Institute of Chartered Financial Analysts of India (ICFAI) University 2008 C.A Accounts _PCC_-_ – 2 : AUDITING AND ASSURANCE - Question Paper

PAPER – two : AUDITING AND ASSURANCE

ans all the ques.

ques. 1

State with reasons (in short) whether the subsequent statements are actual or False :(Answer any
ten)

(i) Procedural fault arises as a outcome of transactions having been recorded in a
fundamentally incorrect manner.

(ii) When inherent and control risks are low, an auditor can accept a lower detection risk.

(iii) Audit procedure and Audit technique are not 1 and identical thing.

(iv) An auditor can be appointed as 1st auditor of a newly formed company simply because
his name has been said in the Articles of Association.

(v) AAS-24 deals with responsibility of the auditor of the service organisation.

(vi) Interest accrued but not due on "Secured loans" is needed to be shown under
improper sub-heads under the head "Secured loans".

(vii) For the purpose of AAS-10 "Principal Auditor" means the partner of the firm signing the
Audit report.

(viii) The term 'fund' and 'reserve' can be used interchangeably.

(ix) An expert for the purpose of AAS-9 is a person, firm or association of persons
possessing special skill, knowledge and experience in auditing.

(x) CARO '2004 is also applicable to the audit of branch of a company, other than where the
company is exempt from the applicability of the order.

(xi) All the joint auditors are jointly and severally responsible for the work, which is not
divided und carried on jointly by all the joint auditors.

(xii) Compliance procedures are tests designed to find audit evidence as to completeness,
accuracy and validity of the data produced by accounting system. (10 ? two = 20 Marks)

ques. 2

As an auditor how would you react to the subsequent situations/comments?

(a) Director (Finance) of KK Ltd. informed their newly appointed statutory auditor that they
have sound Internal control system implemented by a renowned professional firm and he
is satisfied with its effectiveness and functioning and therefor, the statutory auditor
should concentrate on verifying only the routine books and financial statements.(8 Marks)

(b) TT Ltd. has suffered recurring losses due to steep fall in production and has negative net
worth. It's production head, an expert, have also left the company. Reply of the
management is inadequate to these developments and there is no sound action plan to
mitigate these situations. (6 Marks)

(c) PP Ltd., a garment exporter, asked their Internal auditor, a practicing chartered
accountant, to conduct physical verification of the year end inventory and the report of
such verification was handed over to the statutory auditor for their view and use. Can
Statutory auditor rely on such report? (6 Marks)


ques. 3

(a) elaborate the different assertions an auditor is concerned with while obtaining audit
evidence from substantive procedure? (6 Marks)

(b) What does AAS-3 say about utility, ownership, custody and retention of working papers?
(4 Marks)

ques. 4

(a) How would you assess the reliability of Internal control system in computerised
info system? (6 Marks)

(b) When does an auditor problem unqualified opinion and what does it indicate? (4 Marks)

ques. 5

(a) Briefly mention 5 important items which you would examine while verifying payment of
interest out of capital during construction. (5 Marks)

(b) What is the importance of having the accounts audited by an independent auditor?
(5 Marks)

ques. 6

(a) State any 6 important points to be examined by you, as an auditor, in verifying the
correctness of bank balance of an Educational Institution which deposits all its
collection/receipt in separate collection account of a bank. (6 Marks)

(b) Mention, any four, areas where surprise check can significantly improve the effectiveness
of an audit. (4 Marks)

ques. 7

How would you vouch/verify the following? (Answer any two)
(a) Advertisement Expenses.
(b) Sale of Scrap.

OR

Borrowings from Bank.
(c) Work in progress. (5 + five = 10 Marks)

ques. 8

Write short notes on the following: (Answer any two)
(a) Reliability of audit evidences.
(b) Audit against Rules and Orders.

OR

Advantages of Statistical sampling in Auditing.
(c) Contents of Audit Note-book. (5 + five = 10 Marks)

Earning:   Approval pending.