Q1Auditor's concerns in IT-dependent audit environment
0 marks easy
Case: SaviLees Limited is a listed Company which deals in the manufacture of Switches. Four employees with IT service providers handle IT transactions of the company on a time-sharing basis. The company's sales have been very high in the last financial year due to essential products it deals. The company is highly automated and is driven by IT systems. The controls that are used by the company have been updated in conjunction with the planning system since last five years. During a statutory audit of the Company, the Statutory Auditor is required to conduct the statutory audit. The Senior Auditor ap…
The auditor is concerned about:
(A) Increased complexity of transactions
(B) IT-rich environment
(C) Volume of transactions is low
(D) Company Policy (Compliance)
Q1IT Audit - Access Controls
1 marks easy
A type of super user access to information systems that enforces ties or to limits on using the system access in known as:
(a) Super access.
(b) Super user access.
(c) Unlimited access.
(d) Privileged access.
Q1Audit procedures and principles
7 marks hard
Indicate whether each of the following statements are true or false:
Q2Auditing - Fraud Detection and Prevention
1 marks easy
Which one of the following is an example of relation of payments:
(a) Making payments against fictitious vouchers.
(b) Adjusting unauthorized or fictitious retains, allowances, discounts, etc. to customer accounts and misappropriating amount paid by them.
(c) Making payments against vouchers, the amounts whereof have been inflated in order to cover any illicit payments, including them names of dummy workers, by affixing them in any other manner.
Q2Nature, Objective and Scope of Audit
0 marks easy
Discuss the fundamental principles of professional ethics relevant to the auditor when conducting an audit of financial statements. Discuss and explain the meaning of ethics.
Q3Auditing Standards - Documentation Retention
1 marks easy
_____ requires little to establish policies and procedures for the retention period for audit engagements voluntarily is no shorter than _____ from the date of the auditor's report, or if later, the date of the audit assignment.
(a) SA 200, audit documentation, seven years
(b) SA 220, engagement documentation, seven years
(c) SA 230, documentation, six years
Q3Nature, Objective and Scope of Audit
0 marks easy
The Code of Ethics for Professional Accountants, prepared by the International Federation of Accountants (IFAC), classifies the types of threats. Briefly explain in detail giving examples.
Q4Auditing - Independence and Auditor Threats
1 marks easy
The threat which occurs when the auditor promotes, or is perceived to promote the auditor's opinion to a point where people ought objectively is getting compromised.
Q4Audit Strategy, Audit Planning and Audit Programme
0 marks hard
Case: Mr. Anand, a Senior Partner of M/s Harsh Kapoor of Kanpur and Associates, wishes to develop an understanding of Sampurna Fabrics Ltd.
Mr. Anand, a Senior Partner of M/s Harsh Kapoor of Kanpur and Associates, wishes to develop an understanding of Sampurna Fabrics Ltd. Discuss the matters to be discussed in audit plan.
Q5Audit Strategy, Audit Planning and Audit Programme
0 marks easy
Case: You are being appointed as the auditor of Track Ltd. for the first time.
You are being appointed as the auditor of Track Ltd. for the first time. You wish to determine the materiality level and for that you have decided to determine the values of thresholds. Explain the whole. What are the factors which may affect the qualification of an appropriate benchmark?
Q5SA 320 Materiality in Planning and Performing an Audit
0 marks easy
Case: SA 320 'Materiality in Planning and Performing an Audit' prescribes the use of materiality while performing an audit. Determining materiality involves the exercise of professional judgment. A percentage is applied to a chosen benchmark as a starting point in determining materiality for financial statements as a whole. Evaluating factors that affect the identification of an appropriate benchmark include the following: (i) The element of the financial statements (for example, assets, liabilities, equity, revenue, expenses); (ii) Whether users rely on which the attention of the user is directed i…
Discuss the role of materiality in an audit.
Q6Audit Execution and Audit Evidence
0 marks easy
Case: While conducting the audit of Puttiny Limited, the statutory auditors collected written representations from the Management.
While conducting the audit of Puttiny Limited, the statutory auditors collected written representations from the Management. The audit was focused in addition to other audit evidence, on the representations collected. What is the importance of enquiry as one of the methods of Audit Evidence?
Q6SA 500 Audit Evidence - Inquiry
0 marks easy
Case: SA 500 defines inquiry as the process of seeking information of knowledgeable persons, financial and non-financial, both within the entity or outside the entity. Inquiry is used extensively throughout the audit process. Some inquiries may provide the auditor with information not previously obtained in substantive audit evidence. The communication of evidence obtained through inquiry is often of particular significant value. However, the auditor should note that the ability of individuals available to support management's intent may be limited.
Inquiry: As per SA 500 Audit Evidence
Q7Audit Execution and Audit Evidence
0 marks hard
Case: During a special limited audit conducted by a Chartered Accountant, ABC Company for the year ended 31.03.2022 is concerned with the presentation and disclosure of segment information included in Company's Annual Report.
During a special limited audit conducted by a Chartered Accountant, ABC Company for the year ended 31.03.2022 is concerned with the presentation and disclosure of segment information included in Company's Annual Report. GPS & Co. Limited wishes to understand what information on the segment reporting and what information have resulted in disclosure in accordance with the applicable financial.
Q8Audit Planning - Reporting Framework
5 marks medium
Reporting framework. Guide ICFAI & Co. with Examples of Matters that may be relevant when obtaining an understanding of the methods used by the management with reference to the Relevant Standards on Auditing.
Q9Risk Assessment - SA 300
5 marks hard
S.V.Industries Limited. Chartered Accountants, having competed the audit of Genuine Leaders Ltd has stated the assessing of true audit risk. This & Associates has started its engagement with the subsequently company at 31st March. Advise the company regarding the applicability of SA 300 and guidance with reference to SA2C1, wherever required.
Q10Internal Audit and Internal Controls
5 marks hard
Sabir Textile Ltd is an established player in the textile manufacturing sector. It has developed strong internal control in almost every area. It has appointed its own in-house Chartered Accountants for internal audit. The company's Internal Audit analyses the effectiveness with which the internal control of the company is operating and also makes suggestions for improvement in that internal control.
Q11Fraud Reporting - Companies (Audit and Auditors) Rules, 2014
5 marks hard
CA Firm & Co., auditors of company, Green Fabs Ltd., in the course of the performance of his duties as auditor, has reason to believe that an offence of fraud to the tune of Rs.1,25,00,000 has been committed in the company by its employees. CA Firm has decided to report the matter accordingly in accordance with the provisions of Rule 13 of the Companies (Audit and Auditors) Rules, 2014. Sub-rule (1) of the rule states that if an auditor of a company, in the course of the performance of his duties as an auditor, has reason to believe that an offence of fraud is being committed against the company by its officers or employees, the auditor shall report the matter to the Central Government.
Q1.2IT systems risks and controls
1 marks easy
Which of the following is a risk that arises from the use of IT systems?
(A) Direct data changes (backend changes)
(B) Limited/Moderated access
(C) Adequate segregation of duties
(D) Authorised access to data
Q12Auditor Independence and Resignation
5 marks hard
While conducting audit of Always Best Company Ltd, audits B of B.L Kapoor & Co. observes lot of errors, misstatement, e.g. false income etc., and considers these occurrences as suspicious. Discuss these through why question his ability to continue holding the audit. Advise the client.
Q1.3Relationship between control types
1 marks easy
The relationship between two controls is such that _____ are needed to support the designing of _____ and both are needed to ensure complete and accurate _____ of a processing function.
(A) IT Dependent Controls, General Controls
(B) Application Controls, General Controls
(C) General Controls, IT Dependent Controls
(D) General Controls, Application Controls
Q13Audit in Automated Environment
10 marks hard
With respect to audit in an automated environment, explain the following:
Q1.4Internal Financial Controls
1 marks easy
The Item Internal Financial Controls (IIFC) refers to the policies and procedures put in place by management for ensuring which of the following:
(A) accuracy and completeness of records
(B) effectiveness and efficiency of operations
(C) safeguarding of human resources
(D) prevention and detection of errors
Q14Internal Financial Controls
8 marks hard
Explain the meaning of Internal Financial Controls clearly stating reporting requirement with reference to audit on adequacy of internal financial controls. Also discuss about Internal Financial Controls with regard to adequacy of internal financial controls, especially on various types of Companies.
Q14Internal Financial Controls and IT Controls
0 marks easy
General ITC Controls: Are a type of internal control within organizations that help in mitigating risks that arise due to use of Information Technology and Information systems in a business. Explain how Internal Financial Controls (IFCs) encompass policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company policies, safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information.
Q1.5Data analysis in audit
1 marks easy
Data analysis can be used in testing of electronic records and data residing in IT systems using spreadsheets and specialized audit tools viz., IDEA and ACL. In perform which of the following?
(A) Evaluating impact of control deficiencies
(B) Compliance with applicable laws and regulations
(C) Authorized changes to system or programs
(D) Providing latest information
Q15Audit Sampling - Statistical Methods
5 marks medium
What are the advantages of Statistical sampling technique in auditing
Q15Statistical Sampling in Auditing
0 marks easy
Advantages of Statistical Sampling in Auditing: State the advantages which may be summarized as follows: (i) The amount of testing sample size does not increase in proportion to the increase in the size of the population tested. (ii) The sample selection is more objective and thereby more defensible. (iii) The method provides a means of estimating the minimum sample size associated with the audit evidence. (iv) It provides a means for deriving a 'calculated risk' and corresponding precision (sampling error) i.e. the probable difference in result due to the use of a sample in lieu of entire population.
Q16Sampling Risk and Erroneous Conclusions
5 marks medium
Sampling may can lead to types of erroneous conclusions. Explain clearly stating the type(s).
Q16Test of Controls vs Substantive Testing
0 marks easy
Discuss the differences between Test of Controls and Substantive Testing in the context of sampling. Explain how sampling risk can lead to two types of erroneous conclusions: (i) accepting an invalid conclusion when actually the auditor's conclusion is valid; and (ii) in the case of a test of controls, concluding that a control is less effective than it actually is, or in the case of substantive testing, concluding that a material misstatement does not exist when it does.
Q17Analytical Procedures - SA 520
5 marks medium
If analytical procedures performed in accordance with SA 520 identify fluctuations or relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount, how would the auditor investigate such
Q17Audit Evidence and Error Evaluation
0 marks easy
Errors: Discuss the relationships that are inconsistent with other relevant information or that differ from expected values by a significant amount. Explain how an auditor should investigate such differences by: (i) inquiring of management's responses; (ii) evaluating those responses; (iii) considering other audit evidence obtained during the course of the audit; and (iv) considering the performance of other audit procedures as necessary in the circumstances.
Q18Analytical Procedures - Evaluation of Expectations
5 marks medium
Discuss the matters relevant to the auditor's evaluation of whether the expectation can be developed sufficiently precisely to identify a misstatement that, when aggregated with other misstatements, would be detected by the planned audit procedures.
Q18Materiality in Auditing
0 marks easy
Materiality: Matters relevant to the auditor's evaluation of whether the expectation can be developed sufficiently precisely to identify a misstatement that, when aggregated with other misstatements, may cause the financial statements to be materially misstated.
Q19Audit of Financial Statement Items
10 marks hard
Explain how you will verify the items given while conducting an audit of an entity:
Q20Debt Restructuring and Audit Reporting
0 marks easy
While conducting audit of Air Space Ltd, the auditor observes that it has issued shares at discount to its creditors when its debt is converted into equity shares in pursuance of debt restructuring scheme in accordance with any guidelines specified by the Reserve Bank of India. The auditor should _________ before issuing an audit report on the financial statements prepared by the company and also arrange for the verification by the auditor.
Q20Companies Act 2013 - Share capital
5 marks hard
Case: Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares at a discount in its creditors when its debt is converted into shares in accordance with any guidelines or directions or regulations specified by the Reserve Bank of India under the Reserve Bank of India Act, 1934 or the Banking Regulation Act, 1949. Where any company fails to comply with the provisions of this section, such company and every officer who is in default shall be liable to a penalty not exceeding five lakh rupees, whichever is less, and the company shall also be liable to refund all monies …
Shares issued at a discount - According to Section 53 of the Companies Act, 2013, a company cannot issue shares at a discount except in the case of all issue of fresh equity shares given under Section 54 of the Companies Act, 2013.
Q2.1Auditing - Asset Recognition and Control
1 marks easy
Is the raw material lying in the warehouse of overtime Limited accounted for correctly in its books of account?
(a) No, since the same belongs to Mr. AM and should appear in the books.
(b) Yes, since the same is in possession of overtime Limited and was billed to it in the following month.
(c) It should not appear in the books since ICMR was not paid yet.
(d) It should not appear in the books of overtime Limited or Mr. AM and the new material should be disclosed as a note in the final accounts of both the entities.
Q21Auditor Appointment and Consent
0 marks easy
Before appointment a male under Section 139(1) of the Companies Act, 2013, he written consent of such person shall be made and _________ has been filed to see that the audit appointment is valid and that the person _________ the requirements and status clearly prescribed by Section 139(1) of the Act. In the rule 4 of the Companies Audit and Auditors Rules, 2014.
Q21Companies Act 2013 - Auditor appointment
5 marks hard
Case: Under Rule 4 of the Companies (Audit and Auditors) Rules, 2014, the said certificate must include: (a) the individual or the firm, as the case may be, is eligible for appointment and is not disqualified for appointment under the Act; (b) the proposed appointment is as per the term provided under the Act; (c) the proposed appointment is within the limits laid down by the authority of the Act.
Auditor appointment and authorized services - A company may only appoint auditors in accordance with the provisions of the Companies Act, 2013. Before an auditor's appointment is made, the written consent of the auditor to such appointment and a certificate from him or it that the appointment, if made, shall be in accordance with the conditions as may be prescribed, must be obtained from the appropriate regulatory bodies.
Q21Non-audit services, Section 144, Auditor independence
5 marks hard
Case: CA Lakshman is associated with CA Abhishek working with Insurance Services Limited. He offered actuarial services which were approved by the Board of Directors. Determine compliance with non-audit services restrictions under Section 144.
As per Clause (i) of Part A of 2020, the auditor is required to include a statement in the auditor's report regarding non-audit services. CA Lakshman is associated with CA Abhishek, who works with Insurance Services Limited for a term of 5 years. He has also offered additional services of actuarial which were approved by the Board of Directors. CA Lakshman is advised whether the services can be provided by him as an auditor. Identify which non-audit services listed below can be rendered by an auditor and which cannot be rendered as per Section 144 of the Act.
Q2.2Foreign Exchange Accounting
1 marks easy
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.
Q22Audit Planning and Actuarial Services
0 marks easy
As per the ICAI guidelines, an audit is planned in _________ of years. Further, the company obtained from the services of actuarial which were also approved by the board of directors. As an auditor, how would you deal with such a situation?
Q22Companies Act 2013 - Auditor restrictions
5 marks hard
Case: If the auditor provides any prohibited services are rendered directly or indirectly by the company of its holding company or subsidiary company, the following services cannot be provided:
Section 141 of the Companies Act, 2013 prescribes a person to be appointed as an auditor and has specifically been drawn out in the case of appointment of consulting and specialized services. Section 144 of the Companies Act, 2013 prescribed certain services not to be rendered by the auditor. An auditor appointed under this Act shall provide the company only such other services as approved by the Board of Directors or the audit committee.
Q22Property, Plant and Equipment, Intangible assets, Audit docu
5 marks medium
In relation to Property, Plant and Equipment, prepare a statement showing full particulars of intangible assets with the following details: Description of property, Gross value, Net book value, Whether property, plant or equipment were revalued, Period for which held in company name, and Reason for being held in name of company.
Q2.3Auditing Assertions - Fixed Assets
1 marks easy
Which of the following assertions with respect to fixed assets has not been complied with by the Company?
(a) Completeness
(b) Valuation
(c) Cut-Off
(d) Rights and Obligations
Q23CARO 2020 - PPE and Intangible Assets
0 marks easy
The auditor should ensure that the auditor should ensure under CARO 2020 related to PPE and Intangible assets. Explain in detail.
Q2.4Accounting Standards - Provisions
1 marks easy
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 event 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.
Q24Financial Statement Preparation and Auditor Evaluation
0 marks easy
The auditor shall evaluate whether the financial statements are prepared in accordance with the requirements of the applicable financial reporting framework. Explain in an audit manner.
Q24Auditor evaluation of financial statements, Accounting polic
8 marks hard
The auditor shall evaluate whether the financial statements are prepared in accordance with the requirements of the applicable financial reporting framework. This evaluation shall include consideration of the qualitative aspects of the entity's accounting practices, including indicators of possible bias in management's judgments. Evaluate the following aspects:
Q2.5Accounting Standards - Dividends
1 marks easy
Dividends are recognized in the statement of profit and loss only on fulfilment of which condition:
(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) All of the above
Q25Auditor Disagreement and SA 700
0 marks easy
When the auditor disagrees an opinion on the financial statements due to its inability to obtain sufficient appropriate audit evidence, the auditor must provide the description of the auditor's responsibilities required by SA 700. Explain.
Q26Bank Audit - NPA Categories
0 marks easy
In conducting audit of Banks, the auditor should recognize the requirements as regards to categories of NPA such as Sub-standards assets. Doubtful assets and loss assets. Explain in detail.
Q27Audit of Operating Expenses and Regulatory Compliance
0 marks easy
(a) For audit of operating expenses, the auditor should study and evaluate the system of internal control relating to expenses. (b) For compliance with the _________, the auditor should ensure that the companies for regulatory requirements for processing as contained in the various circulas have been fulfilled.
Q28Audit of Hotels - Pilfering and Internal Control
0 marks easy
Pilfering is one of the greatest problems in any hotel and the importance of internal control should be emphasized. Explain.