The Institute of Chartered Financial Analysts of India University 2008 PCC - AUDITING - Question Paper

PCC MAY 2008 – AUDITING

Answers to ques. are to be provided only in English other than in the case of candidates who have chosen for indi medium. If a candidate who has not chosen for Hindi medium, answers in Hindi, his answers in Hindi will not be valued. ans all the ques.

1. State with reasons (in short) whether the subsequent statements are actual or False: (Answer any ten) (10 x 2)

(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) AAS24 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 subheads under the head "Secured loans".

(vii) For the purpose of AAS10 "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 AAS9 is a person, firm or association of persons possessing special skill, knowledge and experience in auditing.

(x) CARD '200 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 and 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.


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. (08 Marks)

(b) TT Ltd. has suffered recurring losses due to steep fall in production and has negative net worth. It'sproduction 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. (06 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? (06 Marks)


3.
(a) elaborate the different assertions an auditor is concerned with while obtaining audit evidence from substantive procedure? (06 Marks)

(b) What does AAS3 say about utility, ownership, custody and retention of working papers? (04 Marks)

4.
(a) How would you assess the reliability of Internal control system in computerized info system? (06 Marks)

(b) When does an auditor problem unqualified opinion and what does it indicate? (04 Marks)

5.
(a) Brifely mention 5 important items which you would examine while verifying payment of interest out of capital during construction. (05 Marks)

(b) What is the importance of having the accounts audited by an independent auditor? (05 Marks)

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. (06 Marks)


(b) Mention, any four, areas where surprise check can significantly improve the effectiveness of an audit. (04 Marks)

7. How would you vouch/verify the following? (Answer any two) (10 Marks)
(a) Advertisement expenses
(b) Sale of Scrap

OR

(a)Borrowings from Bank.
(b) Work in progress.


8. Write short notes on the following: (Answer any two) (10 Marks)
(a) Reliability of audit evidences.
(b) Audit against Rules and Orders.

OR

(a) Advantages of Statistical samling in Auditing.
(b) Contents of Audit Notebook.

Earning:   Approval pending.