GOVERNANCE AND COMPLIANCE AUDIT  DECEMBER 2023  PAST PAPER

TUESDAY: 5 December 2023. Morning Paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

KENYA HORIZON BANK (KHB)
Kenya Horizon Bank (KHB) stands as a cornerstone institution contributing to shaping the nation’s economic trajectory.

However, the institution faces the challenge of balancing power and responsibility which necessitates robust governance and compliance measures. In the new era of increased regulatory scrutiny in the country, KHB has been compelled to reassess its governance structures and compliance frameworks.

KHB found itself at the centre of evolving legal risks. Directives introduced by the Central Bank of Kenya (CBK) brought a number of challenges that included the need for a realignment of internal policies with updated regulatory requirements, addressing potential cybersecurity vulnerabilities and ensuring strict adherence to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. Additionally, concerns arose regarding the transparency and efficiency of KHB’s board governance structures, prompting a deeper evaluation of decision-making processes.

Recognising the need for a comprehensive audit, KHB carefully navigated the process of engaging an external audit firm. After thorough evaluation, Kenya Assurance Services (KAS) emerged as the partner of choice. The decision to engage KAS was informed by proven track record, industry reputation and experience in navigating the complex web of Kenyan regulatory requirements. KHB initiated a consultative process with key stakeholders, including regulators to align expectations and concerns. This collaborative approach laid the foundation for a fruitful partnership, ensuring that the audit would not only meet regulatory standards but also address specific concerns unique to KHB.

With clear terms-of-reference in place, the engagement unfolded with careful planning. The audit plan was agreed upon by both teams so as to kick off the audit process. KAS, leveraging its expertise, collaborated closely with KHB to conduct an in-depth risk assessment. The process involved identifying potential gaps in governance structures and compliance frameworks, enabling the strategic allocation of resources across technology, human resources and internal controls. A realistic timeline was established, ensuring a comprehensive audit without unduly disrupting KHB’s daily operations.

Throughout the audit, effective documentation and communication were important. An elaborate document management system was introduced to ensure that the governance audit was smooth and seamless. Regular updates from KAS to KHB’s management and the board fostered transparency, allowing for a real-time understanding of the audit process. This proactive communication approach facilitated the prompt addressing of emerging concerns and adjustments to the audit strategy when
necessary. The culmination of the audit saw KAS present a comprehensive audit report to KHB. The report presented the findings in clear details, providing insights into governance and compliance strengths, weaknesses and areas of improvement.

Recommendations were accompanied by a detailed remedial roadmap, empowering KHB to address identified issues systematically. In the collaborative journey between KHB and KAS, the governance and compliance audit not only identified and mitigated risks but also fortified KHB’s resilience against regulatory challenges. This experience emerged as a guiding light for other financial institutions in the country, underlining the importance of proactive governance and compliance measures in ensuring
the stability and sustainability of the nation’s financial sector. As KHB continues to evolve and grow, it offers a testament to the enduring commitment required for navigating the complex intersection of governance, compliance and financial stewardship in the modern era. It also highlights the importance of strategic and collaborative approach to audits, ensuring that they are not just compliance exercises but opportunities for organisational growth and improvement.

Required:

1. An elaborate document management system was introduced at KHB to ensure that the governance audit was smooth and seamless.

Explain FIVE documents that may have been contained in this system to assist in the audit. (10 marks)

2. The completion of the audit saw KAS present a comprehensive report to KHB.

Evaluate FIVE components of this report. (10 marks)

3. KHB found itself at the centre of certain risks.

Examine FIVE of these risks. (10 marks)

4.  Analyse FIVE benefits of the plan that both teams agreed upon so as to kick off the audit process. (10 marks)

(Total: 40 marks)

 

QUESTION TWO

1. Assurance engagements play an important role in helping stakeholders to make informed decisions.

Summarise FIVE elements of these engagements. (5 marks)

2. Examine FIVE roles of the Code of Ethics for Certified Secretaries. (10 marks)

(Total: 15 marks)

 

QUESTION THREE

1.  Explain FOUR qualities of a good governance audit. (4 marks)

2. Evaluate FOUR components in the scope of a governance audit. (4 marks)

3. A Governance and Compliance audit is a systematic process of evaluating an organisation’s governance and compliance practices.

Analyse SEVEN steps of this cycle. (7 marks)

(Total: 15 marks)

 

QUESTION FOUR

1. The board of directors plays a critical role in ensuring the successful implementation of the audit recommendations action plan.

Explain FIVE sections covered by an audit action plan. (5 marks)

2. Site visits are an important part of a governance audit.

Examine FIVE benefits of conducting a site visit. (10 marks)

(Total: 15 marks)

 

QUESTION FIVE

1. Summarise FIVE guidelines of assessing subsequent events during a governance audit. (5 marks)

2.  A peer reviewer is responsible for evaluating and assessing the quality of another auditor’s work or an audit firm’s processes.

List FIVE qualifications of a peer reviewer. (5 marks)

3. Explain FIVE benefits of using the governance index during governance awards. (5 marks)

(Total: 15 marks)

(Visited 21 times, 1 visits today)
Share this:

Written by