAL ALLOWANCESInitial % Annual %Office Equipment 50 25Motor Vehicles 50 25Office Building 15 10Furniture & Fittings 25 20Industrial Building 15 10Non-Industrial Building 15 10Plant and Machinery – AgriculturalProduction 95 NIL– Others 50 252. INVESTMENT ALLOWANCE 10%3. TAX – FREE ALLOWANCE:Maximum Per YearNRent 150,000Transport 20,000Utility 10,000Meal Subsidy 5,000Entertainment 6,000Leave10% of Annual Basic Salary4. PERSONAL INCOME TAX RELIEFS / ALLOWANCES(a) Personal Allowance – N5,000 plus 20% of Earned Income(b) Children Allowance – N2,500 per annum per unmarried childsubject to a maximum of four children.(c) Dependent Relative – N2,000 each(d) Disabled Persons – N5,000 or 10% of Earned Income (whichever is higher)(e) Life Assurance – Actual Premium paidINTERMEDIATE EXAMINATION - NOVEMBER 201065

PATHFINDER5. RATES OF PERSONAL INCOME TAX:Taxable IncomeRate of TaxN %First 30,000 5Next 30,000 10Next 50,000 15Next 50,000 20Over 160,000 25Note: Annual income of N30,000 and below is exempted from tax but aminimum tax of 0.5% will be charged on the total income.6. COMPANIES INCOME TAX RATE 30%7. EDUCATION TAX 2%8. CAPITAL GAINS TAX 10%9. VALUE ADDED TAX 5%10. WITHHOLDING TAXESType of payment Rates Rates(Companies)(Non- corporate)Dividend, Interest, Rent 10% 10%Royalties 15% 15%Contract supplies 5% 5%Building construction activities 5% 5%Consultancy/Professional services 10% 5%Management services 10% 5%Commissions 10% 5%Technical services 10% 5%Directors fees 10% 10%INTERMEDIATE EXAMINATION - NOVEMBER 201066

PATHFINDERSOLUTIONS TO SECTION APART I: MULTIPLE-CHOICE QUESTIONS1. D2. E3. A4. B5. D6. A7. B8. C9. C10. E11. B12. E13. E14. C15. E16. B17. C18. C19. B20. CEXAMINERS‟ REPORTThe questions test various aspects of the Syllabus.Almost all the candidates attempted the questions and performance was good.Candidates are advised to cover the entire Syllabus to be able to perform betterin future.INTERMEDIATE EXAMINATION - NOVEMBER 201067

PATHFINDERPART II: SHORT-ANSWER QUESTIONS1. an assessable profit2. annuitant.3. Executive Secretary of Education Trust Fund4. absolute cell5. currency of the transaction6. Acceptance Certificate from the Inspectorate division of the FederalMinistry of Industries7. President and Commander in Chief of the Armed Forces8. preceding year basis, (if in writing to the relevant tax authority) otherwise,cessation rule will apply9. spreadsheet10. once11. assessable profit12. Turnover assessment13. 2 nd and 3 rd years of assessment14. total profit15. Pay As You Earn (PAYE) system16. Franked Investment Income17. The chairman of the Federal Inland Revenue Service Board18. tax evasion19. The Joint Tax Board20. Actual year basisEXAMINERS‟ REPORTThe questions test various aspects of the Syllabus.Almost all the candidates attempted the questions and performance was good.INTERMEDIATE EXAMINATION - NOVEMBER 201068

SOLUTIONS TO SECTION BQUESTION 1PATHFINDER(a)SAMUEL, BAKO & CHUKWU (SBC & CO)COMPUTATION OF ASSESSABLE INCOME OF EACH PARTNERSAMUEL BAKO CHUKWU TOTALN N N NSalaries 210,000 240,000 50,000 900,000Interest on capital 36,000 48,000 36,000 120,000Bonus 18,000 12,000 30,000 60,000264,000 300,000 516,000 1 ,080,000Share of adjustedProfit/(loss ) (82,629) (82,629) (123,942) (289,200)Assessable Income of 181,371 217,371 392,058 790,800each partner(b)COMPUTATION OF SAMUEL‟S INCOME TAX LIABILITY FOR 2003 ASSESSMENTYEARNNAssessable/Earned income 181,371Less: ReliefsPersonal allowance (N5,000 + 20% x N181,371) 41,274Children allowance (N2500 x 4) 10,000Dependant relative (N2000 x 2) 4,000Life assurance 4,800 (60,074)N121,297Income Tax Payable:N1st N 30,000 @ 5% - 1,500.00Next N30,000 @ 10% - 3,000.00Next N50,000 @ 15% 7,500.00Next N11,297 @ 20% 2,259.40N121,297INTERMEDIATE EXAMINATION - NOVEMBER 201069

PATHFINDERIncome tax payable 14,259.40Note: Gratuity of Samuel from public office is exempted from tax.Computation of Adjusted Loss:NLoss per accounts 630,000Less: Depreciation 340,800Adjusted Loss 289,200EXAMINERS‟ REPORTThe question tests candidates‟ understanding of the assessment of partnership income.Most candidates demonstrated a good understanding of the question and theirperformance was good.Candidates‟ commonest pitfall was their inability to separate the answers to (a) and(b). This is because they are used to arriving at the assessment of partners under asingle procedure.Candidates are advised to learn to separate different answers for different questions.INTERMEDIATE EXAMINATION - NOVEMBER 201070

PATHFINDERQUESTION 2(a)ZEEM LIMITEDCOMPUTATION OF ASSESSABLE PROFITS ON COMMENCEMENT OF BUSINESSWithout Tax Payers‟ ElectionWith Tax Payers‟ ElectionAssessmentAssessableAssessableYears Basis Period Profit Basis Period ProfitNN2003 1/6/03-31/12/03 21,000 1/6/03-31/12/03 21,0002004 1/6/03-31/5/04 51,000 1/1/04-31/12/04 72,000(N21,000+ 5/12X 72,000)2005 1/1/04 -31/12/04 72,000 1/1/05-31/12/05 54,000123,000 126,0002006 1/1/05-31/12/05 54,000 1/1/05-31/12/05 54,0002007 1/1/06-31/12/06 28,800 1/1/06-31/12/06 28,800Recommendation: The tax payer should not exercise his right of election to beassessed on actual basis for the 2 nd and 3 rd years of assessment, because it willproduce a higher tax liability.(b)ABDULAHI NIGERIA LIMITEDCOMPUTATION OF ASSESSABLE PROFITS FOR THE RELEVANT YEARS (Based onOld Accounting Period)Year of Basis Period Assessable ProfitAssessmentN2001 1/7/1999-30/6/2000 240,0002002 1/7/2000-30/6/2001(N180,000+N140,000) 320,0002003 1/7/2001-30/6/2002(N140,000+N160,000) 300,000860,000INTERMEDIATE EXAMINATION - NOVEMBER 201071

PATHFINDERBased on the New Accounting dateYear of Basis Period Assessable ProfitAssessmentN2001 1/1/2000-31/12/2000(1/2xN240,000+N180,000) 300,0002002 1/1/2001-31/12/2001 280,0002003 1/1/2002-31/12/2002 320,000900.000Conclusion: Since the assessment based on new accounting date is higher thanthe old accounting date, the final assessment will be N 900,000.EXAMINERS‟ REPORTThe question tests candidates‟ knowledge of “Commencement” rules and their abilityto take a decision based on the options available to tax payers.Candidates demonstrated a good understanding of the question and their performancewas fair.The commonest pitfall of some candidates is their inability to assign correctly “basisperiods” to relevant years of assessment.Candidates are advised to learn how to assign correctly “basis periods” to relevantyears of assessment and also how to apportion profits when they fall into more thanone basis period.INTERMEDIATE EXAMINATION - NOVEMBER 201072

PATHFINDERQUESTION 3(a)MR JAMESCOMPUTATION OF ADJUSTED PROFIT FOR 2009 YEAR OF ASSESSMENTN NNet Profit 233,000Add: Disallowable ExpensesPreliminary expenses 3,000Loss on disposal of vehicle 3,000Depreciation 8,000Donation: Purchase of furniture 1,300Legal and Professional fees: Renewal of long lease 3,000Cost of tax appeal 1,800 4,800Bad Debts: General Provision 7,500 27,600260,600Less: Non-taxable incomeProfit on sale of fixed assets (165,000)ADJUSTED PROFIT N95,600(b)ii) Badges of TradeThe question as to which activity constitutes a trade or business for the purposeof subjecting the profit there from to tax has been a matter of judicialcontroversy over the years.The question was settled by case laws which laid down the tests against whicha particular activity is measured in order to determine whether or not a tradehas indeed been carried on.The tests referred to as to what constitutes “Badges of trade” are: Subjects – matter of the transactions; Frequency of transactions; Supplementary work; Profit motive; and Reason for sale.INTERMEDIATE EXAMINATION - NOVEMBER 201073

PATHFINDERAll the above principles will not be considered by the courts in deciding whetheran activity constitutes a trade or not as was done in the case of Arbiz limited vFederal Inland Revenue Service.(ii) Foreign employment“Foreign employment” means an employment the duties of which are whollyperformed outside Nigeria, save during any temporary visit of the employee toNigeria.An individual who holds a foreign employment on the first day of January in ayear of assessment, who first becomes liable to income tax in Nigeria for that yearby reason of his entering that employment during that year, shall be deemed to beresident for that year in the territory in which the principal office of hisemployment is situated on that day, or on the day his foreign employmentcommences, as the case may be.EXAMINERS‟ REPORTThe question tests the candidates‟ ability to compute the assessment of individual taxpayers.Many candidates attempted the question and demonstrated a good understanding ofit with the exception of foreign income where the performance was poor.The commonest pitfall was the inability of candidates to present the solution in a flow.Candidates are advised to learn presentations of the assessment of individuals.INTERMEDIATE EXAMINATION - NOVEMBER 201074

PATHFINDERQUESTION 4(a)iThe Steps to create a general View in Microsoft excel are:-Click on custom view option,-Click on View menu, and-Click on the add button to create a view-Click ok buttoniiSteps required to create a specific view are:-Change the settings that you want to save in the view.-Click custom view- Type the name for the view-Select the option you want- Click ok button(b)CONTENTS OF NOTICE OF APPEALi) Assessment notice number and relevant year of a assessment.ii) Amount of tax charged by the assessment.iii) Amount of total profit on which the tax is charged as shown in the noticeof assessment.iv) Date appellant was served notice of refusal to amend the assessment bythe FIRS.v) Precise grounds of appeal which should be limited to those contained inthe tax payer‟s notice of objection to FIRS.vi) Address for service of any notice, precepts or other documents by theSecretary of the tribunal.INTERMEDIATE EXAMINATION - NOVEMBER 201075

PATHFINDEREXAMINERS‟ REPORTPart (a) of the question tests candidates‟ knowledge of the use of Microsoft ExcelSpreadsheet, while part (b) tests candidates‟ knowledge of the contents of Notice ofAppeal.Most candidates attempted the question and performance was very poor in part (a)but good in part (b).Candidates‟ commonest pitfall was the inability to understand the use of MicrosoftExcel Spreadsheet.Candidates are advised to pay attention to areas of information contained in theSyllabus.INTERMEDIATE EXAMINATION - NOVEMBER 201076

PATHFINDERQUESTION 5(a) (i) Formatting is an act of applying commands to text, numbers andgraphics in order to transform them to a more visually attractive state.(ii) Formatting characteristics are:• Font types• Font sizes• Font colour• Bolding• Italicizing• Underlining• Adding border• Shading• Alignment(b)XYZ BANK PLCMoratorium Interest Rate Agric Loan Interest Interest ExemptedNNi) 24 months 15% 7,500,000 7,500,000ii) 18 months 18% 2,400,000 2,400,000iii) 18 months 14% 2,100,000 2,100,000iv) 18 months 35% 3,000,000 NILTotal interest exemptedN12,000,000Note: The loan Interest of N3,000,000 is disallowed because the interest ratehas exceeded the base rate of 18%.EXAMINERS‟ REPORTPart (a) of the question tests candidates‟ understanding of the use of Worksheet andcharacteristics of formatting, while part (b) tests the candidates understanding of thetaxation of agricultural loan interest.Most of the candidates attempted the question and performance was poor in part (a)but fair in part (b).Candidates‟ commonest pitfall was their inadequate understanding of the two areascovered by the question.INTERMEDIATE EXAMINATION - NOVEMBER 201077

PATHFINDERCandidates are advised to pay attention to these areas in future examinations.QUESTION 6SOULINE COMPANY LIMITEDCOMPUTATION OF VALUE ADDED TAX PAYABLE FOR 2010 ASSESSMENT YEARNNINCOMEPart payment received 2,900,000Additional payment received 1,600,000 4,500,000Output VAT on income received @5%(N4,500,000 X 5%) 225,000DIRECT EXPENSES:Bought chipping materials 60,000Bought load of cement 80,000Bought load of sand 50,000 190,000Input VAT on direct expenses @5%(N190,000 x 5%) N9,500NET VAT PAYABLE = 225,000 – 9,500= N215,000b. The VAT computed must be paid on or before the 21 st day of themonth following that in which the supply or purchase wasmade.INTERMEDIATE EXAMINATION - NOVEMBER 201078

PATHFINDERc. Tax invoices contain the following information:i. Tax payer‟s Identification Number(TIN)ii. Name, address and VAT registration numberiii. Customer‟s name and addressiv. Type of supplyv. A description of the goods and services suppliedvi. Quality of the goods and services suppliedvii. The rate of VATviii The rate of any cash discount offeredix. The total VAT payableNote: VAT on fixed assets bought are not to be remitted butcapitalized. Input VAT N2,100,000 will not be remitted.EXAMINERS‟ REPORTThe question tests candidates‟ knowledge of the provisions of the Value Added TaxLaw.Candidates demonstrated a good knowledge of the question but could not distinguishbetween Invoice Value and Payment Received. The performance of the candidateswho attempted the question was good.The commonest pitfall is the inability of the candidates to know that VAT on fixed assetis to be capitalized.Candidates are advised to study the VAT Act and also practice the computation of VAT.INTERMEDIATE EXAMINATION - NOVEMBER 201079

PATHFINDERICAN/102/P/4EXAMINATION NO.................THE INSTITUTE OF CHARTERED ACCOUNTANTS OF NIGERIAINTERMEDIATE EXAMINATION-NOVEMBER 2010BUSINESS COMMUNICATION AND RESEARCH METHODOLOGYTime allowed-3 hoursSECTION A: Attempt all questionsPART I: MULTIPLE CHOICE QUESTIONS (20 Marks)1. The middle value in a set of numbers arranged in order of size is identified byA. mean.B. median.C. mode.D. geometric mean.E. harmonic mean.2. Which of the following is a single value computed from sample data that is usedto estimate a population parameter?A. Interval estimate.B. Point estimate.C. Confidence interval.D. Confidence level.E. Sample.3. The sampling technique that does not guarantee randomness in the selection ofitems of any sort from a study population is referred to asA. judgement sampling.B. stratified sampling.C. simple random sampling.D. systematic sampling.E. cluster sampling.INTERMEDIATE EXAMINATION - NOVEMBER 201080

PATHFINDER4. The following are stages of the communication process EXCEPTA. Source.B. Encoding.C. Message.D. Modeling.E. Channel.5. The method of delivering a speech off hand isA. impromptu.B. outline.C. memorized.D. blank.E. prompt.6. The technique used to take decisions about a population, using sample is calledA. Descriptive statistics.B. Inferential statistics.C. Computational statistics.D. Essential statistics.E. Efficient statistics.7. The page that displays the result of data analysis on Statistical Package forSocial Sciences (SPSS) viewer isA. string.B. output.C. crosstab.D. case production.E. help.8. Which of the following is used to describe the effect of taking decision about theworth of an object information?A. Testing.B. Evaluation.C. Measurement.D. Validation.INTERMEDIATE EXAMINATION - NOVEMBER 201081

E. Assessment.PATHFINDER9. All research designs do all of the following EXCEPTA. Specifying type of data to collect.B. Revealing confidence level.C. Serving as a frame work.D. Identifying population of study.E. Serving as a blue print.10. Which of the following cannot affect the validity of an interview?A. Perceptual difficulty.B. Language.C. Cultural distortion.D. Halo effect.E. Inaccurate judgement.11. A perfect negative correlation is represented by a correlation coefficient ofA. 0.00B. 1.00C. -1.00D. -0.50E. -0.2512. Which of these Microsoft packages can be used to determine the coefficient ofvariation of a given variable?A. Info-path.B. Power point.C. Network.D. Webcam.E. Excel.INTERMEDIATE EXAMINATION - NOVEMBER 201082

PATHFINDER13. Which one of these concepts illustrates the process of selecting a small numberof items for the purpose of estimating the behaviour of the entire items?A. Sampling.B. Sample.C. Sampling frame.D. Census.E. Testing.14. Select one of the following concepts that does not describe reliabilityA. Accuracy.B. Stability.C. Variability.D. Consistency.E. Dependability.15. Which of these types of measurement scales can a researcher use to determinethe difference between 16 o C to 17 o C and 10 o C to 11 o C reading on athermometer?A. Interval scale.B. Ratio scale.C. Nominal scale.D. Ordinal scale.E. Reliability scale.16. The statistical technique that is used to predict a respondent‟s score of onevariable on the basis of his scores on several other variables is calledA. split-half.B. Cronbach alpha.C. Rank Order Correlation Coefficient.D. Regression.E. Coefficient of Skewness.INTERMEDIATE EXAMINATION - NOVEMBER 201083

PATHFINDER17. Some students in the school doubt the English teacher‟s competence. Theunderlined expression is aA. statement.B. clause.C. phrase.D. part of speech.E. predicate.18. Which of these depicts a report in a specialised field?A. Regular report.B. Progress report.C. Analytic report.D. Technical report.E. Informational report.19. The following is untrue in a negatively skewed distribution EXCEPTA. The mean is smaller than the median.B. The mean is larger than the median.C. The mean and median are equal.D. The median and the mode are equal.E. The mean is equal to variance.20. Which one of these concepts links range, mean deviation, variance andstandard deviation?A. Measure of degree of variability.B. Measure of highest value.C. Measure of class interval.D. Measure of validity.E. Normal distribution.INTERMEDIATE EXAMINATION - NOVEMBER 201084

PATHFINDERPART II SHORT-QUESTIONS ANSWER (20 MARKS)1. The variable which value or behaviour cannot be determined by the variable(s)specified in a given relationship is called…………………..2. Electronic libraries can be easily accessed through the …………………3. A sample with the same characteristics as the population is called………….4. In a progress research report, the part of its component that tells about theentire activities in brief is the ……………………..5. The sending of messages to distant but defined receiver is called…………..6. The statistical measure that is dependent on two extreme scores in thedistribution is known as ……………………….7. Establishing relationship between variables will require …………research8. The aspect of a research report that gives a brief description of the entire studyis ...…….9. The measuring scale that is regarded as the simplest and lowest level ofmeasurement is called ................10. A variable that determines the value of another variable in a given relationshipis called ....……….11. The sampling technique where a researcher selects his items at a regularinterval from a sampling frame is ...................12. A researcher was interested in studying why the “old Accounting system” of the1960s failed. Some members of ICAN who used the old Accounting systemduring the 1960s were interviewed. These accountants are considered as.............13. A rule of grammar showing agreement in number, gender or person is................14. A study population where some items cannot be easily accessed is referred toas ........... population.INTERMEDIATE EXAMINATION - NOVEMBER 201085

PATHFINDER15. The statistic that divides data set into two equal parts is ...............16. A variable that assumes whole numbers is ...............17. Two types of current electronic statistical packages used by research analystsare ................. and ...................18. Inferences on the situation in a technical report would be presented in the................19. A summary of a report extracted for the management of the organization is........................20. The part of the report in which a sample of the questionnaire used to gatherdata is usually included under……………….INTERMEDIATE EXAMINATION - NOVEMBER 201086

PATHFINDERSECTION B ATTEMPT ANY FOUR QUESTIONS (60 marks)QUESTION 1Discuss briefly any five factors that promote the flow of information in the grapevinechannel.QUESTION 2Discuss briefly five principles of effective communication.QUESTION 3(15 marks)(15marks)(a) What is sampling frame? (2 marks)(b)(c)QUESTION 4Itemise the three processes involved in simple random sampling.Distinguish between the following sets of sampling methods:(a)QUESTION 5(3marks)i. Systematic and Stratified Random Sampling. (5 marks)ii. Cluster and Quota Sampling. (5 marks)(Total: 15 marks)Write briefly on the following sampling techniques:(a) Stratified Sampling. (5 marks)(b) Simple Random Sampling. (5 marks)(c) Systematic Sampling. (5 marks)(Total: 15 marks)(a) Define Literature Review. (3 marks)(b)Discuss briefly any four reasons why a researcher must carry outLiterature Review.(12 marks)(Total: 15 marks)INTERMEDIATE EXAMINATION - NOVEMBER 201087

PATHFINDERQUESTION 6A survey on the sources of drinking water conducted among 450 dwellers inDamaturu town revealed the following result:EducationalBackgroundTotalSource Literate IlliterateBore-hole 110 145 255Pipe-Borne 90 105 195Total 200 250 450You are required toa. find the expected frequencies corresponding to the observed frequencies.(7marks)b. use a suitable statistical technique to test the hypothesis that the source ofdrinking water is independent of the status of the dwellers at 5% level ofsignificance.(8 marks)(Total: 15 marks)INTERMEDIATE EXAMINATION - NOVEMBER 201088

PATHFINDERSOLUTIONS TO SECTION APART I MULTIPLE – CHOICE QUESTIONS1. B2. B3. A4. D5. A6. B7. B8. C9. B10. A11. C12. E13. A14. C15. A16. D17. C18. D19. A20. AINTERMEDIATE EXAMINATION - NOVEMBER 201089

PATHFINDEREXAMINERS‟ REPORTThe questions test all sections of the topics as covered in the syllabus: that isCommunication, Research Methodology and Statistics in relation to accountingprocedures. This part of the question paper is attempted by all candidates.About 75% of the candidates scored above average.The commonest pitfall was the candidates‟ inability to choose the appropriate optionfrom the given options.It is recommended that candidates study in such a way as to understand the conceptsand technical words in all topics. In addition, candidates should work through pastquestion papers and access good books on the relevant subjects.INTERMEDIATE EXAMINATION - NOVEMBER 201090

PATHFINDERPART II SHORT-ANSWER QUESTIONS1. exogenous variable2. internet3. representative sample/unbiased sample.4. executive summary5. broadcasting6. range7. correlation8. abstract9. Nominal scale10. independent variable/explanatory/predictor11. systematic sampling12. primary sources/respondents/interviewees13. concord14. infinite15. median16. discrete17. SPSS/ EPI-Info/SAS/EXCEL/E-VIEW/MINITAB18. conclusion19. executive brief20. appendixINTERMEDIATE EXAMINATION - NOVEMBER 201091

PATHFINDEREXAMINERS‟ REPORTThe questions test all sections of the topics as covered in the syllabus, that isCommunication, Research Methodology and Statistics in relation to accountingprocedures. This part of the question paper is attempted by all candidates.About 60% of the candidates scored below average of the allotted marks.The commonest pitfalls were in the candidates‟ inability to understand the conceptstested and also their inability to relate such concepts to applicative scenarios.It is recommended that candidates pay special attention to in-depth applications ofconcepts.They should use updated study/learning materials. They could also involve themselvesin students‟ group study irrespective of status.INTERMEDIATE EXAMINATION - NOVEMBER 201092

PATHFINDERSOLUTION TO SECTION BQUESTION 1i. Ego: It is believed that information is power. People who have important andsecret information at their disposal want to make it known that they have suchmaterial. This is because they feel it confers a level of importance on them.\ii. Unusual access to privileged information: Some workers by virtue of theirposition and job schedules get information that they do not usually handle.They are then able to access information before it is released into the workenvironment. Having come into possession of this information, they then sharewith people who are close to them. Also, when sensitive and important issueslike promotions are being handled, people who are handling them usually feela sense of excitement and share the information.iii. Insecurity and conflicts: Situations, such as retrenchment, rationalization, anddownsizing in a place of work, when they are well advertised and anticipated,tend to generate a lot of anxiety and fear. In this situation of anxiety, fear andspeculation about what would and what would not happen become the order ofthe day.iv. Relationships and allegiances: People whose friends and relations are affectedby an important but secret decision usually feel they have a sense ofresponsibility to communicate such information to them.v. Informal interactions: Informal interactions have a way of instigating people tochat freely and in that type of circumstance and scenario, sensitive and secretinformation may be communicated. The material for communication in thegrapevine channel would have been provided through this medium.INTERMEDIATE EXAMINATION - NOVEMBER 201093

PATHFINDERvi.vii.Information hoarding: In situations where information hoarding is rampant,workers who may be affected by withheld information would do anything to getinformation and where this proves difficult, speculation and rumour take over.Even where workers get authentic information, this would be largelyembellished to satisfy the yearnings and hunger of the information seekers.Problems in the formal channel: Where the formal channel is not operatingoptimally, a number of developments occur, which may stimulate the flow inthe grapevine channel. Unjust and slow handling of complaints and issues maygive an impetus to the informal channel to react to information on such matters.EXAMINERS‟ REPORTThis question tests candidates‟ understanding of the factors that promote /aid the flowof grapevine information in an organisation. Less than 20% of the candidatesattempted this question. Of this percentage, more than 50% of them scored belowaverage.Candidates‟ commonest pitfall is lack of idea on the topic tested; candidates have nounderstanding of the concept of grapevine, that is, informal communication mode andas such could not apply it to organisation‟s scenarios.It is recommended that candidates should read current books on informalcommunication in order to apply these concepts to life situation.INTERMEDIATE EXAMINATION - NOVEMBER 201094

PATHFINDERQUESTION 2The principles of effective communication are also known as the 7Cs ofcommunication. These principles are: Conciseness, Concreteness, Correctness, Courtesy,Clarity, Completeness and Consideration. They are explained below:(i) Conciseness: Communication should contain essential information. It shouldnot be made unnecessarily long. Every item in any piece of communicationmust be necessary and useful.(ii)(iii)(iv)(v)(vi)Concreteness: Communication should be vivid, lucid and convincing. It shouldnot be abstract. It must be easily identifiable and its meaning must be withoutambiguity and derived without ambiguity and vagueness.Correctness: Communication should be correct. It should not contain errors; itshould not be misleading. When information is accurate and correct it can beproperly applied to achieve the desired result.Courtesy: It is important to be polite and civil to others in any situation. Enoughrecognition and respect should be accorded the receiver of any communication.He should not be treated in just any way but should be treated with dignity andrespect.Clarity: Communication needs to be clearly conceived and encoded orcomposed. The intentions of the communicator should be very clear. Equally,the message should not be complex. It should not be difficult to understandand should be distinct. The message should be clear.Completeness: Communication should be complete. It should contain all thecomponents needed to convey the necessary information. Informationcommunicated in part would not produce the desired effect. It is, therefore,desirable that all information be completed wholly.INTERMEDIATE EXAMINATION - NOVEMBER 201095

PATHFINDER(vii)Consideration: Communication needs to be handled with sensitivity to thefeelings of others. This would affect the choice of message and the manner ofcommunicating the message because the information is not the only thing to beconsidered in communication. The manner of communication is as important asthe message. One then has to consider the situation the receiver is in and howthe message would be received.EXAMINERS‟ REPORTThe question tests candidates‟ understanding of the principles of effectivecommunication. More than 50% of the candidates attempted the question.About 75% of them scored above 50% of the marks obtainable.The commonest pitfall identified is that candidates made irrelevant points on theprocess and channels of communication. A number of them could not explain theprinciples though they could identify them.It is recommended that the candidates should be exposed to extensive reading andwriting skills. Also, candidates should read various academic texts on the concept anddevelop a good perception of reading culture.INTERMEDIATE EXAMINATION - NOVEMBER 201096

PATHFINDERQUESTION 3a. Sampling frame is the list of elements from which the sample is drawn. It isreferred to as the working universe or non-theoretical population.b. The steps included in simple random sampling are:i. Defining population sets;ii. Numbering cases in the sampling frame;iii. Selecting sample case using any random sampling method and /or statisticalrandom table.c.iSystematic Random SamplingSelection of sample is at regularintervals.Selection is not determined by anyattribute except that based on study.A sampling fraction is used todetermine the frequency of selection.Sample fraction is the ratio of actualfraction and total population.It is sometimes considered as nonrepresentativeand the result cannotbe applied to all members of thepopulation.Stratified Random SamplingSample is divided into two or moresignificant strata.Selection is determined by commonattribute of population type.Simple random sampling method isused to select sample.The method is said to berepresentative enough because thestrata contains all members of thepopulation.INTERMEDIATE EXAMINATION - NOVEMBER 201097

PATHFINDERc ii.Cluster SamplingIt is a probability sampling method.Population is divided into discretegroups.Population representativeness maybe highIt is used basically for descriptivestudy.Quota SamplingIt is a non-probability samplingmethod.Population sample is entirely basedon representative variability.Population representativeness is low.It is used for survey study likeinterview.EXAMINERS‟ REPORTThe question tests Sampling and Sampling Procedures. Candidates were to itemiseprocesses of Simple Random Sampling and state the differences between Probabilityand Non-probability Sampling procedures.About 80% of the candidates attempted this question. More than 50% of thispercentage scored above average.The major pitfall identified in this question is candidates‟ inability to recognise thatquestions C (i) & (ii) are examples of differences between probability and nonprobabilitysampling methods; thus, finding it difficult to list enough differences toearn them good mark.It is recommended that candidates make use of the study pack provided by theInstitute so as to be acquainted with the required techniques for the examination.INTERMEDIATE EXAMINATION - NOVEMBER 201098

PATHFINDERQUESTION 4(a)(b)(c)Stratified SamplingThis is a sampling technique where study population is divided into groups withhomogenous features. The relevant sub-samples are thereafter selected withineach group or stratum using simple random techniques. The sample drawnfrom each group must be proportional to the size of group in the studypopulation.Simple Random SamplingThis is the sampling technique where every sample item in the population isgiven equal and independent chance of being selected or included in thesample. In the process of obtaining a simple random sampling, the researchercould use the ballot box /raffle draw, shuffled card method or the use of randomnumber table. This method ensures the randomness of the sample items.Systematic SamplingThis is the probability sampling that involves the selection of every n th item fromthe sampling frame that has been serially arranged. The n th item or the regularinterval is obtained by dividing the population size by the required sample size.Thereafter, the first item is selected from the sampling frame using randomtechniques. The subsequent items are selected using the regular interval or n thitem.INTERMEDIATE EXAMINATION - NOVEMBER 201099

PATHFINDEREXAMINERS‟ REPORTThe question tests understanding of candidates‟ ability to write briefly on the topic ofsampling techniques. More than 80% of the candidates attempted this question.Of this, over 70% of the candidates scored above average.The major pitfall identified is that candidates failed to mention the key concepts ineach of the sampling techniques examined. Also, candidates could not clearlydifferentiate between the different sampling methods. This could also mean that someof the candidates do not link the explanations to the concepts required.It is recommended that candidates should learn and understand these concepts intheir right perspectives.QUESTION 5a. Literature review can be defined as the critical evaluation of past worksrelevant to the research under study, with a view of identifying areas ofconvergence and divergence in such past work. It is a process involving thesystematic identification, location and analysis of documents containinginformation relevant to the research problem area of interest.b. Reasons for carrying out Literature Review:(i)(ii)To determine what has already been carried out in the past that relatesto the problem of the study.It also enables researchers to critically study the findings of the researchwork. Literature review makes it possible to determine the meaning andrelationship between variables. In addition, it enables researchers toclarify underlying processes as well as facilitate the interpretations ofresearch findings.INTERMEDIATE EXAMINATION - NOVEMBER 2010100

PATHFINDER(iii)(iv)(v)(vi)(vii)Literature review can be used to achieve the purpose of replication andalso help the researcher to delimit and define the problem. It helps tofind out whether a finding in one area of social, academic, political oreconomic life can be found or generalized in another area.Literature review indicates where there is gap in current literature onsubject of research study. This allows the researcher to identify where hiswork would fit in and what his contribution to knowledge should be.Literature review is used to provide grounding and justification for theresearcher‟s findings and conclusions. It shows that they are not strangeand are in tandem with the subject of research and are as suchlegitimate material emanating from the field of study.To lay the basis for theoretical postulations. The researcher can onlyextract theory from existing literature. This theory is the foundation onwhich his work would rest. The review of literature gives the researcherthe facility of exploring diverse but relevant theoretical directions, whichwould be the foundation of the work and guide the researcher in his owntheoretical postulations.Every field has leading figures whose works determine the colourationand direction of developments. Literature review leads the researcher torecognize these figures, their contributions and give intellectual statureand dignity to the work.INTERMEDIATE EXAMINATION - NOVEMBER 2010101

PATHFINDEREXAMINERS‟ REPORT:The question tests candidates‟ knowledge on Literature Review as well as their basicunderstanding of the need for review of literature in a research study. More than 80%of the candidates attempted this question.The question was well-understood by the candidates and as such about 75% scoredabove average of the total marks obtainable.The commonest pitfall was in the candidates‟ presentation of ideas. Few candidatescould not distinguish between reasons and sources of literature review.It is recommended that candidates study extensively and prepare ahead for theexamination.QUESTION 6a. The expected frequencies are obtained as follows:e = (RT) (CT)GTWhere RT = Row TotalCT = Column TotalGT = Grand Totale 11 = 200 x 255 = 113.33450e 12 = 200 x 195 = 86.67450e 21 = 250 x 255 = 141.67450e 22 = 250 x 195 = 108.33 450INTERMEDIATE EXAMINATION - NOVEMBER 2010102

PATHFINDERTo test the hypothesis:(b). H 0 : The source of drinking water is independent of the status of thedwellers.H 1 : The source of drinking water is dependent of the status of thedwellers.The suitable statistical technique is2- test of IndependenceAppropriate test statistics2= ∑ ( fo ─ fe) 2fewhere o = Observed frequenciese = Expected frequenciesFo fe fo ─ fe (fo ─ fe) 2 (fo─fe) 2fe90 113.33 - 3.33 11.09 0.13110 86.67 3.33 11.09 0.10105 141.67 3.33 11.09 0.10145 108.33 -3.33 11.09 0.08Total 0.412= 0.41Degree of Freedom = ( r ─1) ( c ─1)=( 2 ─1) ( 2─1)= 1The table value of2at 0.05 level of significance is 3.84INTERMEDIATE EXAMINATION - NOVEMBER 2010103

PATHFINDERDecision:Since the calculated value of2= 0.41 is less than the tabulated value20.05 = 3.84, we accept the null hypothesis and reject the alternatehypothesis.EXAMINERS‟ REPORT:The question tests candidates‟ knowledge of hypothesis testing using Chi-Square.More than 80% of the candidates attempted the question.Of this percentage, about 80% scored above average.The commonest pitfall was that candidates approximated the parameters given, thusarriving at varied test-results which in turn affected the findings but this did not affectthe decisions arrived at.INTERMEDIATE EXAMINATION - NOVEMBER 2010104