CA PCC Question Papers Group I Auditing and Assurance May 2008

CA PCC Question Papers Group I

Auditing and Assurance

 May 2008

 

 

This Paper has 31 answerable questions with 0 answered.


Total No. of Questions — 8]
Time Allowed : 3 Hours

Maximum Marks : 100
Answer all the questions
1. State with reasons (in short) whether the following statements are True or False Answer any ten) 10×2=20
(i) Procedural error arises as a result of transactions having been recorded in a fundamentally incorrect manner. (0)
(ii) When inherent and control risks are low, an auditor can accept a lower detection risk. (0)
(iii) Audit procedure and Audit technique are not one and same thing. (0)
(iv) An auditor can be appointed as first auditor of a newly formed company simply because his name has been stated in the Articles of Association. (0)
(v) AAS–24 deals with responsibility of the auditor of the service organisation. (0)
(vi) Interest accrued but not due on “Secured loans” is required to be shown under appropriate sub–heads under the head “Secured loans”. (0)
(vii) For the purpose of AAS–10 “Principal Auditor” means the partner of the firm signing the Audit report. (0)
(viii) The term ‘fund’ and ‘reserve’ can be used interchangeably. (0)
(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. (0)
(x) CARO ‘2004 is also applicable to the audit of branch of a company, except where the company is exempt from the applicability of the order. (0)
(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. (0)
(xii) Compliance procedures are tests designed to obtain audit evidence as to completeness, accuracy and validity of the data produced by accounting system. (0)
2. As an auditor how would you react to the following 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 (0)
(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 (0)
(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 (0)
3. (a) What are the various assertions an auditor is concerned with while obtaining audit evidence from substantive procedure? 6 (0)
(b) What does AAS–3 say about utility, ownership, custody and retention of workingpapers? 4 (0)
4. (a) How would you assess the reliability of Internal control system in computerised information system? 6 (0)
(b) When does an auditor issue unqualified opinion and what does it indicate? 4 (0)
5. (a) Briefly mention five important items which you would examine while verifying payment of interest out of capital during construction. 5 (0)
(b) What is the importance of having the accounts audited by an independent auditor? 5 (0)
6. (a) State any six 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 (0)
(b) Mention, any four, areas where surprise check can significantly improve the effectiveness of an audit. 4 (0)
7. How would you vouch/verify the following? (Answer any two) 5+5=10
(a) Advertisement Expenses. (0)
(b) Sale of Scrap. (0)

OR

Borrowings from Bank. (0)
(c) Work in progress. (0)
8. Write short notes on the following: (Answer any two) 5+5=10
(a) Reliability of audit evidences. (0)
(b) Audit against Rules and Orders. (0)

OR

Advantages of Statistical sampling in Auditing. (0)
(c) Contents of Audit Note–book. (0)

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