QA1Those 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
QA10Threats to auditor independence
1 marks easy
Which of following is not a threat to independence of auditor?
(A) Self-interest threats
(B) Self-review threats
(C) Advocacy threats
(D) Peer group threats
QA2Audit planning for commodity futures dealer
1 marks easy
CA Tarini is in process of formulating audit plan for conducting audit of a company engaged in business of dealing in commodity futures. Which of the following is not likely to be an appropriate audit procedure to be included in audit plan for the abovesaid company?
(A) Verification of turnover of company
(B) Verification of cost of raw material consumed
(C) Examination of company's accounting policy for revenue recognition
(D) Verification of contract notes with brokers
QA3Audit documentation – SA 230
1 marks easy
A company has started its manufacturing operations from a newly constructed building. CA Z is statutory auditor of company. Which of following is not likely to be an example of audit documentation?
(A) E-mail correspondence with CFO of company concerning significant matters
(B) Audit programme
(C) Response to external confirmation requests
(D) Structural engineer's report on strength of building
QA4Going concern – operating indicators
1 marks easy
Following are examples of events or conditions that may cast significant doubt on an entity's ability to continue as a going concern. Which of following is an example of operating event/conditions?
(A) Adverse key financial ratios
(B) Inability to pay creditors on due dates
(C) Indications of withdrawal of financial support by creditors
(D) Shortages of important supplies
QA5Elements of audit report – SA 700
1 marks easy
Which of following is not an element of audit report in accordance with SA 700?
(A) Title
(B) Addressee
(C) Audit strategy
(D) Auditor's opinion
QA6Disclaimer of opinion – SA 705
1 marks easy
An auditor disclaims opinion when_________________?
(A) He is unable to obtain audit evidence and concludes that possible effects on financial statements of undetected misstatements could be material.
(B) He is unable to obtain audit evidence and concludes that possible effects on financial statements of undetected misstatements could be both material and adverse.
(C) He is unable to obtain audit evidence and concludes that possible effects on financial statements of undetected misstatements could be both material and pervasive.
(D) He is unable to obtain audit evidence and concludes that possible effects on financial statements of undetected misstatements could be both material and perverse.
QA7UDIN applicability
1 marks easy
UDIN (Unique Document Identification Number) is required to be stated by practising Chartered Accountant on:
(A) Each audit report only
(B) Each audit report and each certificate
(C) Each audit report issued under Companies Act, 2013 only
(D) Each audit report issued under Companies Act, 2013 only and each certificate
QA8CARO 2020 applicability
1 marks easy
For which of following company, provisions of CARO, 2020 would be applicable?
(A) Boost Up Training (OPC) Private Limited
(B) RCI Bank Limited
(C) PST Industries Limited
(D) Moon Insurance Limited
QA9CARO 2020 – fraud reporting threshold
1 marks easy
While reporting under CARO, 2020, it is duty of statutory auditor of company to report:
(A) Fraud of less than ₹1 crore committed by officers or employees of company during the year
(B) Fraud of ₹1 crore or more committed by officers or employees of company during the year
(C) Fraud of ₹5 crore or more committed by officers or employees of company during the year
(D) Any fraud by the company or on the company noticed or reported during the year
QB1Mixed audit concepts – correct or incorrect statements
14 marks very hard
Examine with reasons (in short) whether the following statements are correct or incorrect: (Attempt any 7 out of 8)
QB2Absolute assurance, internal controls testing, related parti
14 marks very hard
Discuss the following:
QB3Risk of material misstatement, auditor rotation under Compan
14 marks very hard
Answer the following:
QB4Basis for opinion, misappropriation of assets, depreciation
14 marks very hard
Answer the following:
QB5Audit sampling, adverse vs qualified opinion, inventory righ
14 marks very hard
Answer the following:
QB6Bank auditor independence, hotel internal controls, hotel in
14 marks very hard
Answer the following:
Q1.1Inherent risk assessment
2 marks hard
Case: CA Sanjoy is conducting audit of PETA Education Solutions Private Limited for the first time. The company is engaged in providing solutions to students appearing for competitive exams under engineering and medical streams. Company's business is operated from physical centres spread in many states of the country. However, of late, number of aspirants availing company's services are shrinking due to emergence of new competitors and inability of company to switch to new technologies available in market to render its services. The company had taken bank loans in past years for expansion of its phy…
After studying description of the company and its nature of operations, which of following statements is most appropriate?
(A) Inherent risk for revenue and profit assertions is likely to be lower.
(B) Inherent risk for revenue and profit assertions is likely to be higher.
(C) Inherent risk for revenue and profit assertions cannot be assessed from given situation.
(D) There does not exist inherent risk for revenue and profit assertions in described situation.
Q1.2Control environment indicators
2 marks hard
Case: CA Sanjoy is conducting audit of PETA Education Solutions Private Limited for the first time. The company is engaged in providing solutions to students appearing for competitive exams under engineering and medical streams. Company's business is operated from physical centres spread in many states of the country. However, of late, number of aspirants availing company's services are shrinking due to emergence of new competitors and inability of company to switch to new technologies available in market to render its services. The company had taken bank loans in past years for expansion of its phy…
The case scenario describes a situation of leaving of experienced faculties, high employee turnover and absence of training programmes for staff of the company. Such indicators are an example of ____________?
(A) Unsatisfactory risk assessment process used by the company
(B) Unsatisfactory control environment of the company
(C) Unsatisfactory performance reviews carried out by the company
(D) Unsatisfactory system of segregation of duties in the company
Q1.3Reliance on internal controls over revenue
2 marks hard
Case: CA Sanjoy is conducting audit of PETA Education Solutions Private Limited for the first time. The company is engaged in providing solutions to students appearing for competitive exams under engineering and medical streams. Company's business is operated from physical centres spread in many states of the country. However, of late, number of aspirants availing company's services are shrinking due to emergence of new competitors and inability of company to switch to new technologies available in market to render its services. The company had taken bank loans in past years for expansion of its phy…
The auditor is planning to test company's system for booking revenue in its books of accounts. Identify the correct statement in this regard:
(A) He is likely to place greater reliance on controls relating to booking of revenue.
(B) He is likely to place lower reliance on controls relating to booking of revenue.
(C) Reliance placed by him on controls relating to booking of revenue would be unaffected due to reduction in contractual costs by company.
(D) Reliance placed by him on controls relating to booking of revenue would be unaffected due to shrinking number of aspirants.
Q1.4Detection risk and substantive testing
2 marks hard
Case: CA Sanjoy is conducting audit of PETA Education Solutions Private Limited for the first time. The company is engaged in providing solutions to students appearing for competitive exams under engineering and medical streams. Company's business is operated from physical centres spread in many states of the country. However, of late, number of aspirants availing company's services are shrinking due to emergence of new competitors and inability of company to switch to new technologies available in market to render its services. The company had taken bank loans in past years for expansion of its phy…
The auditor has increased area of 'substantive checking' in the company. It is due to the reason that ________________
(A) he wants to lower detection risk
(B) he wants to lower control risk
(C) he wants to raise sample risk
(D) he wants to lower inherent risk
Q1.5Auditor's business risk
2 marks hard
Case: CA Sanjoy is conducting audit of PETA Education Solutions Private Limited for the first time. The company is engaged in providing solutions to students appearing for competitive exams under engineering and medical streams. Company's business is operated from physical centres spread in many states of the country. However, of late, number of aspirants availing company's services are shrinking due to emergence of new competitors and inability of company to switch to new technologies available in market to render its services. The company had taken bank loans in past years for expansion of its phy…
The auditor does not want to suffer from probable adverse publicity or loss of professional goodwill. Such a situation is indicative of _____________?
(A) audit risk
(B) auditor's business risk
(C) auditor's detection risk
(D) non-sampling risk
Q2.1Inventory ownership – third-party goods in custody
2 marks hard
Case: You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC & Company have been appointed as the statutory auditors of Onetime Limited, a public company which manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has been exporting the clocks since past two years. However, the domestic sales have contributed towards major source of revenue for the Company. One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent some raw material to the Company for storage in their warehouse i…
Is the raw material lying in the warehouse of Onetime Limited accounted for correctly in its books of account?
(A) No, since the same belongs to Mr. AM and should appear in his books.
(B) Yes, since the same is in possession of Onetime Limited and was billed to it the following month.
(C) It should be shown in the books of both Onetime Limited and Mr. AM.
(D) It should not appear in the books of Onetime Limited or Mr. AM and the raw material should be disclosed as a note in the final accounts of both the entities.
Q2.2Foreign currency debtors – year-end exchange rate
2 marks hard
Case: You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC & Company have been appointed as the statutory auditors of Onetime Limited, a public company which manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has been exporting the clocks since past two years. However, the domestic sales have contributed towards major source of revenue for the Company. One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent some raw material to the Company for storage in their warehouse i…
Which exchange rate is considered for accounting of foreign debtors at the year end?
(A) Exchange Rate on the date of the invoice.
(B) Exchange Rate on the last day of the financial year.
(C) Exchange Rate on the date of shipment of the products to the customer.
(D) Exchange Rate on the date of delivery of the products to the customer.
Q2.3PPE management assertions – Rights and Obligations
2 marks hard
Case: You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC & Company have been appointed as the statutory auditors of Onetime Limited, a public company which manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has been exporting the clocks since past two years. However, the domestic sales have contributed towards major source of revenue for the Company. One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent some raw material to the Company for storage in their warehouse i…
Which of the following management assertions is not satisfied with respect to Cars included in the PPE items by the company?
(A) Existence
(B) Valuation
(C) Completeness
(D) Rights and Obligations
Q2.4Recognition criteria for provisions – AS 29
2 marks hard
Case: You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC & Company have been appointed as the statutory auditors of Onetime Limited, a public company which manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has been exporting the clocks since past two years. However, the domestic sales have contributed towards major source of revenue for the Company. One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent some raw material to the Company for storage in their warehouse i…
Which of the following condition is not required to be met for recognizing a provision?
(A) When a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity.
(B) When an entity has a present obligation (legal or constructive) as a result of a past event.
(C) A reliable estimate can be made of the amount of the obligation.
(D) When it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Q2.5Recognition of dividend income
2 marks hard
Case: You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC & Company have been appointed as the statutory auditors of Onetime Limited, a public company which manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has been exporting the clocks since past two years. However, the domestic sales have contributed towards major source of revenue for the Company. One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent some raw material to the Company for storage in their warehouse i…
Which of the following conditions is not necessary for recognising dividends in the statement of profit and loss of Onetime Ltd.?
(A) the entity's right to receive payment of the dividend is established.
(B) it is probable that the economic benefits associated with the dividend will flow to the entity.
(C) the amount of the dividend can be measured reliably.
(D) payment of income tax on dividends received