Institute of Chartered Financial Analysts of India (ICFAI) University 2007 C.A Accounts -PCC- Auditing And Assurance – 1-.doc - Question Paper

PROFESSIONAL COMPETENCE COURSE

GROUP – I

Model Test Paper – BOS/PCC/ Auditing And Assurance – 1/2007

Time : three hours Maximum Marks : 100

PAPER – two : AUDITING AND ASSURANCE

ans all the ques.

1. ans any ten ques..

(a) SG Ltd. is a subsidiary of a Government company. Can it be called a Government
Company?

(b) SBC Ltd. is a Company in which 26% of the subscribed share capital is held by the
Central Government. Whether it is needed to appoint / reappoint the auditor by
special resolution?

(c) ‘Pratham’ is the 1st auditor of company Nirman Pvt. Ltd. He is removed from office
before the expiry of his term. Is obtaining prior approval of Central Government is
necessary?

(d) ‘Dharm Sanstha’ is a company licenced to operate under part 25 of the
Companies Act, 1956. Will CARO, 2003 be applicable to it?

(e) The internal auditor as well as the statutory auditor are both appointed by the
members in general meeting. Comment.

(f) ‘Child Treat’ is an NGO, registered under the Companies Act, 1956. It maintains its
books of accounts on cash basis. Would it amount to non compliance of the
provision of the Companies Act?

(g) Karmen did the audit of XX Pvt. Ltd. Directors of XX Pvt. Ltd. claim that audit
working papers are the property of the company. Is the claim proper?

(h) ‘D’ a CA in practice disclosed info acquired in the course of his professional
engagement to his friend ‘P’ without the consent of his client. Comment.

(i) What is Control Risk?

(j) ACC & Co. is a partnership firm. At the time of admission of D, goodwill of the firm is
raised to Rs. 100000, by passing subsequent entry;
Goodwil a/c Dr. 100000
A’s Capital a/c 33334
B’s Capital a/c 33333
C’s Capital a/c 33333
Is the entry passed by ACC & Co. in confirmity with AS 10?

(k) Fixed assets have been revalued and the resulting surplus has been adjusted
against the brought forward losses. Comment.

(l) An auditor purchased goods worth Rs.1,500 on credit from a company being audited
by him. The company allowed him 1 month’s credit, which it normally allowed to
all known customers.Comment. (10 X two = 20 Marks)

2. (a) An entity’s continuance as a going concern is usually presumed in the preparation of
financial statements. However there are a few indicators questioning the
appropriateness of the going concern assumption. elaborate those indicators? (10 Marks)

(b) What is the purpose of the AAS 20 (Knowledge of Business). State the sources of
obtaining knowledge of the industry and the entity. (10 Marks)

3. (a) AB Pvt. Ltd. maintains its books of accounts in EDP environment. According to Mr.
M, the Chief Accountant of AB Pvt. Ltd., ‘ auditing in an EDP environment is simpler
since the trial balance always tallies.’ Analyse critically his statement. (5 Marks)

(b) What is the meaning of the term ‘ exam in Depth’? discuss with an example. (5 Marks)

4. (a) While doing audit of a concern, you observe that there are a few cheques received
by the concern on the last date of the financial year, but they have not been
deposited with the bank on that day. No entry is passed for these cheques received
by the auditee on the last day of the year. Comment. (6 Marks)

(b) How will you vouch the “Goods sent out on sale or return basis”? (4 Marks)

5 State the special steps involve in the audit of a hospital. (10 Marks)

6. (a) CG Ltd. is a company in which 25% of the paid up share capital is held by a State
Government and 26% of the paid up share capital is held by a Government
Company.Who will appoint the auditor of CG Ltd.?Also state other categories of
companies to which provision of part 619B is applicable. (6 Marks)

(b) Books of accounts of ST Pvt. Ltd. were audited by CA. Sidharth.After completing
audit he issued an unqualified audit report. What does an unqualified audit report
indicate? (4 Marks)

7. (a) CNT Ltd. has raised money by problem of shares to meet the cost of construction of
building and plant. Building and plant cannot be made profitable for a long time.
CNT Ltd. wants to pay interest on paid up share capital during construction period.
Is there any provision in the Companies Act, 1956 under which it can pay interest on
paid up share capital during construction period?

OR

SW Ltd. wants to problem sweat equity shares. discuss the meaning of sweat equity
shares and conditions to be fulfilled for issuing these kind of equity shares. (6 Marks)

(b) How auditing is related to financial management? (4 Marks)

8. Write short notes on any 2 of the following:
(a) Work performed by others
(b) Limitation of scope
(c) Qualities of auditors (5 x two = 10 Marks)

Earning:   Approval pending.