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Auditing made easier for you
M. V. Kali Prasad
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MODEL PAPER — IPCC AUDIT AND ASSURANCE
Q1. How do you react as an auditor in the following circumstances?
1. A Company acquired a loan from a bank against the sovereign assurance of the Chief Minister of the state and discloses the same as secured loans.
2. Two partnership firms and an individual were appointed as joint auditors of the Company. The individual dies towards the middle of the audit.
3. The Company requests you not to send letters seeking confirmation to one of its debtors stating the position is sensitive and a suit is pending in court.
4. The Company says internal control is a matter internal to the company and therefore does not concern the auditor.
Q2. Comment on the following.
a) The probability of a misstatement remaining undetected is inversely proportional to its materiality. Comment.
b) When an auditor comes across a situation to arouse his suspicion of existence of a fraud, he should probe the matter further to confirm or dispel the suspicion. How do you proceed to do so?
Q3. Answer in brief.
a) Why is scrutiny of ledgers carried out? What factors do you consider while doing so?
b) What are the factors to be considered while determining the reliability of audit evidence?
Q4. Answer the following questions.
a) What is audit sampling? How does it differ from test check?
b) Audit evidence in support of estimates is less conclusive than in other transactions. Discuss.
c) What is examination in depth? What is the objective and why is it carried out?
Q5. How do you vouch / verify the following:
a) Audit fees b) Securities premium c) Trade discount d) Advance tax
Q6. Give explanations for the following.
a) What points would you consider while auditing of incomplete records?
b) What shortcomings do you foresee while auditing a small private limited company?
c) State any eight points to consider while auditing a five-star hotel.
Q7. Write short notes on:
a) Reserve capital b) Skill and competence c) Buyback of shares d) Audit trail
MODEL PAPER — ADVANCED AUDITING CA FINAL
1. As a Statutory Auditor of a Public Limited Company how do you deal with the following situations?
a) The Company passed a special resolution to commence a new line of business totally unconnected to the existing line of activity. A copy of the resolution was filed online with the MCA, and immediately the Company commenced the new line of activity.
b) The company subscribed to 100000 equity shares of Rs 10 each, of which Rs 7 was paid up. Value of investments was shown at face value, and the liability of unpaid amount of Rs 3 per share, was disclosed as a current liability.
c) As of March 31, 2011, the Company had a TDS receivable of Rs 1 lakh and paid an advance tax of Rs 1 lakh. Total tax liability of the Company for the assessment year 2011-12 was calculated at Rs 2.20 lakh. The Company had merely carried a provision of Rs 0.20 lakh in the financial statements.
d) The Company deposited the money received on its public issue in a fixed deposit with a nationalised bank. Interest received on the deposit was credited to the profit and loss account, and offered to tax under the head `income from other source'.
2. Discuss if the following situations constitute a professional misconduct.
a) A Chartered Accountant secures a job for his neighbour in a company. The neighbour gifts a laptop to the CA.
b) A Chartered Accountant was also a director of a couple of companies. His visiting card carried the names of all the companies of which he was a director.
c) There was a billboard on the main road welcoming the Chief Minister to the place.
The billboard contained the photograph of a Chartered Accountant, his name and mobile number.
d) A member in service had a brother who was also a Chartered Accountant in practice. The younger brother was appointed to carry out a management audit assignment.
3. Answer these with reference to the context.
a) CARO requires the auditor to state if dues to Government by way of PF, ESI, etc were being regularly paid by the Company. How would you ensure compliance?
b) What are the requirements of disclosures to be made in respect of related parties?
c) How would you ensure that none of the directors of the Company are disqualified Under Section 274 (1)(g)?
d) What are the requirements for signing an audit report?
4. i) Answer to the point.
a) Peer review is a handholding exercise and not a fault-finding exercise. Comment.
b) Discuss in brief, the procedure for carrying out a peer review.
ii) How does operations audit differ from internal audit?
5. Explain the following.
a) Under which circumstances do advances turn to non-performing assets? What are the consequences?
b) What are the constraints on the investments made by an Insurance Company?
6. 1) Discuss with reasons, if a Chartered Accountant in practice is liable to tax audit if he has the following incomes in Rs lakhs:
a) Rent from property — 1
b) Practice — 10
c) Paper setting and valuation of papers — 2
d) Teaching at academies — 3
e) Conferences and seminars — 2
f) Writing for journals and newspapers — 1
2) What are the provisions for cost audit of a company?
3) What points do you consider in the audit of non-corporate borrowers of banks?
4) What are agreed-upon procedures?
7. Write short notes on the following:
a) Flash report b) Management representations c) Management frauds
d) Disclaimer of opinion
(This article was published in the Business Line print edition dated October 24, 2011)
Home Companies Markets Industry & Economy Opinion Features Today's Paper Topics
Auditing made easier for you
M. V. Kali Prasad
Share · print · T+
MODEL PAPER — IPCC AUDIT AND ASSURANCE
Q1. How do you react as an auditor in the following circumstances?
1. A Company acquired a loan from a bank against the sovereign assurance of the Chief Minister of the state and discloses the same as secured loans.
2. Two partnership firms and an individual were appointed as joint auditors of the Company. The individual dies towards the middle of the audit.
3. The Company requests you not to send letters seeking confirmation to one of its debtors stating the position is sensitive and a suit is pending in court.
4. The Company says internal control is a matter internal to the company and therefore does not concern the auditor.
Q2. Comment on the following.
a) The probability of a misstatement remaining undetected is inversely proportional to its materiality. Comment.
b) When an auditor comes across a situation to arouse his suspicion of existence of a fraud, he should probe the matter further to confirm or dispel the suspicion. How do you proceed to do so?
Q3. Answer in brief.
a) Why is scrutiny of ledgers carried out? What factors do you consider while doing so?
b) What are the factors to be considered while determining the reliability of audit evidence?
Q4. Answer the following questions.
a) What is audit sampling? How does it differ from test check?
b) Audit evidence in support of estimates is less conclusive than in other transactions. Discuss.
c) What is examination in depth? What is the objective and why is it carried out?
Q5. How do you vouch / verify the following:
a) Audit fees b) Securities premium c) Trade discount d) Advance tax
Q6. Give explanations for the following.
a) What points would you consider while auditing of incomplete records?
b) What shortcomings do you foresee while auditing a small private limited company?
c) State any eight points to consider while auditing a five-star hotel.
Q7. Write short notes on:
a) Reserve capital b) Skill and competence c) Buyback of shares d) Audit trail
MODEL PAPER — ADVANCED AUDITING CA FINAL
1. As a Statutory Auditor of a Public Limited Company how do you deal with the following situations?
a) The Company passed a special resolution to commence a new line of business totally unconnected to the existing line of activity. A copy of the resolution was filed online with the MCA, and immediately the Company commenced the new line of activity.
b) The company subscribed to 100000 equity shares of Rs 10 each, of which Rs 7 was paid up. Value of investments was shown at face value, and the liability of unpaid amount of Rs 3 per share, was disclosed as a current liability.
c) As of March 31, 2011, the Company had a TDS receivable of Rs 1 lakh and paid an advance tax of Rs 1 lakh. Total tax liability of the Company for the assessment year 2011-12 was calculated at Rs 2.20 lakh. The Company had merely carried a provision of Rs 0.20 lakh in the financial statements.
d) The Company deposited the money received on its public issue in a fixed deposit with a nationalised bank. Interest received on the deposit was credited to the profit and loss account, and offered to tax under the head `income from other source'.
2. Discuss if the following situations constitute a professional misconduct.
a) A Chartered Accountant secures a job for his neighbour in a company. The neighbour gifts a laptop to the CA.
b) A Chartered Accountant was also a director of a couple of companies. His visiting card carried the names of all the companies of which he was a director.
c) There was a billboard on the main road welcoming the Chief Minister to the place.
The billboard contained the photograph of a Chartered Accountant, his name and mobile number.
d) A member in service had a brother who was also a Chartered Accountant in practice. The younger brother was appointed to carry out a management audit assignment.
3. Answer these with reference to the context.
a) CARO requires the auditor to state if dues to Government by way of PF, ESI, etc were being regularly paid by the Company. How would you ensure compliance?
b) What are the requirements of disclosures to be made in respect of related parties?
c) How would you ensure that none of the directors of the Company are disqualified Under Section 274 (1)(g)?
d) What are the requirements for signing an audit report?
4. i) Answer to the point.
a) Peer review is a handholding exercise and not a fault-finding exercise. Comment.
b) Discuss in brief, the procedure for carrying out a peer review.
ii) How does operations audit differ from internal audit?
5. Explain the following.
a) Under which circumstances do advances turn to non-performing assets? What are the consequences?
b) What are the constraints on the investments made by an Insurance Company?
6. 1) Discuss with reasons, if a Chartered Accountant in practice is liable to tax audit if he has the following incomes in Rs lakhs:
a) Rent from property — 1
b) Practice — 10
c) Paper setting and valuation of papers — 2
d) Teaching at academies — 3
e) Conferences and seminars — 2
f) Writing for journals and newspapers — 1
2) What are the provisions for cost audit of a company?
3) What points do you consider in the audit of non-corporate borrowers of banks?
4) What are agreed-upon procedures?
7. Write short notes on the following:
a) Flash report b) Management representations c) Management frauds
d) Disclaimer of opinion
(This article was published in the Business Line print edition dated October 24, 2011)
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