Institute of Chartered Financial Analysts of India (ICFAI) University 2010 C.A Chartered Accountant final Auditing . - Question Paper
CA final Auditing Paper Nov.2010
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Roll No.
Total No. of Questions - 7 Tolai No. of Printed Pages - 4
Time Allowed - 3 Hours Maximum Marks - 100
Answers to questions are to be given only in English except in the ease of candidates who have opted lor Hindi medium. If a candidate has not opLed for Hindi medium, his answers in Hindi will
not be valued.
Question No. 1 is compulsory. Answer any five from the rest.
M arks
1. Comment on the fallowing :
(a). A Co. Ltd. has not included in the Balance Sheet as on 31-03-2010 a sum of 5 ? 1.50 crores being amount in the arrears of salaries and wages payable to the staff for the last 2 years as a result of successful negotiations v/hicVi were going
on during the last 18 months and concluded on 30-04-2U1U. The auditor wants to sisn the said Balance Sheet and give the audit report or 31-05-2010. The auditor came to know the result oflhe negotiations on 15-05-2010.
(b) B Co, Ltd. is engaged in the business of developing mass scale housing projects 5 including development of small commercial complexes. The flats/commercial spaces are booked by the public and are allot Led by way of allotments letter to each allottee. Major construction activities pertaining to buildings are undertaken after allotment is over. Alter completing the construction, possession of flats/commercial spaces is given to allottees by executing legal document. The CEO of the B Co. Ltd. says that AS 7 is not applicable to the company.
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(c) In the noles to accounts of C Co. Ltd. as on 31-03-2010 Note no, 11 states that 5 Certain machinery items arcjy.in.g accustoms .warehouses and company-has paid ?_900 lakhs ti to_j0-0fr-2009 as detention charges, out of wliicluUjLinipf ? 580 lakhs is writlen back durinsjhe year 2009-10 based on scttlemenLwtth [heTonTedlmtlioriricm respect ca_m_ajor spares_of_maduncry. for the rernaftiTnmachTneryTtems negotiations are pending and a provision of f 44 lakhs is made. As such total amount of? 364 lakhs paid/provided on account, of detention charges have been capitalized and included in the Fixed Assets/Capital work in progress. The management is of Lhe view that these expenses arc directly attributable to tbe_ac_quisi1;ion of the relatedJixed Asset.
HOT P-T.G.
(d) During the course of audit ofD Co. Ltd. you as an auditor have observed that Truer Corporate deposit of ? 50 lakhs has been overdue. The D Co. Ltd, have disclosed this in the notes to accounts note No. 15 in schedule no, 21 stating that r 50 lakhs is overdue from XYZ Co. Ltd, and the said company is in the process oTliquidation. The management is taking steps to appoint the liquidator.
Give your comments with reference Lo Chartered Accountants Act, 1949 and schedules thereto ;
(a) PQR and Associates, Chartered Accountants have their website and on the letterhead of the firm iL is mentioned thaL Visit our website : PQR.com", In the website the nature of assignment handled, names of prominent clients and fees charged is also displayed.
(b) Mr. B is a practising Chartered Accountant holding a valid certificate of practice. He accepted the appointment as Director of the Green World Co, Ltd.
Mr. C, a partner of Mr. B is statutory auditor of the said company.
(c) YKS & Co., a proprietary firm of Chartered Accountants was appointed as concurrent auditor of a bank. YKS used his influence for getting some cheques
purchased and thereafter failed to repay the loan/overdraft.
(d) Mr. Mohan is a practising Chartered Accountant, Tie issued a certificate of consumption which did not reflect the correct factual position of the
consumption of raw material by the concerned entity. H is found that the certificate is given on the basis of data appearing in the minutes of meeting of the Board of Directors.
(a) XZ Ltd, appoints you as the Auditor of the company. You observe that \P" previous auditors A & Co., resigned. Also Balance Sheet as at 31-03-2010 shows an audit fee payable of ? 25,000. What precautions you will take before / commencing the audit work ?
b) While doing audit, Ram, the Auditor requires reports from experts for the 4 purpose of Audit evidence. What types of reports/opinions lit: can obtain and to what extent he can rely upon the same ?
(c) Different types of controls which operate over data moving into, through and g out of the computer. Auditor is required to review such controls. Comment.
(a) /Mr- Ram, a relative of a Director was appointed as an auditor of the company. Comment.
(b) Mr. X, Director of ABC Ltd. made a purchase contract for 10,00,000 with the 5 company. Comment.
(c) PQR Ltd., a listed company and having an average annual turnover of more 5 than ? 5 erores has no Internal Audit System. Give your views.
(a) Examination of overdue debts* audit classification of society, and reporting the infringement of provisions of the Act are the special features of audit of a co-operative society. Do you agree V
(b) Mr. R, the Tax Auditor finds that some payments inadmissible under Section 5 40 A(3) were made, and advised the client to reporL Lhe same in form 3CD. The client contends lb at cash payments were_made since the other parties insisted upon lhe same and did not have Bank Accounts. Comment.
(c) Your client is contemplating taking over a manufacturing concern and desires 5 that in the course of due diligence review, you should specifically look for hidden liabilities and over valued assets, if any. State in brief the major areas
you would examine for the above.
HOT Marks
6. . (a) While doing the audit, X, ihe Statutory Auditor of ARC Ltd. observes thaL 5 ce ft ai n 10 a n s an d ad van c es were mad e w i tho u l propcr se c uri li e s, c e rt ai n d e b tors and c['editors were adjusted intersc, and persona] expenses were charged to revenue. Comment.
(b) _XYZ, a m aim fact uring unit does not accept the recommendations for 5 improvements made by the Operational Auditor, Suggest an alternative way to tackle the hostile management,
(c) Corporate accountability and cjvil_.and_.eriminal penalties-for white-collar crimes- Comment 011 the major provisions of Sarbanea Os ley Act.
7, Write short notes on any of the four :
/a, fay- CircLtii filters. 4
(b) Reversal of Income under Rank Audit. 4
"J .($' Guidance note on Audit of Miscellaneous Expenditure (revised) 4
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(dfJ Verification of Outstanding Premium and Agents Balances. 4
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(e) Reconciliation of Cost and J;inaiicial Accounts. 4
HOT
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