QB1Correct or incorrect statements — fraud, representations, co
14 marks very hard
Examine with reasons (in short) whether the following statements are correct or incorrect: (Attempt any 7 out of 8)
QB2Management assertions on PPE, qualities of auditor, audit pl
14 marks very hard
Discuss the following:
QCS1.1Revision of overall audit strategy and plan
2 marks hard
Case: Ghan Shyam & Associates have been appointed as the statutory auditors of ABC Ltd. for the FY 2019-2020. The engagement partner, CA Ghan Shyam established the overall audit strategy and made the detailed plan with respect to the audit assignment of ABC Ltd. after discussing the same with the engagement team. The strategy adopted by Ghan Shyam & Associates consisted of relying on the internal control system of the company and the audit plan and programme were developed accordingly & executed by the engagement team. During the course of audit, the engagement partner, CA Ghan Shyam found that some…
Is CA Ghan Shyam right in changing the overall audit strategy and plan after the audit team has started working as per the earlier strategy established & plan so developed?
(A) CA Ghan Shyam is not right as once the audit team has started the audit work, it is not correct to change the audit strategy and plan.
(B) CA Ghan Shyam is not right as once the overall audit strategy has been established the same cannot be changed. Audit plan however can be revised.
(C) CA Ghan Shyam is right in making changes to the overall audit strategy and the audit plan.
(D) CA Ghan Shyam can change the overall audit strategy and audit plan only after discussing the same with the management of ABC Ltd.
QCS1.2Audit procedures for debtors balance verification
2 marks hard
Case: Ghan Shyam & Associates have been appointed as the statutory auditors of ABC Ltd. for the FY 2019-2020. The engagement partner, CA Ghan Shyam established the overall audit strategy and made the detailed plan with respect to the audit assignment of ABC Ltd. after discussing the same with the engagement team. The strategy adopted by Ghan Shyam & Associates consisted of relying on the internal control system of the company and the audit plan and programme were developed accordingly & executed by the engagement team. During the course of audit, the engagement partner, CA Ghan Shyam found that some…
Which of the following audit procedures should the audit team perform with respect to verification of debtors balance?
(A) Ghan Shyam & Associates can compare the debtors balance reflected in financial statement with the total balance of ledgers account in the books of ABC Ltd.
(B) Ghan Shyam & Associates can obtain direct balance confirmation from the debtors as this is external evidence which is most reliable and relevant.
(C) Ghan Shyam & Associates can obtain management representations with respect to the debtors balance from the management of ABC Ltd and need not perform other audit procedure as obtaining written representation from management constitutes sufficient and appropriate audit evidence.
(D) Both a & b.
QCS1.3Reliability of audit evidence
2 marks hard
Case: Ghan Shyam & Associates have been appointed as the statutory auditors of ABC Ltd. for the FY 2019-2020. The engagement partner, CA Ghan Shyam established the overall audit strategy and made the detailed plan with respect to the audit assignment of ABC Ltd. after discussing the same with the engagement team. The strategy adopted by Ghan Shyam & Associates consisted of relying on the internal control system of the company and the audit plan and programme were developed accordingly & executed by the engagement team. During the course of audit, the engagement partner, CA Ghan Shyam found that some…
Statement 1: The reliability of information to be used as audit evidence is influenced by its source and its nature, and the circumstances under which it is obtained.
Statement 2: The audit evidence obtained from sources external to the entity are generally more reliable than the audit evidence from internal sources.
(A) Only statement 1 is true
(B) Only statement 2 is true
(C) Both the statements are true
(D) None of the statements is true
QCS1.4Audit procedures for inventory held at warehouse
2 marks hard
Case: Ghan Shyam & Associates have been appointed as the statutory auditors of ABC Ltd. for the FY 2019-2020. The engagement partner, CA Ghan Shyam established the overall audit strategy and made the detailed plan with respect to the audit assignment of ABC Ltd. after discussing the same with the engagement team. The strategy adopted by Ghan Shyam & Associates consisted of relying on the internal control system of the company and the audit plan and programme were developed accordingly & executed by the engagement team. During the course of audit, the engagement partner, CA Ghan Shyam found that some…
With respect to the inventory of ABC Ltd. kept in warehouse, which audit procedures can the audit team perform to obtain sufficient and appropriate audit evidence?
(A) Checking of warehouse receipt with the inventory record of ABC Ltd.
(B) Obtaining direct confirmation with respect to quantity & condition of inventory of ABC Ltd. from the warehouse.
(C) Both a & b
(D) Seeking a management representation regarding inventory valuation and mentioning the fact regarding inventory being kept at the warehouse in the audit report.
QCS1.5External confirmation — direct response requirement
2 marks hard
Case: Ghan Shyam & Associates have been appointed as the statutory auditors of ABC Ltd. for the FY 2019-2020. The engagement partner, CA Ghan Shyam established the overall audit strategy and made the detailed plan with respect to the audit assignment of ABC Ltd. after discussing the same with the engagement team. The strategy adopted by Ghan Shyam & Associates consisted of relying on the internal control system of the company and the audit plan and programme were developed accordingly & executed by the engagement team. During the course of audit, the engagement partner, CA Ghan Shyam found that some…
Is management correct in asking the debtors to provide the reply of confirmation request of auditor to the General Manager of accounts department of the company?
(A) Yes, the management has correctly asked the debtors to respond directly to the GM of accounts department.
(B) No, management is not correct in asking for a direct response to GM of accounts department as external confirmation is the response obtained directly by the auditor.
(C) Yes, the management is correct in advising direct response to the GM of accounts department as this will ensure that only correct confirmation are provided to the auditors.
(D) No, management is not correct as this is the option of the auditor to see if the response to external confirmation is to be obtained by management or auditor himself.
QCS2.1Factors determining extent of audit sampling
2 marks hard
Case: RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed his audit team regarding the factors affecting the sample selection and the sample size. The team was also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj gave a detailed audit programme to his team. The audit programme with respect to the checking of accounts receivable and accounts payable consists of checking the accounts on sample basis. C…
Which of the following factors should not be considered by CA Raj in deciding the extent of checking while making the sample plan in case of UVW Ltd.?
(A) The size of UVW Ltd.
(B) The state of the internal control system of UVW Ltd.
(C) The tolerable error range decided in case of UVW Ltd.
(D) The competence of the engagement team.
QCS2.2Effect of internal control weakness on sample size
2 marks hard
Case: RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed his audit team regarding the factors affecting the sample selection and the sample size. The team was also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj gave a detailed audit programme to his team. The audit programme with respect to the checking of accounts receivable and accounts payable consists of checking the accounts on sample basis. C…
With respect to the weakness in internal control system of accounts receivable during the FY 2019-20, the audit team:-
(A) Should consider a larger sample size or 100% examination of accounts receivables.
(B) Should consider a smaller sample size of accounts receivables.
(C) Should not consider applying sampling techniques.
(D) Should give a disclaimer of opinion.
QCS2.3Obligatory nature of audit sampling
2 marks hard
Case: RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed his audit team regarding the factors affecting the sample selection and the sample size. The team was also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj gave a detailed audit programme to his team. The audit programme with respect to the checking of accounts receivable and accounts payable consists of checking the accounts on sample basis. C…
Statement 1: While conducting an audit, it is obligatory for the auditor to apply sampling.
Statement 2: There may be sometimes where test checking or sampling may not be suitable.
(A) Only statement 1 is true
(B) Only statement 2 is true
(C) Both the statements are true
(D) None of the statements is true
QCS2.4Audit sampling methods — stratified sampling
2 marks hard
Case: RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed his audit team regarding the factors affecting the sample selection and the sample size. The team was also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj gave a detailed audit programme to his team. The audit programme with respect to the checking of accounts receivable and accounts payable consists of checking the accounts on sample basis. C…
With respect to selecting sample for accounts receivable and accounts payable which method of selecting of sample is advised by CA Raj to the engagement team?
(A) Stratified Sampling method
(B) Monetary Unit Sampling method
(C) Haphazard Sampling method
(D) Interval Sampling
QCS2.5Response to systematic deviations in internal controls
2 marks hard
Case: RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed his audit team regarding the factors affecting the sample selection and the sample size. The team was also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj gave a detailed audit programme to his team. The audit programme with respect to the checking of accounts receivable and accounts payable consists of checking the accounts on sample basis. C…
With respect to the deviation identified by the auditor occurring on 9th and 10th of every month, what course of action should the audit firm adopt?
(A) RRM & Associates should ignore such deviation as it exists only on a very few instances during the entire year under audit.
(B) RRM & Associates should extend its audit procedures to such deviated transactions.
(C) RRM & Associates shall investigate the nature and causes of such deviations as such deviations may be intentional and may indicate the possibility of fraud.
(D) Both b & c
QMCQ.1Threats to auditor independence
1 marks easy
………….. is the threat which occurs when auditors are deterred from acting objectively with an adequate degree of professional skepticism.
(A) Familiarity threat
(B) Advocacy threat
(C) Self Review threat
(D) Intimidation threat
QMCQ.10Fraud risk factors
1 marks easy
Events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud are called as:
(A) Fraud risk factors
(B) misappropriation of assets
(C) Fraud opportunities
(D) eventual frauds
QMCQ.2Capital vs revenue expenditure
1 marks easy
Which of the following is an example of revenue expenditure?
(A) Wages on installation of Machinery
(B) Regular repairs incurred on PPE
(C) Legal expenses in purchase of land and building
(D) Freight inwards on purchase of PPE
QMCQ.3SA 320 — materiality and audit risk
1 marks easy
SA 320 on 'Materiality in Planning and Performing an Audit' requires that an auditor
(A) should not consider materiality and its relationship with audit risk while conducting an audit.
(B) should consider materiality and its relationship with audit risk while conducting an audit.
(C) should not consider materiality but should consider its relationship with audit risk while conducting an audit.
(D) should consider materiality but need not consider its relationship with audit risk while conducting an audit.
QMCQ.4SQC 1 — quality control inspection
1 marks easy
In relation to completed engagements, procedures designed to provide evidence of compliance by engagement teams with the firm's quality control policies and procedures is known as:
(A) Monitoring
(B) Inspection
(C) Subsequent Audit procedures
(D) Compliance procedures
QMCQ.5SQC 1 — audit documentation retention period
1 marks easy
As per SQC 1 the retention period for audit engagements ordinarily is no shorter than …………. from the date of the auditor's report.
(A) ten years
(B) five years
(C) seven years
(D) four years
QMCQ.6Joint audit — disagreement on opinion
1 marks easy
Which of the following is correct, in case of joint audit, where there is disagreement with regard to the opinion or any matters to be covered by the audit report?
(A) The auditors shall express their opinion in separate audit report.
(B) The audit report(s) issued by the joint auditor(s) shall make a reference to each other's audit report(s).
(C) Both (a) and (b) are correct
(D) The auditor who is having a separate opinion is bound by the opinion of the majority of the auditors and needs to issue a common audit report.
QMCQ.7Management assertions
1 marks easy
……………. refer to representations by management, explicit or otherwise, that are embodied in the financial statements, as used by the auditor to consider the different types of potential misstatements that may occur.
(A) Assertions
(B) Positive Confirmation
(C) Written representation
(D) Audit Evidence
QMCQ.8Those charged with governance
1 marks easy
The persons with responsibility for overseeing the strategic direction of the entity and obligations related to the accountability of the entity are:
(A) management
(B) Those charged with governance
(C) audit committee
(D) board of directors
QMCQ.9Audit risk components
1 marks easy
The risk that the financial statements are materially misstated prior to audit is called-
(A) Risk of material misstatement
(B) detection risk
(C) audit risk
(D) significant risk