Every question in Audit, searchable by chapter and source.
Considering the mandatory requirements for listed entities, which of the following represents a lapse in objective evaluation of an EQCR?
Regarding the "Show Cause Notice" and the expired environmental licenses, how should the auditor's responsibility be categorized under the standards on auditing?
Given the dispute over the ` 15 crore loan to a Company in which the MD's spouse held shares, what is the mandatory reporting requirement for M/s. MS & Associates under CARO 2020?
Following the warehouse fire on May 22, 2026, and management's subsequent refusal to amend the financial statements, which is the most appropriate course of action for CA Raja?
CA Raja's reliance on the valuation expert's findings for the Service Concession Assets was based on his 'intuitive comfort' and the expert's professional credentials. With reference to relevant Standard on Auditing, which of the following statements is appropriate?
Considering the various security breaches described (the Chairman's email, the SMS alerts, and the password disclosure over the phone), which of the following accurately categorizes the nature of these social engineering attacks for the purpose of the Risk Assessment and Internal Control evaluation?
CA Vicky is reviewing the audit report draft prepared by his assistant regarding the reliance on the Type 2 report of DSPL. Considering the materiality of payroll, which of the following is the most appropriate professional response?
CA Vicky has assigned several tasks to the internal audit function. Evaluate the appropriateness of these assignments under the framework of using the work of internal auditors.
Regarding CA Anaya's offer to become a Whole-time Director at the educational Trust. Which of the following is most appropriate in the background of professional guidelines issued by the Institute?
How the above information would likely to be disclosed by GHIL in "principle- wise performance disclosures" as a part of BRSR for the current year? Select the correct option.
Select the correct option with reference to professional code of conduct applicable for the M/s. Sterling & Co LLP who are involved in preparation of BRSR study, providing advisory services, and acting as BRSR Core Assurance provider?
The Board is debating the forensic investigation for the steel price inflation in the "Green Data Park”. Which of the following statements is inappropriate in this regard?
Virup Global Holdings Ltd. (VGHL) is preparing Consolidated Financial Statements for the year ended March 31, 2026. VGHL owns 80% of Nexus Systems Private Ltd. (NSPL). During the year, VGHL sold goods to NSPL at a 25% markup on cost. At year end, 40% of these goods remained unsold in NSPL's inventory. The applicable tax rate is 30%. The group prepares consolidated financial statements under Ind AS. Separately, NSPL had a customer receivable of ` 4 crore outstanding as at March 31, 2026. On May 15, 2026, the customer was declared insolvent following a fire incident that occurred on March 30, 2026 in his factory. The required consolidation adjustments and treatment of subsequent events is
During the statutory branch audit of ABC Bank for the financial year ended March 31, 2026, you are reviewing the credit portfolio of the Corporate Banking division. One significant exposure involves G-Mart Ltd., which was granted a working capital credit limit of ` 100 lakh on September 1, 2023. According to the bank's internal policy and regulatory norms, these limits were due for a comprehensive renewal on September 1, 2025. Upon scrutiny, you observe that as of March 31, 2026, the formal renewal had not been executed, despite more than 180 days having elapsed since the due date. The Branch Manager contends that the account is "perfectly healthy", noting that the balance has remained within the sanctioned Drawing Power, interest has been serviced promptly, and the account shows high turnover. The delay is attributed to the sudden demise of G-Mart Ltd.'s statutory auditor, which stalled the finalization of audited financial statements required for renewal. A letter dated February 15, 2026, from the client confirms that a new auditor was appointed and the audited financial statements were finally submitted on April 10, 2026, and the bank issued the formal renewal letter on April 12, 2026, prior to the signing of your branch audit report. Your audit assistant argues that because the 180-day grace period expired during the financial year without a formal renewal, the account's status is non-negotiable and must be downgraded to NPA. As the Statutory Branch Auditor, how should you evaluate the asset classification of G-Mart Ltd.'s account for the year ended March 31, 2026?
The examination of public enterprises by the Committee takes the form of comprehensive appraisal or evaluation of performance of the undertaking. It involves a thorough examination, including evaluation of the policies, programmes and financial working of the undertaking. Therefore, the Parliament and the State Legislatures have, for this purpose, constituted specialized Committees. Funds were approved to procure medical equipment for district hospitals. Audit reports show that 30% of the equipment remains unused due to lack of trained staff. Which Committee can bring to the notice of the house that the particular policy is not leading to the desired results or is leading to waste:
Based on the auditor's observation regarding the new revenue recognition policy, what type of audit opinion should CA RM issue on the financial statements of ATS?
Considering the issue with the physical verification of inventory, what is the most appropriate course of action for the auditor?
What should be the auditor's conclusion if the management refuses to disclose the pending litigation?
What is the most appropriate safeguard that CA RM should apply upon discovering the relationship between the articled assistant and the CFO?
Which out of the following is not the auditor's responsibility concerning the internal control system of ATS in respect of related party transaction?
For the loan of ` 3.8 crores to RR Traders, what should be the correct asset classification and minimum total provisioning required for F.Y. 2024-25?
During the audit of DEF Finance Ltd., which actions of the audit assistant regarding signing of documents and conducting of jobs should be approved by the engagement partner as correct?
Which of the following are most specific IT controls for MT Industries Limited to implement and operate to demonstrate that the audit trail feature is functional, operated and not disabled? (i) Controls to ensure that User IDs are assigned to each individual employee and that User IDs are not shared among multiple users. (ii) Controls to ensure that the audit trail data is encrypted using advanced cryptographic algorithms. (iii) Controls to ensure that changes to the configurations of the audit trail are authorized and logs of such changes are maintained. (iv) Controls to ensure that all audit trail reports are printed and physically stored in fire-proof cabinets. Choose the correct option from below:
Which of the following information given in the notes to the separate financial statement need not be included in Global Reach Ltd.'s consolidated financial statements under IND AS 110?
What should be CA L's observation regarding the custody arrangement of investment made in approved liquid assets held by SH Finance Limited?
CA H, with an experience of 3 years in practice, has recently joined as a partner with JP & Associates, Chartered Accountants. He is making efforts to increase his professional income by taking up various assignments. Some of the areas where he has engaged himself are as under: (i) He is a part time faculty for the Live Virtual Classes run under the aegis of the Institute for CA Students. (ii) He is also a lecturer of Management Accounting in one Private University in his locality. (iii) He is providing tutorship to Class XII Commerce students of Good Edu Public School run by G H Educational Society. (iv) He is providing consultation for recovery of loans and advances portfolio of MM Bank Limited. The senior partner of his firm is of the view that all these assignments which CA H has taken up require specific and prior approval of the Council and that CA H will be deemed to be guilty of professional misconduct as he has not taken such approval. Based on the above, which amongst the four activities require specific and prior approval of the Council?
The engagement partner CA B, while evaluating and reporting on the designs and efficiency of internal financial controls at GHB Ltd., also highlighted to the directors, independent directors and the audit committee the manner in which the Companies Act, 2013 places greater emphasis on the effective implementation and reporting on the internal control of a company. With reference to reporting on the internal financial controls system under the Companies Act, 2013, which of the following statements does not fall within the nature of responsibility of GHB Ltd.?
The concept of a firm-wide 'system of quality management' generally requiring an audit firm to establish policy and procedure designed to provide reasonable assurance that the firm and its own personnel comply with professional standard is generally understood to reflect quality as a:
The concept of an 'engagement quality review' (a review by a qualified reviewer not otherwise involved in the engagement, for a higher-risk audit) is generally understood to provide an additional, independent check distinct from the ordinary:
The concept of a firm's own 'leadership responsibility for quality' generally requiring the firm's own leadership to promote a culture that recognises quality as essential is generally understood to reflect the recognition that a tone at the top can meaningfully influence:
The concept of a firm's own 'human resource' policy (covering recruitment, training, and evaluation) being one component of a quality management system is generally understood to reflect the recognition that audit quality depends significantly on the:
The concept of client acceptance and continuance procedure being part of a quality management system is generally understood to reflect a concern with ensuring a firm does not accept or continue a client relationship where an ethical or:
The concept of 'monitoring and remediation' as a component of a quality management system generally requires a firm to evaluate whether its own quality management system is actually operating effectively, reflecting an ongoing feedback loop distinct from the initial:
The concept of a firm's own 'risk assessment process' within a quality management system generally requiring the firm to identify a quality risk specific to its own circumstance is generally understood to reflect that a generic, one-size-fits-all quality system may not adequately address a risk specific to:
The concept of an engagement partner remaining responsible for the overall quality of an individual audit engagement is generally understood to reflect that a firm-wide quality management system does not itself:
The overarching purpose of a robust quality management framework applicable to an audit firm is generally understood to be providing reasonable assurance that every engagement the firm undertakes is performed in accordance with applicable professional standard and:
The concept of 'root cause analysis' being applied when a quality deficiency is identified is generally understood to require the firm to investigate the underlying reason a deficiency actually occurred, reflecting a concern with addressing the cause, rather than merely:
The concept of audit planning at the advanced, final level generally building on the foundational planning concept introduced earlier is generally understood to require a deeper, more nuanced application of the same core principle to a more complex:
The concept of 'audit strategy' at an advanced level needing to address a complex, multi-location engagement is generally understood to require additional consideration such as how work will be coordinated across a:
The concept of a more sophisticated risk assessment at the advanced audit level, incorporating a factor such as a complex financial instrument or a significant estimate, is generally understood to reflect that a large, complex entity presents a materially different risk profile than a:
The concept of 'audit execution' generally referring to the actual performance of the planned audit procedure is generally understood to be distinguished from the earlier planning stage, since execution concerns actually:
The concept of a dynamic audit strategy needing to be revised where execution reveals a matter different from what was anticipated during planning is generally understood to reflect that planning represents a reasonable starting estimate, rather than a:
The concept of allocating a senior, experienced team member to the audit of a complex or high-risk area is generally understood to be an important planning and execution consideration, reflecting a concern with ensuring the team's own:
The concept of integrating the use of technology (such as a data analytic tool) into audit planning and execution is generally understood to reflect an evolving approach that may enable examination of a larger proportion of a population than a purely:
The concept of ongoing supervision during execution being distinct from a final, end-of-engagement review is generally understood to reflect that a problem is more likely to be identified and addressed:
The concept of an evolving audit environment (such as an increasingly regulated or complex financial reporting landscape) requiring an audit firm to continually update its own strategy and execution approach is generally understood to reflect that a static, unchanging approach may eventually become:
The overarching purpose of advanced audit planning, strategy, and execution is generally understood to be applying the foundational planning discipline with the greater rigour and sophistication demanded by a large, complex, or high-stakes:
The concept of coordinating audit strategy across a large, cross-functional engagement team is generally understood to require clear communication of the overall strategy to every team member, reflecting a concern that a team member lacking awareness of the broader strategy may:
The concept of budgeting a realistic amount of time for each phase of a complex engagement is generally understood to reflect the practical need to balance thoroughness against a constraint on:
The concept of an early identification of a significant risk during planning being valuable is generally understood to reflect that early identification allows the audit strategy to be designed around that risk from the:
The concept of documenting the rationale behind a significant planning decision (such as why a particular area was deemed lower risk) is generally understood to support later accountability, reflecting the need for a decision to be explicable, rather than:
The concept of execution phase feedback informing the planning of a subsequent period's audit for the same client is generally understood to reflect a valuable learning loop, since an issue encountered this period may remain relevant to:
The concept of an auditor's own 'civil liability' generally arising from a negligent failure to exercise reasonable professional skill and care is generally understood to be distinguished from 'criminal liability', which instead generally requires a finding of:
The concept of an auditor's own 'liability to a third party' (someone other than the client) is generally understood to be a more legally contested area than liability to the client itself, reflecting the absence of a direct:
The concept of 'professional misconduct' generally being defined and addressed by a professional accountancy body is generally understood to reflect a distinct disciplinary mechanism separate from an ordinary:
The concept of an auditor being held to a 'reasonable skill and care' standard, rather than an absolute guarantee of accuracy, is generally understood to reflect that an error made despite exercising reasonable professional judgment does not necessarily amount to:
The concept of 'professional indemnity insurance' being maintained by an audit firm is generally understood to provide a financial safeguard against a claim arising from an error or omission, reflecting a risk-management practice distinct from the underlying:
The concept of a landmark case in auditing legal history being studied to illustrate the practical application of a liability principle is generally understood to reflect the value of a concrete, real-world example in illuminating an otherwise:
The concept of an auditor's own duty of confidentiality potentially conflicting with a statutory reporting obligation (such as reporting a suspected fraud to a regulator) is generally understood to require the auditor to navigate a tension between two legitimate, but sometimes competing:
The concept of a disciplinary committee's own finding of professional misconduct being capable of resulting in a sanction such as reprimand, fine, or removal from the professional register is generally understood to reflect a graduated response, calibrated to the:
The overarching relationship between an auditor's own robust adherence to professional ethics and the reduction of a liability exposure is generally understood to be that a diligent, ethically compliant auditor is less likely to face a successful claim of:
The concept of 'contributory negligence' being raised as a defence by an auditor facing a liability claim generally refers to an argument that the claimant's own conduct contributed to the loss actually suffered, reflecting a defence distinct from arguing that the auditor:
The concept of a court needing to establish that an auditor's own negligence was a proximate cause of the claimant's own loss is generally understood to reflect that liability does not generally attach merely because negligence occurred and a loss separately arose, without a:
The concept of an engagement letter's own limitation-of-liability clause being subject to a legal or regulatory constraint on its own enforceability is generally understood to reflect that an auditor cannot generally contractually:
The concept of a peer review or quality inspection finding being relevant to a subsequent disciplinary or liability proceeding is generally understood to reflect that an earlier documented quality concern may be referenced as evidence of a:
The concept of an auditor's own liability exposure being heightened in an audit of a publicly listed or otherwise highly regulated entity is generally understood to reflect the wider circle of party who may rely on, and be affected by the:
The concept of a robust internal risk-management culture within an audit firm (encompassing careful engagement acceptance, thorough documentation, and ongoing training) is generally understood to serve a preventive function, reducing the underlying likelihood of the kind of error that could eventually give rise to a:
The concept of advanced-level reporting building on the foundational audit report structure is generally understood to require applying the same core reporting principle to a more complex scenario, such as reporting on a:
The concept of reporting on a 'special purpose framework' (a financial reporting framework designed to meet a specific user's own need, distinct from a general purpose framework) is generally understood to require the audit report itself to alert the reader to the:
The concept of a comparative financial statement (presenting the current period alongside a prior period figure) requiring specific consideration in the audit report is generally understood to reflect the need to address the auditor's own responsibility with respect to:
The concept of reporting under a specific statutory requirement (such as a requirement to comment on a specific matter beyond the ordinary true-and-fair opinion) is generally understood to require the auditor to address a matter the applicable law itself specifically:
The concept of a complex disclaimer or adverse opinion scenario requiring a more elaborate basis-for-opinion section is generally understood to reflect that a more severe modification often stems from a more complex or multifaceted underlying:
The concept of reporting on a first-time audit engagement (where the auditor did not perform the prior period's audit) is generally understood to require particular consideration of how the auditor will obtain sufficient appropriate evidence about the:
The concept of an elaborated key audit matter section, at an advanced reporting level, requiring the auditor to describe how the matter was actually addressed during the audit, is generally understood to reflect a deeper level of transparency than merely:
The concept of a careful review of the audit report's own wording before issuance is generally understood to be an important final safeguard, reflecting a concern that an imprecise or ambiguous report may fail to communicate the auditor's own conclusion:
The overarching purpose of advanced reporting study is generally understood to be equipping a Final-level practitioner with the deeper technical fluency required to accurately report on a complex, varied engagement scenario, beyond the:
The concept of a well-drafted 'emphasis of matter' paragraph in a complex reporting scenario is generally understood to require careful, precise wording to avoid creating a misleading impression that the paragraph itself:
The concept of a report addressing a dual reporting obligation (such as an opinion under a general framework alongside a separate opinion required by a specific regulator) is generally understood to require the auditor to present each distinct opinion in a manner that avoids:
The concept of a restated prior-period financial statement (corrected after an error was subsequently discovered) requiring specific consideration in the current audit report is generally understood to reflect the need for the report to address how the:
The concept of a consistent, standardised report format across an audit firm's own various engagement is generally understood to support quality and comparability, while still requiring adaptation to the specific:
The concept of a thorough review of a draft report by a second, independent reviewer (beyond the engagement team itself) is generally understood to provide a valuable check against an error or ambiguity that the engagement team, having been:
The concept of a tailored key audit matter description reflecting the entity's own specific circumstance (rather than a generic, boilerplate description) is generally understood to be an important quality expectation, reflecting a concern with ensuring the report's own communicative content is:
The concept of an auditor needing to consider whether an event occurring close to the report signing date affects the report's own already-drafted conclusion is generally understood to reflect that report drafting itself does not mark the end of the auditor's own:
The concept of the audit report ultimately serving as the tangible, visible culmination of the entire audit process is generally understood to reflect that every earlier stage of planning, evidence-gathering, and evaluation ultimately exists to support the:
The concept of 'due diligence' generally refers to a thorough investigation undertaken before a significant transaction (such as an acquisition), reflecting a different purpose from an ordinary audit, since due diligence is generally intended to support a specific:
The concept of an 'investigation' generally referring to an inquiry undertaken in response to a suspicion or specific concern (such as a suspected fraud) is generally understood to differ from an ordinary audit in its own narrower, more targeted:
The concept of 'forensic accounting' generally combining accounting skill with an investigative technique suited to a matter likely to end up in legal proceeding is generally understood to require the practitioner to maintain a standard of evidence-gathering suitable for:
The concept of 'financial due diligence' (focused specifically on the target's own financial position and performance) is generally understood to be distinguished from a broader due diligence exercise that may also examine a matter such as:
The concept of 'chain of custody' being maintained over a piece of evidence gathered during a forensic investigation is generally understood to be important to preserving the evidence's own later admissibility, reflecting a concern that a gap in custody could raise a question about the evidence's own:
The concept of the 'fraud triangle' (opportunity, pressure, and rationalisation) being a useful analytical model in a forensic investigation is generally understood to help an investigator understand the underlying condition that may make a specific individual more likely to:
The concept of a due diligence report needing to highlight a specific risk or red flag identified during the review, rather than presenting only a reassuring, favourable summary, is generally understood to reflect the report's own underlying purpose of supporting an informed:
The concept of a forensic accountant needing specialised interviewing skill (beyond an ordinary audit inquiry technique) is generally understood to reflect the different dynamic of interviewing someone who may be a:
The overarching relationship between due diligence, investigation, and forensic accounting is generally understood to be that all three represent a specialised application of core accounting and auditing skill to a purpose distinct from the:
The concept of 'legal due diligence' (examining a target's own contractual, litigation, and regulatory position) being conducted alongside financial due diligence is generally understood to reflect that a significant risk relevant to a transaction may arise from a source other than the target's own:
The concept of an 'investigation' being commissioned by a party different from the entity's own ordinary management (such as a board's own audit committee, in response to a whistle-blower complaint) is generally understood to reflect that the commissioning party's own independence from the matter under suspicion:
The concept of 'data analytic' technique being applied within a forensic investigation to identify an unusual transaction pattern is generally understood to reflect the practical value of a systematic, technology-assisted approach in examining a:
The concept of a due diligence exercise being time-constrained (typically conducted within a compressed period ahead of a transaction deadline) is generally understood to require the practitioner to prioritise the most:
The concept of a forensic accountant needing to be prepared to serve as an expert witness in a legal proceeding is generally understood to reflect that the work product of a forensic engagement may ultimately need to be defended and explained:
The concept of a due diligence report being marked as confidential and prepared for the exclusive use of the commissioning party is generally understood to reflect a concern with limiting the report's own reliance by a party who was not part of the:
The concept of forensic accounting requiring the practitioner to remain objective and unbiased, notwithstanding being engaged by a party with an interest in a specific outcome, is generally understood to reflect the same underlying independence-of-mind principle applicable to an ordinary:
The concept of a 'red flag' (such as an unexplained, unusually large cash transaction) being identified during due diligence is generally understood to warrant further, targeted investigation, reflecting that a warning sign should not generally be:
The overarching value of due diligence, investigation, and forensic accounting collectively to the broader business and legal ecosystem is generally understood to lie in providing a specialised, rigorous capability for uncovering a matter that ordinary financial reporting or a routine audit alone might not:
The concept of an audit of an insurance company requiring specialised knowledge of actuarial valuation and claim reserve estimation is generally understood to reflect a specialised area distinct from the audit of an ordinary:
The concept of an audit of a mutual fund or a collective investment scheme requiring particular attention to the accuracy of net asset value computation is generally understood to reflect the central role that computation plays in determining a:
The concept of an audit of a non-banking financial company requiring particular attention to a specific regulatory prudential norm applicable to that category of entity is generally understood to reflect that a non-banking financial company operates under a regulatory framework distinct from an ordinary:
The concept of an audit of a stock broker or depository participant requiring particular attention to the strict segregation of client fund and securities from the entity's own proprietary asset is generally understood to reflect a concern with protecting the client from a risk of:
The concept of an audit of a co-operative bank combining an ordinary banking-audit concern with a specific co-operative regulatory requirement is generally understood to reflect the hybrid, dual character of a co-operative bank, being subject to both:
The concept of an audit involving a specialised sector (such as power, telecom, or infrastructure) requiring the auditor to develop a familiarity with that sector's own specific accounting practice and regulatory nuance is generally understood to reflect that a generic auditing skill alone may not itself be sufficient for a:
The concept of an audit of a real estate developer requiring particular attention to revenue recognition timing given the long, multi-period nature of a typical construction and sale cycle is generally understood to reflect a risk of revenue being recognised at an inappropriate point relative to the:
The overarching purpose of studying a range of specialised audit area is generally understood to be equipping a Final-level practitioner with an awareness that a sector-specific engagement often demands a tailored approach, beyond a:
The concept of an audit of a hospital or healthcare entity requiring particular attention to a complex billing structure spanning insurance, government scheme, and self-pay patient is generally understood to reflect a revenue-recognition complexity distinct from a:
The concept of an audit of an educational institution requiring particular attention to compliance with a specific fee-regulation or grant-utilisation requirement is generally understood to reflect that such an institution operates under a distinct oversight regime relative to an ordinary:
The concept of an audit of a technology-driven start-up (often operating at a loss while pursuing rapid growth) is generally understood to require the auditor to give particular attention to the going concern assumption, reflecting a risk profile distinct from a:
The concept of an audit of a cross-border, multinational entity requiring the auditor to coordinate with a different national auditing standard or regulatory expectation is generally understood to reflect an additional layer of complexity beyond an ordinary:
The concept of an audit of an entity engaged in a highly regulated activity (such as pharmaceutical manufacturing) requiring the auditor to be aware of a specific compliance requirement relevant to that industry is generally understood to reflect that industry-specific regulation may have a direct financial reporting or contingent-liability:
The concept of an audit of an entity with a significant related-party transaction volume (such as a group holding company) requiring particular attention to the arm's-length nature of intra-group pricing is generally understood to reflect a risk that such a transaction may not necessarily be conducted on the same basis as an:
The concept of an audit of an entity operating in a commodity-driven industry (subject to significant price volatility) requiring the auditor to give particular attention to inventory valuation and hedging arrangement is generally understood to reflect a complexity arising from an underlying:
The concept of a specialised audit area often requiring the auditor to engage an expert (such as an actuary, valuer, or engineer) whose own specialised knowledge exceeds the auditor's own general accounting expertise is generally understood to reflect a practical recognition that an auditor is not expected to be:
The concept of an auditor needing to evaluate an expert's own competence, capability, and objectivity before relying on that expert's work is generally understood to reflect that mere reliance on an external specialist does not itself relieve the auditor of the underlying responsibility to:
The overarching relationship between a specialised sector's own unique risk and the general auditing principle applicable across every engagement is generally understood to be that core principle such as evidence, materiality, and professional scepticism remain applicable, but must be:
The concept of an audit of an entity operating a regulated pension or provident fund scheme requiring particular attention to the fund's own compliance with applicable trust and regulatory requirement is generally understood to reflect the heightened public-interest character of a scheme holding money on behalf of a large number of:
The concept of an auditor's own overall objective, at the Final level, being reaffirmed as obtaining reasonable assurance about whether the financial statements as a whole are free from material misstatement is generally understood to remain the same foundational objective introduced earlier, applied with:
The concept of the auditor's own responsibility for a fraud-related risk being examined in greater depth at the Final level is generally understood to reflect a more nuanced treatment of the distinction between management's own primary responsibility for fraud prevention and the auditor's own separate responsibility to:
The concept of the auditor's own responsibility to consider compliance with an applicable law or regulation, at an advanced level, is generally understood to require distinguishing between a law with a direct financial statement effect and a law whose own non-compliance may instead have a broader, indirect:
The concept of a deepened understanding of 'professional scepticism' at the Final level generally requiring the auditor to resist a natural tendency to accept a plausible but insufficiently corroborated management explanation is generally understood to reflect an elevated expectation appropriate to a more:
The concept of the auditor's own responsibility with respect to a complex accounting estimate (involving significant management judgment and a wide range of possible outcome) being examined at an advanced level is generally understood to require a deeper evaluation of the reasonableness of the underlying assumption, rather than merely accepting the:
The concept of an auditor's own understanding of the applicable financial reporting framework's own conceptual underpinning (rather than merely a rule-by-rule familiarity) being important at an advanced level is generally understood to support a more principled evaluation of a novel or unusual transaction not explicitly addressed by a:
The concept of the auditor's own responsibility to remain alert throughout a lengthy, multi-month audit engagement (rather than only at discrete, scheduled checkpoint) is generally understood to reflect that a relevant matter could emerge at:
The overarching purpose of revisiting general auditing principle and auditor responsibility at the Final level is generally understood to be consolidating and deepening a practitioner's own foundational understanding, ensuring it is robust enough to support the exercise of:
The concept of the auditor's own responsibility to maintain independence throughout the engagement, at an advanced level, is generally understood to require particular vigilance where a long-standing client relationship might create a familiarity threat, reflecting a concern that:
The concept of an auditor's own responsibility for obtaining audit evidence at the Final level being examined in the context of an increasingly technology-driven business environment is generally understood to require an awareness of how a digital record or an automated control may affect the:
The concept of an auditor bearing responsibility for the overall conclusion, even where a significant part of the underlying work was performed by a junior team member, is generally understood to reflect the hierarchical, ultimately accountable structure of an engagement, since supervision and review does not itself:
The concept of the auditor's own responsibility to appropriately respond to an identified risk of material misstatement being examined in greater depth at the Final level is generally understood to require a more sophisticated linkage between the specific risk identified and the specific:
The concept of the auditor's own ethical obligation extending beyond mere technical compliance with a specific rule, to encompass a broader spirit of integrity and public trust, is generally understood to be an important theme reinforced at the Final level, reflecting the elevated:
The concept of an auditor's own responsibility to challenge management on a matter of significant judgment, rather than deferring entirely to management's own preferred conclusion, is generally understood to reflect the auditor's own independent role, distinct from being merely a:
The concept of a holistic, cross-topic mastery of auditing principle being expected of a Final-level candidate is generally understood to reflect that a real-world audit engagement rarely presents an issue in an isolated, single-topic manner, but instead typically requires integrating:
The concept of the auditor's own responsibility to remain current with a change in an applicable auditing standard, regulation, or accepted practice is generally understood to reflect that the auditor's own professional competence is not a static, one-time achievement, but rather a:
The concept of the auditor's own responsibility to balance efficiency (completing the engagement within a reasonable time and cost) against thoroughness (obtaining sufficient appropriate evidence) is generally understood to require the exercise of professional judgment, since neither consideration alone should be allowed to:
The concept of the auditor's own responsibility to communicate a significant matter to those charged with governance, at an advanced level, being examined in the context of a complex governance structure (such as a multi-tier board) is generally understood to require identifying who, within that structure, is:
The overarching relationship between the auditor's own foundational responsibility and the Final-level examination of that responsibility in greater depth is generally understood to be that the underlying principle does not itself change, but the expectation of how skilfully and sophisticatedly that principle is:
The concept of the auditor's own responsibility to form an independent conclusion, even where a client's own management applies significant pressure toward a particular outcome, is generally understood to reflect that a well-founded conclusion cannot itself be compromised by an external:
The concept of 'materiality' being examined in greater depth at the Final level generally requires the auditor to apply both a quantitative and a qualitative lens, reflecting that a small numerical misstatement could still be material where it involves a matter such as:
The concept of 'performance materiality' (a lower threshold set below overall materiality) being applied at an advanced level is generally understood to reduce the risk that the aggregate of a several individually immaterial misstatement could together become:
The concept of a more sophisticated risk assessment methodology at the Final level, incorporating a factor such as industry-specific risk and a complex group structure, is generally understood to reflect the elevated complexity of a large, multifaceted engagement relative to a:
The concept of an entity's own internal control over a complex, IT-driven process (such as an automated revenue recognition system) being examined in greater depth at the Final level is generally understood to require the auditor to evaluate both a general IT control and a specific:
The concept of a revised materiality figure being required mid-engagement, where a significant new fact emerges (such as an unexpectedly large loss), is generally understood to reflect that materiality itself is not a fixed, immutable figure determined once at the:
The concept of evaluating an entity's own risk assessment process (as an internal control component) at an advanced level, for an entity operating in a rapidly evolving industry, is generally understood to require particular attention to whether that internal process is capable of identifying a:
The concept of a deeper evaluation of 'management override of control' as a risk category, at the Final level, is generally understood to reflect the recognition that this specific risk is present in every audit, regardless of how otherwise:
The overarching purpose of studying materiality, risk assessment, and internal control at an advanced level is generally understood to be building the sophisticated analytical capability required to appropriately scope and execute an audit of a large, complex entity, consistent with the demand of a:
The concept of 'materiality by nature' (a matter material because of its own inherent character, regardless of its own numerical size) is generally understood to be distinguished from 'materiality by size', reflecting two different bases on which a misstatement can become:
The concept of a group-wide risk assessment (for a consolidated entity with multiple component) requiring the auditor to assess risk both at the overall group level and at each significant component level is generally understood to reflect that a risk relevant to one component may not itself be relevant to:
The concept of a cyber-security-related internal control risk being an increasingly significant consideration at the Final level is generally understood to reflect the growing reliance an organisation places on a digital system, and the corresponding risk that a security breach could compromise the:
The concept of an auditor needing to consider the interaction between an identified control weakness and the resulting adjustment to substantive procedure is generally understood to reflect that a weakness in control generally requires the auditor to place:
The concept of a documented rationale for the specific materiality threshold selected (rather than an unexplained, arbitrary figure) is generally understood to support later accountability, reflecting the need for a significant judgment to be:
The concept of a more nuanced treatment of 'inherent risk factor' (such as complexity, subjectivity, and susceptibility to management bias) at the Final level is generally understood to help the auditor differentiate between a routine account balance and one warranting:
The concept of a dynamic reassessment of risk throughout the audit (rather than a static, once-only assessment made at planning) is generally understood to reflect that an execution-stage finding may reveal a risk different from what was:
The concept of a holistic evaluation of an entity's own overall control environment (as distinguished from evaluating an individual control in isolation) is generally understood to recognise that a strong individual control can still be undermined by a weak:
The concept of a rigorous evaluation of an entity's own use of a complex estimation technique (such as a model-based fair value estimate) as part of risk assessment is generally understood to require the auditor to understand the underlying model's own key assumption and its own sensitivity to:
The concept of an entity's own use of a third-party service organisation (such as an outsourced payroll processor) affecting the auditor's own risk assessment and internal control evaluation is generally understood to require the auditor to consider whether an internal control relevant to the audit is operated by:
The concept of communicating an identified significant deficiency in internal control to those charged with governance, at an advanced level, is generally understood to require the auditor to articulate why the specific deficiency is considered significant, reflecting a more analytical communication than a:
The overarching connection between materiality, risk assessment, and internal control is generally understood to be that all three concepts work together to determine the specific nature, timing, and extent of an audit procedure proportionate to a:
The concept of audit evidence being examined in greater depth at the Final level generally requires the auditor to evaluate evidence relating to a complex or judgment-intensive area, such as a fair value estimate, rather than only a straightforward:
The concept of evaluating evidence relating to a complex financial instrument (such as a derivative) is generally understood to require the auditor to understand both the instrument's own underlying terms and the appropriate valuation methodology, reflecting a deeper technical demand than an ordinary:
The concept of an auditor relying on a management's own expert (an internally or externally engaged specialist whose work management itself uses to prepare the financial statements) is generally understood to require the auditor to evaluate that expert's own competence, capability, and objectivity, in a manner distinct from evaluating:
The concept of evaluating evidence relating to a significant, non-routine transaction (such as a large, one-off asset disposal) is generally understood to require particular scrutiny, reflecting that a non-routine transaction generally lacks the benefit of an established, well-tested:
The concept of evidence obtained through a sophisticated data analytic technique (such as analysing an entire population of transaction, rather than a sample) is generally understood to potentially provide a more comprehensive evidentiary base than a traditional:
The concept of a careful evaluation of contradictory or inconsistent evidence (where one piece of evidence appears to conflict with another) is generally understood to require the auditor to resolve the inconsistency, rather than:
The concept of evidence relating to a complex tax provision (involving an uncertain tax position) is generally understood to require the auditor to evaluate the reasonableness of management's own judgment about the likelihood of a specific tax outcome, rather than simply accepting the:
The concept of a sufficient body of evidence being required before an auditor reaches a conclusion on a significant, judgment-intensive matter is generally understood to reflect that a high-stakes conclusion should not rest on a:
The overarching purpose of examining audit evidence in greater depth at the Final level is generally understood to be equipping a practitioner with the sophisticated evidentiary judgment demanded by a complex, real-world engagement, beyond the:
The concept of evidence relating to a complex business combination (a merger or acquisition) is generally understood to require the auditor to evaluate the reasonableness of the purchase price allocation, reflecting a judgment-intensive area involving the valuation of a:
The concept of evidence relating to a significant impairment assessment (evaluating whether an asset's own carrying value exceeds its own recoverable amount) is generally understood to require the auditor to evaluate the reasonableness of the underlying cash flow projection and discount rate used, reflecting a forward-looking:
The concept of evidence obtained through a direct, external confirmation being generally treated as more reliable than evidence obtained solely through internal inquiry, even at the Final level, is generally understood to reflect that this well-established evidence-reliability hierarchy remains applicable, regardless of the:
The concept of evidence relating to a complex going concern evaluation, at an advanced level, is generally understood to require the auditor to evaluate management's own future cash flow forecast and financing plan, reflecting a forward-looking assessment distinct from an ordinary:
The concept of the auditor's own responsibility to maintain professional scepticism when evaluating evidence supplied by management, even at the Final level, is generally understood to remain an enduring principle, reflecting that increased seniority or experience does not itself justify:
The concept of evidence relating to a complex share-based payment arrangement (such as an employee stock option scheme) is generally understood to require the auditor to evaluate the reasonableness of the option valuation model and its own key input, reflecting a technical evaluation beyond a:
The concept of a careful assessment of the sufficiency of audit evidence for a matter subject to significant estimation uncertainty is generally understood to require the auditor to consider a reasonable range of outcome, rather than accepting only a single, point:
The concept of a retrospective review of a prior period's significant accounting estimate (comparing the actual outcome to the earlier estimate) being useful evidence for evaluating current-period estimation reliability is generally understood to reflect that management's own past estimation track record can inform the auditor's own assessment of a current:
The concept of evidence relating to a litigation or contingent-liability matter requiring the auditor to correspond with the entity's own external legal counsel is generally understood to reflect a recognition that assessing legal risk requires a specialised expertise the auditor:
The concept of the auditor's own overall evaluation of whether sufficient appropriate evidence has been obtained across the entire audit being a holistic, cumulative judgment is generally understood to reflect that this final evaluation considers the combined weight of every piece of evidence gathered, rather than assessing each piece of evidence in complete:
The concept of evidence relating to a complex lease arrangement (evaluating whether a lease has been correctly classified and measured under the applicable standard) is generally understood to require the auditor to evaluate the underlying contractual terms and the judgment applied, rather than relying solely on a:
The concept of completion and review being examined in greater depth at the Final level generally requires the auditor to evaluate a complex aggregation of uncorrected misstatement arising across multiple component of a large group engagement, reflecting a more sophisticated version of the same:
The concept of a complex going concern evaluation at the completion stage, involving a significant judgment about a mitigating plan management has proposed (such as a refinancing arrangement), is generally understood to require the auditor to evaluate the feasibility of that plan, rather than accepting it:
The concept of a comprehensive final analytical review at the completion stage, for a large, multi-segment entity, is generally understood to require the auditor to examine a relationship both at the overall entity level and at the level of a significant individual:
The concept of a rigorous evaluation of a subsequent event affecting a complex, multi-jurisdictional entity is generally understood to require the auditor to coordinate across a dispersed set of location, reflecting the practical challenge of a subsequent-event review at a:
The concept of an engagement quality reviewer's own thorough evaluation, for a high-risk, high-profile engagement, being conducted before the audit report is finalised is generally understood to provide an additional, independent safeguard proportionate to the:
The concept of a detailed evaluation of the aggregate effect of a numerous small, uncorrected misstatement across multiple financial statement line item at completion is generally understood to require the auditor to apply professional judgment about whether the combined effect crosses the threshold of:
The concept of a thorough final review of a complex disclosure note (such as a segment reporting or financial instrument disclosure) at completion is generally understood to require confirming that the disclosure satisfies the applicable standard's own specific requirement, rather than merely appearing:
The overarching purpose of examining completion and review at greater depth at the Final level is generally understood to be preparing a practitioner to draw a well-founded overall conclusion for a large, complex engagement, where the final synthesis of evidence is itself a:
The concept of obtaining a comprehensive written representation from management at completion, covering a broader range of matter for a complex engagement, is generally understood to still be treated as necessary but insufficient on its own, consistent with the well-established principle that written representation:
The concept of a thorough evaluation of whether a significant accounting policy has been consistently applied across a multi-year comparative presentation is generally understood to be part of the completion-stage overall review, reflecting a concern with detecting an undisclosed:
The concept of a careful evaluation of the overall presentation, structure, and content of a complex financial statement at completion is generally understood to require the auditor to consider whether the financial statement as a whole represents the underlying transaction and event in a manner consistent with:
The concept of a rigorous evaluation of an identified fraud risk that materialised during the engagement being addressed at the completion stage is generally understood to require the auditor to reconsider whether the overall audit approach remains sufficient in light of that:
The concept of documenting a significant judgment made at the completion stage of a complex engagement, including the alternative considered and rejected, is generally understood to support later accountability, reflecting the need for a high-stakes final decision to be:
The concept of a thorough review of the consistency between the audited financial statement and other information included in the same annual report (such as a director's report) is generally understood to require the auditor to identify a material inconsistency, reflecting a concern with:
The concept of a careful evaluation of whether every significant matter has been appropriately communicated to those charged with governance before the audit report is finalised is generally understood to be an important completion-stage check, reflecting a concern with avoiding a gap between what the auditor:
The concept of a comprehensive completion checklist for a complex, Final-level engagement generally covering a broader range of matter (such as group reporting, regulatory compliance, and an industry-specific requirement) than a simpler engagement's own checklist is generally understood to reflect the greater breadth of consideration a complex engagement:
The concept of a careful final assessment of whether the audit as a whole achieved its own overall objective, at completion, is generally understood to require the auditor to step back from the accumulated detail of individual test result and consider the:
The concept of a disciplined process for resolving a disagreement between an engagement team member and a reviewing partner at completion is generally understood to be important, reflecting the need for a dispute over a significant judgment to be:
The concept of a final, cumulative check of whether every planned audit procedure has been completed, and every identified issue resolved, before the engagement partner signs the audit report is generally understood to serve as a last, comprehensive safeguard against a:
The concept of the completion stage functioning as the point at which every earlier stage of the audit -- planning, risk assessment, evidence-gathering, and evaluation -- converges into a single, final, defensible conclusion is generally understood to reflect completion's own role as the:
The concept of a 'group audit' generally refers to the audit of financial statement that include the financial information of more than one distinct component, reflecting a coordinated engagement led by a:
The concept of a 'component auditor' generally refers to an auditor who performs work on the financial information of a specific component for a purpose of the group audit, reflecting a role distinct from the group engagement partner, who instead retains overall responsibility for the:
The concept of a 'significant component' (one of individual financial significance to the group, or one likely to include a significant risk of material misstatement) generally requiring a more extensive audit response than a component not significant is generally understood to reflect a risk-proportionate approach applied at the:
The concept of the group engagement team needing to evaluate the component auditor's own competence and independence before relying on that component auditor's own work is generally understood to reflect that reliance on another auditor's work is not itself:
The concept of the group engagement team needing to be involved in the risk assessment and instruction process at each significant component (rather than merely receiving a final, finished report) is generally understood to reflect an active, coordinating role, distinct from a purely:
The concept of a consistent accounting policy needing to be applied across every component of a group, or an appropriate adjustment made where a difference exists, is generally understood to reflect the need for a meaningful, coherent consolidated financial statement, rather than a mismatched:
The concept of the elimination of an intra-group transaction and balance (such as an inter-company sale or loan) being verified as part of the group audit is generally understood to reflect a concern with avoiding an overstatement of the consolidated group's own:
The concept of the group engagement team needing to determine an appropriate component materiality, lower than the overall group materiality, is generally understood to reduce the risk that an aggregate of an immaterial-at-the-component-level misstatement could become material when:
The overarching purpose of the group audit framework is generally understood to be enabling a coherent, well-coordinated audit opinion to be expressed on a consolidated financial statement, notwithstanding the practical complexity of a component dispersed across:
The concept of the group engagement team needing to review the component auditor's own working paper or documentation, for a significant component, is generally understood to reflect a step beyond merely receiving that component auditor's own summarised:
The concept of a different national auditing standard applying to a component auditor operating in a different jurisdiction is generally understood to require the group engagement team to evaluate whether that component auditor's own work, performed under that different standard, is sufficient for the:
The concept of the group audit report needing to consider the effect of a modified opinion issued by a component auditor on the overall group opinion is generally understood to reflect that an issue identified at the component level may have a broader implication for the:
The concept of a direct visit or site inspection by the group engagement team, for a significant component, being one available means of gaining a first-hand understanding of that component is generally understood to reflect an alternative distinct from relying entirely on:
The concept of a clear, timely communication of a group-wide instruction (such as a common reporting deadline or a specific area of focus) to every component auditor is generally understood to be important, reflecting the practical need for a coordinated, multi-component engagement to operate:
The concept of a careful evaluation of goodwill and other consolidation adjustment arising from an acquisition of a subsidiary during the group audit is generally understood to require specialised valuation and accounting expertise, reflecting a complex area beyond a:
The concept of the group engagement team needing to identify a non-significant component and determine an appropriate, proportionate response (such as analytical procedure alone, rather than a full audit) is generally understood to reflect an efficient allocation of audit effort proportionate to a component's own:
The concept of a careful evaluation of an intra-group loan's own recoverability (from the perspective of both the lending and the borrowing component) is generally understood to require the group engagement team to reconcile a potentially different view held by each component auditor, reflecting the need for a:
The concept of the group engagement team needing to remain alert to a fraud risk that could specifically arise from the manipulation of an intra-group transaction (used to obscure a loss or artificially inflate a profit at a specific component) is generally understood to reflect a distinctive fraud risk consideration relevant specifically to a:
The concept of a careful review of a component's own use of a different functional currency (requiring translation into the group's own presentation currency) is generally understood to require the group engagement team to evaluate whether the translation has been performed in accordance with the:
The concept of a dormant or immaterial component still requiring some minimal, proportionate level of audit attention (rather than being entirely excluded from the group audit scope without any consideration whatsoever) is generally understood to reflect the need for the group engagement team to confirm, rather than merely assume, that a component is:
The concept of 'internal audit' generally referring to an independent, objective assurance and consulting activity designed to add value and improve an organisation's own operation is generally understood to be distinguished from an external, statutory audit, since internal audit generally reports to a different party:
The concept of internal audit's own organisational independence being supported by a direct reporting line to the audit committee (rather than to operational management alone) is generally understood to reduce the risk that internal audit's own finding could be:
The concept of an external auditor evaluating internal audit's own competence and objectivity before deciding whether to rely on internal audit's own work is generally understood to reflect that such reliance is not itself:
The concept of internal audit's own scope extending beyond financial matter alone, to encompass operational, compliance, and strategic risk, is generally understood to reflect a broader mandate than the ordinarily more narrowly financial-statement-focused scope of a:
The concept of a risk-based internal audit plan (prioritising the area of a highest organisational risk for internal audit attention) is generally understood to reflect an efficient allocation of internal audit's own limited resource, consistent with a broader:
The concept of an internal audit function being outsourced to an external service provider (rather than maintained entirely as an in-house function) is generally understood to be one available structural option, reflecting that the underlying activity of internal audit is not itself tied to a specific:
The concept of internal audit playing a consultative role (advising management on a proposed process improvement, distinct from a purely assurance-oriented finding) is generally understood to reflect a broader, dual character of internal audit's own modern role, combining both assurance and:
The overarching value of a well-functioning internal audit function to an organisation is generally understood to lie in providing management and the board with an ongoing, independent source of assurance about the effectiveness of an organisation's own:
The concept of a qualified Chief Internal Auditor reporting functionally to the audit committee, while reporting administratively to management, is generally understood to reflect a careful structural balance intended to preserve independence while still enabling:
The concept of a periodic quality assurance review of the internal audit function itself (an internal audit of internal audit) is generally understood to reflect a recognition that internal audit's own quality is not itself:
The concept of internal audit applying a systematic, disciplined approach to evaluating and improving the effectiveness of an organisation's own risk management, control, and governance process is generally understood to distinguish a professional internal audit function from a:
The concept of internal audit following up on a previously reported finding to confirm whether management has implemented an agreed corrective action is generally understood to be an important part of the internal audit cycle, reflecting a concern with ensuring a finding does not merely remain:
The concept of internal audit maintaining objectivity, even where an internal auditor was previously employed within the very function now being examined, is generally understood to require an appropriate cooling-off period or an alternative safeguard, reflecting a concern with a:
The concept of internal audit's own use of a data analytic technique to support continuous, ongoing monitoring of a high-risk process (rather than only a periodic, point-in-time review) is generally understood to reflect an evolving approach that may enable an earlier detection of a:
The concept of internal audit's own charter (a formal document defining internal audit's own purpose, authority, and responsibility within the organisation) being approved by the board or audit committee is generally understood to provide an important, formal foundation for internal audit's own:
The concept of internal audit providing an assurance opinion to the audit committee on the overall effectiveness of the organisation's own internal control system, at a holistic level, is generally understood to complement, rather than duplicate, an external auditor's own narrower focus on:
The concept of internal audit being resourced with an appropriate mix of skill (including a specialised skill such as IT audit or forensic capability) is generally understood to reflect a recognition that a modern organisation's own risk landscape is not itself confined to a purely:
The concept of internal audit's own reporting to the audit committee including a candid assessment of a systemic or recurring issue (rather than only an isolated, one-off finding) is generally understood to help the board identify a deeper, more structural:
The concept of internal audit's own function evolving in tandem with an organisation's own growth and increasing complexity is generally understood to reflect that an appropriate internal audit structure and scope for a small organisation may not itself remain appropriate as that organisation:
The concept of internal audit maintaining a constructive, professional working relationship with management, while still preserving its own independence and objectivity, is generally understood to reflect a delicate but necessary balance, since an unduly adversarial relationship could undermine internal audit's own ability to:
The concept of 'digital auditing' generally referring to the use of technology-enabled tool and technique within the audit process itself is generally understood to be distinguished from merely auditing a client that happens to use technology, since digital auditing specifically concerns the auditor's own:
The concept of 'data analytics' being applied to examine an entire population of transaction (rather than a limited sample) is generally understood to potentially enable the identification of an unusual or outlier transaction that a traditional, sample-based approach might:
The concept of an auditor needing to understand a client's own IT general control (such as access control and change management) before placing reliance on a system-generated report is generally understood to reflect that a report's own reliability depends on the underlying system that:
The concept of an emerging use of artificial intelligence or machine learning within the audit process (such as an anomaly-detection algorithm) is generally understood to require the auditor to understand the underlying methodology sufficiently to evaluate its own output, rather than treating the technology as an unexplainable:
The concept of 'blockchain' technology being used by a client to record a transaction is generally understood to present a novel auditing consideration, since the technology's own distributed, immutable ledger character may affect how the auditor approaches evaluating:
The concept of a data security and confidentiality risk arising from the auditor's own use of a client's own sensitive data within a digital audit tool is generally understood to require the auditor to maintain an appropriate level of data protection, consistent with the auditor's own broader professional duty of:
The concept of an auditor's own evolving technical skill requirement, in light of an increasingly digital audit environment, is generally understood to reflect that a competent modern auditor requires a broader skill set extending beyond a purely traditional:
The overarching relationship between digital auditing and assurance and the enduring core principle of auditing (evidence, materiality, professional scepticism) is generally understood to be that technology changes the how of gathering and evaluating evidence, while the underlying:
The concept of an auditor's own use of a 'continuous auditing' approach (leveraging technology to monitor a transaction on an ongoing, near-real-time basis) is generally understood to be distinguished from a traditional, periodic, point-in-time audit, reflecting a different temporal:
The concept of an auditor needing to validate the completeness and accuracy of a data extract obtained from a client's own IT system, before relying on that data for a data analytic procedure, is generally understood to reflect a concern that a flawed extraction process could undermine the reliability of any:
The concept of a 'robotic process automation' tool being used by an entity to perform a repetitive, rule-based task (such as a routine reconciliation) is generally understood to require the auditor to evaluate the control surrounding that automated process, reflecting a concern that automation does not itself eliminate the:
The concept of an auditor maintaining documentation of the specific digital tool, script, or query used to perform an analytic procedure is generally understood to support later reproducibility and review, reflecting the same underlying documentation principle applied to a traditional, manual:
The concept of an appropriate balance between leveraging technology for efficiency and maintaining professional judgment in evaluating a technology-generated result is generally understood to reflect that a powerful analytical tool does not itself eliminate the auditor's own underlying responsibility to:
The concept of a growing regulatory and professional body expectation that a firm invest in an appropriate digital audit capability is generally understood to reflect a broader recognition that a purely manual approach may increasingly become insufficient for auditing a large, complex, technology-driven:
The concept of an auditor needing to consider a cyber-security incident (a data breach affecting the client) as part of the audit is generally understood to require an evaluation of the incident's own potential effect on the reliability of the client's own:
The concept of an appropriate quality control process being applied specifically to a firm's own use of a digital audit tool (such as validating the tool's own underlying algorithm before deploying it firm-wide) is generally understood to reflect the same underlying quality-management principle applied to any other:
The concept of digital assurance extending beyond the traditional financial statement audit, to include an emerging assurance service (such as an assurance report on a client's own cyber-security control) is generally understood to reflect a broadening scope of what:
The concept of an auditor being alert to the risk that a sophisticated, technology-enabled fraud (such as a manipulated system log) could be harder to detect than a traditional, manual fraud is generally understood to reflect a heightened professional scepticism appropriate to a:
The concept of an auditor needing appropriate training to competently use a new digital audit tool, before deploying it on a live engagement, is generally understood to reflect the broader professional competence principle applied specifically to an evolving:
The concept of an appropriate audit trail being preserved within a digital audit tool (recording exactly what analysis was performed, by whom, and when) is generally understood to support the same underlying accountability purpose served by a traditional, manual working paper's own:
The concept of an audit of a public sector undertaking being subject to a dual oversight, involving both an ordinary statutory audit and a separate examination by a national audit authority, is generally understood to reflect the heightened public accountability applicable to an entity owned by:
The concept of a 'propriety audit' (examining whether public money has been spent with due regard to economy and public interest, beyond mere legal compliance) is generally understood to be a distinctive feature of public sector auditing, reflecting a broader concern than the:
The concept of a specific statutory or governmental framework governing the appointment, remuneration, and reporting obligation of an auditor for a public sector undertaking is generally understood to reflect that the auditor selection process for such an entity is not itself left entirely to:
The concept of an 'efficiency-cum-performance audit' (evaluating whether a public sector undertaking has achieved its own intended objective in an efficient, economical manner) being distinct from an ordinary financial audit is generally understood to reflect a broader focus on:
The concept of a specific parliamentary or legislative committee reviewing the report of an audit of a public sector undertaking is generally understood to reflect a distinctive accountability mechanism, providing a further layer of public, democratic scrutiny beyond a:
The concept of an auditor of a public sector undertaking needing to be aware of an applicable public procurement rule (governing how the entity acquires a good or service) is generally understood to reflect a specific regulatory dimension not typically present in the audit of a:
The overarching relationship between public sector auditing and ordinary commercial auditing is generally understood to be that core auditing principle remains applicable throughout, while requiring adaptation to the specific:
The concept of a 'supplementary audit' being conducted by a national audit authority even after a statutory auditor has already expressed an opinion on a public sector undertaking's own financial statement is generally understood to reflect an additional layer of scrutiny not typically present for a:
The concept of a public sector undertaking being subject to a specific government directive on matter such as a pricing policy or a social obligation (beyond ordinary commercial consideration) is generally understood to reflect the entity's own dual character, being accountable to both:
The concept of a specific reporting format prescribed by a national audit authority for a public sector undertaking's own audit report is generally understood to promote consistency and comparability across a large number of a similarly:
The concept of an auditor of a public sector undertaking being required to comment on whether the entity has complied with a specific government direction issued to it is generally understood to reflect an additional reporting dimension beyond the ordinary:
The concept of a specific concern with the arm's-length nature of a transaction between a public sector undertaking and a related government department or entity is generally understood to reflect a risk analogous to but arising in a distinctively:
The concept of a distinctive challenge in evaluating the going concern assumption for a loss-making public sector undertaking (which may continue to operate due to government support, notwithstanding a poor commercial performance) is generally understood to reflect a different consideration than an ordinary:
The concept of a specific audit concern with a public sector undertaking's own compliance with a disinvestment or privatisation process (where applicable) is generally understood to reflect a distinctive, transitional area of scrutiny not present in the audit of a:
The concept of a careful evaluation of whether a public sector undertaking's own social welfare expenditure (such as a corporate social responsibility spend mandated by regulation) has been correctly accounted for is generally understood to reflect a specific compliance dimension relevant to an entity operating under a:
The concept of an important distinction between a public sector undertaking's own commercial autonomy (as an incorporated entity capable of independent action) and its own ultimate accountability to a government owner is generally understood to reflect a nuanced governance structure, distinct from either a fully independent private entity or a directly administered:
The concept of an auditor of a public sector undertaking needing to be aware of a specific transparency and right-to-information requirement applicable to the entity is generally understood to reflect an additional dimension of public accountability not present for a:
The concept of a careful evaluation of a public sector undertaking's own compliance with an applicable pay and pension regulation for its own employee (often distinct from a purely private-sector employment arrangement) is generally understood to reflect a specific compliance area relevant to an entity governed by:
The concept of a broad public interest in the outcome of a public sector undertaking's own audit (given the entity's own use of a public resource) is generally understood to underscore why the reliability of that audit carries an elevated significance relative to an audit of a:
The concept of an auditor of a public sector undertaking maintaining independence, notwithstanding the entity's own ownership by the very government that may also influence the broader regulatory environment the auditor operates within, is generally understood to present a distinctive independence consideration relative to an auditor of a:
The concept of 'ESG assurance' generally refers to an independent examination of an entity's own environmental, social, and governance-related disclosure, reflecting an emerging assurance area distinct from a traditional financial statement audit, since ESG assurance concerns:
The concept of a growing stakeholder demand (from an investor, regulator, and consumer) for a reliable, independently assured sustainability disclosure is generally understood to reflect a concern that an entity's own self-reported ESG claim, without independent assurance, may be susceptible to a concern of:
The concept of an appropriate, established sustainability reporting framework (against which an ESG disclosure is measured) being necessary for a meaningful assurance engagement is generally understood to reflect the same underlying need present in a financial statement audit, where an applicable:
The concept of a distinction between 'limited assurance' and 'reasonable assurance' being relevant to an ESG assurance engagement, in the same manner as it is relevant to a review versus an audit of a financial statement, is generally understood to reflect that a lower level of assurance involves a:
The concept of an ESG assurance practitioner needing to evaluate a non-financial metric (such as a carbon emission figure or a workforce diversity statistic) is generally understood to require a different, specialised evidence-gathering technique than an ordinary:
The concept of a growing regulatory expectation that a large or listed entity provide a mandatory sustainability disclosure (potentially subject to a mandatory assurance requirement) is generally understood to reflect ESG reporting's own evolving journey from a voluntary practice toward an increasingly:
The concept of an appropriate professional competence requirement for a practitioner providing ESG assurance (potentially requiring a specialised understanding beyond a purely financial accounting background) is generally understood to reflect the same underlying professional competence principle applicable to any specialised:
The overarching relationship between ESG assurance and the enduring core principle of assurance work (independence, evidence, and professional judgment) is generally understood to be that the underlying subject matter is different, while the:
The concept of the 'Sustainable Development Goal' (a globally recognised set of goal addressing a broad social and environmental challenge) providing a useful reference point for an entity's own sustainability reporting is generally understood to reflect a broader, internationally coordinated framework distinct from a purely:
The concept of a careful evaluation of the underlying data source and calculation methodology behind a quantitative ESG metric (such as a water usage figure) is generally understood to be necessary, reflecting the same underlying concern with data reliability applicable to any quantitative:
The concept of a qualitative ESG disclosure (such as a narrative statement about an entity's own community engagement initiative) being harder to objectively verify than a quantitative metric is generally understood to reflect a challenge distinctive to a narrative, non-numerical:
The concept of an ESG assurance practitioner needing to consider a relevant scope boundary (such as which entity or facility a sustainability disclosure covers) is generally understood to reflect the same underlying scoping principle applicable to a group audit's own concern with:
The concept of a careful assessment of the materiality of a specific ESG matter (from the perspective of a broad stakeholder group, rather than a purely financial-statement-user perspective alone) is generally understood to require a different materiality lens than an ordinary financial:
The concept of an evolving international standard specifically addressing sustainability assurance being progressively developed by a professional standard-setting body is generally understood to reflect the discipline's own maturing journey toward a more:
The concept of an ESG assurance practitioner needing to maintain independence from the entity being examined, in the same manner required of a financial statement auditor, is generally understood to reflect that the underlying credibility-enhancing function of independence remains important regardless of the specific:
The concept of a careful evaluation of an entity's own governance-related ESG disclosure (such as board diversity or an anti-bribery policy) requiring the practitioner to evaluate both a policy's own existence and its own effective operation is generally understood to reflect a concern with avoiding a mere:
The concept of a growing convergence between ESG-related risk (such as a climate-related physical or transition risk) and traditional financial statement risk (such as an asset impairment or a going concern consideration) is generally understood to reflect that sustainability-related matter can have a real, tangible effect on:
The concept of an expert being engaged by the ESG assurance practitioner (such as an environmental scientist for a technical emission calculation) is generally understood to reflect the same underlying principle of expert reliance applicable to a financial statement audit's own use of a specialised:
The overarching value of a reliable, independently assured ESG disclosure to a broader stakeholder community is generally understood to lie in providing a trustworthy basis for evaluating an entity's own sustainability performance, rather than relying solely on an entity's own:
The concept of an ESG assurance engagement culminating in a written assurance report, communicating the practitioner's own conclusion to the intended user, is generally understood to reflect the same underlying communicative purpose served by a traditional audit report, notwithstanding the different:
The concept of a 'related service' (such as an agreed-upon procedure engagement or a compilation engagement) generally refers to an engagement distinct from an audit or review, since a related service generally does not itself result in the practitioner expressing an:
The concept of an 'agreed-upon procedure' engagement generally involves the practitioner performing a specific procedure that the engaging party has itself specified, reflecting an engagement where the reader of the resulting report must form their own:
The concept of a 'compilation' engagement generally involves the practitioner using accounting expertise to assist management in preparing a financial statement, reflecting an engagement that generally does not itself require the practitioner to obtain assurance about whether the:
The concept of the practitioner's own report on a compilation engagement clarifying that no assurance is expressed is generally understood to be important, reflecting a concern with avoiding a reader misinterpreting the practitioner's own involvement as providing:
The concept of an agreed-upon procedure report being restricted to distribution among the party who agreed to the specific procedure is generally understood to reflect that the resulting factual finding may not itself be meaningful or appropriate for a party who:
The concept of a clear engagement letter being important for a related service (in the same manner as for an audit) is generally understood to reflect the need for the engaging party and the practitioner to share a common understanding of the:
The concept of a related service still requiring the practitioner to comply with an applicable ethical requirement (such as professional competence and integrity), even where formal independence is not required in the same manner as an audit, is generally understood to reflect that a lower assurance level does not itself eliminate every:
The overarching purpose of studying a related service, alongside audit and review, is generally understood to be equipping a practitioner with an understanding of the full spectrum of a service they may be engaged to provide, extending beyond a:
The concept of a compilation engagement's own report generally still requiring the practitioner to apply accounting expertise to identify an obvious material misstatement encountered during the engagement is generally understood to reflect that, while no assurance is expressed, the practitioner is not itself permitted to:
The concept of the specific wording of an agreed-upon procedure report being limited to a factual description of the finding, without a broader conclusion or recommendation, is generally understood to reflect a concern with preserving the clear distinction between an agreed-upon procedure engagement and a broader:
The concept of a related service being an attractive, lower-cost option for a smaller entity that does not itself require a full statutory audit is generally understood to reflect the practical value of a scaled-down service proportionate to a:
The concept of the practitioner performing an agreed-upon procedure engagement needing to ensure that every party who will receive the resulting report has agreed to the specific procedure in advance is generally understood to reflect a concern with avoiding a misunderstanding about the report's own limited:
The concept of a related service being distinguished by the specific level of responsibility the practitioner assumes for the underlying information, ranging from an audit's own comprehensive responsibility for an opinion to a compilation's own more limited responsibility, is generally understood to reflect a graduated spectrum of:
The concept of the practitioner needing to clearly mark every page of a compiled financial statement (such as with an appropriate legend indicating no assurance is expressed) is generally understood to be a practical safeguard against a reader mistaking the:
The concept of the practitioner maintaining appropriate documentation for a related service, notwithstanding its own generally lower assurance level, is generally understood to reflect the same underlying documentation principle applicable to any professional engagement, supporting later:
The concept of an entity choosing between an audit, a review, and a related service being influenced by a different cost, level of assurance, and regulatory requirement applicable to each option is generally understood to reflect a practical, real-world decision that balances a:
The concept of a compilation engagement requiring the practitioner to obtain a general understanding of the entity's own business and accounting system, even though no assurance is expressed, is generally understood to reflect that competent preparation still requires:
The concept of a risk that an entity might misuse or misrepresent a compiled or agreed-upon-procedure report to a third party as though it were an assured, audited statement is generally understood to reflect a reason the practitioner should take reasonable step to prevent such:
The concept of a related service being subject to an applicable professional standard specifically governing that particular type of engagement (distinct from an auditing standard) is generally understood to reflect that, notwithstanding a lower assurance level, the engagement is not itself left entirely:
The concept of a related service providing a useful, lower-cost entry point through which a practitioner may build a relationship with a smaller client, potentially leading to a more extensive engagement (such as a review or audit) as the client itself grows, is generally understood to reflect a practical:
The concept of a 'review' engagement generally providing a lower level of assurance than an audit is generally understood to reflect that a review's own procedures are generally limited to a narrower set of technique, such as inquiry and analytical procedure, rather than the:
The concept of a review engagement generally providing 'limited assurance', expressed as a negative conclusion (such as, nothing has come to the practitioner's attention causing them to believe the statement is materially misstated), is generally understood to reflect a different form of conclusion than an audit's own:
The concept of a review of interim financial information (such as a quarterly result for a listed entity) being one common application of a review engagement is generally understood to reflect a practical need for a timely, cost-effective level of assurance between the:
The concept of a review engagement still requiring the practitioner to maintain independence from the entity is generally understood to reflect that, notwithstanding the lower level of assurance, the credibility-enhancing function of independence remains applicable, in the same manner as it is applicable to a:
The concept of a practitioner needing to apply professional scepticism during a review engagement, notwithstanding the reduced procedure relative to an audit, is generally understood to reflect that reduced procedure does not itself reduce the underlying need for a:
The concept of a review report needing to clearly describe the limited nature of the procedure performed is generally understood to be important, reflecting a concern with ensuring the reader understands the report's own conclusion is not equivalent to a:
The concept of a matter identified during a review causing the practitioner to believe the financial information is materially misstated is generally understood to require the practitioner to modify the review conclusion, reflecting that a review's own limited assurance does not itself excuse the practitioner from responding to a:
The overarching relationship between a review and an audit is generally understood to be that both engagements share the same core assurance discipline, differing primarily in the different level of:
The concept of an 'inquiry' procedure being central to a review engagement is generally understood to involve seeking explanation from management about a fluctuation or unusual item, reflecting a technique that, on its own, is generally understood to provide comparatively:
The concept of an 'analytical procedure' applied during a review generally involves evaluating a relationship between a financial and non-financial datum to identify a plausible or implausible pattern, reflecting a technique shared with an audit, but applied with a different intensity or:
The concept of an appropriate engagement letter being important for a review engagement, in the same manner as for an audit, is generally understood to reflect the need for both party to share a common understanding of the:
The concept of a practitioner needing to obtain a written representation from management as part of a review engagement, in a manner analogous to an audit, is generally understood to reflect the same underlying principle of formally documenting management's own acknowledgment of:
The concept of a modified review conclusion (analogous to a qualified or adverse audit opinion) being issued where the practitioner identifies a material misstatement is generally understood to reflect that a review's own conclusion, like an audit's own opinion, is not treated as a binary, all-or-:
The concept of an auditor of an entity's own annual financial statement also being engaged to review that same entity's own interim financial information is generally understood to potentially provide a useful, cumulative familiarity that could inform:
The concept of a review engagement's own reduced procedure relative to an audit reflecting a deliberate, considered trade-off between the cost of obtaining assurance and the level of assurance needed for a specific purpose (such as an interim, mid-year update) is generally understood to reflect that not every assurance need requires the:
The concept of a thorough documentation of the specific inquiry made and analytical procedure performed during a review engagement is generally understood to support later accountability, reflecting the same underlying documentation principle applicable to any:
The concept of a practitioner declining to issue a review conclusion where the entity refuses to provide adequate access or explanation is generally understood to reflect that a review, like an audit, cannot itself proceed to a meaningful conclusion without an adequate degree of:
The concept of a review of a smaller, less complex entity's own annual financial statement (as an alternative to a full statutory audit, where permitted) is generally understood to reflect a proportionate response to that entity's own lower:
The concept of a careful evaluation of whether a review engagement's own limited procedure remains sufficient, even where a significant, unusual matter unexpectedly arises during the engagement, is generally understood to reflect that a review's own predetermined, limited procedural scope is not itself:
The overarching value of the review engagement to the broader assurance ecosystem is generally understood to lie in filling a meaningful middle ground between a full audit and no independent examination at all, providing a credible, cost-proportionate level of assurance for an appropriate:
The concept of 'prospective financial information' generally refers to a forward-looking financial information (such as a forecast or projection) prepared based on an assumption about a future event, reflecting a subject matter distinct from the historical financial statement examined in an:
The distinction between a 'forecast' (based on a most-likely assumption) and a 'projection' (based on a hypothetical assumption, such as a what-if scenario) is generally understood to reflect two different approaches to preparing prospective financial information, with a projection being used where the entity wishes to examine a:
The concept of an examination of prospective financial information being inherently more limited in the level of assurance it can provide, relative to an examination of historical information, is generally understood to reflect the inherent uncertainty of any:
The concept of an examiner of prospective financial information needing to evaluate whether management's own underlying assumption is reasonable is generally understood to be a central part of the engagement, reflecting that the reliability of the resulting forecast or projection depends heavily on the reasonableness of the:
The concept of a report on prospective financial information needing to include a clear caveat that the actual result may differ from the forecast, since the forecast itself is based on an assumption about an uncertain future event, is generally understood to reflect a concern with avoiding a reader treating the forecast as a:
The concept of an 'other assurance service' (such as an assurance engagement on a non-financial subject matter, distinct from a financial statement) is generally understood to reflect the broader applicability of the underlying assurance framework, extending beyond the:
The concept of an assurance engagement requiring an appropriate 'subject matter', 'criterion', and 'sufficient appropriate evidence', regardless of whether the underlying subject matter is financial or non-financial, is generally understood to reflect the common, underlying structural element every assurance engagement:
The overarching relationship between prospective financial information examination and other emerging assurance service, and the traditional financial statement audit, is generally understood to be that all three rest on the same underlying assurance discipline, applied to a:
The concept of an examiner needing to evaluate whether the prospective financial information is presented in accordance with the applicable reporting framework is generally understood to reflect that the examination itself extends beyond merely checking the underlying assumption, to also cover:
The concept of management bearing the primary responsibility for preparing the prospective financial information, notwithstanding the practitioner's own separate examination role, is generally understood to reflect the same well-established division of responsibility that applies in a:
The concept of a practitioner declining to accept, or withdrawing from an engagement to examine prospective financial information where the underlying assumption is clearly unrealistic is generally understood to reflect a concern with avoiding the practitioner's own association with a:
The concept of an 'agreed-upon procedures' engagement (where the practitioner reports factual findings from a specific procedure, without expressing an opinion or conclusion) is generally understood to be a distinct type of other assurance-related service, reflecting a different report format from a:
The concept of a 'compilation' engagement (where the practitioner applies accounting expertise to assist in preparing financial information, without providing any assurance on it) is generally understood to reflect a non-assurance service, distinct from the assurance-providing:
The concept of a practitioner needing to obtain a written representation from management regarding the intended use and distribution of prospective financial information is generally understood to reflect a concern with the risk of the information being used by a reader beyond its own intended:
The concept of an examination of prospective financial information requiring the practitioner to assess whether the underlying assumption is internally consistent, in addition to being individually reasonable, is generally understood to reflect a concern with a coherent set of assumption that does not:
The concept of an emerging assurance service (such as an assurance engagement on a sustainability or non-financial metric) applying the same core assurance framework as a traditional audit is generally understood to reflect that the underlying assurance discipline is adaptable to a:
The concept of a practitioner needing to include, in the examination report on prospective financial information, a clear statement that the practitioner's own procedures do not constitute an audit, and accordingly no audit opinion is expressed, is generally understood to reflect a concern with avoiding a misleading impression of a:
The concept of a practitioner restricting the distribution of a report on prospective financial information (such as to a specific, identified recipient like a lender) where the underlying assumption is hypothetical, is generally understood to reflect a concern with a broader, unintended reader misunderstanding the:
The concept of a subsequent event (occurring between the date of the report on prospective financial information and its own issuance) requiring the practitioner's own consideration is generally understood to reflect the same well-established subsequent-event responsibility that applies in a:
The concept of the overall chapter on 'Prospective Financial Information and Other Assurance Services' tying together examination-type engagement on future-oriented and non-financial subject matter is generally understood to reflect the broader theme that assurance itself is a flexible discipline, applicable well beyond the:
With regard to the unspent amount of ₹ 20 lacs, out of the following select the appropriate reporting responsibilities of M/s HG & Co. for compliance of CARO 2020:
How will CA H report the matter relating to the non-compliances under Foreign Exchange Management Act?
Which of the following is not a current period consolidation adjustment?
For failing to keep moneys in a separate bank account, will CA H be held guilty of professional misconduct under the Chartered Accountant Act, 1949 and its schedules thereto?
You are required to calculate the amount of revenue leakage calculated by the auditors for Kochi Branch of KLM Bank limited.
Select the correct option after calculating the aggregate risk adjusted value of above funded assets for reckoning the minimum capital ratio of Easy Finance Limited for the year ended on 31st March, 2025.
How will M/s SQC & Associates report under CARO, 2020, with reference to the revaluation of assets of MRP Limited?
What type of opinion or reporting M/s SQC & Associates should issue in their auditor's report of MRP Limited considering the two observations as
Which of the activities verified by the subordinate staff of ABC & Associates pertains to the Control Activities - Information processing? Options:
Which of the following are not the specific procedures to evaluate the relevance and reasonableness of Mr. C's finding and consistency with other audit evidence?
The effect of early adoption of Ind-AS will be reported under which head in the Audit Report? Options:
Which audit firm is responsible for lapses in the audit procedures for testing of control activities relating to information processing, in terms of SA 299, in case the audit procedures are not performed professionally by subordinate staff of ABC & Associates?
Which of the following options is correct regarding the classification and treatment of the identified misstatements of DEAF Ltd. under relevant
Which of the following actions is not required as part of the auditor's documentation for the identified misstatements of DEAF Ltd.?
Based on the listed additional procedures, which of the following are the inappropriate actions for the auditor to take decision on Going Concern in the case of Purple Pvt. Ltd.?
Which of the following statements is most appropriate in the context of the roles of QRB and NFRA?
CA JP, the engagement partner is satisfied with the procedures suggested by audit manager but he is not convinced with the sequence of steps while planning the performance audit of Wind power Ltd. He seeks your advice in suggesting the correct sequence after rearranging them. You are required to select the correct option from the following:
As regards the method suggested for conducting performance audit of Wind power Ltd., by which team member do you think that it may not be possible for the auditor to work with complete data due to its high volume and in such cases sampling techniques are required to be used?
The following audit procedures are undertaken by the audit team in relation to audit of advances of the Indore Main branch: (i) Examine existence, enforceability, and valuation of securities in respect of securities requiring registration. (ii) Verify correctness of master data of loan accounts updated in CBS. Check parameters like instalments, EMI, rate of interest, tenure of loans etc. (iii) Examine whether system laid down in bank for review/renewals of advances is being followed. © The Institute of Chartered Accountants of India (iv) Examine accounts identified to be problem accounts but which have not yet slipped into NPA category. This can be done by obtaining list of SMA1 and SMA2 borrowers from the bank and same can be considered for selection of problematic accounts. (v) Review auditor's reports in case of borrowers having credit facilities from the banking system beyond a cut-off limit fixed by board of directors of bank. From the above, identify the audit procedures that Mr. Y should focus upon.
What is the Drawing Power (DP) available to Kiran Ltd. as of 31st March 2025?
Considering the factors influencing audit procedures for opening balances, which of the following is the most appropriate course of action
Based on SA 530, which of the following is the most appropriate response for the auditor in handling these situations while performing sampling tests and procedures?
Which of the following is the most appropriate for M/s GDP Associates in response to the events that occurred when performing external confirmation procedures to obtain relevant and reliable audit evidence in
M/s GDP Associates are concerned with SA 620, which deals with the auditor's responsibilities regarding the use of external IT expert when that work is used to assist the auditor in evaluating cyber security framework. Which of the following is incorrect option in relation to agreement with the auditor's expert?
Mr. K, the engagement partner of M/s KAP & Co, failed to maintain any documentation of the whole verification process and did not perform impairment testing on the PPE at the end of the financial year. Select the appropriate option as per SA 299.
The management of the company has adopted a new ERP system and accordingly, the audit trail was maintained from Dec 03rd, 2023 only in the new ERP System. Whether the action of auditors with respect to reporting © The Institute of Chartered Accountants of India requirement of audit trail was justified?
Mr. B, engagement partner of M/s BMS & Co., was responsible for verifying Procure to Pay Process, he did not perform any procedure and relied upon the work of Internal Auditor, without keeping any documentation. Which of the following is correct as per SA 610?
Considering the above case, whether reporting under CARO, 2020 will be applicable to ABC Private Ltd.?
While preparing a consolidated financial statement of WYZ Ltd., division of responsibility between auditors of WVZ Ltd. and auditor of ABC Private Ltd. should be reported in:
As per SA 701, “Communicating Key Audit Matters in the Independent Auditor’s Report”, which of the above-mentioned areas should the audit committee and the auditors consider while determining the 'Key Audit Matters'?
Assuming the role of the auditor of Cash Limited, based on the above observations, which aspects would you report as control failures, and what would be your rationale for considering them as such?
Among the various passion-driven activities undertaken by CA M as discussed in the case, which of these are generally permitted by the Institute of Chartered Accountants of India (ICAI)?
According to the provisions of the Chartered Accountants Act, 1949, under which clause would CA M be guilty of professional misconduct?
Is there any professional misconduct involved in the submission of the municipality tender application by BNM & Associates under the Chartered Accountants Act, 1949?
As per the provisions of CARO 2020, what should be the auditor’s reporting responsibility with regard to revaluation of Property, Plant and Equipment done by Zenith Components Ltd.?
Whether reporting is required under CARO, 2020 in case of sanctioned cash credit limit i.e., working capital limits?
The report of audit of State Housing Department by the C&AG is likely to be submitted to:
With respect to EcoTherm Power Ltd., which of the following statements correctly categorizes the sustainability reporting indicators?
Whether CA Nisha would be held guilty of professional misconduct if she accepts the offer to become a member of the Board of Management of Navlok Co-operative Bank (Primary Urban Co-operative Bank)?
In the given case, the cyber-attack technique encountered by the Company is known as:
Considering the facts given in the case relating to loss and deficiency in internal controls which led to the fraud, what is the most appropriate reporting implication for the auditor regarding the opinion?
The management of TechNova decided to prepare a statement detailing their Environmental, Social, and Governance (ESG) performance. If the company were to follow the SEBI mandate for disclosure on non-financial metrics, which report would it primarily be required to file, being a Top 500 listed entity?
Can M/s A & P Associates accept the offer to provide internal audit services for TechNova Solutions Ltd. for the current financial year's Quarter 4 period?
Which of the following is correct with regards to CA Supriya approached by a hospitality client for conducting mystery audit?
What should CA Supriya do in case of Cosy Textiles Ltd.?
Can CA Supriya digitally sign the ROC Forms for Fair Private Limited?
Does CA Supriya is correct in using a messaging application?
As per SQC 1, what is the most appropriate action for CA Rajul to take after assessing that her audit team lacks experience in pharma R&D?
The fact that the previous Big 4 auditor resigned due to scope limitations should prompt which of the following actions by ADM & Associates?
Under SA 220, what is CA Rajul’s responsibility as the engagement partner regarding audit quality?
Which items should Ms. Mansi select for testing so as to get the samples on which Vendor Balance Reconciliations can be performed? (i) Major Vendors where the confirmation balances agrees to General Ledger. (ii) Vendors which have high volume of business with Simran Edible Oil Limited. (iii) Vendors with balances of ₹ 15,00,000 or more outstanding at the year end. (iv) Vendors with balances of ₹ 15,00,000 or less outstanding at the year-end.
How can Ms. Mansi audit the operating effectiveness of internal control around the accounting of Trade payables?
What are the audit procedures that Ms. Mansi should perform to verify whether the payable balances of Krishi Sunflower Seeds Ltd. are correctly recorded in the financial statements? © The Institute of Chartered Accountants of India
What would be proper course of action to be taken by Ms. Mansi for two errors amounting to ₹ 4,00,000 and ₹ 8,00,000 in the given scenario?
The management argued that the reviewer has no powers to assess the business feasibility, as the company has been running a profitable business from many years. Which of the following statement should be correct?
The due diligence reviewer was given audited financial statement of the company for his financial review for the year ended March 2024. However, the reviewer asked for financial statements for the year ended 31st March 2023, which was already audited by the statutory auditors of the company and the management of the company declined this request.
The reviewer for due diligence reviewed the consultation documents pertaining to various litigations going on including those related to matters. Further, he also suggested that the decision taken by the company in some matters was not correct.
The management may refuse to share the details of promoters. Comment on this.
Whether CA Harman will be held guilty for reflecting income from currency and commodity derivatives as "Business Income". If yes, under which clause?
Before which authority would CA Harman’s misconduct case be placed for disciplinary proceedings?
What is the minimum punishment that could have been imposed on CA Harman under the Chartered Accountants Act, 1949?
Whether the opinion of Manohar & Co. for referring the work of the auditor’s expert, Mr. Tanmay in the audit report, can be considered as valid?
Whether the opinion of Llyods & Co. for treating the item as a misstatement in the case of test of controls as well in the case of test of details for which the joint auditors were not able to apply the designed audit procedures or suitable alternate procedures, can be considered as valid?
Whether the insistence by Manohar & Co. for determining implications of not obtaining response to positive confirmation request on the audit opinion can be considered as valid?
Whether Namo & Co. would be considered to have satisfied the requirements of communicating with the previous auditor?
While finalising the audit report CA Kamlesh decided to present the early adoption of IND AS under the “Other Matter Paragraph” as in the auditor’s judgment, is relevant to users’ understanding of the audit, the auditor’s responsibilities or the auditor’s report. Kindly guide CA Kamlesh with respect to correct reporting in the Audit Report as per SA 706:
CA Kamlesh ’s risk assessment includes an expectation that controls at the service organization are operating effectively and he contended that there was no requirement to obtain a Type 2 report. Kindly guide CA Kamlesh with respect to the requirement of SA 402. © The Institute of Chartered Accountants of India
CA Kamlesh was not sure with respect to the UDIN requirement for the letter to Those Charged with Governance containing important audit topics and findings for discussion. Kindly guide CA Kamlesh with respect to UDIN requirements for this letter.
Which of the following statements is likely to be correct in regard to PQT Limited?
Is the provision for Loss Assets of ₹ 2 crores correct as per RBI norms?
Fincorp Limited has classified ₹ 15 crores of loans as sub-standard assets. As per RBI norms, what should be the minimum provision required for this category?
Fincorp Limited has ₹ 8 crores in doubtful assets (one to three years) and has provided ₹ 2.00 crores. What is the shortfall in provisioning as per RBI norms?
With reference to the ₹ 8 crore sales transaction with TechSynergy Solutions Pvt. Ltd., and management’s refusal to disclose the relationship with the entity, how should CA. Gaurav assess this matter in accordance with SA 240?
What is the reporting responsibility of CA. Gaurav under para 3(i) of CARO 2020, regarding the undisposed robotic arm with a written down value of ₹ 2.5 crores that was not physically located?
Assuming that CA. Gaurav's father purchased the shares with a face value of ₹ 10 lakhs in AutoBots Ltd., the subsidiary company, on 1st April, 2025, what is the implication on the audit engagement of IRPL under the Companies Act, 2013 and the Chartered Accountants Act, 1949?
What is the most appropriate type of audit opinion that CA. Gaurav should express for IRPL's financial statements in accordance with SA 700 regarding multiple unresolved issues, specifically the ₹ 8 crore revenue transaction, the missing ₹ 2.5 crore asset and the impact of the subsidiary's qualified opinion? © The Institute of Chartered Accountants of India
If CA. Gaurav surrenders to the pressure from IRPL's management and issues an unmodified audit report for the year ended 31st March 2025, despite the unresolved issues regarding the revenue transaction with TechSynergy and the unverified robotic arm, he would be guilty of professional misconduct. Which of the following clauses of Part I of the Second Schedule to the Chartered Accountants Act, 1949, would be applicable?
Considering the requirements of SA 250, "Consideration of Laws and Regulations in an Audit of Financial Statements" and the specific context of an NBFC audit, what is the most appropriate course of action for CA. Mehta regarding the non-classification of loan accounts worth ₹ 15 crores as NPAs?
that the CA. Arjun is finalised as the signing on behalf of the firm Mehta © The Institute of Chartered Accountants of India assignment for the Assessment Year 2025-26 as per the guidelines issued by the Council of ICAI?
CA. Mehta has identified the matter regarding NPA classification and the non-disclosure of the lawsuit as the two most significant issues of the entire audit. He wishes to highlight these matters prominently in his report as Key Audit Matters. Considering the nature of matters, which of the following is the only appropriate method for CA. Mehta to communicate these in his audit report?
Apart from making inquiries with management wherein the management’s assessment of the lawsuit is "remote," which audit procedures should be designed and performed by CA. Mehta?
The delayed disclosure of environmental violations at the new manufacturing plant is contrary to which BRSR principle?
Which clause of CARO, 2020 is most likely to require reporting in respect of delayed wages and labour-related statutory non-compliances at Prakriti Limited?
The grievances raised by contractual workers regarding delayed wages © The Institute of Chartered Accountants of India and unsafe working conditions primarily indicate non-compliance with which principle?
Sharing customer data with third-party marketing agencies without explicit consent amounts to a violation of:
Which of the following activities undertaken by Wire Ltd. falls under the Environmental (E) pillar of ESG?
Policies relating to labour welfare, gender diversity, and community development primarily relate to which pillar of ESG?
Whether the instruction of CA Ankur, Partner of APR & Associates, to his articled assistant CA Mihir is in compliance with the provisions of the Chartered Accountants Act, 1949 and the Schedules thereto?
The presence of independent directors and constitution of Audit and Risk Management Committees indicate adherence to:
Whether payment to Mr. Varun described as “legal consultancy and office support charges” is permissible under the provisions of the Chartered Accountants Act, 1949 and the Schedules thereto?
The phone call received by the CFO requesting OTP details to reverse a failed transaction is known as:
Whether purchase of goodwill form a non-CA in the given case will tantamount to Professional Misconduct under the provisions of the Chartered Accountants Act, 1949 and the Schedules thereto?
The email sent to the Managing Director impersonating the Chairman and seeking urgent wire transfer authorisation is an example of:
Regarding the website “bat-ca.com”, which of the following statements is correct under the Council General Guidelines, 2008?
In the given case, whether approach of audit team i.e., relying on written representation and MIS with respect to reporting under relevant
Whether Mr. P will be held guilty for professional misconduct for handing over the firm’s bio-data during a TV interview under the Chartered Accountants Act, 1949 and Schedules thereto?
Whether the publishing of the photograph by Mr. Q is permissible under the Chartered Accountants Act, 1949 and the Schedules thereto?
Items at which serial number, as aforesaid, have been wrongly included or excluded for the computation of Demand and Time Liabilities?
Whether the classification of advance and income recognition by Quick Trust Bank Ltd. is correct?
Would the auditor’s conclusion change if the advance, which has remained overdue for more than 18 months, was guaranteed by a State Government instead of the Central Government?
Whether Verma & Co. can accept the stock audit assignments, as aforesaid?
Though the company had significant growth in the past years, it has not done well over the last two financial years. As per SA 570, there are certain events or conditions that individually or collectively may cast significant doubt about the going concern assumptions. In order to assess whether MINSAN Ltd is a going concern or not, which of the following audit procedures should NOT be performed?
Company has made an estimate for allowance of debtors @ 5%. Some financial statement items cannot be measured precisely but can only be estimated. The nature and reliability of information available to management to support the making of an accounting estimate varies widely, which thereby affects the degree of estimating uncertainty associated with accounting estimates. Please advise which among the following may have higher estimate uncertainty and higher risk as per SA 540?
The company in the notes accompanying its financial statements disclosed the existence of the suit filed against the company with full details. Based on the audit evidence obtained, it is necessary to draw user’s attention to the matter presented in the financial statement by way of clear additional communication as there is an uncertainty relating to the future outcome of the litigation. In this situation, which of the following reporting option would be correct if the auditor is satisfied with © The Institute of Chartered Accountants of India the conclusions reached by the management and this matter is fundamental to the reader of financial statements?
Company got a show cause notice from State Pollution Control Board. As per SA 250, the auditor shall perform the audit procedures to help identify instances of non-compliance with other laws and regulations that may have a material effect on the financial statements. As the audit team of the company became aware of information concerning an instance of non-compliance with law, what would not be the audit procedure to be performed?
The company had availed some amount of loan for new plant and machinery during the year under audit. Out of the total loan sanctioned an amount of ₹ 25 lakh was earmarked for the purchase of the machinery- Oil Extractor, but the company has acquired an improved model of machinery, viz, Oil extractor with Dryer instead. State which of the reporting option would be correct.
Was the decision of XY & Associates not to report the issues of ABC Enterprises in CARO, 2020 justified? If so, under what reason?
What is the total amount of loans that should be classified as NPA by ST Bank?
Which of the following must be reported as a contingent liability for ST Bank Ltd.?
As per SA 701 – Communicating Key Audit Matters in the Independent Auditor’s Report, which of the following areas should XY & Associates consider when determining "Key Audit Matters"? (i) The effect of significant transactions that took place during the financial year on the audit. (ii) Areas of high risk as assessed and reported by the management's expert. (iii) Significant auditor judgment related to financial areas involving significant management judgment.
Whether the act of conducting joint training session on GST by CA Love & Kush and sharing of the fee collected leads to professional misconduct as per the Chartered Accountants Act 1949?
With regards to the BRSR reporting on the data of total emissions & the future energy consumption plans of the company, how do you treat them?
The futuristic plan which the company has for its energy consumption can be categorized under which principle of National Guidelines on responsible business conduct?
By accepting the offer to become a member of the Board of Management of KYC Co-operative Bank, do you think that CA Love would be held guilty of professional misconduct?
In the given case, it is mentioned that CA Kush is a practicing CA and is also engaged as an Equity Research Advisor. Do you think that CA Kush will be held guilty of professional misconduct as per the provisions of the Chartered Accountant Act,1949?
With respect to the non-consolidation of the financial statements of Soccer Ltd. with the financial statements of Delco Ltd., how should the auditor deal with the same in their audit report?
With respect to the corresponding figures of the financial year 2022-23 in the current year financial statements, what are the auditor’s reporting responsibility for the same?
What is the reporting responsibility of the auditor in case the prior period financial statements are not audited? © The Institute of Chartered Accountants of India
Preparing the financial statements in accordance with the applicable Delco Ltd. Which of the following is correct in regard to the disclosure of such management responsibility?
If the auditors of Delco Ltd. decide to give a qualified/ adverse opinion in the current financial year with respect to the non-consolidation of financials of Soccer Ltd., which of the following is true with regard to the use of EOM paragraph for some other matter?
If the management discloses the fact of non-consolidation of financial statements of Soccer Ltd. in the notes to accounts of the current financial year, what will be the impact on the audit report?
Mishty and Associates, Chartered Accountants were already appointed for stock audit by the audit committee for the ten branches, so whether © The Institute of Chartered Accountants of India Mishty and Associates, Chartered Accountants are authorised to accept the appointment as statutory auditors for the same branches? Select the correct option from the following:
Whether the Bank’s Management is authorised to appoint and fix the remuneration of statutory auditors without consulting the Audit Committee of the Board of Directors or members in Annual General Meeting? Select correct option from the following:
You have been asked by your senior to verify the high value cash deposits at the Kerala branch. What parameters/ documents will you verify as the concurrent auditor of the branch? Select the correct option from the following:
How the discrepancy of not preserving the intimations of cash remittances to currency chest by Kerala branch of the bank should be dealt by the concurrent auditor in his audit report? Select correct option from the following:
In the given case, cyber-attack encountered by the company is known as:
The engagement partner is confused as to whether the audit report would be impacted by the cyber-attack instance. What is the appropriate reporting implication:
The company wants to prepare an Integrated Report as contained in the International Integrated Reporting Council and endorsed by SEBI. The Company Secretary is of the view that an Integrated Report is mandatory for a listed entity. Which of the following is correct in this regard?
Integrated Reporting comprises 6 categories of capital. The company observed that it has capitalised intangible assets (patent) and roof top solar equipment in the balance sheet. In the Integrated Report patents and solar equipment should be disclosed respectively as:
Can the auditor accept the system audit as offered by ComTeK Limited?
From the above facts and details, what is the correct amount of interest which the bank should account in its financial statements?
What could be the possible amount classified as NPA relating to the accounts with respect to observation regarding the inclusion of interest income given below: - ₹ 5 lakh interest relating to a short-term crop loan where instalment was overdue for one crop season. - ₹ 7 lakh relating to an advance (guaranteed equally by Government of India & Government of Tamil Nadu) where the instalment was due for more than six months.
In NPA, sales to asset reconstruction company, what discrepancy auditor might have noticed:
Among the services to be provided to the start-up company, providing which service(s) would not lead to violation of the Chartered Accountant Act, 1949?
What was the responsibility of NLP & Co. with respect to the issue of limited review report at the time of resignation?
What was the responsibility of Mr. Kamal when the management refused to remove the said limitation?
If the auditor proposed to resign on 14th November before issuing Limited Review Report for second quarter, then what will be the © The Institute of Chartered Accountants of India responsibility of MNL & Co. with respect to withdrawal from engagement and issue of limited review report at the time of resignation?
Whether in the given circumstance withdrawal from engagement was mandatory and if so, what is the responsibility of the auditor with respect to such withdrawal?
Assuming Opus Chemicals Ltd. to be an unlisted company, whether the reason for resignation by NLP & Co. was proper?
Whether RST & Co. should adhere to the opinion formulated by LM & Co. and ABC & Co. or explore alternative options.
In the above given case, what should be the next course of action on the part of auditors of JMP Limited when the auditors conclude that the reason for management’s refusal to allow to send the confirmation to the debtors is unreasonable and the auditor is unable to obtain relevant and reliable audit evidence from alternative audit procedures?
Auditor of the RJ Private Limited, shall mention the fact that the financial statements for the prior period were audited by another auditor, in____.
In the above given case, what should be the course of the action on the part of HJK & Co., when they found material misstatement that has not been accurately accounted or presented or disclosed in the financial statement of current year?
In the context of the aforementioned scenario, does CARO apply to RJ Private Limited company, an associate company of JMP Limited?
The company has requested its previous auditor to give back its audit documentation (“working papers”) and warned the previous auditor with legal notice to submit them back to the company showing the confidentiality clause:
The engagement partner has requested you to comment upon the usage of work of Internal auditor by the engagement team in accordance with
The Trainee asked whether the audit team is required to perform any procedures for the investment in SteelX Private Limited:
The trainee asked about role of auditor in case the investment in SteelX Private Limited is increased to 60% in the next year:
Kindly guide Mr. Rajan regarding areas where he may need to report the absence of internal audit function in the company in Audit Report.
Mr. Rajan reported, under Clause 3(A)(III) of Master Direction - Non- Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016, that JDDS Deposit Limited is not eligible to hold its Certificate of Registration under section 45-IA of the RBI Act, as during the year the Net Owned Funds went below the minimum required limit. Management of the NBFC had a different opinion that a certificate pertaining to the Net Owned Funds from the statutory auditor is required with reference to the position of the Company as at the end of the financial year ended 31 March and not based on each month’s position. Kindly guide Mr. Rajan with respect to the requirement under Master Direction.
Mr. Rajan wants to highlight the matter with respect to the absence of internal audit function in his audit report under the Emphasis of Matter paragraph. However, management was of the view that the audit partner was not right by disclosing the said matter in his audit report as it was an internal matter, and the audit team had not identified any material evidence which could impact the opinion of the auditor. Kindly guide Mr. Rajan whether proposed reporting under Emphasis of Matter (EOM) para in the Audit Report is correct.
As per the Chartered Accountants Act, 1949, under which clause CA Taran is liable for misconduct?
MSK & Partners sought direct assistance from CA. IA, internal auditor as stated in the above scenario. Advise as to whether he is permitted to do
With respect to the fees to be charged for its new assignment, which option can be opted by MSK & Partners.? (i) To charge fees of ₹ 501/-, or (ii) To charge fees as percentage of Net Profits.
the previous auditor and obtained the postal acknowledgement. Will CA Manik be held guilty of professional misconduct under the Chartered Accountants Act, 1949?
In the given case scenario, has Govil breached the maximum limit of clients. If yes, can he be held guilty of professional misconduct?
Will the retaliating act of Chandan against the company make him guilty of professional misconduct?
In the given case scenario, visiting cards printed by Govil & Chandan, is there anything which may lead to professional misconduct? If so, under what provisions?
The firm had received the following assignments: (i) Concurrent audit for TT Bank Ltd. (ii) Statutory audit for HBT Bank Ltd. (it is to be noted that the bank was not sponsored by TT Bank) (iii) Offer to act as settler of JJ Charitable Trust. (iv) Internal audit of PF Trust of Government Company Ltd. (v) Statutory Auditor of Government Company Ltd. Among the above assignments, which assignments can be accepted by the firm?
Whether the selection of EQCR is as per the requirements of SQC 1?
The reviewer is of the view that the audit opinion on internal controls under section 143(3)(i) of the Companies Act 2013 should have been modified as material weakness existed in the comparative information. Do you agree with the reviewer?
Whether CA Honey should consider the Board Report or not as the audit report was already issued:
Since there arose a doubt on the management representation and considering the responsibilities of M/s HVM & Co. to obtain written select the incorrect option from the following:
CA V, engagement partner, in the course of audit of AST Ltd. wants to communicate as he considers necessary to include additional information in the auditor's report in accordance with SA 260. Following are the circumstances for which communication with those charged with governance is required. Help CA V in getting identified incorrect circumstance from the below mentioned circumstances.
In view of the Board of Directors of the VED Ltd. agreeing to include an amount of ₹ 8500 crore on account of incentives in respect of F.Y. 2021- 22 in the financial statements of the company for the Financial Year ended on 31 March, 2024 by amending the accounts, CA H shall consider the following procedures. Identify the incorrect procedure from the following:
The balance of GHF Bank with the Swiss based Bank should be converted into Indian Currency at the following rate:
What should be the proper audit procedure in respect of Interest on deposits accrued but not due amounting to ₹ 87,75,000/- appearing in the financial statements of GHF Bank?
The amount of Interest Rate Swaps amounting to ₹ 81,26,500/- should appear as ……… in the financial statements of the bank :-
Which of the following is correct statement related to the requirement laid down by the RBI for Roshan & Associates while verifying the © The Institute of Chartered Accountants of India compliance with the SLR requirements of the bank?
As per the requirement of SA 570, how auditors should deal with the matter of unwillingness of management to provide for the assessment relating to going concern?
As per SA 501, what is the correct audit procedure to be followed regarding the existence and condition of inventory wherein an inventory valued ₹ 12.35 crore is lying with the third party? © The Institute of Chartered Accountants of India
State the amount required to be reported by the auditor of BNN Ltd., under clause 3(xvii) of Para 3 of CARO, 2020 on account of losses during the year under consideration.
According to SA 510, which of the following audit procedures can be implemented by M/s JKL & Co. to obtain sufficient and appropriate audit evidence on the opening balances about whether it contain any material misstatement that could affect financial statements of current year? (i) Closing balances of the preceding period have been correctly brought forward to the current period. (ii) Performing specific audit procedures to obtain evidence regarding its opening balances. (iii) Determining whether the opening balances reflects the application of appropriate accounting policies.
Considering the nature of the business, which Reporting clauses of CARO, 2020 would be applicable from below: - (i) Whether the company has conducted any Non-Banking Financial or Housing Finance activities without a valid Certificate of Registration (CoR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934 (ii) In respect of loans and advances in the nature of loans, whether the schedule of repayment of principal and payment of interest has been stipulated and whether the repayments or receipts are regular; (iii) Whether the company is required to be registered under section 45- IA of the Reserve Bank of India Act, 1934 and if so, whether the registration has been obtained. (iv) Whether the company has provided any loans, guarantee or provided security to any other entity.
What is the auditor’s responsibility when the audit of EFG Ltd. for the previous year has not been conducted by the current auditor i.e. M/s SDS & Co.? (i) The auditor needs to report such matters in the other matter paragraph in the main audit report. (ii) The auditor needs to report such matter in the emphasis of matter paragraph. (iii) The auditor shall be responsible for obtaining sufficient and appropriate audit evidence that the opening balances does not contain any material misstatement.
In the given case, what is the reporting requirement in relation to SA 250, on the part of the auditor, with reference to violating guidelines by the company relating to the acceptance of public deposit?
Whether letter of comfort given to banks by the target company needs to be reviewed as part of the financial due diligence. Choose the correct reasoning from below? © The Institute of Chartered Accountants of India
Which among the following is not a matter included in the scope of a full- fledged financial due diligence?
Can Bhuvan & Co. take the assistance of experts in pursuing the investigation? Choose the correct reasoning from the below?
Identify the correct statement relating to the reporting duties of the auditor under clause 3(i) of CARO, 2020 with regard to:
Should the fraud described in the case be reported by the auditor under clause 3(xi)(a) of CARO, 2020?
As regards cost records is concerned, which of the following statements is correct regarding reporting under clause 3(vi) of CARO, 2020?
It has been contended by the auditor that the audit was properly planned. He has further stated that it was practically not feasible for firms of small size to prepare a detailed audit plan. Which of the following views is most appropriate in this regard?
On your overall reading of the case study, which of the following statements appears to be true?
Considering auditor’s point of view regarding engagement quality control review, identify the most appropriate statement from below: -
Considering the auditor’s reply regarding errors in data feeding entry by junior staff in relation to accounting standards, which of the following statements is proper?
With respect to auditor’s conclusion relating to risk of material misstatement due to fraud related to revenue recognition, which of the following statements is most appropriate in this respect? © The Institute of Chartered Accountants of India
Considering the auditor’s findings related to inventory quantities, which of the following is not likely to be an appropriate response to outlined assessed risk of material misstatement due to fraud?
Which of the following statements most appropriately describes the responsibilities of auditor in relation to compliance with state pollution control legislation and regulations?
With respect to the auditor’s observation relating to the matter of child labour, which is the most appropriate course of action for him to proceed in this matter?
Which of the following statements is most appropriate about documentation of non-compliance with laws and regulations by an auditor in context of SA 250?
In assessing whether the risk of material misstatement related to Rev Motors Ltd.'s revenue recognition policy is a significant risk, which of the following is most critical for the statutory auditor to consider as per SA 315, even when the internal audit team has found no fraud risk based on management's experience?
Based on the above case scenario and the auditor's assessment of the company's financial performance, which of the following courses of action is most consistent with the requirements of SA 570 Going Concern?
Rev Motors Ltd. paid their arrears of undisputed statutory dues just a day before the date of the audit report. After this, now the auditor believes that only disputed dues need to be reported under CARO 2020 as undisputed are paid before the date of the audit report. Which of the following is the most appropriate course of action for the auditor in this situation?
As regards description regarding revenues generated through cash sales of a company, which of the following statements is most appropriate in terms of SA 705?
Considering litigation matter of Excel Limited, which of the following statements is most appropriate in this regard?
Considering description of issue regarding non-recoverability of export receivable of ₹ 3 crore from a chain of stores, which type of opinion is appropriate to be issued in audit report? © The Institute of Chartered Accountants of India
Regarding issue of not informing team regarding inventory of finished goods lying at a location taken on rent in February 2024, which type of opinion is appropriate to be issued in case of this client?
What should be the appropriate date of signing of the new audit report?
CA Priya would have taken into account a lot of procedures to get knowledge of the events occurring after the balance sheet date up to the date of the audit report relating to the company. Which of the following does not fall under such audit procedures as per SA 560?
W.r.t the first audit report dated 15.07.2024, which type of opinion was most likely provided by her?
W.r.t the new audit report issued, which type of opinion is most appropriate?
The fire event occurring on 27.6.2024 in the company’s plant requires the following action on part of management: -
Considering disclosure of additional information in consolidated financial statements as stated in para (A) of case study, which of the following statements is correct?
What should be auditor’s proper course of action pursuant to situation highlighted in para [B] relating to financial statements of a foreign subsidiary?
Which of the following statements is correct in respect of goodwill and other matters described in the case scenario?
Which of the following statements is most appropriate regarding consolidation of financial statements of a subsidiary acquired on 15.06.23?
As regards reporting under reporting CARO, in respect of consolidated financial statements, which of the following is in accordance with requirements of law?
The concurrent auditor wants to ensure that fresh CASA accounts opened in the branch are KYC compliant. Which of the following best sums up the scope of KYC guidelines prescribed by RBI?
Is the thinking of CA. Ronit correct, as regards the duty of the concurrent auditor with respect to the dormant deposit accounts in the branch?
Which of the following statements is most appropriate regarding the sanction of fresh advances to borrowers aggregating to ₹ 15 crore, from the concurrent auditor’s perspective?
As regards the matter of levying of foreclosure charges described in case scenario, what is appropriate course of action for concurrent auditor?
Which of the following statements is most appropriate as regards reporting of matters relating to temporary over limits in cash credit accounts and temporary overdrafts in current accounts?
The auditor has performed audit procedures relating to allowances as mentioned in para (B). As these allowances involve significant judgment and estimates, she wants to state how it was addressed by her. How can she do that?
Which of the following statements is most appropriate in respect of reporting requirements relating to certificate of registration of the company obtained from RBI as described in the above case? © The Institute of Chartered Accountants of India
As regards description of capital adequacy ratio as described in the case, which of the following statements meets regulatory reporting requirements?
Regarding instances of cash embezzlement identified by the company during the year, which of the following statements best fits into the reporting requirements of an auditor?
Considering the description stated in para [A] of the case, the above audit finding is likely to fall in which areas?
In para [B] of the case, which Parliamentary Financial Committee is likely to examine above report of C&AG and make its recommendations?
Considering the nature of audit finding in the case concerning delay in completion of work of thermal power plant, the said audit finding is likely to fall in domain of:
Which of the following statements is most appropriate with regard to the listed PSU, stated in para [D]? © The Institute of Chartered Accountants of India
PSU engagements are generally attestation engagements or direct reporting engagements. Which of the following statements is correct in this regard?
Which according to you is the correct statement in context of the aforesaid case scenario?
Which components of audit risks are represented in the aforesaid scenario? © The Institute of Chartered Accountants of India
Which Internal Control seems to have been compromised as the root cause here?
Which Segregation of Duties aspect seems to have been compromised here?
Whether AK & Co. is correct in not including a report on CARO in their Statutory Auditor Report?
M/s Deva & Co., in their auditor's report on the current period's financial statements, wants to report that Tom Ltd. does not want to make provision for doubtful debts in F.Y. 2024-25. Identify the correct action to be resorted out of the following:
M/s Deva & Co. assigned the following procedures to internal auditors to provide direct assistance. © The Institute of Chartered Accountants of India (i) that relate to higher assessed risks of material misstatement where the judgment required in performing the relevant audit procedures or evaluating the audit evidence gathered is more than limited. (ii) that relate to work with which the internal auditors have been involved, and which will not be reported to management or those charged with governance by the internal audit function. (iii) that relate to decisions the statutory auditor makes in accordance with SA. From the above, identify the appropriate procedure(s) that can be assigned to internal auditors:
Issue identified by Deva & Co., with regard to holding significant bank significant related party transactions is a fraud risk factor. What is the condition created by that fraud risk factor and what fraud does it result in?
Out of the following which view of M/s Deva & Co. is the correct one for complying the reporting requirement under CARO, 2020 as regards lump- sum deposit of estimated ESI collections and its adjustment against next months’ deposit leaving the insignificant difference of ESI amount? © The Institute of Chartered Accountants of India
Keeping in view of the information in para (ii), Identify under which layer APP Ltd. will be categorised -
Based on facts given in para (i), you are required to Compute Demand and Time Liabilities (DTL) balance as on 30th September 2024.
Keeping in view of the information in para (iii), in the case of Performance audit of PSU, which one of the following is not part of Audit Design Matrix (ADM)
Is Shubh and Laabh LLP guilty of professional misconduct for accepting the audit of Arpan Films Ltd.?
Since the subsidiary Neel Ltd. was already audited by other auditor, whether Shubh and Laabh LLP have to compulsorily rely on the financial consolidated financial statements?
Management of Arpan Films (Parent Company) reconciled its balances with the customers and vendors at an interim period. Shubh and Laabh LLP also decided to send independent requests to the customers and vendors to confirm their balances as of the year's end. With the risk of material misstatement assessed to be low, the top 15 parties, comprising 5% of customers and 7% of vendors, were selected to obtain external confirmations. Is the sampling strategy appropriate?
Would the advance for purchasing music rights to the extent remaining unadjusted as at the year-end (i.e. INR 30 crores) require reporting under Clause 3(iii) of CARO 2020 (i.e. grant of loans, etc.)?
Shubh and Laabh LLP considered the qualification of the auditor of Teacup Ltd. They conclude that the audit opinion on the consolidated financial statements of the Group should be:
PMP Ltd. is an associate of PMP Inc, a company based in Kuwait. PMP Ltd. is listed in India having its corporate office at Assam. The company’s operations have remained stable over the years and the management is looking to expand the operations for which the management is considering different business ventures. The company’s auditors issued clean audit report on the audit of the financial statements for the year ended 31st March 2020. For the financial year ended 31st March 2021, the auditors made some changes in their audit team. While the audit partner remained the same, the field incharge has been replaced, as the field incharge who was engaged in the audit of the financial statements for the year ended 31st March 2020 has left the firm. The audit team has a new person as External Quality Control Reviewer (EQCR) who has specialized knowledge of the industry in which the company is operating. EQCR has been employed with the firm for over 2.5 years and is yet to clear his CA (Chartered Accountancy) final exams. The changes were made on the basis of the consideration that the firm has enough experience of engagement with this client. The audit team commenced the work for audit of the year ended 31st March 2021 after detailed planning and it was observed that EQCR had various comments on certain matters which were not accepted by the audit partner. Audit partner had better understanding of the client and after assessing the comments of the EQCR did not find those relevant. The audit partner without concurrence of the EQCR finalized the audit and issued the audit report. In the given situation, please advise which one of the following is correct?
VKPL & Associates, a firm of Chartered Accountants, have been operating for the last 5 years having its office in Gurgaon. The firm has staff of around 25 persons with 3 Partners. The firm has been offering statutory audit, risk advisory and tax services to its various clients. The major work of the firm is for taxation services. The audit partners also discussed that the firm needs to work significantly to improve the quality of the services they offer and that would also help the firm to grown its business. Considering this objective, the firm started training programmes for the staff which were made mandatory to be attended. During one of the training programmes on quality, a topic was discussed regarding the information that should be obtained by the firm before accepting an engagement with a new client, when deciding whether to continue an existing engagement, and when considering acceptance of a new engagement with an existing client. It was explained that the following points may assist the engagement partner in determining whether the conclusions reached regarding the acceptance and continuance of client relationships and audit engagements are appropriate (as per SA 220): i. The integrity of the principal owners, key management and those charged with governance of the entity; ii. The qualification of all the employees of the entity; iii. Whether the engagement team is competent to perform the audit engagement and has the necessary capabilities, including time and resources; iv. The remuneration offered by the entity to its various consultants; v. Whether the firm and the engagement team can comply with relevant ethical requirements; and vi. Significant matters that have arisen during the current or previous audit engagement, and their implications for continuing the relationship. We would like to understand from you which of the above mentioned points are relevant for the topic under discussion?
ZOV is a private limited company engaged in the business of mining. The company’s operations are fairly large and its turnover is INR 4,000 crore on an annual basis. Due to the nature of the business and the size of the company, the company has appointed a firm of Chartered Accountants as its statutory auditors who have the relevant experience of the industry in which the company has been operating. During the course of the audit of the financial statements for the year ended 31st March 2021, the audit team had various observations which resulted in many adjustments in the financial statements of the company and that was also appreciated by the CFO of the company. At the time of final reviews of the audit team, the audit partner requested working paper on final analytical procedures from the engagement team, however, the engagement team explained that they performed substantive testing procedures which also resulted in some adjustments and the same was incorporated in the final set of financial statements given to the audit partner for the review and accordingly there was no need to perform final analytical procedures. Audit partner was not convinced with this and requested the engagement team to perform this procedure. Considering that the timeline to conclude the audit was approaching, the audit partner also requested the CFO that the audit team would need some more time to perform final analytical procedures. CFO was very impressed with the engagement team and agreed for the time but he also told the audit partner that work of the team was excellent and hence the audit partner should avoid these additional procedures. You are requested to give your view in respect of this matter as per SA 520.
BDJ Private Ltd. was established in 2001 and since then the company’s operations have grown significantly. The company is based in Kanpur and has branch offices outside Kanpur. The company is engaged in tours and travels business and because of the nature of the business, it has voluminous transactions. The annual turnover of the company is INR 700 crore. During the audit of the financial statements of the company for the year ended 31st March 2021, the auditors observed wide variation in various details of sales and various expenses as compared to last year. Various balances of trade receivables, loans and advances, statutory liabilities showed significant increase and many balances were found to be non-moving which were aged for more than 3 years. On the basis of the materiality and planned procedures, the audit team requested the client for testing of various samples for sales, expenses etc. The client observed that the number of samples that the team has requested increased as compared to last year and asked the team to cut down on the number of samples so that it is the same number of samples which were tested in the previous years. The audit team did not agree with this and explained various factors which the team had considered for sample selection and the reasons for changes in the samples and also explained the requirements of SA 530 to the client but the client still did not agree. Now there is a situation of deadlock and you are requested to provide your guidance to resolve this matter.
SKJ Private Ltd. is engaged in the business of construction. The company has also got some real estate projects few years back on which it started the work in the last 2 years. The annual turnover of the company is INR 600 crore and profits of INR 40 crore. The statutory auditors of the company got rotated by another audit firm due to mandatory audit rotation requirements as per the Companies Act 2013. The new statutory auditors of the company started audit of the financial statements for the year ended 31st March 2021 in May 2021. The audit team also requested the client to provide certain information on the opening balances to perform their audit procedures. Initially the management did not provide any information to the auditors on the opening balances thinking that this is not within the scope of their work, however, after going through the auditing standards, the management agreed and provided the required information. Later on, the audit team also started requesting information for the period from 1st April 2021 to 31st May 2021. With this requirement, CFO of the company got very upset and angry and set up a meeting with the senior members of the audit team. CFO raised a concern that the audit team has not been doing the work properly and has been asking for unnecessary information like information on opening balances and then the information for the period after 31st March 2021. The audit partner explained to the CFO that everything requested by the audit team has been as per the auditing standards, however, CFO said that in the earlier years, the previous auditors never asked for such information. You are requested to give your view in respect of this matter.
M/s Ram Raj & Associates have been appointed as statutory auditors of Venus Ltd. for the FY 2020- 21. During the year, the company has entered into some related party transactions. CA Ram, the engagement partner has taken a management representation letter regarding the proper accounting, presentation and disclosure of such related party transactions. Is there any further responsibility of CA Ram with respect to the other procedures to be performed for related party transactions?
MNO Ltd. is a company engaged in the manufacture of Kids toys. The company sells its goods on credit basis. M/s. Ajay Vijay & Associates have been appointed as statutory auditors of MNO Ltd. for the FY 2020-21. During the course of audit, CA Ajay, the engagement partner asks the management about the email addresses of trade receivables of the company for the purpose of obtaining balance confirmation from the trade receivables. The management of the company asked its sales supervisor to send confirmation request to the trade receivables and collect all the responses and provide all such responses to the auditor. The management of MNO Ltd. also informed CA Ajay that confirmation with respect to two of its trade receivables namely Sports Star Ltd. and Kids Zone Ltd. won’t be available as a dispute between MNO Ltd. and both the trade receivables is going on. With respect to other trade receivables, the sales supervisor provided CA Ajay with all the balance confirmation. With respect to the balance confirmation request, which of the following is warranted as per the requirement of the relevant SA?
M/s ABC & Associates are the statutory auditors of PQR Ltd. for the FY 2020-21. While conducting the audit, CA Aman, the engagement partner noticed the following: • Payments of various fines and penalties • Unusual cash payments • Payments to various government employees not supported by any document • Notices received from various regulatory authorities. • Heavy payments to legal counsels. CA Aman should consider the above as indicative of:
Auditors do not normally examine all the information available to them as it would be impractical to do so and using audit sampling will produce valid conclusions. Random selection ensures that all items in the population have an equal chance of selection, e.g. by use of random number tables or random number generators. Block sampling method includes selection of a block or blocks of continuous items from within the organisation. Which of the following selection can be considered as block sampling method?
You are the audit senior of Tey & Co. are responsible for the audit work to be managed for the fixed assets of the company. Tey & Co. has 4 properties amounting to Rs.12.5 crore. One of the important tasks ahead for you is to confirm the ownership of these properties. Which of the following would provide the most persuasive evidence of the ownership?
Professional skepticism is defined as:
Professional judgement is defined as:
Judgements about materiality are made in the light of surrounding circumstances, and are affected by:
The following inherent limitations in an audit affect the auditor’s ability to detect material misstatements except:
AK & Co., a firm of Chartered Accountants, have been operating for the last 6 years. Due to the quality of service offered by the firm, it has made its name and is quite renowned especially in Southern India where its head office is located. The firm has a staff size of 240 including graduates, Chartered Accountants, Management Consultants, Company Secretaries and lawyers. The firm has 3 branches other than head office at Bangalore, Chennai and Pune. The firm has got many clients for statutory audit over the period and ensures that to maintain the quality of work, proper planning is done by each team before starting any engagement. One of the engagement team, picked up for statutory audit of Sun Private Ltd., was involved in the process of planning of audit for the financial year ended 31st March, 2021. The audit for the financial year ended 31st March, 2020 was conducted by a different engagement team. However, the engagement team of Sun Private Ltd. for the current year has got the industry experience. The audit team is confused during the planning work and would like to have your views on following points. Please advise by answering one of them.
Kshitij Private Ltd. is a company based out of Kochi having operations primarily in Europe. Because of the nature of the operations of the company, it is required to prepare its financial statements as per International Standards for reporting to the local regulatory authorities over there. Since the business is based in Europe, the audit team is also required to visit the locations wherever the company has offices and is accordingly, required to perform certain audit procedures over there. During the audit of this company for the financial year ended 31st March, 2021, the auditors, who had planned their work appropriately and had a large team for conducting the audit, were facing lot of challenges at various stages. They were also required to revisit their materiality level during the course of the work. However, at the time of final reviews when this was discussed with the Audit Partner (Audit Incharge), he was not convinced with the approach of the audit team wherein they reassessed their plans continuously resulting in waste of time. In this situation, please advise which one of the following would be correct.
RJ Private Limited having its office at Bangalore and operations spread across Southern India, had a discussion with its statutory auditors regarding the audit plan and the timelines. In the past years, there have been significant delays in completion of audit work and the management wanted that for the current year, audit should get completed on time. For doing this, the audit team suggested that the information for the purpose of audit should be ready on time and only then the timelines as agreed can be achieved. On the basis of the discussions with the client & the auditors and internal discussions amongst the audit team members, a detailed audit programme was prepared by the audit team for the current year’s audit. But the audit team discussed that they will not document this audit programme till the completion of the audit work because at various stages, the work may require changes. If the audit team documents the audit programme then it would create problems later on at the time of assembling of the audit file wherein the audit team would have to show the changes made by them in the audit programme during the course of the audit. You are required to share your views in respect of this understanding and approach of the auditor.
KJ Private Ltd. has a business of pharmaceuticals and has an annual turnover of INR 1,500 crore. During the last few years, considering the environment in which the company operates, its profit has reduced and are still reducing. Hence, the management has been looking at various ways to cut the costs. AD & Associates are the statutory auditors of the company and RM & Associates are the internal auditors of the company. Initially, the company did not want to appoint any internal auditors to save costs, however, at insistence of the statutory auditors, the company appointed the internal auditors. During the course of the statutory audit for the financial year ended 31st March, 2021, the statutory auditors requested for the detailed working papers of the internal auditors which the internal auditors refused. However, the statutory auditors told the management if the same are not provided then they would qualify their report. In this situation, please advise which of the following would be correct.
RIM Private Ltd. is engaged in the business of manufacturing of steel having annual turnover of INR 10,000 crore. The company is very capital intensive and has its plants at two locations – Mohali and Hosur. During the year ended 31st March, 2021, the company carried out a detailed physical verification of its property, plant and equipment and also reassessed their useful lives by engaging a consultant. The consultant submitted its report to the management on 21st April, 2021. The statutory auditors of the company started their audit work from May 2021 and when this information was given to them regarding the physical verification and the reassessment of the useful lives of property, plant and equipment, the auditors told the management that the consultant should have submitted its report to the auditors also independently. Further, in the absence of this direct communication of the report of the consultant to the auditors, the audit team would have to review the work of the consultant which is not efficient but it cannot be avoided now. Management did not agree with both the points of the auditors that the consultant should have shared report with the auditors directly and that the auditors need to review the work of the consultant. The management would like to have your views on this matter.
M/s Viaan Viraj & associates are the statutory auditors of ABC Ltd. for the FY 2020-21. The company has a strong internal audit team. During the course of audit, CA Viaan, the engagement partner found that the company has factories all across the country. In order to verify the wages expenses at all the factories, CA Viaan decided to use the Internal Audit Team of the company. He accordingly discussed the same with Mr. Gaurank, the Chief Internal Auditor of ABC Ltd. to provide him a report on the wages expenses across all factories. Which of the following requirements as per SA 610 are required to be fulfilled by CA Viaan prior to using the direct assistance of the Internal Audit Team of the company?
An auditor’s expert may be either an auditor’s internal or an external expert. Which of the following can not be an auditor’s internal expert?
CA Sameer, after developing the audit strategy for Menka Ltd., develops an audit plan but finds a need to revise the materiality levels set earlier and therefore, a deviation from the already set audit strategy is felt necessary. In this case, he should
M/s MNO & Co. (a CA firm with 3 partners) are the statutory auditors of PCL Limited, a company engaged in real estate business. PCL Limited recently launched a real estate project in Bangalore Whitefield location at an all- inclusive price of Rs.5,500. PCL Limited also announced that their first 50 customers would be allowed a special inauguration discount of 10%. Mr. M, one of the partners with MNO & Co. and the audit engagement partner for PCL Limited booked one 3 BHK flat and he was offered the all- inclusive price of Rs.4,950 (after 10% inauguration discount). Another partner- Mr. N also booked one 3 BHK flat at the all- inclusive price of Rs.5,500. Which of the following statements is correct:
Raj Private Limited is engaged in the business of retail and has its retail outlets concentrated towards Northern India. Currently, the company has 59 outlets and the plan of the management is to take this to at least 100 over the next 2 years. The company is audited by Raj & Associates, a firm of Chartered Accountants, who have been operating for over 20 years, however, they don’t have much experience in the retail sector. Because of this fact the audit team decided to plan efficiently for the audit of the financial statements of the company for the year ended 31st March 2021, being their first year of audit. During the course of risk assessment by the auditors, it was discussed that the company is operating in an industry where the operations are not very complicated and mostly the processes are known to all. Considering the same they decided that assessment of inherent risk should not be done for this company as that would be inefficient. However, the auditors will take due care of the control risks. The same assessment was deliberated upon and after lot of discussions it was finalized like this. In the given situation, please advise which one of the following would be correct.
Kshitij Private Ltd. is a company based out of Noida having operations in India and Dubai. The company’s operations in Dubai have increase over the last 2 years and the management is earning very good profits. Because of the profits, the management also planned that they should now focus on strengthening of internal controls of the company and for that purpose they have discussed with the statutory auditors to carry out the audit for the financial year ended 31st March 2021 very rigorously. The report on internal financial controls is also applicable to the company and hence the auditors during the course of their work asked for Risk-control matrices from the company. During the year ended 31st March 2020, Risk-control matrix was not available with the company and was prepared in a draft manner and the same was shared with the audit team during that year and the auditors completed their work on the basis of that. However, for the year ended 31st March 2021, the auditors would like to have robust documentation and are not ready to accept the same Risk-control matrices. In the given situation, please suggest what should be the course of action.
SK Private Limited is a medium-sized company having operations in Jharkhand. The company manufactures some parts and sells that to various dealers on ex-works basis. The financial statements of the company are prepared as per Ind AS and internal financial controls report is also applicable on the same. During the course of audit of the financial statements for the year ended 31st March 2021, the management of the company had a detailed discussion with the auditors for audit planning. Further it was also decided that any observations of the auditors should also be discussed with the management before conclusion by the audit team which was not done in the past years. Considering this, the auditors started the risk assessment and requested the management to share their documentation for the same on which the management said that they don’t have any risks and if the auditors come across any such thing they can discuss that with the management. But the auditors were not convinced with the view of the management and the same thing has happened in the past years as well. You are required to provide your inputs to resolve this matter.
AJ Private Ltd. is in the business of telecom and have significant operations across India predominantly in Northern India. The statutory auditors of the company have been continuing for the last 3 years and have been issuing clean report. For the financial year ended 31st March 2021, the statutory auditors commenced their work in March 2021 as per discussions with the management and with a plan to complete the audit by first week of May 2021. The audit team concluded the work as per the agreed timelines and the financial statements and audit report were signed on 5th May 2021 along with the engagement letter for the financial year ended 31st March 2021. In the given situation, please advise which of the following would be correct.
RIM Private Ltd. is engaged in the business of manufacturing of water bottles and is experiencing significant increase in turnover year on year. It is a subsidiary of RIM Gmbh, based out of Germany. During the financial year ended 31st March 2021, the company carried out a detailed physical verification of its inventory and property, plant and equipment. During the year, various other activities were carried out to increase efficiency in operations and reductions of costs. The statutory auditors of the company started their audit work from April 2021 and requested for a documentation on changes in processes and activities during the year as well as any resultant impact of the same on management controls. The management of the company told the auditors that all such documentation is maintained by the parent company as this is a closely held private company and even though internal financial controls reporting is applicable on this company, the parent company is taking due care of each and every process. The auditors did not agree with the views of the management. Please advise both the management and the auditors.
XYZ Private Limited is engaged in trading of parts of machineries used in boiler plants. Company has seen growth of 60% in the sales and management expecting similar growth in next 3 financial years and is planning to onboard new dealers in order to achieve management goal. Purchase department also expect to develop new suppliers in order to meet customer demands. Internal auditor of the company has identified frequent changes in the bank account and other master details of suppliers. At this expansion planning phase, company has no defined control to provide assurance on said supplier master changes. Management agreed to develop the process of monthly detailed review of supplier master changes done in supplier master by Finance assistant in order to ensure authorized changes in supplier master. One of the members from the Management would like to know that above controls falls under which category:
The management of Magoo Ltd. has developed a strong internal control in its accounting system in such a way that the work of one person is reviewed by another. Since no individual employee is allowed to handle a task alone from the beginning to the end, the chances of early detection of frauds and errors are high. CA. Olive has been appointed as an auditor of the company for current Financial Year 2020-21. Before starting the audit, she wants to evaluate the internal control system of Magoo Ltd. To facilitate the accumulation of the information necessary for the proper review and evaluation of internal controls, CA. Olive decided to use internal control questionnaire to know and assimilate the system and evaluate the same. Which of the following questions need not be framed under internal control questionnaire relating to purchases?
The firm from which you are pursuing your articleship training is the internal auditor of ABC Ltd. While conducting the audit of the medical expense reimbursements of the company employees, you come across some bills which are clearly not medical in nature, and some others which have been overwritten. During the discussions, the accountant points out that the employee is a functional head who enjoys a significantly higher medical expense reimbursement limit, and that you should ignore those bills as the amount is not material. You will:
Adequate design and effective implementation of Internal Controls may not lead to the identification of:
KPL Private Limited is a large software company based out of Hyderabad. The annual turnover of the company is INR 2,100 crore. The company sells software and is also involved in the implementation of those software for its clients. The major chunk of the revenue though comes from sale of software only. The company works on a completely paper-less office and accordingly, most of the documents are available in soft copy. During the financial year ended 31st March 2021, the auditors during the course of their audit obtained various audit evidence some of which were in hard copy but mostly in soft copy. On conclusion of the audit, the auditors are in a dilemma whether to maintain their documentation entirely in hard copy or soft copy or can it be mixed of both. After consultations with various persons, the auditors stood that the documentation for this company, being operated in fully automated environment should be in soft copy only. Please advise whether this understanding is correct.
KJ Private Ltd. is engaged in the business of e-commerce wherein most of the operations are automated. The company has SAP at its ERP package and is planning to upgrade the SAP version. Currently, the version of SAP being used is fine but the higher version would lead to increased efficiencies and hence the company is considering this plan which will also involve a huge outlay. KPP & Associates, were appointed as the statutory auditors of this company for the year ended 31st March 2021 and the statutory audit firm has been working in this industry for long but most of the work which the firm did was more of risk advisory or internal audit. For the first time, this audit will be conducted and that’s why the audit team started obtaining understanding of the operations of the company which included understanding of the SAP system of the company. However, the management of the company was not comfortable with this approach of the audit team particularly because audit team was spending good time on understanding of the IT systems of the company. The management suggested that the auditors should limit their understanding and should perform audit procedures rather than getting into business/ operations. But the auditors have a different view on this matter and because of which work has got stuck. In the given situation, please suggest what should be the course of action.
AR Private Limited is a medium-sized company engaged in the business of trading of electronic equipment. The company has various warehouses where all of these equipment are kept and has an inventory levels of generally 2-3 months. The internal environment of the company is driven by various processes some of them are manual and some automated. Accordingly, the management has also set up various controls both manual and automated and is comfortable with their design and operating effectiveness. During the course of audit of the financial statements for the year ended 31st March 2021, the auditors raised various queries regarding various processes where the controls were operating effectively. This was because of the fact that auditor was considering either only manual controls or only automated controls in a process. As per the auditor, the management should have adopted the same approach and hence they would like to increase the substantive audit procedures because they had a view that as per the current approach of the management, controls should be considered as ineffective irrespective of the fact that the testing which the audit team had performed resulted in the controls being effective. Currently, the concern was regarding the approach on which management was also stuck on their point. You are required to provide your inputs to resolve this matter.
AJ Private Ltd. is in the business of construction and infrastructure having an annual turnover of INR 1,100 crore. The operations of the company are run efficiently driven by the well laid out policies and procedures. The processes of the company are very strong and are well documented and properly communicated to its employees, as required. The management had also done a detailed risk assessment in the earlier years and currently the risk management system of the company is considered to be very effective. The internal controls include both automated and manual. During the course of the audit of the financial statements of the company for the financial year ended 31st March 2021, the statutory auditors did their risk assessment and also reviewed the general IT controls which were found to be effective. Considering the same, one of the senior audit team members asked the team to start performing the substantive audit procedures taking the approach that controls are effective. However, the audit team did not find this approach correct and discussed that they should also check the effectiveness of other manual and automated controls by testing them and then move on to substantive testing. The audit team recently had a training on the internal controls and hence their understanding was different from the audit senior. This led to a conflicting situation between the audit senior and remaining audit team. In the given situation, please advise which of the following would be correct.
RIM Private Ltd. is engaged in the business of manufacturing of cranes and other construction equipment. The nature of the operations are such that purchases are quite significant even though the sales may or may not be very significant, in terms of number of transactions during the year. The company’s statutory auditors have also obtained certain audit tools to help the audit team on various audit procedures to bring efficiency in various audits. During the course of the audit of the financial statements for the financial year ended 31st March 2021, the auditors used those audit tools (also known as computed assisted audit techniques) for sampling procedures and data analytics. The outcome of the tools resulted in some analysis and requirements which the audit team requested from the client. However, the client refused to provide any such information because as per the client all these tools were those of the auditor and any outcome of the same needs to be handled by themselves instead of asking the management. The auditors have suggested that such an attitude of non-cooperation would not help the either party and would defeat the objective of the audit. The management of the company is, however, ready to provide any other information to the auditors. In this situation, please advise both the management and the auditors.
ABC Private Limited uses in-house developed application system for Accounting. The auditor observed that user ID and password is mandatory to access the application system and felt that this is a good control. What type of control is this?
XYZ Private Limited uses ERP software for all business processes. The application is hosted in cloud and is maintained by a third party. Statutory Auditor is not confident about the risk management process in the third party organization and requests for audit access to such data centre. The request was declined and management informed that the third party is ISO certified and audit on controls at Service Organisation is regularly being conducted. What the auditor should do?
Rimmi Ltd. was set up initially as a private limited company. Subsequently, it got converted into a public company. The company’s management has plans of expansion but the business was not growing in an organic manner. Therefore, the management decided to acquire the competitors. During the financial year ended 31st March, 2021, the company acquired two companies in India and France in September, 2020 and January, 2021 respectively. The company controls both of these companies as per the criteria laid down in the Companies Act 2013 as well as the applicable accounting standards. The management started discussions with the auditors regarding the audit wherein it was also pointed out by the auditors that the management should also prepare consolidated financial statements (CFS), if they want. Management needs your advise on the same.
SKJ Private Ltd. has an annual turnover of INR 200 crore and profits of INR 25 crore. The company is engaged in the business of textiles and has fairly stable operations over the years. There has not been much growth in the company in the last few years despite the attempts of the management. Currently the management is more focused towards cost cutting and has been considering all the options to achieve that objective. The statutory auditors of the company have been auditing the financial statements for the last 3 years and have issued clean reports over these years. During the financial year ended 31st March 2021, management got a large project from a new customer which resulted in significant increase in the turnover of the company. However, the profitability of the company did not improve much because the margins in the contract were not high. The statutory auditors during the course of their audit of financial statements for the year ended 31st March 2021 (their fourth year of audit) did not agree with the revenue recognition criteria followed by the company. Since the matter was significant, lot of discussions/ debates happened between the auditor and the management. But it was finally agreed that the auditors would qualify their audit report. Auditors wanted that the management should explain this matter in detail in the notes to accounts to the financial statement over which the auditors are qualifying the audit report. However, the management had a different view. Management said that if the auditor is qualifying his report then why should the management also highlight that matter in the financial statement and hence refused to include any note for the same. On account of the conflict, since audit is not getting concluded. You are required to suggest how the matter get resolved?
A significant deficiency exists in the process of flow of approval of travel re-imbursements of the officials. This was communicated in the previous year to those charged with Governance and no remedial action was taken on the same so far. The auditors are of the opinion that it need not be communicated again. Is the opinion of the auditors on NOT to communicate the deficiency in internal control reported in the previous year correct?
BC Ltd. is the business of manpower consulting. The company has a huge cash and bank balance including fixed deposits with banks. During the course of audit of the financial statements of the company for the year ended 31st March 2021, auditors circulated independent bank balance confirmations. The auditors received all the balance (covering fixed deposits) confirmations independently. Auditors observed that the fixed deposits balances as per the independent balance confirmation did not match with the books balances in some cases. Management produced the fixed deposit certificates to the auditors wherein the balances of fixed assets matched with the balances as per the books. How should the auditor deal with this matter?
While auditing the complete set of consolidated financial statements of Tulips Ltd., a listed company, using a fair presentation framework, M/s Pintu & Co., a Chartered Accountant firm, discovered that the consolidated financial statements are materially misstated due to the non- consolidation of a subsidiary. The material misstatement is deemed to be pervasive to the consolidated financial statements. The effects of the misstatement on the consolidated financial statements have not been determined because it was not practicable to do so. Thus, M/s Pintu & Co. decided to provide an adverse opinion for the same and further determined that, there are no key audit matters other than the matter to be described in the Basis for Adverse Opinion section. Comment whether M/s Pintu & Co. needs to report under SA 701 ‘Communicating Key Audit Matters in the Independent Auditor’s Report’?
50:50 test determination is popularly used in:
XYZ & Associate Chartered Accountants were appointed auditors for Weknow LLP. The engagement manager of the audit team, while designing the auditor response to assessed risk, concluded that there are no requirements of the applicable financial reporting framework for disclosing the related party transaction in the Firm’s Financial Statement and hence the audit team is not required to perform any audit procedures with respect to identification and disclosure of related party relationship and transaction in financial statement. You as an engagement partner guide the engagement manager by selecting the appropriate response from below:
BCO Private Limited is operating in India for the last 15 years. It has three group companies – one subsidiary in India and the other two in Ireland and France. All these subsidiaries were acquired one by one and investments were made in these companies gradually i.e. initially control was not obtained and after investment for some period, control was obtained. The statutory auditors have evaluated that all the group companies are significant for the purpose of audit of consolidated financial statements. During the year ended 31st March 2021, the audited financial statements of all the components are available except for French company whose audit got delayed and would not get completed before the release date of CFS of parent company. For the purpose of consolidation, the parent company has provided the audited financial statements of other components. Please suggest what can be the possible situation in respect of financial statements of French company for the purpose of consolidation for the purpose of audit of CFS.
KB Ltd. is engaged in the business of construction. It has multiple subsidiaries and associates in India. The company acquired PPP GMBH in Germany on 1st February 2021. The company also obtained control in PPP GMBH on the same date. Its investment in PPP GMBH was of a huge amount. The company has been preparing its CFS over the last few years and this has also become a matter of concern for the company for the year ended 31st March 2021. The management is of the view that consolidation of PPP GMBH would not be required in CFS for the year ended 31st March 2021 because this is the first year of acquisition. However, the auditors have not been agreeing for the same. The timeline of submission of audited financial statements is due in few months time. In the meantime, the management moved on the consolidation of PPP GMBH taking audited financial statements of PPP GMBH which are available in the GAAP of its local country and GAAP conversion adjustments from its local GAAP to Indian GAAP have been made by the parent company. GAAP conversion adjustments are significant at CFS level. In the meantime, the management has also been consulting whether the consolidation would be required or not also considering the fact that comparative figures in case of PPP GMBH would not be available. Further the auditors have also raised observations regarding the GAAP conversion adjustments over which management has a disagreement. As per the management the auditors are not required to comment on GAAP adjustments because audited financial statements of PPP Gmbh have been given to the auditors. Please help to resolve these matters.
VDN Ltd. is a medium-sized company engaged in the business of retail. It has two subsidiaries and one joint venture. Both the subsidiaries are larger in size as compared to the parent company. The accounting policies of the parent company, its subsidiaries and joint venture were same. However, during the year ended 31st March 2021, one of its subsidiary, SMA Pvt Ltd. changed the method of depreciation of Property, plant and equipment (PPE) to written down value method which is different from the method followed by the parent company i.e. Straight line method. Further this subsidiary also changed the method of valuation from FIFO to Weighted average method which has become different from parent as the parent follows FIFO method. These changes were made by the subsidiary because it reflected the better picture of its standalone financial statements. Now for the purpose of CFS, the auditors have asked the management of parent company to ensure that accounting policies of the group companies should align with that of parent in line with the requirements of accounting standard. But the management of parent and subsidiary company believe that out of three group companies other than parent, only one group company requires this change for the purpose of consolidation and the same should be ignored by the auditors. Please suggest.
AJ Private Ltd. is engaged in the business of retail having annual turnover of Rs.1,800 crore. The company has a plan to get listed on Bombay Stock Exchange next year. The company has 3 associates, 4 subsidiaries, and 1 joint venture. The company prepares its consolidated financial statements on a quarterly basis for the purpose for internal purposes. The quarterly financials are reviewed by the statutory auditors of the company. The group companies of the parent company have increased in terms of their size looking at the total assets and revenue of the group. For the purpose of audit of consolidated financial statements for the year ended 31st March 2021, management has request the statutory auditors that it would be able to provide management certified accounts of the joint venture as its audit would not get completed on time and even without joint venture, the auditors would be able to cover 75% of the total assets of the group at consolidated level. However, the statutory auditors are insisting that they need to cover at least 80% of the total assets of the group at consolidated level as per the requirements of the Auditing Standards and for that financials of the joint venture should also be audited. Please advise.
Advik Ltd. is an unlisted public company. The company acquired few companies in the last 3-4 years which have been assessed as its subsidiaries/ associates/ joint ventures (hereinafter jointly called as ‘components’). The company prepares its condensed consolidated financial statements every quarter to review the performance of the group. In the past years, the company used to get the financials of its components reviewed/ audited on a quarterly basis. AJ & Co LLP is the statutory auditor of parent company and KSH & Associates is the statutory auditor of all the components. Quarterly condensed consolidated financial statements of the group are reviewed by the statutory auditors as per the terms of the engagement letter. AJ & Co LLP has communicated to Advik Ltd. that in line with the requirements of the Companies Act 2013, it would also be required to undertake audit/ limited review of all the components which would be consolidated with those of Advik Ltd. and for which KSH & Associates are the statutory auditors currently. Management is not agreeing with the same as they don’t want to change KSH & Associates as auditors of the components and the requirement mentioned by AJ & Co LLP would lead to duplication of work of auditors as well as the management. Please advise.
Entity P, is audited by a different auditor than the parent entity Q. The principle auditor i.e. the auditor of entity Q, decides to use the work of auditor of component i.e. entity P, in relation to audit of consolidated financial statements. In doing so, he should comply with requirements of:
You are the internal auditor of FCD Bank Limited for the year 2020-21 and the bank maintains all the data on computer. You are instructed by your senior to verify the loan against fixed deposits of the Navi Mumbai branch. As per the scope of audit, you need to ensure that proper lien has been marked on all the fixed deposits against which loan has been issued. Which of the following procedure you will follow for the same:
PFS Bank was engaged in the business of providing Portfolio Management Services to its customers, for which it took prior approval from RBI. Your firm has been appointed as the statutory auditors of the Bank’s financial statements for the year 2020-21. Your senior has instructed you to verify the transactions of Portfolio Management Services (PMS). While verifying the transactions you noticed that the bank has not prepared separate record for PMS transactions from the Bank’s own investments. As a statutory auditor what will be your decision for verification of PMS transactions?
Your firm has been appointed statutory auditor by a Nationalised Bank for the year 2020-21. Your senior advised you to check all the standard assets shown in the balance sheet as on 31st March 2021. While verifying you observed that one of the accounts was regularised on 28th March 2021, for which the interest and instalment amount was overdue from the quarter ending 30th September 2020. The account was regularised after the repayment of overdue interest and instalment amounts was done on 26th March 2021. Only the last day of the financial year was reckoned as the date of account becoming NPA by the Bank. As a statutory auditor will you agree with the Bank’s policy?
XYZ bank had an NPA account of M/s Glenpark showing recoverable amount of Rs.55 lakh in the books. It sold the NPA for Rs.56 lakh. Please select as to which of the following options is the correct accounting:
Below is an extract from the list of supplier statements as at 31st March 2021 held by the Company and corresponding payables ledger balances at the same date along with some commentary on the noted differences: Supplier Statement balance Rs.'000 Payables ledger balance Rs.'000 Cete Company 80 60 Lice Company 185 115 The difference in the balance of Cete Company is due to an invoice which is under dispute due to defective goods which were returned on 30th March 2021. Which of the following audit procedures should be carried out to confirm the balance owing to Cete Company? i. Review post year-end credit notes for evidence of acceptance of return. ii. Inspect pre year-end goods returned note in respect of the items sent back to the supplier. iii. Inspect post year-end cash book for evidence that the amount has been settled.
AJ & Co. LLP is a firm of Chartered Accountants. The firm has 10 Partners. The firm has a good portfolio of clients for statutory audits, but the same clients had some other firms as their tax auditors. In the current year (FY 2021-22), many existing clients for whom AJ & Co. LLP happens to be the statutory auditor have requested the firm to carry out their tax audits as well. The firm is expecting the no of tax audits to increase significantly this year. One of the partners of the firm has also raised a point that the firm can accepts tax audits up to the maximum limit. However, other partners are of the strong view that limits on audits is applicable in case of statutory audits and not for tax audits. This needs to be decided as soon as possible so that the appointment formalities can also be completed. You are requested to advise the firm in this matter.
RCE Ltd. was set up under the Companies Act 2013 and got itself registered as non-banking financial company with the Reserve Bank of India, fulfilling the required criteria. During the financial year ended 31st March 2021, the company’s operations have started. The company’s total assets were rupees 298 crore out of which trade receivables, loans receivable in cash, cash and bank balances comprised of rupees 199 crore. During the financial year ended 31st March 2021, the company’s operations generated total income of rupees 99.50 crore. The management also did an assessment and observed that income from its financial assets was not much during the year and amounted to only rupees 60 crore. The management is looking at various alternatives to improve its operations, if required, to generate better income in the coming years. Further, the company during the year also accepted and gave demand deposits which have been very efficient for the company. Management has a plan to significantly increase these deposits in the next 2 years as that would help in the overall functioning of the company. In the context of the above, please answer which of the following options would be correct.
Setir Ltd. is a company in which 59% of the paid up share capital is held by Punjab Government. The company is engaged in the business of providing consultancy services in relation to construction projects. The Punjab Government is also planning to induct funds in the company in future, if required. Nocri Ltd. is a company controlled by Setir Ltd. The business of Nocri Ltd. is construction and has an annual turnover of INR 2500 crore approx. The audit of the financial statements of Nocri Ltd. for the financial year ended 31st March 2021 got completed but Nocri Ltd. observed that during the course of audit, there was lot of intervention of Comptroller & Auditor General of India, wherein C&AG was giving directions to the auditors on the manner in which audit should be conducted in respect of certain areas. Further, it also received comments from C&AG on the audit report of the auditors. Nocri Ltd. is seeking legal opinion to go against C&AG so that they can avoid unnecessary interference of C&AG and is also looking to have new auditors appointed by Nocri Ltd. with whom they will have an engagement letter with the terms that those auditors don’t accept any interference of C&AG which the existing auditors have not been able to avoid. In this context, please advise which of the following should be correct?
CGN Ltd. is a large company engaged in the business of oil exploration in India. The Tamil Nadu Government and the Central Government hold 37% and 20% respectively of the paid-up share capital of this company. The C&AG appointed the statutory auditors of this company as per requirements of the Companies Act 2013. The company had a concern regarding this appointment because company wanted to appoint another auditors as per their assessment, however, considering the legal hassles which would have got involved, the company decided to go ahead with this. The audit of the financial statement for the year ended 31st March 2021 got completed by the auditors appointed by the C&AG. Subsequent to this, the C&AG also issued an order to conduct test audit of the accounts of the company which was objected by the management of the company. The management objected saying that the complete set of financial statements have been audited by auditors appointed by the C&AG and hence this order is not acceptable because this would lead to duplication of work. Moreover, the management has also written to the C&AG that for the next financial year, the existing auditors should either resign so that the management may bring in their own auditors or the C&AG should have faith in the work of the auditors appointed by them. Please suggest how to resolve this matter.
NOP Ltd. is a joint venture of Central Government and a private company and is engaged in the business of distribution of electricity in Chennai. The Central Government holds 51% shares of the company. The company is acknowledged for its consumer-friendly practices. Initially it was completely owned by the Government and was running into significant losses but after the joint venture, the aggregate technical and commercial losses of the company showed a record decline. The operations of the company have improved significantly as claimed by the management of the company. The C&AG wants to conduct the performance audit of one of the departments of the company through a subordinate office of Indian Audit and Accounts Department. For this purpose, the audit programme has also been finalized and the Accountant General has intimated the company that the audit would start within a day’s time. The company is concerned because the programme which has been received from the Accountant General is quite detailed and would involve significant time. Further the management of the company is quite surprised as to why this audit should be conducted as this is not a company subject to such types of audits as per law. The management of the company would like to have your inputs in respect of this matter. Please guide.
AJ Petroleum & Refining Ltd. is a Maharatna Central Public Sector Undertaking (PSU) in India having its registered office in Uttaranchal. It is engaged in the business of oil refining, pipeline transportation & marketing, exploration & production of crude oil & gas, petrochemicals, gas marketing and other downstream operations. The PSU has global aspirations for which its management is working on various plans/ programmes so that the same can be achieved in future. It is also planning to pursue diverse business interests by setting up of various joint ventures with reputed business partners from India and abroad to explore global opportunities. Considering these objectives and other factors, the C&AG directed the performance audit in respect of its certain activities/ functions which has been in progress. Before starting the audit, the detailed scope and composition of audit team was shared with the management of the company and tentative timelines were also given with which the management was fine. However, during the course of the audit the audit team changed its audit programme to achieve the desired objectives which was approved by the competent authority, however, the management was not happy with those changes. The management wants the audit team to conclude the audit with the same scope as this is a special type of audit wherein such flexibility cannot be accepted as that would defeat the purpose of the law. However, the audit team has a different view. Please guide.
In Case of PSU, Direct Reporting Engagement does not include
A report submitted by you after an audit of a public sector unit is more likely to be finally reviewed by
You have been given an assignment of audit of IT department of a PSU. A checklist was handed over to you which contained many questions such as, Are separate user names and passwords assigned to individual users? Are periodical changes of passwords ensured? Are external (offsite) data backups maintained at a place outside the premises? The type of audit being conducted is likely to be:
Mr. P, a partner of XYZ Ltd. is a statutory auditor of PQR Ltd. since 1st April, 2015. Mr. P also provides services of tax audit and represents before tax authorities for various litigation matters. PQR Ltd. now wishes to avail internal audit and booking keeping services from Mr. P. Mr. P is required to give his views for whether he can render such services to PQR Ltd. in addition to existing services. You are required to choose an appropriate option from the following alternatives:
Gama Ltd. is a renowned limited liability partnership firm specialized in retendering services relating to statutory audits, tax audits, consultancy relating to direct and indirect taxes etc. Gama Ltd. is appointed as a statutory auditor for the year ended 31st March, 2021 of Beeta Ltd., a listed Company. Alfa Ltd., Chartered Accountants were retiring auditors of Beeta Ltd. You are required to suggest, Gama Ltd. is required to carry out which audit procedures with retiring auditor, Alfa Ltd. before start of audit:
VBN & Associates, chartered accountants are Statutory auditors of Gold Ltd. for the year ended 31st March, 2021. While conducting audit for the year, the auditor have come to know that the fraud amounting to Rs.2 crore was done by one of the employees. Under Sec 143(12) of Companies Act, 2013, you are required to suggest whether as a statutory auditor, VBN & Associates is required:
OPE Ltd. issued a prospectus in respect of an IPO which had the auditor’s report on the financial statements for the year ended 31 st March 2021. The issue was fully subscribed. During this year, there was an abnormal rise in the profits of the company for which it was found later on that it was because of manipulated sales in which there was participation of whole-time director and other top officials of the company. On discovery of this fact, the company offered to refund all moneys to the subscribers of the shares and sued the auditors for the damages alleging that the auditors failed to examine and ascertain any satisfactory explanation for steep increase in the rate of profits and related accounts. The company emphasized that the auditor should have proceeded with suspicion and should not have followed selected verification. The auditors were able to prove that they found internal controls to be satisfactory and did not find any circumstance to arouse suspicion. The company was not able to prove that auditors were negligent in performance of their duties. Please suggest your views on this.
Kshitij and a group of persons subscribed to the shares of JNN Ltd. JNN Ltd. had issued a prospectus for issuance of shares against which these persons had subscribed the shares. It was later on found that some information as included in the prospectus was misleading. These persons filed a case against the company covering all the parties who were responsible for the prospectus on the ground that the information contained in the prospectus was misleading and they suffered losses by relying on that information. The company consulted this matter with its legal consultants in respect of the course of action to be taken and also consulted that if the outcome of the case goes against the company then which all parties may be held liable and what could be the other consequences. The prospectus included auditor’s report who had also given his clearance. Some of the experts were also involved in respect of the information on which the litigation was filed. Subsequently, it was proved that the contention of Kshitij and those persons was correct. It was held that the directors, promoters of the company and the experts involved would be liable to pay compensation to all these persons who had sustained losses or any damage. The auditors of the company were also asked to make good the losses but they refused with an argument that it is limited to directors, promoters and experts. In this context, please suggest which of the following statement is correct.
JK Ltd. is a company engaged in the business of software development. It is one of the largest companies in this sector with a turnover of INR 25,000 crore. The operations of the company are increasing constantly, however, the focus of the management is more on cost cutting in the coming years to improve its profitability. In respect of the financial statements of the company which are used by various stakeholders, some deficiencies were observed in respect of assets reported therein due to which those stakeholders suffered damages. As a result, those stakeholders went for a civil action against the company including all the parties who had the responsibility in respect of those financial statements. The statutory auditors of the company were also roped in. The statutory auditors went against this civil action and were able to prove that there was no professional negligence on their part. It was decided that the loss was occasioned through the negligence of directors and the fault of the auditor in failing to verify the asset was considered to be only technical. On the basis of above mentioned facts, what should be the correct option out of the following?
KKR Ltd. is a medium-sized company engaged in the business of e- commerce. The company’s operations have remained stable over the years and its profitability has been going down. The company also ventured into different markets over the last few years but that has not helped much in terms of growth of business or increasing the profitability. The company’s immediate plan is to expand its operations with focus on increasing the profitability. The company was looking for funds to achieve this objective and issued a prospectus to the public to subscribe to its shares. The financial statements of the company for the year ended 31st March 2021 included in the prospectus showed a very different picture of the company particularly in respect of its profits. It was later on found that some of the information contained in the prospectus was misstated i.e. it was untrue and misleading to attract the public to subscribe the shares of the company. Legal action was taken by the stakeholders against the company including its auditors and the company’s management/ directors were confident that they would not be required to face any action considering the fact that the financial statements were duly audited by a reputed firm of Chartered Accountants. If at all any problem arises, it would be the responsibility of the auditors. Please advise whether anyone can be held liable in this matter or not. If yes, what action can be taken against him/them? If no, what should be the corrective action?
Vimal Kumar, a Chartered Accountant by profession, has been into practice for the over 6 years. He developed a specialization in respect of matters related to Income Tax and hence got various clients to whom he was advising. Other than the taxation work, Vimal was also good in accounting matters but he could not develop his business/ clientele the accounting services over the period. He used to represent his clients in respect of income tax returns. For one of his clients, he, as an authorised representative, prepared the return of income and furnished the same and other required documents (the particulars of accounts, statements and other documents supplied to him by the assessee for the preparation of the return) to the Assessing Officer. He had also conducted an examination of those records and submitted a report on the scope and results of his examination. The assesse in this case was a very old client of Vimal and also used to pay him very good remuneration. In order to provide some benefits to the assesse, Vimal provided certain information to the assessing officer which was found to be false later on. In the given case, which of the following options should apply?
The Board of Directors of Young Ltd., a listed company, appointed Mr. Old, a Cost Accountant (not in practice), to conduct an internal audit of the functions and activities of the company. The job of Mr. Old would be of an independent management function, involving a continuous and critical appraisal of the functioning of the company with a view to suggest improvements thereto and add value to and strengthen the overall governance mechanism of the company, including the entity’s strategic risk management and internal control system. However, some of the officers of the company are against the appointment of a Cost Accountant who is not in practice as an internal auditor. State whether those officers are correct or not in their viewpoint by referring to the provisions of the Companies Act, 2013?
D.M. Ltd. appointed M/s K.K. & Co., Chartered Accountants as Statutory Auditors. The Statutory Auditors found the internal audit function reliable and effective. The Statutory Auditor assigned the task of assessing the inventory levels of a few branches where the Statutory Auditor believed that there might be some risk of material misstatement to one of the internal auditor Mr. Ryan. Since the Internal Auditor had recently done such assessment as a part of their internal audit program, therefore, the Statutory Auditor believed that they could rely on the former’s report. Besides this, because of the paucity of time the Statutory Auditors also requested Mr. Ryan to help them in some paperwork including audit documentation. Before the audit was concluded, Mr. Ryan got promoted and shifted to another city. During the audit discussion stage, the lead Statutory Auditory found out that the documentation delegated to Mr. Ryan was not complete. Accordingly, Statutory Auditor further checked the inventory work delegated to the Internal Auditor, however, it was found to be satisfactory. In view of the above case scenario, state which of the following statement(s) hold true:
IMIR Inc is a major technology, engineering, manufacturing and financial services conglomerate, with global operations having its registered office in US. The Company’s manufacturing footprint extends across eight countries in addition to US. It has several international offices and a supply chain that extends around the globe. HIN Private Limited is a medium-sized Fast-Moving Electrical Goods (FMEG) company and is also involved in power distribution equipment manufacturing. This company is based in India and enjoys a good market share in a wide spectrum of products like Industrial & Domestic Circuit Protection Devices, Cables & Wires, Fans, Commercial and Industrial Applications. IMIR Inc (Acquirer) is currently in talks to acquire HIN Pvt Ltd. (Target). The initial price has been agreed for the acquisition of business based on net worth and profitability of the target company with an assumption that all contingent liabilities of the target company impacting its future business have been considered. The acquirer appointed a firm to carry out the financial due diligence review of the target company and advised that the firm should strictly work as per the scope. The firm during the course of its review found some show-cause notices (which have not matured into demands) being issued against the target company. The firm also found that there could be a potential high value labour claim which may arise out of the negotiation which was ongoing between the target company and the labour union and the labour wage agreement has already expired. The firm discussed all these matters with the management of the target company. The target company confirmed that these matters are under discussion and was confident that these matters would not result into any liability and hence it did not consider the same in the initial price. The firm after its discussion with the target company reported these matters to the acquirer. In the given situation, please suggest which one of the following should be correct?
ARA & Associates is a partnership firm and has been in existence for the last 15 years. The firm is engaged in consultancy business related to various areas and has built a good name for itself over the period. Some of the clients of the firm are very old who have been continuing since its existence. The business of the firm has gone through various phases some of them were very bad. But currently the business is going very well and the firm is looking to expand its operations into different geographies. For this, the firm’s management decided that some of its senior partners will move to new offices and new partners would be inducted. A team of new partners is in discussion with some of the senior partners, regarding their joining the firm. The new partners would be interested to know whether the terms offered to them are reasonable having regard to the nature of the business, profit records, capital distribution, personal capacity of the existing partners, socio-economic setting etc. and whether they would be able to derive continuing benefits in the form of return on capital to be contributed and remuneration of services to be offered. In addition, they also want to ascertain whether the capital to be contributed by them would be safe and applied usefully or not. For this purpose, an investigation of the business of the firm was set up on behalf of these new partners. At the time of scrutiny of the record of profitability of the firm’s business, the investigating accountant picked up records of last 4 -5 years wherein he observed that the profits for 2 years were highly erratic and fluctuating. The investigating accountant, therefore, investigated the profits of last 7-8 years to iron out the fluctuation. He also examined the provisions of the partnership deed particularly the composition of partners, their capital contribution, drawing rights, retirement benefits and goodwill. He also asked for details of jobs/ contracts in hand and the range of current clientele of the firm, for his examination. Some of these procedures of the investigating accountant were not found appropriate by the senior partners of the firm and they advised the investigating accountant not to go beyond his scope. Please advise which of the above-mentioned procedures of investigating accountant is/are not appropriate and what improvements/ changes are required in his approach.
AB Ltd. which is based in Mumbai, is in the business of manufacturing leather products since 1995 and wants to acquire FC Leathers Private Limited, which is based in Pune and engaged in the business of selling leather products manufactured by different companies. Before acquisition AB Ltd. wants to get a due diligence review to be done of FC Leathers. AB Ltd. appointed S & S Associates for conducting overall due diligence of FC Leathers. During the review the accountant asked FC Leathers to provide financial projections of the company for next five years, but FC leathers refused to provide the same and claimed that financial projections is not a part of due diligence review. Whether the objection raised by the management of FC Leathers is correct? Give reason.
CA. D, a chartered accountant in practice, availed of a loan against his personal investments from a bank. He issued 2 cheques towards repayment of the said loan as per the instalments due. However, both the cheques were returned back by the bank with the remarks "Insufficient funds". As per Chartered Accountants Act, 1949, under which clause CA D is liable for misconduct?
CA. Intelligent, a Chartered Accountant in practice, provides part-time tutorship under the coaching organization of the Institute. On 30th June, 2021, he was awarded ‘Best Faculty of the year’ as gratitude from the Institute. Later on, CA. Intelligent posted his framed photograph on his website wherein he was receiving the said award from the Institute. As per Chartered Accountants Act, 1949, under which clause Intelligent is liable for misconduct?
Mr. Hopeful, an aspiring student of ICAI, approached Mr. Witty, a practicing Chartered Accountant, for the purpose of articleship. Mr. Witty, the principal, offered him stipend at the rate of Rs.2,000 per month to be paid every sixth month along with interest at the rate of 10% per annum compounded monthly to compensate such late payment on the plea that cycle of professional receipts from clients is six months. Mr. Hopeful agreed for such late payment in the hope of getting extra stipend in the form of interest. Mr. Witty, however, used to disburse salary to all of his employees on time. As per Chartered Accountants Act, 1949, under which clause Mr. Witty is liable for misconduct.
CA Ram is practicing in the field of financial management planning for over 12 years. He has gained expertise in this domain over others. Mr. Ratan, a student of Chartered Accountancy course, is very much impressed with the knowledge of CA Ram. He approached CA Ram to take guidance on some topics of financial management subject related to his course. CA Ram, on request, decided to spare some time and started providing private tutorship to Mr. Ratan along with some other aspirants for 3 days in a week and for 2 hours in a day. However, he forgot to take specific permission for such private tutorship from the Council. Later on, he came to know that the Council has passed a Resolution under Regulation 190A granting general permission (for private tutorship, and part-time tutorship under Coaching organization of the Institute) and specific permission (for part-time or full-time tutorship under any educational institution other than Coaching organization of the Institute). Such general and specific permission granted is subject to the condition that the direct teaching hours devoted to such activities taken together should __ _ _ in order to be able to undertake attest functions.
RMI Ltd. is a listed company in the business of manufacturing and trading of furniture and has annual turnover of INR 1,800 crore. The company’s business has declined in the last 2 years. The internal auditors of the company have been very helpful in terms of coming up with observations/ suggestions which have helped the management improve its operations over the years. The Company set up a plant around 4-5 years ago and the internal auditors have observed that the management needs to strengthen controls around compliance with Minimum Wages Act, 1948 and rules framed thereunder. Following were the observations of the internal auditors: Weekly offs not provided : As per Minimum Wages (Central) Rules, 1950, Rule 23 (2), “Employee shall not be required or allowed to work in a scheduled employment on the rest day unless he has or will have a substituted rest day for a whole day on one of the five days immediately before or after the rest day, provided that no substitution shall be made which will result in the employee working for more than ten days consecutively without a rest day for a whole day”. However, on review of the attendance records of contractual workers, it was noted that contractual staff worked continuously for more than 10 days, ranging from 13 to 31 consecutive days. Working hours exceed the maximum limit of 12 hours a day: As per rule 24(2), "The working day of an adult worker shall be so arranged that inclusive of the intervals of rest, if any, shall not spread over more than twelve hours on any day". However, on a sample review of attendance records of workers for the month of April for contractual workers, it was noted that there were 24 exceptions wherein workers have worked more than 16 hours up to 23 hours a day. Management explained to the auditors that this has been the practice in the area in which the company is operating. Further the management also told that they will review the working schedule of workers and ensure the compliance with the requirement, ensure that weekly offs and extended hours of labour will be as per legal requirements. Please suggest the internal auditors in respect of this matter.
In accordance with provisions of Companies Act, 2013 with respect to investigation into the affairs of a company, who can be appointed as an inspector? I. Minaj & Associates, a firm. II. CA Mehul. III. Rahim Pvt. Ltd., a body corporate. IV. XYZ & Partners LLP, a body corporate.
Description of each key audit matter in the “key audit matters section” needs to cover except following aspects:
Ms. Kee, the engagement partner of Best Hospitality Limited’s audit team did not perform the necessary communication with those charged with governance over some critical issues identified during the course of the audit. Moreover, when management identified that the engagement partner has not communicated to those charged with governance of the Best Hospitality Limited, they also chose not to communicate. Upon identification of this issue, the personnel charged with governance inquired with management and auditors as to why there was no communication of the critical matters to them. Upon such inquiry, Engagement Partner contended that it was the responsibility of Management to communicate first, then only the audit team should communicate. However, Management was of the view that they are not liable to communicate to those charged with governance. As an Engagement Quality Control Reviewer, what will be your opinion?
Kinfin Private Limited had taken overdrafts from three banks (Bank A, Bank B and Bank C) with a limit of Rs.40 lacs each against the security of fixed deposit it had with those banks and an unsecured overdraft from a financial institution (Financial Institution X) of Rs.36 lacs. As on 30th October 2020, the management used the overdraft fully of the A & C bank to the tune of Rs.40 lacs each. However, the overdraft of second bank (Bank B) was not used until 31st December, 2021. On 31st December, 2021, Management took overdraft of B bank and very next day management paid the overdraft of C bank as the rate of interest charged by Bank C on overdraft facility was 15% whereas, the rate of interest charged by Bank B was 12%. As at 31st March 2022 only overdraft of Bank A and Bank B were used fully, overdrafts of Bank C and Financial Institution X were unused. The paid-up capital and reserves of the company as at that date was Rs.85 lacs and its revenue for the financial year ended on 31st March 2022 was Rs.8.95 crore. The management of the company is of the opinion that CARO, 2020 is not applicable to it because turnover and paid-up capital were within the limits prescribed. With respect to the loans, management was of the view that the total outstanding as at 31st March 2022 is less than the prescribed limit. The company further contended that loan limit is to be reckoned per bank or financial institution and not cumulatively. Comment.
A bank has some non-interest-bearing staff advances. In the Balance Sheet these should be presented under:
CA Dharma has established another branch in the same city. Branch was inaugurated on 3rd October 2020 and on 4th October 2020, friends of CA Dharma gave an article on the front page of local newspaper congratulating CA Dharma on opening of another branch which also includes half page photograph of CA Dharma with his consent. In your opinion was the news in newspaper a misconduct on the part of CA Dharma and what actions can be taken against him?
CA Ram identified that there was a misstatement last year and the same is still not corrected. Although unmodified audit report was issued last year by CA Ram. Guide CA Ram on the audit opinion considering the fact that the last year’s misstatement has been identified in the current year and unmodified opinion was issued in the last year?
B Limited controls entity C Limited (75%) and entity A Limited (an investment company). Entity B Limited reduced the control of entity C Limited from 75% to 60%. With regard to that certain adjustments were made to account for the change in the shareholding of entity C Limited which is consolidated. These adjustments are known as:
CA Kamal is the statutory auditor of Autocover Ltd. for the FY 2020 -21. The company is engaged in the business of manufacture of car accessories. CA Kamal noticed that the inventories of the company amounting to Rs.46 crore (equal to 25% of the total assets of the company) at the end of the year do not exist. Also, sales amounting to Rs.33 crore (equal to 10% of the total sales during the year) have not actually occurred. CA Kamal noticed both the material discrepancies just before the finalisation of the audit report for the year ending 31.03.2021. CA. Kamal considers that the above misstatement would distort the true and fair view to a greater extent. What is correct course of action that CA Kamal should consider in such a situation?
The acceptable detection risk needs to be __ __ in order to reduce the audit risk to __ in the area of inventories management and handling.
KB Associates a chartered accountant firm has been appointed as an auditor of the company for the financial year 2020-21. It consists of two partners CA K & CA B. CA K is brother of the father of the finance director of the company. CA B is an old friend of the finance director of the company. What kind of ethical threat is associated with appointment of KB Associates as an auditor of ABC Ltd.?
The audit team has obtained the following results from the trade receivables circularization of Nemi Co for the year ended 31 March 2021. Which of the following statements in relation to the results of the trade receivables circularisation is TRUE? [[TABLE_IMG:/question-tables/aud_q0097.png]]
During the conduct of audit, it was found that the management has intentionally made material misstatements in the several items of the financial statements to deceive the users of the financial statements, to reduce the pressures of meeting market expectations and to increase the reputation of the company. What would be the implications on the auditor’s report if no adjustments are made to the financial statements regarding the misstatements made by the management?
While auditing Veer Ltd., CA. Vardhman divided the whole population of trade receivables balances to be tested in a few separate groups called ‘strata’ and started taking a sample from each of them. He treated each stratum as if it was a separate population. He divided the trade receivables balances of Veer Ltd. for the Financial Year 2020 -21 into groups on the basis of personal judgment as follows. From the abovementioned groups, CA. Vardhman picked up different percentage of items for examination from each of the groups, for example, from the top group i.e. balances in excess of Rs.10,00,000, he selected all the items to be examined; from the second group, he opted for 25 % of the items to be examined; from the lowest group, he selected 2% of the items for examination; and so on from rest of the groups. Which one of the following methods of sample selection is he following? [[TABLE_IMG:/question-tables/aud_q0099.png]]
The notes to the account statement of Nemi Ltd. shows the break-up of accounts payable for the Financial Year 2020-21 as follows. CA. Raju, the auditor of Nemi Ltd., wants to investigate the valuation of accounts payable of Mr. B amounting to Rs.14,56,000. Which of the following procedures is best fitted & more reliable to be followed by CA. Raju to get more reliable evidence for the existence of such balance as on 31st March, 2021? [[TABLE_IMG:/question-tables/aud_q0100.png]]
Factors that the auditor may consider in determining the appropriate level of detail for communication of significant deficiencies under SA 265 depends upon: i. Nature, size and complexity of the entity ii. Nature of the significant deficiencies identified iii. Estimated time required by management to resolve the deficiency iv. Fees charged from the client
As per SA 550 on Related Parties, existence of which relationship indicate the presence of control or significant influence?
If the prior period financial statements were not audited, the auditor shall state the same in.
In case of audits of listed entities, other information section is required in auditor’s report when at the date of auditor’s report:
In case of audits of unlisted corporate entities, other information section is required in auditor’s report when at the date of auditor’s report: