Q1Audit documentation - changes to strategy and plan
0 marks hard
Case: CA Anuj is in practice for the past few years as proprietor of Anuj & Associates. He is very keen on documentation aspects while performing assurance engagements. He handles audits of various corporate and non-corporate clients with team members. The proprietorship concern also handles review engagements as well as engagements to report on prospective financial information as per needs and requirements of its clientele. Presently, it is handling audit of "Buddy Enterprises", a partnership firm, for year 2024-25 in middle of busy audit season. This business enterprise is also availing cash cred…
Considering dilemma of J described in case scenario, which of the following statements is most appropriate?
(A) Only overall audit strategy needs to be documented by audit team.
(B) Only audit plan needs to be documented by audit team.
(C) Both overall audit strategy and audit plan need to be documented by audit team.
(D) Overall audit strategy, audit plan and any significant changes made during the audit engagement to the overall audit strategy or the audit plan and the reasons for such changes need to be documented by audit team.
Q2Sufficient appropriate evidence in assurance engagements
0 marks hard
Case: CA Anuj is in practice for the past few years as proprietor of Anuj & Associates. He is very keen on documentation aspects while performing assurance engagements. He handles audits of various corporate and non-corporate clients with team members. The proprietorship concern also handles review engagements as well as engagements to report on prospective financial information as per needs and requirements of its clientele. Presently, it is handling audit of "Buddy Enterprises", a partnership firm, for year 2024-25 in middle of busy audit season. This business enterprise is also availing cash cred…
Guide K regarding most appropriate statement concerning obtaining of "sufficient appropriate" evidence as described in case scenario.
(A) Sufficient appropriate evidence is to be obtained only in case of statutory audits. In the given case, there is no requirement of law to get accounts audited. Hence, there is no need to obtain sufficient appropriate evidence.
(B) Sufficient appropriate evidence is to be obtained in audit engagements, review engagements and engagements involving examination of prospective financial information.
(C) Sufficient appropriate evidence is to be obtained in audit engagements and review engagements.
(D) Sufficient appropriate evidence is to be obtained in all audit engagements.
Q3Documenting materiality and performance materiality
0 marks hard
Case: CA Anuj is in practice for the past few years as proprietor of Anuj & Associates. He is very keen on documentation aspects while performing assurance engagements. He handles audits of various corporate and non-corporate clients with team members. The proprietorship concern also handles review engagements as well as engagements to report on prospective financial information as per needs and requirements of its clientele. Presently, it is handling audit of "Buddy Enterprises", a partnership firm, for year 2024-25 in middle of busy audit season. This business enterprise is also availing cash cred…
Advise K regarding most appropriate statement in respect of documenting materiality.
(A) Materiality of ₹ 75,000 needs to be documented.
(B) Performance materiality which is set at more than materiality for financial statements as a whole requires to be documented along with materiality of ₹ 75,000.
(C) Performance materiality which is set at less than materiality for financial statements as a whole requires to be documented along with materiality of ₹ 75,000.
(D) Performance materiality (for certain transactions) which is set at par level materiality for financial statements as a whole requires to be documented along with materiality of ₹ 75,000.
Q4Three-party relationship in assurance engagements
0 marks hard
Case: CA Anuj is in practice for the past few years as proprietor of Anuj & Associates. He is very keen on documentation aspects while performing assurance engagements. He handles audits of various corporate and non-corporate clients with team members. The proprietorship concern also handles review engagements as well as engagements to report on prospective financial information as per needs and requirements of its clientele. Presently, it is handling audit of "Buddy Enterprises", a partnership firm, for year 2024-25 in middle of busy audit season. This business enterprise is also availing cash cred…
Which of the following combinations best describes three party relationship in context of audit of partnership firm?
(A) Anuj & Associates, management/partners of Buddy enterprises and income tax authorities.
(B) Individual team members assisting CA Anuj, management/partners of Buddy enterprises and income tax authorities.
(C) Anuj & Associates, management/partners of Buddy enterprises and bankers of Buddy Enterprises.
(D) Anuj & Associates, management/partners of Buddy enterprises and intended users.
Q5Drawing power calculation for cash credit limit
0 marks hard
Case: CA Anuj is in practice for the past few years as proprietor of Anuj & Associates. He is very keen on documentation aspects while performing assurance engagements. He handles audits of various corporate and non-corporate clients with team members. The proprietorship concern also handles review engagements as well as engagements to report on prospective financial information as per needs and requirements of its clientele. Presently, it is handling audit of "Buddy Enterprises", a partnership firm, for year 2024-25 in middle of busy audit season. This business enterprise is also availing cash cred…
Which of the following statements is true regarding drawing power on basis of facts given in case scenario?
(A) DP is ₹ 10 lacs and firm can withdraw funds up to ₹ 10 lacs.
(B) DP is ₹ 12 lacs and firm can withdraw funds up to ₹ 12 lacs.
(C) DP is ₹ 8 lacs and firm can withdraw funds up to ₹ 10 lacs.
(D) DP is ₹ 8 lacs and firm can withdraw funds up to ₹ 8 lacs.
Q6Types of audit risk - control risk
0 marks easy
The auditor of PAC Pvt Ltd., a pickle manufacturing company, notices that the company is expanding its operations into North India States in Financial Year 2024-25, but the related internal control system remains the same to handle the increased volume of transactions and consequently auditor concludes that material misstatements would not be prevented, or detected and corrected by the entity's internal control. Type of risk involved in this situation is:
(A) Detection Risk.
(B) Control Risk.
(C) Inherent Risk.
(D) Audit Risk.
Q7Subsequent events - auditor responsibilities between financi
0 marks easy
The auditor of XYZ Ltd. performed audit procedures to obtain sufficient appropriate audit evidence covering each and every area impacting the financial statements of the company by 20th July 2025. Before signing the auditor's report on 16th September 2025, the auditor became aware of a fire accident at the company's Yarn Factory on 10th August 2025, destroying a large part of inventory. Auditor's responsibilities in such a situation are:
(i) Perform audit procedures designed to obtain sufficient appropriate audit evidence that all events occurring between the date of financial statements and the date of auditor's report that require adjustment or disclosure in the financial statements have been identified.
(ii) If such subsequent events that require adjustment or disclosure in the financial statements have been identified, it shall be determined whether each such event is appropriately reflected in those financial statements.
(iii) Obtain a written representation from management that all events occurring subsequent to the date of financial statements and for which appropriate adjustment has been done or required disclosure has been made.
(A) (i)
(B) (i) and (ii)
(C) (i) and (iii)
(D) (i), (ii) and (iii)
Q8Audit assertions - valuation of borrowings
0 marks easy
While conducting audit of Sandhya Ltd., having turnover of ₹ 200 crores and borrowings from Banks ₹ 50 crores. Audit team is determining that the accounting policies and methods of recording debt are appropriate and applied consistently and also verifying loan balances with reference to sanction letter/loan agreement. By doing above, audit team is trying to satisfy about:
(A) Completeness.
(B) Existence.
(C) Valuation.
(D) Disclosure.
Q9Reasonable assurance vs absolute assurance - objectives of a
0 marks easy
Micky & Associates, Chartered Accountants, were appointed as the auditors of STI Ltd., a Textile manufacturing company, for the financial year 2024-25. Management of the company discussed with the newly appointed auditors that the company has been suffering losses for the last few years and also the Directors are suspecting that accounts are not properly maintained and might contain errors and frauds. So, in the given situation, management of the company requested the auditors to give complete assurance/guarantee about the financial statements of the company. Can the auditors give complete assurance/guarantee in the above situation? Discuss with reference to objectives of Audit.
Q10Preliminary engagement activities in audit planning
0 marks easy
MICA Associates., Chartered Accountants, are appointed as statutory auditors of B Ltd. for the first time in F.Y. 2024-25. Before commencing the audit, the engagement partner considers the integrity of Directors, evaluates compliance with ethical requirements including independence, sends an engagement letter to avoid misunderstanding. Explain the above stage of the audit planning process as considered by the engagement partner.
Q11Concept of misstatement - definition and examples
0 marks easy
SPOM & Co. is a firm of Chartered Accountants established in 2010 with major focus on Audit Practice. In F.Y. 2024-25, firm has four partners and 15 articled assistants handling various Internal audit and Statutory Audit assignments. Partners and articled assistants meet monthly to discuss various aspects of practical as well as academic issues. While discussing about various aspects of Audit Risk, Risk of material misstatement etc., Partner S asks one of the articled assistants to explain the concept of misstatement with the help of at least five examples.
Q12SA 505 External Confirmations - terminology definitions
0 marks easy
With respect to SA 505, "External Confirmations", name the appropriate term that may be used in relation to the below statements:
Q13SA 510 - Initial audit engagements and opening balances
0 marks easy
SIME & Co., Chartered Accountants, have been appointed as statutory auditors of Delight & Delight, a Partnership firm, for the first time for F.Y. 2024-25. The previous year's financial statements were not subject to audit. During the audit, the new auditors noticed differences in some opening balances brought forward from previous year. With respect to relevant SA, explain the objective of Auditor with respect to opening balances.
Q14Audit assertions - Rights and Obligations for PPE ownership
0 marks easy
In the Balance Sheet of Watches Ltd., additions worth ₹ 20 Crores are appearing under Property, Plant & Equipment. Auditor of the company, in addition to the procedures undertaken for verifying completeness of additions to PPE during the period under audit, while performing testing of additions also want to verify that all PPE purchase invoices are in the name of the company. Name the relevant assertion for verification of ownership and procedure to verify the same.
Q15SA 230 - Audit file assembly, permissible changes, and reten
0 marks easy
FSY & Co., Chartered Accountants, completed the statutory audit of HIMMAT Ltd. for the year ended 31st March 2025. The audit partner instructed the audit team to finalize and assemble the audit documentation immediately after signing the auditor's report on 15th September 2025. However, audit team took this instruction lightly and forgot to assemble the audit documentation. After six months, audit team started assembling the file and completed its documentation. When audit partner became aware of this, he called a meeting of staff and discussed policies and procedures for timely completion of audit files, changes to audit documentation and period of retention of engagement documentation. Explain various points discussed by audit partner with reference to relevant standard on auditing.
Q16Written representations - necessity and purpose despite othe
0 marks easy
GEM Ltd has appointed GSP & Co., Chartered Accountants as its Statutory Auditors. While conducting its audit, the audit partner requested the management to provide a written representation that it has fulfilled its responsibility for the preparation of financial statements in accordance with the applicable financial reporting framework. The Manager (Finance) is of the view that since all records and evidence have already been given, a separate written representation is not required. Explain.
Q17SA 701 - Purpose of communicating key audit matters in audit
0 marks easy
SA 701 deals with the auditor's responsibility to communicate key audit matters in the auditor's report. It is intended to address both the auditor's judgement as to what to communicate in the auditor's report and the form and content of such communication. In the above context, explain the purpose of communicating key audit matters.
Q18Audit of hotels - verification of food and beverage inventor
0 marks easy
You are appointed as an auditor of Great Eastern Hotel, a Five Star hotel, for Financial Year 2024-25. As an auditor what are the special points that need to be considered in verifying the Inventories in the nature of food and beverages?
Q19Bank audit - NPA provisioning norms for doubtful assets (D2
0 marks easy
While verifying provisions of advances of a branch of HFC Bank as part of statutory branch audit, CA Mini notices that credit facilities consisting of term loan to JT Mills have been classified under doubtful asset (D2) category. The outstanding balance in above term loan account as on 31.3.2025 is ₹ 150 lakhs. Value of security held in account is ₹ 100 lakhs. The branch has made provision of ₹ 75 lakhs. Is provision made by branch proper? Discuss.
Q20Fundamental principles of professional ethics - objectivity,
0 marks easy
CA Jatin is auditor of XYZ Pharma, his brother-in-law's Partnership Firm. His family relationship creates a conflict of interest that could unduly influence his professional judgment, making it difficult for him to provide an unbiased opinion on the firm's financial statements.
In another assignment of Tax Audit of a company, CA Jatin is also required to prepare the company's tax return. He fails to check the latest provision of the Income-tax Act which allows for a major new deduction resulting in the client overpaying income tax.
CA Jatin is also preparing GST returns of one of his clients. The client instructs him to intentionally understate the sales figures to reduce the tax liability.
Identify and explain the fundamental principles of professional ethics involved in above situations.