Institute of Chartered Financial Analysts of India (ICFAI) University 2010 C.A Chartered Accountant Auditing and assurance - Question Paper

4. As an auditor, what would you do in the subsequent situations ?
One customer from whom Rs.4 lakhs are recoverable for credit sales provide a motor car
in full settlement of the dues. The directors estimate that the market value of the motor
car transferred is Rs.4.20 lakhs. As on the date of the balance sheet the car has not
been registered in the name of the auditee.


5. (a) Reena Ltd received Rs.50 lakhs as grant from the State Government towards the
part cost of a specific machinery. The company credited the above sum of Rs.50
lakhs as income in its profit and loss account for the year. elaborate your views on
the accounting treatment of the above receipt of Rs.50 lakhs?
(b) As an Auditor, comment on the subsequent situation/statement:
JKT Ltd. having Rs.40 lacs paid up capital, Rs.9.50 lacs reserves and turnover of
last 3 consecutive financial years, immediately preceding the financial year
under audit, being Rs.4.90 crores, Rs.4.50 crores and Rs.6 crores, but does not
have any internal audit system. In view of the management, internal audit system is
not mandatory.



6. State with reasons your views on the following:
(a) Ram and Hanuman Associates, Chartered Accountants in practice have been
appointed as Statutory Auditor of Krishna Ltd. for the accounting year 2002-2003.
Mr. Hanuman holds 100 equity shares of Shiva Ltd., a subsidiary company of
Krishna Ltd.
(b) Mr. Ramadas, a fellow member of the Institute of Chartered Accountants of India,
working as Manager of Sivram & Co., a Chartered Accountant firm, signed the audit
report of Om Ltd. on behalf of Sivram & Co.


7. How will you, as an auditor, verify and value the subsequent ?
(a) Preliminary expenses
(b) Discount on problem of shares or debentures
(c) Contingent assets
(d) Liabilities


8. Write short notes on the following:
(i) Auditing around the computer
(ii) Auditing through the computer


9. Comment on the following:
(i) While finalising an audit you have to decide whether it is necessary to disclose
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receivables written off or advances written back as a separate item in the financial
statements. How will you proceed?
(ii) Materials have been issued on loan to other companies or contractors. Should such
materials be disclosed under inventories or under the head 'loans and advances'?
(iii) A company has disclosed the figures for raw materials consumption needed to be
disclosed in the notes to the profit and loss statement vide Schedule VI to the
Companies Act on working back or derived basis, i.e., by deducting closing stock
from the sum of opening stock and purchases.
(iv) A company has included shortages, losses and wastage in the figures for raw
materials consumption needed to be disclosed in the notes to the profit and loss
statement vide Schedule VI to the Companies Act.


10. provide your comments on "M/s Health Zone, a partnership firm, running a nursing home
have decided to discontinue you as an auditor for the next year and requests you to
handover all the relevant working papers of the previous year.


11. You are the auditor of a manufacturing company, whose year ends on 31st March. An
event occurred after the year ended, but before you complete the audit. The audit report
issued by you is dated 20th July, 2009. The sales ledger balance at 31st March, 2009
was Rs.90,000. By 20th July 2009 Rs.55,000 only had been received against this amount
as full and final payment.


12. An auditor intends to use a Generalised Audit Software (GAS) application for creditors.
discuss with the help of an example, the steps the auditors should take in this regard.


13. The management of Anita Limited suggested for quick completion of the statutory audit
that it would provide its representation about the receivables in terms of their recoverability.
The management also acknowledged to the auditors that the management would provide
their representation after scrutinizing all accounts diligently and they own responsibility
for any errors in these respects. It wanted auditors to complete the audit checking all
other important areas other than receivables. The auditor certified the account clearly
indicating in his report the fact of reliance he placed on representation of the
management.


14. How the work of an expert should be evaluated before accepted the identical as an Audit
evidence ?


15. (a) How does an auditor audit Government Expenditure?
(b) What categories of Companies are specifically exempted from the application of
Companies (Auditor's Report) Order, 2003?


16. (a) provide your comment on "The Central Government has appointed Mr. Sushil, a retired
Finance Director of a reputed company, a non-practising member of ICAI, as a
special auditor of MM Ltd., on the ground that the company was not being managed
on sound business principles. Mr. Ajay, MD of MM Ltd. feels, that the appointment
of Mr. Sushil is not valid as he does not hold a certificate of practice".
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(b) As a company auditor how would you react to the subsequent situation? Rs. five lakhs
paid by a pharma company to the legal advisor defending the patent of a product
treated as capital expenditure.


17. Mention the special steps involved in the audit of an Educational Institution.


18 Mention the special points in the case of an audit of the entity from Incomplete Records.


19. Mention any 8 special points which you as an auditor would look into while auditing
the books of a partnership firm.


20. Comment on the "Responsibility for properly determining the volume and value of
inventories rests with the management of the entity".

Earning:   Approval pending.