Q1Understanding of business and business environment (SA 315)
0 marks easy
Case: Aditya & Co. LLP are the statutory auditors of Benuka Furniture Ltd., a company engaged in the manufacture of wide range of office furniture that suits various workspaces ranging from home offices to corporate environments. The audit team is headed by CA Aditya, being the engagement partner who is further assisted by 2 articled assistants namely Rohit and Mudit. Before starting the audit work of the company, CA Aditya briefed the engagement team about the client's business, the various audit procedures the team can perform and the Standard on Auditing that the team needs to be complied with wh…
Whether the view of Mudit regarding obtaining understanding of the client business is correct:
(A) The view of Mudit is correct because as a member of the audit team, he needs an understanding only about the audit procedures to be performed by him.
(B) The view of Mudit is not correct because while conducting an audit, the understanding of business and business environment of the client whose audit is to be conducted is very important.
(C) The view of Mudit is partially correct because such understanding is required only for the engagement partner and not by the members of the audit team.
(D) The view of Mudit is not correct because such information forms a crucial part of the audit report to be issued at the end of the audit process.
Q2External confirmation methods - positive vs negative
0 marks easy
Case: Aditya & Co. LLP are the statutory auditors of Benuka Furniture Ltd., a company engaged in the manufacture of wide range of office furniture that suits various workspaces ranging from home offices to corporate environments. The audit team is headed by CA Aditya, being the engagement partner who is further assisted by 2 articled assistants namely Rohit and Mudit. Before starting the audit work of the company, CA Aditya briefed the engagement team about the client's business, the various audit procedures the team can perform and the Standard on Auditing that the team needs to be complied with wh…
What kind of confirmation requests Rohit decided to send the debtors for verification of balances of trade receivables?
(A) Negative confirmation.
(B) Positive confirmation.
(C) Exception letter.
(D) Written Representation.
Q3Audit sampling methods - haphazard sampling
0 marks easy
Case: Aditya & Co. LLP are the statutory auditors of Benuka Furniture Ltd., a company engaged in the manufacture of wide range of office furniture that suits various workspaces ranging from home offices to corporate environments. The audit team is headed by CA Aditya, being the engagement partner who is further assisted by 2 articled assistants namely Rohit and Mudit. Before starting the audit work of the company, CA Aditya briefed the engagement team about the client's business, the various audit procedures the team can perform and the Standard on Auditing that the team needs to be complied with wh…
Which sample selection method has been opted by Rohit while verifying the loans and advances given by the company?
(A) Interval Sampling.
(B) Block Sampling.
(C) Haphazard Sampling.
(D) Monetary Unit Sampling.
Q4Audit assertions - cut off for inventory
0 marks easy
Case: Aditya & Co. LLP are the statutory auditors of Benuka Furniture Ltd., a company engaged in the manufacture of wide range of office furniture that suits various workspaces ranging from home offices to corporate environments. The audit team is headed by CA Aditya, being the engagement partner who is further assisted by 2 articled assistants namely Rohit and Mudit. Before starting the audit work of the company, CA Aditya briefed the engagement team about the client's business, the various audit procedures the team can perform and the Standard on Auditing that the team needs to be complied with wh…
While verifying the inventory of the client company, which assertion is being verified by Mudit?
(A) Cut Off assertion.
(B) Valuation assertion.
(C) Presentation & Disclosure assertion.
(D) Rights & Obligations assertion.
Q5Audit assertions - rights and obligations for fixed assets
0 marks easy
Case: Aditya & Co. LLP are the statutory auditors of Benuka Furniture Ltd., a company engaged in the manufacture of wide range of office furniture that suits various workspaces ranging from home offices to corporate environments. The audit team is headed by CA Aditya, being the engagement partner who is further assisted by 2 articled assistants namely Rohit and Mudit. Before starting the audit work of the company, CA Aditya briefed the engagement team about the client's business, the various audit procedures the team can perform and the Standard on Auditing that the team needs to be complied with wh…
With respect to fixed assets, which assertion does Mudit want to check?
(A) Valuation assertion.
(B) Presentation and Disclosure assertion.
(C) Rights and obligations assertion.
(D) Existence assertion.
Q6Audit documentation - what need not be included (SA 230)
0 marks easy
CA Rocky is a recently qualified Chartered Accountant. He is appointed as an auditor of Sky Ltd. for the current Financial Year 2023-24. CA Rocky is of the view that he shall record all the matters related to audit i.e., audit procedures to be performed, audit evidence obtained and conclusions reached. Thus, he maintained a file and recorded each and every finding during the audit. His audit file also includes audit programmes, notes reflecting preliminary thinking, letters of confirmation, e-mails concerning significant matters, etc. State which of the following need not be included in the audit documentation?
(A) Audit programmes.
(B) E-mails concerning significant matters.
(C) Letters of confirmation.
(D) Notes reflecting preliminary thinking.
Q7Threats to auditor independence - familiarity threat
0 marks easy
CA Ramesh has been the auditor of XYZ Ltd. for the past 10 years. Over these years, he has built a personal relationship with Mr. Rajan, CEO of the company. During the audit, CA Ramesh discovers several discrepancies, but he feels uncomfortable reporting these issues due to his personal relationship with Mr. Rajan. He has also accepted gifts from the company on several occasions. As a result, CA Ramesh is concerned about the impact of his long-standing relationship with Mr. Rajan on the audit report. Which threat to independence exists in the given case?
(A) Self-interest threat.
(B) Familiarity threat.
(C) Self-review threat.
(D) Advocacy threat.
Q8Audit procedures - recalculation for foreign currency conver
0 marks easy
CA Paras is auditing a firm's financial statements and performs detailed procedures to verify assertions. The firm is engaged in export of goods to Europe. The sales invoices raised in Euros are converted into Indian rupees as per applicable norms. He checks classification of expenses, ensures trade payables are genuine, compares current and past wages, examines title deeds for land, and checks the accuracy of calculation of the conversion of foreign currency into Indian rupees for export invoices. Which audit procedure did he perform to verify whether conversion of foreign currency into Indian rupees is proper or not?
(A) Inspection.
(B) Recalculation.
(C) Observation.
(D) Reperformance.
Q9Scope of audit - change in inventory valuation method withou
0 marks easy
XYZ Ltd., a manufacturing company based in India, operates multiple plants across the country and deals in complex machinery, which requires specialized maintenance and valuation expertise. XYZ Ltd. appointed CA Dhruv as Statutory auditor. During the audit, he observed that the management consistently applied the same method for valuation of inventory over the past few years, but this year, without proper disclosure, they switched to a different valuation method, which resulted in higher reported profits. Does such a matter fall within scope of audit?
Q10Audit programme construction - key considerations
0 marks easy
ATL Pvt. Ltd., a leading manufacturing company, appointed CA Atul as an auditor for the year 2023-24. Given the complexity of the company's operations and the need for a systematic approach, he plans to design a detailed audit programme to ensure the accuracy of financial assertions. As a CA student, if you were assisting CA Atul in constructing this audit programme, what are the points you will keep in mind?
Q11General IT controls - access security and program change obj
0 marks easy
In an automated environment, General IT controls are policies and procedures that relate to many applications and support the effective functioning of application controls. It includes access security as well as program change. What are the objectives and activities included in access security and program change?
Q12Analytical procedures - purpose of comparing P&L items with
0 marks easy
Grape Limited presented its financial statements for the F.Y. 2023-24 to its auditor for expressing an opinion thereon. The auditor while carrying out the audit started comparing various items of profit and loss account of the year under audit with previous financial years. What is the auditor trying to achieve by carrying out those comparisons?
Q13Audit of trade payables - valuation assertion procedures
0 marks easy
CA Tripti is in the midst of conducting audit of a company engaged in manufacturing of range of bicycles in an industrial township located in a North Indian state. As part of its activities, the company procures bicycle components from various small and medium sized enterprises. Besides, the company imports few bicycle components from China on credit terms. The auditor notices that the company has huge trade payables reflected in its financial statements. She wants to be sure that all trade payables reflected in financial statements have been valued appropriately. Suggest few audit procedures to be performed in this respect.
Q14Audit documentation requirements under SA 230
0 marks easy
CA Piku has prepared audit documentation of an entity describing nature, timing and extent of audit procedures performed during the course of audit. In documenting nature, timing and extent of audit procedures performed, which matters shall be recorded? He is also of the view that such documentation alone as described above meets the requirements of Standards on Auditing. Comment upon the validity of his views.
Q15Communication of significant deficiencies in internal contro
0 marks easy
On reviewing internal control over inventories as part of statutory audit of a company, the auditor finds that physical verification is not being conducted at regular intervals as stipulated by the management. The auditor finds it to be a significant deficiency in internal control over inventories. He points it out to the management in a one-liner as under: "Physical verification of inventories is not being conducted at regular intervals as stipulated by management." Is the above communication by the auditor proper? Ignore statutory reporting requirements, if any in this regard.
Q16Key Audit Matters - determination and communication (SA 701)
0 marks easy
As per SA 701, the objectives of the auditor are to determine key audit matters and having formed an opinion on the financial statements, communicate those matters by describing them in the auditor's report. Which factors are taken into account by the auditor while determining Key Audit Matters? How are Key Audit Matters communicated in the audit report?
Q17Types of government audit - sanction, performance, propriety
0 marks easy
A government department has been allocated a budget for infrastructure development. During the audit, the auditor observes the following situations. Identify the different types of audits applicable to each of these observations.
Q18Audit of banks - verification of income reversal on NPA acco
0 marks easy
While conducting the statutory audit of a large branch of KNB Bank for the year 2023-24, CA Hema observed that the Profit and Loss account of the branch reflects interest income of ₹ 80 crores and other income of ₹ 5 crores. She also noticed that few borrower accounts at the branch have slipped into NPA category in past periods as well as in the current year. Which audit procedures should be performed by her to verify reversal of income in the books of the branch?
Q19Accounting treatment of partial recoveries in NPAs and inter
0 marks easy
CBC Bank Ltd. has multiple loan accounts classified as Non-Performing Assets (NPAs). During the financial year, some borrowers made partial payments towards their outstanding dues. However, there was no explicit agreement between the bank and the borrowers regarding the appropriation of these recoveries i.e., whether they should be adjusted against principal or interest. The bank's finance team decided to recognise the recovered amount as interest income in its financial statements. However, during the statutory audit, the auditors raised concerns about the treatment of these recoveries. Discuss the appropriate accounting treatment of partial recoveries in NPAs. Also, explain the principles that banks should follow in recognising interest income from NPAs.
Q20Change in terms of audit engagement - SA 210
0 marks easy
CA Puneet is appointed as an auditor of Kamla Limited for the F.Y. 2023-24. The management of Kamla Limited has requested the auditor to change the terms of original engagement as the company has diversified its business and a few new products have been introduced by the company. Whether CA Puneet can agree to the request made by the management? Under which circumstances can the client make a request to the auditor for a change in the terms of engagement?