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CA Firm Exam Question
CA Firm Exam Question
answer :Statutory audit is done by chartered Accountants, to verify the financial statement's fairness and it
is done annually. It ensures that, to the best knowledge of the auditors, financial statements are free from
any misrepresentations and frauds.
2. WHAT IS INTERNAL AUDIT
ANSWER An inspection and verification of the financial records of a company or firm
by a member of its own staff to determine the accuracy and acceptability of its
accounting practices.
3. WHAT IS EXTERNAL AUDIT ?
ANSWER:a periodic examination of the books of account and records of an entity
conducted by an independent third party (an auditor) to ensure that they have been
properly maintained, are accurate and comply with established concepts, principles,
and accounting standards, and give a true and fair view of the financial state of the
entity.
4. Explain The Difference Between Internal Audit And External Audit?
ANSWER : The internal audit is conducted to help the management. The weakness of
the management is disclosed. The external audit is conducted to help the shareholder.
The rights of owners are protected. The appointment of internal audit is made by the
management. The appointment in external audit is made by the shareholders. Internal
audit is the part of internal control.
External audit is the not the part of internal control.The internal audit can suggest
improvement in internal check system. The external audit can not suggest
improvement in internal check system. The internal audit can perform his duties under
the terms of appointment. The management can limit the scope of work at any time.
The external auditor can perform his work to terms of appointment and other
prescribed law. The scope is very wide. Internal audit is an employee of the company.
He is not an independent person. External auditor is not an employee of the company.
Q: What do you mean by vouching?
Answer : Vouching is the process of checking the authentication of the voucher
maintain by the management with the respective supporting document
Q : Definition of audit ?
Answer : An examination and verification of a company's financial and accounting
records and supporting documents by a professional, such as a Certified Public
Accountant.
Q : What are Objectives Of Internal Audit?
Answer : The purpose of internal audit is to keep proper control over business
activities. When there is proper control there is maximum efficiency. The internal
auditor determines the degrees of control over work. The purpose of internal audit is to
evaluate the accounting system. It is concerned with checking proper authority for
transactions like purchase, retirement and disposal of fixed assets. The vouchers can be
compared with entries in order to determine that figures are facts.
The purpose of internal audit is to help the management. Internal auditor can point out
the weakness. The internal audit can be used as a tool to correct the situation. The
management functions can be performed properly. The purpose of internal audit is to
review the working of business. The working of current tear can be reviewed in detail
just to note the successful area of working. There is a need to locate the weak points.
The corrective measures can be taken for proper working.
Q : Explain the difference between internal audit and statutory audit?
Answer : An internal audit is one which is conducted by the internal auditors of the
company. It is not mandatory for the company and the company just conducts it to
keep a check on the operations of the company. On the other hand statutory audit is
very important because it is by the external auditors and it is mandatory for all kinds
of companies. Statutory audit is usually conducted for various purposes like tax
regulatory requires it for taxation purposes.
Q : What is an audit process?
Answer : The word 'Audit' is a derivative of the word 'Audition' which means 'to hear'.
In earlier times, the Kings used to hear their accountants narrate the accounts verbally.
However, as the complexity of the accounting function grew, need was felt to
thoroughly check the accounts for mistakes misclassification and document the findings
in a written form so that it can be used by the Management, stakeholders, investors,
Government and various other bodies. This process is known as Auditing or Audit.
Q :Functions of audit?
Answer : The function of internal audit is concerned with analysis of internal check.
The internal audit can look into the duties of each employee. All employees are
provided jobs on the basis of their abilities. The auditor can test the effectiveness of
internal check. Thefunction of internal audit is examining the application of legal
requirements.
The accounts are prepared under certain legal frame work. Verification of accuracy is
a function of internal audit. The accuracy of accounting books and records can be
verified with the help auditing techniques. The audit techniques include inspection,
observation, inquiry, confirmation, computation and review. An auditor can check the
accuracy through these techniques.
Q : What is annual general meeting(AGM) ?
Answer: AGM the statutory meeting of the directors and shareholders of a company or
of the members of a society, held once every financial year, at which the annual report
is presented
Q : What is extraordinary general meeting(EGM) ?
Answer : A meeting other than the annual general meeting between a company's
shareholders, executives and any other members. An EGM is Q : Rules surrounding
the AGM
Answer : Most private companies are not required to hold an AGM. Public limited
companies (plcs) must hold an AGM within six months of their financial year end.
Companies can still hold an AGM if they choose to. As with other meetings, an AGM
must be arranged if any director asks for one with due notice, or if 5 per cent of the
members request one. A company may also still need to hold one in certain
circumstances. For example, you must hold an AGM if you want to dismiss a director
or auditor before the end of their term, or if you are a public company with traded
shares.
If the company does hold an AGM:
* You must send written notice to the directors and shareholders 14 days in advance (21
days in advance for public companies with traded shares), unless your company
articles state otherwise. An AGM can be held at shorter notice if 90 per cent of
members agree (95 per cent for plcs).
* You are no longer required to circulate copies of the company's accounts before an
AGM. However, they must be sent to members before they are due to be filed with the
registrar of companies.
* Directors and shareholders can vote on the appointment of directors and auditors to
the company (if required).
* Ordinary resolutions can now be passed by a simple majority and special resolutions
require at least 75 per cent of those eligible to vote in favour.
* You must file at Companies House any special resolutions passed at a meeting.
usually called on short notice and deals with an urgent matter.
Q : what is Accounting ?
Answer : The information system that identifies ,records, and communicates the
economic events of an organization to interested users
Q : definition of cash basis accounting?
Answer: An accounting method in which income is recorded when cash is received, and
expenses are recorded when cash is paid out.
Q : Definition of Accrual Basis accounting ?
Answer : The most commonly used accounting method, which reports income when
earned and expenses when incurred.
Generally Accepted Accounting Principles (GAAP): Authoritative guidelines that define accounting
practice at a particular time.
Internal Revenue Service (IRS): A government agency that prescribes the rules and
regulations that govern the collection of tax revenues in the U.S.
Securities and Exchange Commission (SEC)S: The government body responsible for
regulating the financial reporting practices of most publicly owned corporations in
connection with the buying and selling of stocks and bonds.
Q : what is Intangible Assets ?
Answer : Intangible assets include patents, copyrights, trademarks, trade names,
franchise licenses, government licenses, goodwill, and other items that lack physical
substance but provide long-term benefits to the company. Companies account for
intangible assets much as they account for depreciable assets and natural resources.
The cost of intangible assets is systematically allocated to expense during the asset's
useful life or legal life, whichever is shorter, and this life is never allowed to exceed forty
years. The process of allocating the cost of intangible assets to expense Short notes ;
Book value -- total assets minus total liabilities. (See also net worth.) Book value also
means the value of an asset as recorded on the company's books or financial reports.
Book value is often different than true value. It may be more or less.
Break even point -- the amount of revenue from sales which exactly equals the amount
of expense. Breakeven point is often expressed as the number of units that must be sold
to produce revenues exactly equal to expenses. Sales above the breakeven point
produce a profit; below produces a loss.
Deferred income -- a liability that arises when a company is paid in advance for goods
or services that will be provided later. For example, when a magazine subscription is
paid in advance, the magazine publisher is liable to provide magazines for the life of the
subscription. The amount in deferred income is reduced as the magazines are delivered
is called amortization, and companies almost always use the straight-line method to
amortize intangible assets.
Return on investment (ROI)
-- a measure of the effectiveness and efficiency with which managers use the resources
available to them, expressed as a percentage. Return on equity is usually net profit
after taxes divided by the shareholders' equity. Return on invested capital is usually net
profit after taxes plus interest paid on long-term debt divided by the equity plus the
long-term debt. Return on assets used is usually the operating profit divided by the
assets used to produce the profit. Typically used to evaluate divisions or subsidiaries.
ROI is very useful but can only be used to compare consistent entities -- similar
companies in the same industry or the same company over a period of time. Different
companies and different industries have different ROIs.
Variable cost -- a cost that changes as sales or production change. If a business is producing nothing
and selling nothing, the variable cost should be zero. However, there will probably be
fixed costs.
Working capital -- current assets minus current liabilities. In most businesses the major
components of working capital are cash, accounts receivable, and inventory minus
accounts payable. As a business grows it will have larger accounts receivable and more
inventory. Thus the need for working capital will increase.
Write-off -- the total reduction in the value of an asset, recognizing that it no longer has
any value. Write-downs and write-offs are non-cash expenses that affect profits
Q : what is entry tax . type of entry tax ?
Entry tax is levied on that product which tranfer or enter
a product from-one state to another state or one District
to another district,if you sale as such the prodcut not
restructuring.
There is two types of entry tax are available
1) Entry on Motor Vehicles-- Motor
Vehicles purchsed in other
state enteres to a different State, then entry tax is
leviable. tHIS IS APPLICABLE ONLY FOR VEHICLES liable to be
registered under Motor Vehicles Act. The tax paid in other
State can be compensated or set back of taken, if the rate
of tax is highter in the State where the vehicle is entring
2) Entry Tax on goods--this has been recently strucked by
the apex court in the case of Jindal Strips Ltd for the
reason that entry levied shgould be compensatable otherwise
it can be levied
Imposition of Value Added Tax:
Imposition of VAT
(1) Value Added Tax is imposed and payable on
(a) taxable supplies; and
(b) taxable imports.
capital. It entitles its holder (the shareholder) to an equal claim on the company's
profits and an equal obligation for the company's debts and losses.
###Two major types of shares are
(1) ordinary shares (common stock): which entitle the shareholder to share in the
earnings of the company as and when they occur, and to vote at the company's annual
general meetings and other official meetings, and
(2) preference shares (preferred stock): which entitle the shareholder to a fixed periodic
income (interest) but generally do not give him or her voting rights. See also stock.
Q : definition of trial balance.
Answer : The act of totaling debit balances and credit balances to confirm that total
debits equal total credits.
Q : Definition of ledger.
Answer : A ledger contains summarized financial information that is classified by
assignment to a specific account number using a Chart of Accounts.
Q : definition of adjustment
1.Answer : increase or decrease to an account resulting from an adjusting journal entry
. For example, the accrual of wages at year-end will cause an increase in both salary
expense and salary payable.
2.Answer : changing an account balance because of some happening or event. For
example, a customer who returns merchandise ill receive a credit adjustment to the
account.
Q : definition of appreciation ?
1.Answer : Increase in the value of an asset through a rise in market price, appraised
value, or income earned, as compared to an earlier period. The opposite is
Depreciation.
2.Answer : Increase in the value of one currency vs another, without any change in
official value occurring. It results from growth in market demand under floating
exchange rates rather than official action such as a currency revaluation.
Q : Difference between depreciation appreciation?
Answer : Appreciation and depreciation both deal with asset value over time. Some
assets, such as real estate, bonds, and homes gain value as time goes on. These assets
are said to appreciate. Other assets, such as vehicles, manufacturing plants, and office
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