Q1Section 140 Companies Act 2013 - Auditor penalties and punis
0 marks hard
Case: Post Inc Case Co. was appointed as the auditor of PS Ltd. at the remuneration of ₹1,40,000. However, costs about ₹1,00,000 for months of continuing recruitment revenue. Post Inc wished to hold his auditor, along with for to the new place. Thus, he resigned from the company and did not perform his responsibilities relating to filing of statements to the company and the register indicating the fee and damages for the default.
Post Inc Case Co. was appointed as the auditor of PS Ltd. at the remuneration of ₹1,40,000. However, costs about ₹1,00,000 for months of continuing recruitment revenue. Post Inc wished to hold his auditor, along with for to the new place. Thus, he resigned from the company and did not perform his responsibilities relating to filing of statements to the company and the register indicating the fee and damages for the default. How much fee may he be punishable under section 140(5) for non-compliance of section 140(2) of the Companies Act, 2013?
Q1Audit report qualities
0 marks easy
An audit report according to the wishes articulated by M1, if in this situation which essential quality of the audit report is in question?
(a) Professional Competence
(b) Attendance
(c) Professional Skepticism
(d) Due care
Q1Nature, Objective and Scope of Audit
0 marks easy
State with reason (in short) whether the following statements are true or false:
Q2Auditor threats
0 marks easy
The relationship with the client where they end up being too sympathetic to the client's interests.
(a) Advocacy threats
(b) Self Review threats
(c) Intimidation threats
(d) Familiarization threats
Q2Nature, Objective and Scope of Audit
0 marks easy
Chapter 1: Nature, Objective and Scope of Audit
Q3Governance structure
0 marks easy
The person with responsibility for overseeing the strategic direction of the entity and responsibility of the entity are:
(a) management
(b) those charged with governance
(c) audit committee
(d) board of directors
Q4IT system risks
0 marks easy
Which of the following is a risk that arises from the use of IT systems?
(a) Direct data charges (backend charges)
(b) Logical/Networked access
Q5Contingent liabilities and provisions
0 marks easy
A company is engaged in manufacturing of electric two-wheelers. During the year, a customer has gone to court due to incidental fire in battery-operated vehicle. The damages claimed are likely to be ₹5 lakhs. The company meets that the incident was due to improper maintenance. It is not yet decided to disclose it in the financial statements. The company's lawyers advise that it is probable that company is not likely to be held liable. It will likely be reflected in financial statements of company under___.
(i) Provisions
(ii) Contingent liabilities
(iii) Other current Liabilities
Q5Audit Strategy and Reporting Objectives
0 marks easy
In establishing the overall audit strategy, the auditor shall understand the reporting objectives of the entity. Explain.
Q7Audit Evidence - Use of Expert
0 marks hard
Case: LLI Ltd used the services of an expert for the purpose of physical verification of its inventory, which is appearing in the financial statements of the company at ₹ 75 Crores.
Discuss the broad parameters auditor would take into consideration while deciding about using the work performed by the Management's Expert in physical verification.
Q8Audit Evidence (SA 500)
0 marks easy
SA 500 - 'Audit Evidence', explains what constitutes audit evidence in an audit of financial statements. Discuss the types and fields of accounting records and other information generally available to the auditor and the nature of financial statements. Explain and discuss the meaning of Audit Evidence in detail.
Q10Risk of Material Misstatement
0 marks easy
Risk of material misstatement refers to the risk that the financial statements are materially misstated prior to an audit. Discuss the levels at which this risk exists.
Q1.1Financial statement disclosure requirements, Ind-AS
1 marks easy
Case: Case Scenario - 1: A company's manufacturing facility and attached land is pledged with a bank as security for a term loan taken. The company repaid the item loan on April 23, 2022 after satisfying the charge.
Keeping in view description regarding full payment of item loan on April 23 taken from a bank in April 2022 on satisfaction of charge, which of the following is correct?
(A) The above fact may be disclosed by the company's management in its financial statements as discretion along with reasons as such standards would bring transparency
(B) The above item along with reasons is required to be disclosed by the company in its financial statement in accordance with requirements of Ind-AS
(C) The above item along with reasons is required to be disclosed by the company in its financial statement in accordance with requirements of Ind-Companies
(D) The above fact is not required to be disclosed as item loan has already been repaid and so the company did not utilize long-term borrowing
Q11Fraud and Responsibilities of the Auditor
0 marks easy
Fraudulent financial reporting often involves management override of controls that otherwise may operate to prevent or detect fraud effectively. Illustrate the entire techniques by which Management overrides controls.
Q1.2Audit assertions, verification of borrowings
1 marks easy
Case: Case Scenario - 1
The company's short-term borrowing has increased during the year 2022-23 as compared to last year. One of the following assertions is most relevant to verification of short-term borrowing which one you think is correct?
(A) Existence
(B) Occurrence
(C) Completeness
(D) Valuation
Q1.2Revenue assertions and substantive audit procedures
0 marks easy
The team wants to ensure that revenues of company are not overstated. Which of the following is an audit step in this regard?
(A) Obtaining confirmations from customers
(B) Testing of sales invoices and their reconciliation with revenue stated in statement of profit & loss
(C) Reviewing credit notes issued by company post year end
(D) Reviewing debit notes issued by company post year end
Q12Indicators of Fraud
0 marks easy
Write the circumstances that indicate the possibility of fraud to be problematic or unusual.
Q1.3SA 501, inventory audit procedures
1 marks easy
Case: Case Scenario - 1
As regards item's attendance at physical inventory count process of company's inventories in accordance with SA 501 is concerned, which of following is a relevant procedure?
(A) Inspection of inventories
(B) Checking appropriateness of method employed for valuation of inventories
(C) Evaluating management's instructions for recording results of physical inventory count
(D) Performing test counts
Q13Audit in an Automated Environment
0 marks easy
When a business operates in a more automated environment, we are likely to see several business functions and activities happening within the systems. List the business functions and activities happening within the systems.
Q1.4Trade receivables, audit risk assessment
1 marks easy
Case: Case Scenario - 1
The company's trade receivables have increased during the year 2022-23 as compared to last year. In such circumstances is most appropriate regarding understanding of Karki on the issue?
(A) The view of Karki is correct and if has led to increased audit risk petering to the client's past deduction or reappearance
Q14Audit in an Automated Environment
0 marks easy
The auditor should have understanding of the Company's automated environment.
Q16Audit Sampling - Projection of Misstatement
0 marks easy
The auditor is required to project misstatement for the population to obtain a broad view of the scale of misstatement. Explain in detail.
Q17Audit Procedures - Comparative Analysis
0 marks hard
Case: Powers Limited presented in financial statements for the F.Y. 2022-2023 by auditor for expressing an opinion thereon. The auditor while carrying out the audit started comparing this year with the previous years.
What is auditing trying to achieve by carrying out those comparisons?
Q18Audit Procedures - Substantive Analytical Procedures
0 marks easy
While designing and performing substantive analytical procedures, either alone or in combination with other procedures, may form the auditor's substantive procedures in accordance with SA 330. The auditor shall determine the suitability of particular substantive analytical procedures for given assertions, taking account of the assessed risk of material misstatement and tests of details, if any, for broad assertions. Discuss.
Q19Payment Verification and Audit Documentation
0 marks easy
Examination – In depth of the payment made is omitted. The Audit Assistant of M/s Ltd Co. would verify the following documents of UMP Fraud is sent in case of payment: (i) The invoice and statement of account received from the supplier. (ii) The cheque and the relevant record showing that the goods were received. (iii) The Goods Received Note and Inspection Certificate showing that the goods on receipt were checked and inspected. (iv) The copy of the original order and authority showing that the goods in fact were ordered by authority when was compared to the bill.
Q20Hire Purchase Agreements and Cut-off Procedures
0 marks easy
State with reasons the accuracy of the following: 1. Hire purchase agreement is in writing and is signed by all parties. 2. Hire purchase agreement specifies clearly: (i) the purchase price of the goods to which the agreement relates; (ii) the cash price of the goods, that is to say, the price at which the goods may be purchased by the lender for cash; (iii) the rate of interest which is to be charged on hire-purchase price from the point where it is payable; and (iv) the number of instalments by which the hire-purchase price is to be paid, the amount of each of those instalments, and the date, or the mode of determination of the date, on which each of those instalments and the place where it is payable; and (v) to attach the agreement relates, in a manner sufficient to identify them. 3. Accounts, other than sales, purchase and inventory are not usually affected by the continuity of the business and therefore, this arrangement is generally applied only to sales, purchase and inventory. 4. For efficient application of the cut-off procedure, the procedures are adequately followed and ensure that: (i) Goods purchased are recorded in the accounts during the period they are received and not when they are ordered; (ii) Sales are recorded in the accounts during the period in which they have been dispatched or delivered to the buyer and not when the order is received or when payment is received. 5. Goods Returned: The purchase returns and sales returns received in the form of credit memos or adjustment notes will be entered the same way, i.e., purchase returns inventory received are considered to be purchased/sold.
Q20(a)Audit of Financial Statements - Dividend Verification
0 marks easy
As an auditor, how will you verify the receipt of dividends from a company along with the purchase transaction in the case of an entity.
Q20(b)Company Audit - Transaction Segregation
0 marks easy
A prior appointment of a limited company has not segregated transactions of one period from the other in the invoicing period. As an Auditor, what the correct procedure to be followed by it?
Q2.1Types of audit risk - control risk vs sampling risk
0 marks easy
Case: DOS Solutions Private Limited - A company engaged in manufacturing and supply of DOS Solutions. The auditor is reviewing control testing procedures, including verification of trade receivables and payables, and arithmetical accuracy of aging schedules.
When controls over placing purchase orders are not being followed strictly and controls are less effective than they actually are, which of the following statements is true?
(A) It is a sampling risk and might lead to auditor expressing inappropriate opinion upon observing this result
(B) It is a sampling risk and indicates inadequate details were issued with auditor
(C) It is a control risk and affects audit effectiveness
Q21Companies Act 2013 - Government Company Auditor Appointment
4 marks medium
Appointment of Subsequent Auditor of a Government Company: As per Section 139(1) of the Companies Act, 2013, in the case of a Government company or any company wholly owned or controlled, directly or indirectly, by the Central Government, State Government, or any other body corporate owned or controlled by the Central Government or State Government and partly by one or more State Governments, the Comptroller and Auditor-General of India shall, on behalf of a financial year, appoint an auditor duly qualified to be appointed as an auditor of a company. The auditor shall continue to hold office till the conclusion of the financial year, who shall hold office till the conclusion of the annual general meeting.
Q2.2Sampling and audit findings terminology
0 marks easy
Case: DOS Solutions Private Limited - A company engaged in manufacturing and supply of DOS Solutions. The auditor is reviewing control testing procedures, including verification of trade receivables and payables, and arithmetical accuracy of aging schedules.
The auditor has tested 20 sample wage sheets in different sections of the company and finds that one wage sheet has not been signed by a authorized officer of the company. It represents:
(A) Misstatement
(B) Deviation
(C) Tolerable rate of deviation
(D) Actual rate of deviation
Q22Auditor's Report - Required Matters
0 marks easy
As per Section 143(3) of the Companies Act, 2013, the auditor's report shall also include such other matters as may be prescribed by Rule 11 of the Companies (Audit and Auditors) Regulations, 2014. What other matters are required to be included in the report?
Q22Auditor's Report - Nidhi Company Requirements
8 marks hard
As per the Companies (Audit and Auditors) Rules, 2014, following matters are required to be included in auditor's report relating to Nidhi Company, besides the other matters to be included in auditor's report, as the case may be:
Q2.3Audit sampling methods
0 marks easy
Case: DOS Solutions Private Limited - A company engaged in manufacturing and supply of DOS Solutions. The auditor is reviewing control testing procedures, including verification of trade receivables and payables, and arithmetical accuracy of aging schedules.
Which method of selecting samples for verification of trade receivables has been planned by auditor?
(A) Simple random sampling
(B) Systematic sampling
(C) Block sampling
(D) Stratified sampling
Q23CARO 2020 - Auditor's Report Matters
0 marks easy
What are the matters to be included in the auditor's report as per CARO, 2020 regarding (i) NGO Company. (ii) Transactions with related parties.
Q23CARO 2023 - Nidhi Company Audit Matters
6 marks medium
As per clause (iii) of CARO 2023, the following matter is required to be included in the auditor's report relating to Nidhi Company:
Q2.4Types of audit risk - sampling vs non-sampling risk
0 marks easy
Case: DOS Solutions Private Limited - A company engaged in manufacturing and supply of DOS Solutions. The auditor is reviewing control testing procedures, including verification of trade receivables and payables, and arithmetical accuracy of aging schedules.
The auditor has decided to merely verify arithmetical accuracy and reconciliation of aging schedule relating to trade payables. The use of above audit procedure can lead to:
(A) Sampling risk
(B) Non-sampling risk
(C) Inherent risk
(D) Control risk
Q24Audit Report - Key Audit Matters
0 marks easy
Communicating key audit matters in the auditor's report is in the context of the auditor whether such audit matters in the auditor's report is not considered as a substitute or alternative for a number of audit procedures. What are these items?
Q24SA 701 - Key Audit Matters Communication
5 marks medium
As per SA 701, 'Communicating Key Audit Matters in the Auditor's Report', the auditor should prepare and communicate key audit matters that are highlighted in the auditor's report are:
Q2.5Inherent limitations of audit
0 marks easy
Keeping in view inherent limitations of audit of financial statements, which of following statements is likely to be most appropriate?
(a) Due to inherent limitations of audit, auditor obtains conclusive audit evidence.
(b) Due to inherent limitations of audit, subsequent discovery of material misstatement in financial statements, which was conducted in accordance with SAs, does not indicates a failure of audit.
(c) Due to inherent limitations of audit, auditor can be satisfied with loss than conclusive audit procedures.
Q25Auditor's Report - Opinion Modification
0 marks easy
When the auditor modifies the opinion on the financial statements, explain the amendments he should make in this section.