Top 150 Question – MAY 2020

 150 Handpicked SUPERMOST IMPORTANT QUESTIONS from data base of 3500+ Questions.
 Why so important?
 These questions are very important as these have been selected scientifically and not on the basis of mere
judgement. Following process formed the basis of selection: -
o 1st Step -
We selected those question which have been repeated for more than 7 times in our database of
3500+ questions.

o 2nd Step -
Then we made a list of all question that were from
- MTP & RTP - 2019
- RTP – 2020

o 3rd Step –
After that we made a list of all RTP/MTP questions that were from 2018-2019-2020 . This step was
important to identify those questions that are repeated in database only 1-2 times, but are still
important as they are new.

o 4th Step –
Questions identified in Step 1 + Step 2 & Step 3 were merged together,questions which were asked
in recent exams were deleted

This gave us 150 questions which as per us are very important from view point of MAY-2020 exams.

 Note: -
 Students who have PARAM Question Bank
o With the ULTIMATE -ALL IN ONE “PARAM QUESTION BANK” students already get a edge as these
questions are already covered in PARAM , student just have to go through the CNO’s given in the
attached file .
o Students can just mark the CNO’s while studying from PARAM and use these top 150 question for
last minute revision.
o We believe that the Appropriate Headings , Breakup of Answer , Rearranging the flow of answers ,
Shortcuts , Examples and Author’s note for contradictory and tricky answers given in PARAM would
make your reading easy and fast.
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WISH YOU ALL THE BEST FOR YOUR MAY 2020 EXAMS.
Please note Co-Operative Society / SOX / Cost Audit / EDP are only for OLD course.
Further Forensic Audit / AAE / Quality Review / LIC are only for NEW Course.
Repetat Concept
CNO Topics Questions
ions Headings
AKJ Ltd. is a small-sized 30 years old company having business of manufacturing of pipes. Company has a plant based out of Dehradun and have
their corporate office in Delhi. Recently the company appointed new firm of Chartered Accountants as their statutory auditors.
Mandatory
The statutory auditors want to enter into an engagement letter with the company in respect of their services but the management has contended
matters in
2.01 SA 210 3 that since the statutory audit is mandated by law, engagement letter may not be required. Auditors did not agree to this and have shared a
engagement
format of engagement letter with the management for their reference before getting that signed. In this respect management would like to
letter
understand that as per SA 210 (auditing standard referred to by the auditors), if the agreed terms of the engagement shall be recorded in an
engagement letter or other suitable form of written agreement, what should be included in terms of agreed audit engagement letter?
Revision of Josch & Co., a firm of Chartered Accountants have not revised the terms of engagements and obtained confirmation from the clients, for last 5
3.00 SA 210 2 Engagement years despite changes in business and professional environment. Please elucidate the circumstances that may warrant the revision in terms of
Letter engagement.
Mr. Ram Kapoor, Chartered Accountant, has been appointed as the statutory auditor by XYZ Private Limited for the audit of their financial
statements for the year 2018-19. The company has mentioned in the audit terms that they will not be able to provide internal audit reports to
Precondition
3.05 SA 210 2 Mr. Ram during the course of audit. Further, company also imposed some limitation on scope of Mr. Ram.
s for an audit
What are the preconditions Mr. Ram should ensure before accepting/ refusing the proposal? Also advise, whether Mr. Ram should accept the
proposed audit engagement?
Date of
OP & Associates are the statutory auditors of BB Ltd. BB Ltd is a listed company and started its operations 5 years back. The field work during the
Signing,
audit of the financial statements of the company for the year ended March 31, 2018 got completed on May 1, 2018. The auditor’s report was
Only After
5.01 SA 220 3 dated May 12, 2018. During the documentation review of the engagement, it was observed that the engagement quality control review was
Date of
completed on May 15, 2018. Engagement partner had completed his reviews in entirety by May 10, 2018. Comment.
Completion
of EQCR
Independenc
e-- During the audit of FMP Ltd, a listed company, Engagement Partner (EP) completed his reviews and also ensured compliance with independence
Responsibilit requirements that apply to the audit engagement. The engagement files were also reviewed by the Engagement Quality Control Reviewer (EQCR)
5.02 SA 220 4 y of Partner except the independence assessment documentation. Engagement Partner was of the view that matters related to independence assessment are
and EQCR in the responsibility of the Engagement Partner and not Engagement Quality Control Reviewer. Engagement Quality Control Reviewer objected to
listed this and refused to sign off the documentation. Please advise as per SA 220.
company
Responsibilit
y in
13.00 SA 240 7 Explain briefly the duties and responsibilities of an auditor in case of material misstatement resulting from management fraud.
Managemen
t Fraud
Teeming & The Managing Director of the Company has committed a “Teeming and Lading” Fraud. The amount involved has been however subsequently
20.00 SA 240 2
Lading after the year end deposited in the company. As a Statutory Auditor, how would you deal?
Non While verifying the employee records in a company, it was found that a major por on of the labour employed was child labour On ques oning
23.00 SA 250 7
Compliance the management, the auditor was told that it was outside his scope of the financial audit to look into the compliance with other laws
 SA 260 requires the auditor to communicate with those charged with governance on a timely basis. The appropriate timing for communications
about key audit matters will vary with the Circumstances of the engagement. However, the auditor may communicate preliminary views about
Importance
key audit matters when discussing the planned scope and timing of the audit, and may further discuss such matters when communicating about
24.10 SA 260 1 of Key Audit
audit findings. Doing so may help to alleviate the practical challenges of attempting to have a robust two-way dialogue about key audit matters at
Matter
the time the financial statements are being finalized for issuance. Explain in detail why it is important to communicate key audit matters to those
charged with governance.
NMN & Co LLP and ABC & Associates LLP are the joint statutory auditors of BHS Ltd. BHS Ltd. is a listed company and has been in existence for the
Reliance on
last 50 years. Since beginning this company was audited by MQS & Associates but due to audit rotation, the company had to bring in new
other Joint
28.20 SA 299 2 auditors. Considering the size of the company, two auditors were appointed as joint auditors. Since the company is new to these auditors and the
Auditor and
concept of joint auditors to whom audit work has been divided, management had a discussion and understood that each joint auditor is
reporting
responsible only for the work allocated to him, whether or not he has prepared a separate report on the work performed by him. Advise.
Documentati
on of Audit “The auditor shall document (i) The overall audit strategy; (ii) The audit plan; and (iii) Any significant changes made during the audit engagement
30.31 SA 300 1
Strategy & to the overall audit strategy or the audit plan, and the reasons for such changes.” Explain.
Audit Plan
BSA & Company, Chartered Accountants are duly appointed auditors of ASB LTD engaged in manufacturing of various FMCG products and having
its manufacturing facilities spread across India. Senior partner CA B has called meeting of audit staff to plan the conduct of audit for the year
2017-18 and at the meeting he addresses as under:
Benefits of “SA 200 “Overall Objectives of the Independent Auditor and the Conduct of an Audit in accordance with Standards on Auditing”, states that to
30.32 SA 300 1
Planning achieve the overall objectives of the auditor, the auditor shall use the objectives stated in relevant SAs in planning and performing the audit.
Without a careful plan, the overall objective of an audit may not be achieved. The audit planning is necessary to conduct an effective audit in an
efficient and timely manner”.
In view of above, you are required to analyse and explain the benefits of Planning in an Audit of Financial Statements.
Compute the overall Audit Risk if looking to the nature of business there are chances that 40% bills of services provided would be defalcated,
Audit
inquiring on the same matter management has assured that internal control can prevent such defalcation to 75%. At his part the Auditor assesses
36.50 SA 315 3 Risk(Calculati
that the procedure he could apply in the remaining time to complete Audit gives him satisfaction level of detection of frauds & error to an extent
on)
of 60%. Analyse the Risk of Material Misstatement and find out the overall Audit Risk.
Component
(Control
Environment
-
40.01 SA 315 1 Communicat The effectiveness of controls cannot rise above the integrity and ethical values of the people who create, administer, and monitor them. Explain.
ion of
Integrity &
Ethical
Value)
 XYZ Hospital Private Ltd. is engaged in running a hospital of 200 Beds since last 20 years. Revenue Track of the hospital for last 3 years is as
under:
Internal 2015-16 - 20 Crores
Control 2016-17 25 Crores
40.12 SA 315 1 Structure 2017-18 35 Crores
(Component Hospital has its own Pharmacy, Laboratory, Blood Bank, Radiology & General Stores. Its management suspects that leakages/theft is happening
s) in Pharmacy, Radiology, Laboratory and General Stores departments. It seeks advice of RST & Co., Internal Auditors of the Company,
as to how it can Institute/Improve its Internal Control. In this context, Management wants to understand the concept of components of
Internal Control Structure in detail. Advise.

XYZ LTD has Policy and Procedure Manual containing various accounting policies and established procedures followed by it. Policies and
procedures means those policies and procedures in Addition to the control environment and accounting systems which the management of XYZ
Policies and has established to achieve the entity’s specific objectives. The management is responsible for maintaining an adequate accounting system
40.20 SA 315 1
Procedures incorporating various internal controls to the extent that they are appropriate to the size and nature of the business. There should be reasonable
assurance for the HBC & Associates, the auditors that the accounting system is adequate and that all the accounting information required to be
recorded has in fact been recorded. Internal controls normally contribute to such assurance. Explain with the help of relevant SA.

Auditor A of ABC & Co., Chartered Accountants appointed as Auditors of a Ltd Company observes that certain type of audit evidence obtained by
TOC him are more reliable than others. CA A is of the opinion that his observation would provide more reliable audit evidence than merely making
48.00 SA 330 1 (Interim inquiries. In determining the appropriate audit evidence to support a conclusion about control risk, the auditor A shall consider the audit
Visit) evidence obtained in prior audits. Mr A thinks that he should also consider whether the internal controls were in use throughout the period. The
auditor A decides to perform some tests of control during an interim visit in advance of the period end. Explain in detail.
Relying on
In the course of audit of ZED Ltd, its auditor wants to rely on audit evidence obtained in previous audit in respect of effectiveness of internal
previous
49.00 SA 330 5 controls instead of retesting the same during the current audit. As an advisor to the auditor kindly caution him about the factors that may
year test of
warrant a re-test of controls.
controls
Ganpati Ltd. is a mobile phone operating company. Barring the marketing function it had outsourced the entire operations like
Understandi
maintenance of mobile infrastructure, customer billing,
52.00 SA 402 10 ng Services
payroll, accounting functions, etc. Assist the auditor of Ganpati Ltd. as to how he can obtain an understanding of how Ganpati Ltd. uses the
Given by SO
services of the outsourced agency in its operations.
Inventory
Your firm has been appointed as the statutory auditors of GBM Private Limited for the financial year 2018-19. While verification of company’s
under the
inventories as on 31st March 2019, you found that the significant amount of inventories belonging to the company are held by other parties.
60.05 SA 501 2 Custody and
However, the company has kept all the records of the inventories maintained by other parties. What is your duty as an auditor in order to ensure
Control of a
that third parties are not such with whom the stock should not be held and the stock as disclosed in company’s records actually belongs to them?
Third Party
A Pvt Ltd is engaged in the business of real estate. The auditor of the company requested the information from the management to review the
Review of outcome of accounting estimates (like estimated costs considered for percentage completion etc) included in the prior period financial
81.20 SA 540 2 Prior period statements and their subsequent re-estimation for the purpose of the current period.
estimates The management has refused the information to the auditor saying that the review of prior period information should not be done by the
auditor. Please advise.
 A Co. Ltd. has not included in the Balance Sheet as on 31-03-2017 a sum of Rs 1.50 crores being amount in the arrears of salaries and wages
Subsequent
payable to the staff for the last 2 years as a result of successful negotiations which were going on during the last 18 months and concluded on 30-
88.00 SA 560 2 Event
04-2017. The auditor wants to sign the said Balance
(Salary Case)
Sheet and give the audit report on 31-05-2017. The auditor came to know the result of the negotiations on 15-05-2017. Advise.
AQP Limited is one of the prominent players in the chemicals industry. The company is a public company domiciled in India and listed on BSE and
NSE. The Company was facing extreme liquidity constraints and there were multiple indicators that casted doubt over the company’s ability to
continue as a going concern.
The Company was led into insolvency proceedings by consortium of banks led by PNB and the NCLT ordered the commencement of corporate
Additional
insolvency process against the Company on 31 August 2017. The company invited prospective lenders, investors and others to submit their
procedures
resolution plans to the Resolution Professional (RP) latest by 1 January 2018. The RP reviewed the resolution plans and ensured conformity with
90.05 SA 570 4 and
Insolvency and Bankruptcy Code 2016. The compliant plans were presented to Committee on Creditors (CoC) on 2 February 2018 and the
mitigating
resolution plan submitted by PQR Ltd. was evaluated as highest evaluated Compliant Resolution Plan. CoC of AQP Ltd approved the Resolution
factor
Plan submitted by PQR Ltd. on 2 March 2018. The approval of NCLT was finally obtained on 4 May 2018.
PQR Ltd submitted detailed plans and commitments as part of the resolution plan including clearance of all outstanding debts which were leading
to negative cash flows.
Please suggest how would you deal with this situation as the auditors of AQP Ltd.
PRSH & Co is the statutory auditor of Make My Journey Ltd. The company is in the business of tours and travels. Annual turnover of the company
is INR 2000 crores and profits are INR 190 crores. During the planning meeting of the management and the auditors, it was discussed that the
date of and management needs to provide written representation letter to the auditors for the preparation of the financial statements and for the
period completeness of the information provided to the auditor. At the time of closure of the audit, there has been some confusion about the
covered by requirements of the written representation letter. Management argued that representation need not be written, it can also be verbal which has
97.10 SA 580 1
written been provided to the audit team during the course of their audit. Auditors have completed their documentation and hence in a way,
representati representation based on verbal discussions with the auditors has also got documented. Auditors explained that this is mandatory to obtain
on written representation in accordance with the requirements of SA 580. However, still some confusion remains regarding the date and period
covered by the written representation. You are required to advise about the date of and period covered by written representation in view of SA
580.
aspects
related to
responsibiliti
RAJ Ltd has a branch office which maintains its separate set of books of accounts. The statutory audit of RAJ Ltd and its branch office is conducted
es of parent
by two separate firms of Chartered Accountants. RAJ Ltd being the company with Head Office, its statutory auditors, always intervene in the work
auditor
100.50 SA 600 1 of the statutory auditors of branch office. Due to this, the audit completion takes longer period. Due to the company’s internal policies, they need
(auditor of
to continue with two separate auditors for head office and branch office. Please explain the aspects related to reporting and responsibilities of
HO) and
parent auditor (auditor of HO) and branch office auditors.
branch
office
auditors.
Evaluation
of Internal CA. Amboj, a practicing chartered accountant has been appointed as an internal auditor of Textile Ltd. He conducted the physical verification of
103.10 SA 610 10
Audit the inventory at the year-end and handed over the report of such verification to CA. Kishor, the statutory auditor of the Company, for his view
Function and reporting. Can CA. Kishor rely on such report?
 Mr Anand is appointed as statutory auditor of Xerox Ltd Xerox Ltd is required to
appoint internal auditor as per statutory provisions given in the Companies Act, 2013
and appointed Mr Bhanu as its internal auditor The external auditor Mr Anand asked
Direct internal auditor to provide direct assistance to him regarding evalua ng significant
103.30 SA 610 16
Assistance accoun ng es mates by the management and assessing the risk of material
misstatements
Discuss whether Mr Anand, statutory auditor, can ask direct assistance from
Mr Bhanu, internal auditor as stated above in view of auditing standards
X Ltd had a net worth of INR 1300 crores because of which Ind AS became applicable to them. The company had various derivative contracts –
Agreement
options, forward contracts, interest rate swaps etc. which were required to be fair valued for which company got the fair valuation done
With Expert
105.10 SA 620 5 through an external third party. The statutory auditors of the company involved an auditor’s expert to audit valuation of derivatives. Auditor and
(Matters
auditor’s expert were new to each other i.e. they were working for the first time together but developed a good bonding during the course of the
Covered)
audit . The auditor did not enter into any formal agreement with the auditor’s expert. Please advise.
O Ltd. is in the business of manufacturing of steel. The manufacturing process requires raw material as iron ore for which large stock was
maintained by the company at year end – 31 March 2019. The nature of raw material is such that its physical verification requires involvement of
Reference
an expert. Management hired their expert for stock take and auditors also involved auditor’s expert for the stock take.
to Work of
The auditor observed that the work of the auditor’s expert was not adequate for auditor’s purposes and the auditor could not resolve the matter
106.10 SA 620 2 Expert in
through additional audit procedures which included further work performed by both the auditor’s expert and the auditor.
auditors
Basis above, the auditor concluded that it would be necessary to express a modified opinion in the auditor’s report because the auditor has not
report
obtained sufficient appropriate audit evidence. However, the auditor issued a clean report and included the name of the expert in his report to
reduce his responsibility for the audit opinion. Comment.
Based upon the legal opinion of a leading advocate, X Ltd made a provision of Rs 5 crores towards Income Tax liability The assessing authority
Expert
107.00 SA 620 5 has worked out the liability at Rs 5 crores It is observed that the opinion of the advocate was inconsistent with legal position with regard to
(Income Tax)
certain revenue items
Other
Standards
on Auditing KPI Ltd. is a company on which International Standards on Auditing are applicable along with Standard on Auditing issued by the ICAI. The
in addition company appointed new auditors for the audit of the financial statements year ended 31 March 2019 after doing all appointment formalities.
111.05 SA 700 2
to Standard Therefore, the auditor’s report referred the International Standard on Auditing in addition to the Standard on Auditing issued by the ICAI.
on Auditing As an expert, you are required to advise the auditor regarding auditor’s report for audits conducted in accordance with both the Standards.
issued by
the ICAI
Purpose of
111.10 SA 701 2 The purpose of communicating key audit matters.
KAM
Types of
113.00 SA 705 6 Explain the circumstances which require a modification to the Auditor's Opinion
Modification
 Relevant Notes given by the management in the financial statements of India Branch
Office of ABC Limited are:
• Income tax authorities have raised demands (including interest upto the date of
demand) aggregating to Rs 100 crores and Rs 40 crores respectively for
assessment year 2013-14 based on report by auditors consequent to conduct of
special audit as directed under section 142(2A) of the Income tax Act, 1961 and in addition, have also initiated penalty proceedings against the
Company The
Company has contested these demands before the Commissioner of Income tax
EMP Case (Appeals) and has also filed applications for stay of penalty proceedings and the
Study With same are currently pending disposal
121.00 SA 706 2
Drafting Based on review of underlying documents and legal inputs, the management has
(Income Tax) assessed that there is probability of likely outflow to the extent of Rs 50 crores
(including interest liability till date of stay of payment of Rs 15 crores) in relation to
the above demands and has accounted for the same in these financial statements
With respect to further liability of Rs 50 crores, the management believes that it has
the necessary documents to furnish to the tax authorities and basis the expert’s
inputs believes that Company has good chances of success of receiving the
judgments in its favour Further, the management believes that the likelihood of
penalties being imposed against the Company is not probable and accordingly, no
adjustments are considered necessary in these financial statements • As at March 31, 2017, the Company has accumulated losses of Rs 150
Key phases
149.01 ASPP 1 of audit Key phases in the audit execution stage are Execution Planning, Risk and Control Evaluation, Testing and Reporting. Explain.
Execution
RA & Risk Based
162.00 9 What are the main phases in the conduct of Risk Based Audit.
ICS Audit
New Life Hospital is a multi-speciality hospital which has been facing a lot of pilferage and troubles regarding their inventory maintenance and
control. On investigation into the matter it was found that the person in charge of inventory inflow and outflow from the store house is also
RA & Internal
171.00 15 responsible for purchases and maintaining inventory records.
ICS Check
According to you, which basis system of control has been violated? Also advise the other general conditions pertaining to such system which
needs to be maintained and checked by the management.
Internal
Controls
RA & Yex Ltd. has five entertainment centers to provide facilities for public especially for children and youngsters at 5 different locations in the
174.00 9 (Multiple
ICS peripheral of 200 kms. Collections are made in cash. Specify the adequate control system towards collection of money.
Location
Business)

A limited company having turnover of approximately Rs 50 crores uses a tailor made accounting software package In the said package, all
transactions are recorded, processed
Query Based
189.00 EDP 6 and the final accounts generated from the system The management tells you that in view of the voluminous nature of day books, there is no need
Reports
to print them and that audit can be conducted on the computer itself The management further assures you that any 'query based reports' as
required can be generated and printed As a statutory auditor of the company, enumerate the procedures you would adopt to conduct the audit
 Types of A real-time environment is a type of automated environment in which business operations and transactions are initiated, processed and
204.02 AAE 2 Automated recorded immediately as they happen without delay. It has several critical IT components that enable anytime, anywhere transactions to take
Environment place. You are required to name the components and its example of real-time environment.

Identify the controls which are automated, manual or IT dependent manual for the below mentioned cases?
(i) Price master configured in the sales master can only be edited by authorised personnel in the system.
(ii) Invoice cannot be booked in SAP in case Purchase orders are not approved.
(iii) Inventory ageing report is pulled out from the system based on which provisioning is calculated after analyzing the future demand by the
Manual vs
inventory personnel and approved by the controller.
204.03 AAE 1 automated
(iv) All invoices are signed by warehouse personnel before the goods are dispatched to the customer.
control
(v) Credit limit is assigned to the customer and goods cannot be sold in excess of credit limit configured in the system.
(vi) All changes to the credit limit is approved manually by sales manager.
(vii) Ageing report is pulled out from SAP based on which provisioning is calculated by accounting personnel and approved by financial controller.
(viii) PO, GRN (Good received note) and invoice are matched by the system before it is posted in the financial records.

Application
204.05 AAE 2 Describe application controls and give three examples of automated application controls.
Controls
In an automated environment, the data stored and processed in systems can be used to get various insights into the way business operates. This
Data data can be useful for preparation of management information system (MIS) reports and electronic dashboards that give a high-level snapshot of
204.06 AAE 1
Analytics business performance. In view of above you are required to briefly discuss the meaning of data analytics and example of circumstances when
auditing in an automated environment, auditors can apply the concepts of data analytics.
Uses /
Benefits of “Generating and preparing meaningful information from raw system data using processes, tools, and techniques is known as Data Analytics and
204.06 AAE 1 Data the data analytics methods used in an audit are known as Computer Assisted Auditing Techniques or CAATs.” You are required to give a suggested
Analytics / approach to get the benefit from the use of CAATs.
CAAT
AS 9-
As a statutory auditor of a company, comment on the accounting policy on Revenue Recognition for a company engaged in manufacture and sale
Accoun Measurable
231.00 2 of chemical products was stated as "Revenue is recognized only when it can be reliably measured and it is reasonable to expect ultimate
ting and
collection".
Collectable
Zed Ltd. has flexi deposit linked current account with various banks. Cheques are issued from the current account and as per the
Accoun Sch III--Flexi requirements of funds, the flexi deposits are encashed and transferred to current accounts. As of 31st March, 2018 certain cheques issued
273.00 2
ting Deposit to vendors are not presented for payment resulting in the credit balance in the books of the company. The management wants to present
the book overdraft under current liabilities and flexi deposits under cash & bank balances. Comment.

Comment on the following with reference to Schedule III to the Companies Act, 2013:
Sch III--
(i) A company has disclosed performance guarantee and counter guarantees as Contingent Liabilities.
Accoun Presentation
278.12 1 (ii) A company has clubbed all other expenses under the head ‘Other Expenses” on the basis of
ting (Multiple
1 percent of total revenue or Rs.5,000 whichever is higher.
Cases)
(iii) A company has shown Deferred Tax Liability under Non-Current Liabilities and Deferred tax assets under Non-Current Asset in balance sheet.
 Sch III--
Comment on the following with reference to Schedule III to the Companies Act, 2013:
Accoun Contingent
279.12 1 (i) A company has disclosed performance guarantee and counter guarantees as Contingent Liabilities.
ting Liability and
(ii) The parent company has recognized in the current year’s financial statement, dividend declared by its subsidiary after the balance sheet date.
Dividend
Sch II -- IFFCO Company follows the method of providing depreciation as per Section 123 of the Companies Act, 2013 using the useful lives prescribed as
Accoun
280.01 1 Multiple per Schedule II of the Companies Act, 2013. It has provided depreciation on computers which are used during all the 3 shifts using the rates
ting
Shifts stipulated for continuous process plant since these assets are used for 24 hours (3 shifts). Comment.
Subject to the provisions of sub-rule (1) of Rule 3 of The Companies (Audit and Auditors) Rules, 2014 where a company is required to constitute
Compa Sec 139--
the Audit Committee, the committee shall recommend the name of an individual or a firm as auditor to the Board for consideration and in other
281.10 ny 1 Appointment
cases, the Board shall consider and recommend an individual or a firm as auditor to the members in the annual general meeting for appointment.
Audit I Procedure
Explain manner and procedure of selection and appointment of auditors as per Rule 3 of CAAR 2014.

Sec 139--
Appointment
Compa As an auditor, how would you deal with the following situations:
284.00 ny 4 Nick Ltd is a subsidiary of Ajanta Ltd, whose 20% shares have been held by Central Government, 25% by Uttar Pradesh Government and 10% by
Government
Audit I Madhya Pradesh Government Nick Ltd appointed Mr Prem as statutory auditor for the year
Company
(Prem)
MSY & Co. is an Audit Firm having partners CA Mukti, CA Shakti and CA Yukti. CA
Mukti, CA Shakti and CA Yukti are holding appointment as an Auditor in 4, 6 and 10
companies respectively.
(i) Provide the maximum number of audits remaining in the name of MSY & Co.
Sec 141-- (ii) Provide the maximum number of audits remaining in the name of individual
Compa Disqualificati partner i.e. CA Mukti, CA Shakti, CA Yukti.
300.00 ny 13 on Celing (iii) Can MSY & Co. accept the appointment as an auditor in 60 private companies
Audit I Limit (ABC & having paid-up share capital less than Rs 100 crore which has not committed
Co) default in filing its financial statements under section 137 or annual return
under section 92 of the of the Companies Act with the Registrar, 2 small
companies and 1 dormant company?
(iv) Would your answer be different, if out of those 60 private companies, 45
companies are having paid-up share capital of Rs 110 crore each?
Sec 141--
Disqualificati
on
Compa M/s Raga & Co., Chartered Accountants, appointed as the statutory auditor of R Ltd. for the financial year 2017-18. The company is also in need
Prohibited
309.00 ny 12 of an advisor for its investments. Thus, the Board of Directors of the company offered M/s Swara & Co., an associate of M/s Raga & Co., to
Services
Audit I provide an investment advisory service which has been duly accepted by the firm. Comment.
(Acturial &
Investment
Advisory)
 Sec 141--
Compa Disqualificati
“Mr P” is a practicing Chartered Accountant and “Mr Q”, the relative of “Mr P”, is holding securities of “ABC Ltd” having face value of Rs 90,000/-
313.00 ny 7 on Relative
Whether “Mr P” is Qualified from being appointed as an auditor of “ABC Ltd”?
Audit I Holding
Securities
Sec 143--
Branch
Compa
Auditor Mr P is the statutory auditor of S Ltd which has a branch in Pune The company in general meeting decided to have the accounts of Pune Branch
337.00 ny 2
Appointed audited by Mr Q who was appointed without Mr P’s knowledge and consent State your comments on the above with reasons
Audit I
Without
Consent
Sec 143--
RX Ltd. is a sugar manufacturing company. The company appointed Mr. Suresh, a
Fraud
practicing cost accountant, to conduct cost audit of its cost records under section 148
Reporting
Compa of the Companies Act, 2013. While conducting audit, Mr. Suresh found some
Cost
340.00 ny 7 misstatement resulting into fraud committed by the officers of the company amounting
Accountant
Audit I rupees 1.5 crore. However, he did not report the matter to the Central Government
Dint Not
believing that liability for such reporting lies only with statutory auditor of the company.
Report to
Advise.
Government
Sec 123--
Dividen
365.00 3 Dividend As Auditor of Act Fast Ltd what steps will you take to ensure that the dividend has been paid only out of profit?
d
Verification
The Board of Directors of ACP Ltd. has recommended the dividend of 15% on paid up share capital of Rs. 450 crore for the year ended 31st
Sec 123-- March, 2018, at their meeting held on 1st of May, 2018 when the accounts for the financial year 2017-18 were approved. The Board of Directors
Dividen Reversal of when they met on 7th July, 2018 for the review of first quarter accounts, they realized that results were negative for the first quarter. Therefore,
368.00 2
d Proposed the Board has decided to rescind their decision to recommend dividend. The notice for AGM to be held on 14.8.2018 was sent on 15th July, 2018
Dividend without any recommendation for dividend. At the AGM, the members asked the management how they can rescind the declaration of dividend
once recommended. Comment.
Liability
Criminal Mr. Fresh, a newly qualified chartered accountant, wants to start practice and he requires your advice, among other things, on criminal liabilities
370.00 of 10
Liabilities of an auditor under the Companies Act, 2013. You are required to briefly explain the same to Mr. Fresh.
Auditor
(ii) Certain weaknesses in the internal control procedure in the payment of wages in a large construction company were noticed by the statutory
Liability Weakness in
auditor who in turn brought the same to the knowledge of the Managing Director of the company In the subsequent year huge defalcation came
378.00 of 5 ICS lead to
to the notice of the management The origin of the same was traced to the earlier year The management wants to sue the auditor for negligence
Auditor Fraud
and also plans to file a complaint with the Institute
Cl 1--Title
Deed Not in (ii) NSP Limited has its factory building, appearing as fixed assets in its financial statements in the name of one of its director who was overlooking
391.00 CARO 7
Name of the manufacturing activities.
Company
 Cl 1--Ttitle CT Ltd. owns a piece of Land and Building situated at Ring road, Delhi which was purchased before 30 years. The title deeds for the same are
392.00 CARO 2 Deeds With deposited with State Bank of India for obtaining credit facilities by the company. As the statutory auditor of the company for the year ended 31st
Bank March, 2018, what are the audit procedures to be followed and what is the reporting under CARO 2016?
Cl 1(a) & (b) -
-Physical The Property, Plant and Equipment of Amir Ltd. included Rs.25.75 crores of earth removing machines of outdated technology which had been
392.01 CARO 1 verification retired from active use and had been kept for disposal after knock down. These assets appeared at residual value and had been last inspected ten
of fixed years back. As an Auditor, what may be your reporting concern in view of CARO, 2016 on matters specified above?
Assets
Cl 2--
Physical (ii) Physical verification of only 50% of items of inventory has been conducted by the company The balance 50% will be conducted in next year
393.00 CARO 7
Verification due to lack of time and resources
(50%)
As per Paragraph 3(vi) of CARO, 2016, auditor is required to report whether maintenance of cost records has been specified by the Central
Cl 6--Cl 6
399.00 CARO 7 Government under sub-section (1) of Section 148 of the Companies Act, 2013 and whether such accounts and records have been so made and
Theory
maintained. Explain audit procedure and reporting in relation to this clause.
Cl 7--
XYZ Pvt. Ltd. has submitted the financial statements for the year ended 31 -3-18 for audit. The audit assistant observes and brings to your notice
Statutory
that the company's records show following dues:
400.00 CARO 6 Due
Income Tax relating to Assessment Year 2014-15 Rs. 125 lacs - Appeal is pending before Hon'ble ITAT since 30-9-16.
(Pending
Customs duty Rs. 85 lakhs - Demand notice received on 15-9-17 but no action has been taken to pay or appeal. Comment.
Disputes)
During the course of audit of CT Ltd. for the financial year 2017-18, it is noticed that Rs. 3.00 lakhs of employee contribution and Rs. 7.50
Cl 7--
lakhs of employer contribution towards employee state insurance contribution have been accounted in the books of accounts in respective
Statutory
401.00 CARO 7 heads. Whereas, it was found that Rs. 5.00 lakhs only has been deposited with ESIC department during the year ended 31st March, 2018. The
Due (PF Not
Finance Manager informed the auditor that due to financial crunch they have not deposited the amount due, but will deposit the amount
Deposited)
overdue along with interest as and when financial position improves. Comment as a statutory auditor.
Cl 9--Money
Under CARO, 2016, as a statutory auditor, how would you report on the following:
Raised Miss-
A Term Loan was obtained from a bank for Rs 80 lakh for acquiring R&D
406.00 CARO 10 Applied
equipment, out of which Rs 15 lakh was used to buy a car for use of the
(Loan for
concerned director who was overlooking the R&D activities.
R&D)
Cl 10--Fraud
Paragraph 3(x) of CARO, 2016 requires the auditor to report whether any fraud by the company or any fraud on the company by its officers or
Reporting
407.01 CARO 4 employees has been noticed or reported during the year. The clause does not require the auditor to discover such frauds.
(Noticed or
The scope of auditor’s inquiry under this clause is restricted to frauds ‘noticed or reported’ during the year. Comment.
Reported)
Cl-13-- Loan
Whilst the Audit team has identified various matters, they need your advice to include the same in your audit report in view of CARO 2016:-
taken from
409.01 CARO 4 (i) The long term borrowings from the parent has no agreed terms and neither the interest nor the principal has been repaid so far.
parent
company
 (c) An amount of ` 3.25 Lakhs per month is paid to M/s. WE CARE Associates, a partnership firm, which is a 'related party' in accordance with the
Cl-13-- Non provisions of the Companies Act, 2013 for the marketing services rendered by them. Based on an independent assessment, the consideration
409.02 CARO 4 Disclosure paid is higher than the arm's length pricing by ` 0.25 Lakhs per month. Whilst the transaction was accounted in the financial statements based on
of RPT the amounts' paid, no separate disclosure has been made in the notes forming part of the accounts highlighting the same as a 'related party'
transaction.
Cl 15--Non
Cash RPS Ltd. has entered into non-cash transactions with Mr. Rahul, son of
411.00 CARO 9 Transaction director, which is an arrangement by which RPS Ltd. is in process to acquire
(Son of assets for consideration other than cash.
Director)
In the case of companies carrying on the business of a non-banking financial ins tu on,
Cl 16-- the auditor needs to report under CARO, 2016 whether the registra on has been obtained
412.00 CARO 10 Theory of Cl under sec on 45-IA of the Reserve Bank of India Act, 1934, if required
16 You are required to state in brief the audit procedure to be followed while repor ng under
above mentioned circumstances
Corpor
Audit “Every listed entity shall constitute a qualified and independent audit committee in accordance with the terms of reference.” State the main
ate
422.00 16 Committee features of the Qualified and Independent Audit Committee set up under SEBI (Listing Obligations and Disclosure Requirements) Regulations,
Govern
(Features) 2015.
ance
Corpor
LODR Mr. Suzain has been appointed as a director of CAC Ltd. As an auditor, you are required to state the information to be provided to the
ate
433.01 1 (Regulation shareholders of the company in accordance with Regulation 36 of the Securities and Exchange Board of India (Listing Obligations and Disclosure
Govern
36) Requirements) Regulations, 2015.
ance
Audit
of
Applicability
Consoli
of Where a company has one or more subsidiaries, it shall, in addition to its own financial statements prepare a consolidated financial statement of
dated
435.00 2 Consolidated the company and of all the subsidiaries in the same form and manner as that of its own. Explain clearly with reference of relevant Sections of the
Financi
Financial Companies Act, 2013 and The Companies (Accounts) Rules, 2014.
al
Statement
Statem
ents
Audit
of
Consoli
C Ltd holds shares of D Ltd which also entitles it to 51% voting power These shares are held as “Stock-in-Trade” since C Ltd’s intention is to
dated Temporary
436.10 7 dispose them in the near future Due to this, C Ltd is of the view that the financial statements of D Ltd need not be consolidated As a statutory
Financi Holding-( AS)
auditor, how would you deal?
al
Statem
ents
 Audit
of
Consoli
dated Responsibilit
440.00 7 Briefly explain the responsibility of holding company for preparation of Consolidated Financial Statements.
Financi y of Parent
al
Statem
ents
Audit
of
You are appointed as an auditor of Najib Limited, a listed company which is a main supplier to the USA building and construction market. With a
Consoli
turnover of Rs. 1.9 billion, the company operates through 11 business units and has nearly 1,70 branches across the countries.
dated
443.00 7 Reporting As an auditor, how will you draft the report in case (I) When the Component(s) Auditor Reports on Financial Statements under an Accounting
Financi
Framework Different than that of the Parent?(II) When the Component(s) Auditor Reports under an Auditing Framework Different than that of
al
the Parent?
Statem
ents
NPA M/s. S Ltd. is a MSME unit. The company does multiple banking. The company is availing cash credit limit from U Bank of Rs. 25 crores. The
(classificatio
limit availed remained less than Rs. 5.00 crores during all the days of F.Y. 2017-18. The company has not done any credit in cash credit
Audit
n of Asset account during the year as it is operating current account in newly opened another bank branch adjoining to company premises. The company is
449.01 of 2
pressure by having sufficient security of stocks and debtors and DP of Rs.25.00 crores remains all over the year. The company is availing term loans from
Banks
bank other bank branches. Now the Bank Manager is insisting to route the sale proceeds through U Bank, otherwise cash credit limit and term loan
manager) accounts with other banks will be treated as Non-Performing Accounts. Now company seeks your opinion.
In course of audit of Fair Samaritan Bank as at 31st March, 18 you observed that in a particular account there was no recovery in the past 18
Audit Advances
months. The bank has not applied the NPA norms as well as income recognition norms to this particular account. When queried the bank
458.01 of 9 (Income,
management replied that this account was guaranteed by the central government and hence these norms were not applicable. The bank has not
Banks CASE)
invoked the guarantee. Advise. Would your answer be different if the advance is guaranteed by a State Government?
Advances generally cons tute the major part of the assets of the bank There are
substan al number of borrowers to whom variety of advances are granted The audit of
Audit
Advances(ICS advances requires the major a en on from the auditors
465.00 of 2
) As an expert in bank audit, you are required to briefly discuss the area of focus and
Banks
suggested audit procedures regarding evalua on of internal controls over advances,
substantive audit procedures and recoverability of advances
Audit
Advances
469.00 of 2 As a Statutory Auditor, how would you verify advances against Goods?
(Goods)
Banks
Audit “The Reserve Bank of India requires statutory central auditors of banks to verify the compliance with SLR requirements of 12 odd dates in
475.00 of 7 SLR different months of a financial year not being Fridays.” As statutory central auditors of a Nationalized bank, briefly explain the special points to be
Banks borne in mind in the audit of compliance with "Statutory Liquidity Ratio" (SLR) requirements.
Audit Verification INDO Bank appointed your firm of Chartered Accountants as a branch auditor for the financial year 2018-19. Being head-in-charge of the
483.05 of 2 of bills assignment, while planning, you distributed the work among your team members and assigned Mr. Pary for verification of bills payable. However,
Banks payable Mr. Pary, being fresh to the bank audits, needs your guidance. Kindly guide.
 Audit
Continigent
485.00 of 6 Describe the audit procedures to be followed by a Statutory Auditor of a bank for audit of contingent liabilities
Liability
Banks
Re-
Insurance Girnar is appointed as an auditor of National Insurance Company limited. State the verification procedure to be followed by Mr. Girnar in case of
492.00 GIC 7
(Outward, Re-insurance outward.
Audit)
507.00 GIC 2 Trade credit “Trade Credit Insurance Policy” and basic requirements of a trade credit insurance product.
Premium
Collection,
Auditors should evaluate various sub-processes, employed by the Insurance Companies in accounting of premiums like collection of premium
Accounting
507.04 LIC 2 from the policy holders, booking of premium, banking, accounting and reconciliation of the same. In view of above, you are required to briefly
and
discuss some illustrative points, auditors are required to follow during the Audit of Accounting of Premiums in case of Life Insurance Companies.
reconciliatio
n
Investments ABC & Co, Chartered Accountants are the Auditors of Just Care Life Insurance Company Limited Enumerate the steps to be taken by the auditor
507.06 LIC 2
(Audit) while verifying the Investment
Aspects ( MKc LLP is a newly set up LLP (Limited Liability Partnership). The operations of the LLP have been picking up and management is currently in the
Audit and process of setting up processes and procedures in place. As per the understanding of the management of the LLP, its accounts would not be
507.25 LLP 1 A/cs required to be audited mandatory because of its operations but still the management has decided that they would get the accounts audited
Maintainanc voluntarily. In this regard, the management would like to understand some of the aspects which they should consider not only limited to audit
e of LLP) but also about the maintenance of books of accounts as per the relevant laws. Please advise.
Important
Co-
Aspects of
Operati
508.00 7 Co- Restriction on shareholding in a Co-operative Society.
ve
Operative
Society
Society
Special
Co-
Features of
Operati Examination of overdue debts, audit classification of society, and reporting the infringement of provisions of the Act are the special features of
509.00 9 Co-
ve audit of a co-operative society. Do you agree?
Operative
Society
Audit
Co-
Operati Special
510.00 8 (iii) Special Report to Registrar of Co-operative Societies
ve Report
Society
Investment You are appointed as the auditor of a NBFC which is an Investment company registered with RBI. What shall be the special points to be covered
517.00 NBFC 5
Co (Audit) for the audit of NBFC in case of Investment companies?
NBFC- Shivam & Co LLP are the auditors of NBFC (Investment and Credit Company). Some of the team members of the audit team who audited this
Investment NBFC have left the firm and the new team members are in discussion with the previous team members who are still continuing with the firm
520.05 NBFC 4
& Credit regarding the verification procedures to be performed. In this context, please explain what verification procedures should be performed in
Company relation to audit of NBFC - Investment and Credit Company (NBFC-ICC).
 In order to have uniformity in reporting, frauds have been classified based mainly on the provisions of the Indian Penal Code. Explain
524.00 NBFC 10 Frauds
classification of frauds by NBFC and its reporting.
Applicability
(Multilple
Mr. A engaged in business as a sole proprietor presented the following information to you for the FY 16-17. Turnover made during the year Rs
Items
Tax 124 lacs. Goods returned in respect of sales made during FY 14-15 is Rs 20 lacs not included in the above. Cash discount allowed to his customers
526.00 11 Adjustment,
Audit Rs 1 lac for prompt payment. Special rebate allowed to customer in the nature of trade discount Rs 5 lacs. Kindly advise him whether he has to
Numerical,
get his accounts audited u/s 44AB of the Income Tax Act, 1961.
Sole
Proprietor)
Cl 16-- While conducting the tax audit of A & Co you observed that it made an escalation claim to one of its customers but which was not accounted as
Tax
536.00 4 Escalation income What is your reporting
Audit
Claim responsibility?
Cl 21--No
Mr. R, the Tax Auditor finds that some payments inadmissible under Section 40A(3) were made, and advised the client to report the same in form
Tax Bank
545.00 2 3CD. The client contends that cash payments were made since the other parties insisted upon the same and did not have Bank Accounts.
Audit Account
Comment.
Facility
You are doing Tax Audit of Private Limited Company for the financial year ending 31st March, 2019. During audit, you notice that the company is
Report not regular in deposit of VAT/GST and there remains pendency every year. The details of VAT/GST payable are:
under (i) GST payable as on 31/03/2018 of FY 2017-18 was ` 200 Lakh and out of which ` 100 Lakh was paid on 15/09/2018 and ` 50 Lakh on 30/03/2019
Tax clause 26(A) and balance of ` 50 Lakh paid on 16/09/2019.
546.10 4
Audit and 26(B) in (ii) GST payable of current financial year 2018-19 was ` 100 lakh and out of this, ` 40 Lakh was paid on 25/05/2018 and balance of ` 60 Lakh
reference of remained unpaid till the due date of return.
section 43 B The date of Tax Audit report and due date of return was 30th September.
Now as a Tax Auditor, how/where the said transaction will be reflected in Tax Audit Report under Section 43B(a)?
Applicability You are doing the tax audit of a Limited Company. After submission of Tax Audit Report, management notices that there was apparent mistake of
Tax
558.01 6 of Revision law and due to this mistake, revised the final accounts. As a tax auditor, company seeks your opinion whether the tax audit can also be revised or
Audit
of Audit not.
Applicability The Statutory Auditor of P Ltd. is also appointed to undertake its Tax Audit. After the completion of Statutory Audit, he finalizes Tax Audit without
Tax of Sas & referring to Standards on Auditing and Guidance Notes of Institute as he is of the opinion that Tax Audit relates only to tax matters with which
558.02 1
Audit GNs in Tax the Income tax department is concerned. Moreover, the assesse furnishes to the auditor only the requisite information and records for the
Audit purpose of Tax Audit.
Turnover
before GST Please specify which of the following supplies would form part of reporting under turnover for the period April 2017 to June 2017
Tax
563.25 1 Case, invice (a) Services were provided during the period June 2017. The service was completed on 20.6.2017, but invoice for the service was raised only on
Audit
raise 1.8.2017.
afterward
GSTR 9C- Please state which of the following are liable to reverse charge
Tax
563.30 1 Reverse (a) GTA issued a consignment note on 1.1.18. The consignment notes charges GST @ 12%. The consignor has booked the GTA. The recipient has
Audit
Charge paid the freight to GTA on ‘to collect’ basis. Would this turnover be mentioned in Table 7D?
 In terms of Sl. No. 5G of Form GSTR 9C, the turnovers included in the audited financial statement for the period April 2017 to June 2017 shall be
declared and deducted from the annual turnover to arrive at the turnover as per the GST Laws.
Please specify which of the following supplies would form part of reporting under turnover for the period April 2017 to June 2017
(a) Goods were manufactured and cleared from a factory on 1.6.2017 on sale or approval basis. The goods were not approved by the recipient
GSTR 9C-
and returned back on 25.12.2017.
Tax Reverse
563.31 1 (b) Goods were manufactured and cleared from a factory located in Bangalore on 30.4.2017. The goods were cleared to its showroom located in
Audit Charge(telec
Hyderabad and eventually been sold from there on 30.8.2017. The audit under the GST Law will be conducted for Bangalore GSTIN.
om)
(c) Continuous supply of service in the nature of telecommunication service has been provided for the period 1.6.2017 to 30.6.2017. The bill is
raised on 3.7.2017. The bill is payable by the customer only on 21.7.2017. Should the revenue be recognised in the month of June 2017 and
reduced from total turnover or should it form part of turnover for the period July 2017 to March 2018 since the due date for payment of
consideration is 21.7.2017. The entity recognised the revenue in the month of June 2017.
Turnover
Service has been provided in the month of May 17 amounting to ` 1,00,000/-. Invoice has been raised within 30 days. There was a deficiency in
before GST
Tax the provision of service. The customer has paid only ` 20,000/-. The company has issued credit note amounting to ` 80,000/- on 31.3.2018 and
563.40 1 Case, partial
Audit closed the customer’s account. Should any amount be reduced for the period April 2017 to June 2017. Are any adjustments required to be made
payment
for the period July 2017 to March 2018?
afterwards
In terms of Sl. No. 5G of Form GSTR 9C, the turnovers included in the audited financial statement for the period April 2017 to June 2017 shall be
declared and deducted from the annual turnover to arrive at the turnover as per the GST Laws.
Please specify which of the following supplies would form part of reporting under turnover for the period April 2017 to June 2017
Turnover (a) Goods were manufactured and cleared from a factory on 1.6.2017 on sale or approval basis. The goods were not approved by the recipient
before GST and returned back on 25.12.2017.
Tax
563.50 1 Case, Sales (b) Goods were manufactured and cleared from a factory located in Bangalore on 30.4.2017. The goods were cleared to its showroom located in
Audit
on Approval Hyderabad and eventually been sold from there on 30.8.2017. The audit under the GST Law will be conducted for Bangalore GSTIN.
& Others (c) Continuous supply of service in the nature of telecommunication service has been provided for the period 1.6.2017 to 30.6.2017. The bill is
raised on 3.7.2017. The bill is payable by the customer only on 21.7.2017. Should the revenue be recognised in the month of June 2017 and
reduced from total turnover or should it form part of turnover for the period July 2017 to March 2018 since the due date for payment of
consideration is 21.7.2017. The entity recognised the revenue in the month of June 2017.
Conducting Cost Audit is useful to the management, society, shareholders and the
Cost
566.00 14 Advantages government in many ways. Briefly mention some of the advantages of cost audit to
Audit
the government.
Advantages
(Objectives XYZ Ltd is engaged in the manufacturing of various products in its factories spread across northern states of India. It seeks your advise about cost
of Cost audit. Senior partner Mr A holds a meeting and addresses as under:
Cost
566.01 1 Audit on Cost audit is basically carried out at the instance of the management for obvious advantages. The principal object of this audit is to see that the
Audit
behalf of cost data placed before the management are verified and reliable and they are prepared in such detail as will serve the purpose of the
Managemen management in taking appropriate decisions. Explain stating clearly the objectives of cost audit on behalf of management.
t)
Being an expert in the field of government audit, you are required to briefly explain the
Audit Powers of
597.00 7 powers of Comptroller and Auditor General of India with respect to supplementary audit
of PSU C&AG
and test audit as stated under section 143(6) and 143(7) of the Companies Act, 2013
 Audit Propriety
601.00 2 Propriety Audit.
of PSU Audit
Role of The Comptroller & Auditor General of India plays a key role in the functioning of the financial committees of Parliament and the State
Audit
604.01 1 Financial Legislatures. He has come to be recognised as a 'friend, philosopher and guide' of the Committees. In view of above, you are required to list
of PSU
Committee down any four role.
Perfect Steel Ltd. has reported a higher turnover of ` 560 crores in the year 2018-19 as compared to earlier years but its sales return has also
Shortcoming
increased to 10% from only 4% upto the last year. The management is concerned about the high sales returns and feels a need to get the
M&O s of
615.05 2 operational audit done for sales and production department of the company. The company is also having an internal audit system in the
Audit traditional
company. Elaborate the possible reason/s, why management is getting operational audit done when internal audit has already been done for
sources
both the departments by stating the shortcomings of conventional information sources.
Operational The main objective of operational auditing is to verify the fulfillment of plans, andsound business requirements while in financial auditing, the
M&O
617.01 4 Vs Financial concentration is more in the financial and accounting areas to ensure that possibilities of loss, wastage and fraud are minimized or removed.
Audit
Audit Analyze and Explain stating clearly major differences between Financial and Operational Auditing.
M&O Attrition You have been appointed as an internal auditor of a company. The Managing Director of the company requests you to analyse the causes for high
619.00 7
Audit Rate employee attrition rate in his company. What factors would you consider in such analysis?
M&O Mr. 'P' have been appointed as operational auditor of M/s Books & Magazine Ltd. And observed a totaling error in invoice of Rs 1,000. He has not
620.00 2 Error of 1000
Audit taken care of the same saying that this is out of scope of his work. Comment.
Internal
M&O The internal auditor must be regarded as part of the management and not merely as an assistant thereto. He must have authority to investigate
621.01 1 Audit
Audit from the financial angles every phase of the organisational activity under any circumstances. Explain.
Functions
Mr Q is the proprietor of a very profitable business dealing in speciality chemicals Due to
Due Financial his old age, Mr Q wants to sell his business and has approached XYZ Pvt Ltd, a
623.00 Diligen 8 Due competitor, for the same As an advisor to XYZ Pvt Ltd, you are appointed to do a 'Due
ce Diligence Diligence' of the business Enumerate the points which you would look into as part of the
Due diligence exercise
Due Due A German Company engaged in the business of manufacturing and distribution of industrial gases, is interested in acquiring a listed Indian
628.00 Diligen 6 Diligence Company having a market share of more than 65% of the industrial gas business in India, request you to conduct a “Due Diligence” of this Indian
ce Report Company and submit your Report. As due Diligence Auditor, discuss the key areas you will cover in your review.
 PQR Ltd. is a listed company having turnover of Rs. 50 crores & plans expansion by installation of new machines at new building-having total
additional project cost of Rs. 20 crore.

Project gets implemented in 2017-18 and one of the accountants points out to Managing Director that something wrong has happened in the
purchase of building material.
Rupees (In crore) Purpose
10 - for Building
8.5 - for Machinery
Forensi Forensic
630.00 2 1.5 - for Working Capital
c Audit Audit Steps
20 Crore

On hearing this, the management is planning to appoint Forensic Auditor. Advise the Forensic Auditor about the steps to be undertaken in
case of forensic audit process.

Investigation
H Ltd. is interested in acquiring S Ltd. The valuation of S Ltd. is dependent on
Investig (Future
639.00 7 future maintainable sales. As the person entrusted to value S Ltd., what factors
ation Maintainable
would you consider in assessing the future maintainable sales?
Turnover)
The Central Government is of the view that there are certain interested members and companies who are financially interested in the success or
Investig Investigation failure of the company or who have been able to control or to materially influence the policy of the company. Hence the Central Government
640.00 2
ation (Ownership) wants to investigate the ownership of the company. Describe the scope and extent of investigation by an Investigator/ Chartered Accountant on
behalf of Central Government under Companies Act, 2013.
Peer Technical
648.00 10 Technical, ethical and professional standards as per statement on peer review.
Review Standards
Peer Independenc Arpit, a practicing Chartered Accountant is appointed to conduct the peer review of another practicing unit. What areas Arpit should
650.00 6
Review e review in the assessment of independence of the practicing unit?
Quality Objectives
653.04 2 Objective of Quality Review
Review of QR
Scope of the
Quality
653.04 1 Quality Scope of the Quality review.
review
Review
Reviewers, based on the conclusions drawn from the review, shall issue a preliminary report and subsequently the final report. A clean report
Quality Qualification indicates that the reviewer is of the opinion that the affairs are being conducted in a manner that ensures the quality of services rendered.
653.05 2
Review s by QR However, a reviewer may qualify the report due to one or more reasons. In view of above Give example of some of the situations when
Reviewer of Quality Review Board may qualify the report
Stages of
Quality
653.07 2 Quality Various Stages involved in the Conduct of the Quality Review Assignments
Review
Review
 Quality Actions by List out the consequences if the Quality review board notices major non-compliances with the requirements of the Standards on quality control
653.08 2
Review QRB or standards on auditing or accounting standards?
Basic
Elements of
Quality Reviewers, based on the conclusions drawn from the quality review, shall issue a preliminary report and subsequently the final report. As a
653.09 1 Quality
Review quality reviewer briefly discuss the basic elements of Quality Review Report.
Review
Report
Sec 6 -- The manager of ZedEx (P) Ltd approached CA Vineet in the need of a cer ficate in
Certificate respect of a consump on statement of raw material Without having cer ficate of
655.10 PE 5 Issued prac ce (CoP), CA Vineet issued the cer ficate to the manager of the company,
Without ac ng as a CA in prac ce and applied for the CoP to the Ins tute on very next day to
COP by CA avoid any dispute
First
Comment on the following with reference to the Chartered Accountants Act, 1949 and schedules thereto:
Schedule,Par
Mr. P, a Chartered Accountant in practice entered into a partnership with Mr. L, an advocate for sharing of
665.00 PE 4 t I,Cl,4 --
fees for work sent by one to the other. However, due to some disputes, the partnership was dissolved after 1 month without any fees having
Partnership
been received.
(Advocate)
First
Schedule,Par CA. Intelligent, a Chartered Accountant in practice, provides part-time tutorship under the coaching organization of the Institute. On 30th June,
t I,Cl,6 -- 2016, he was awarded ‘Best Faculty of the year’ as gratitude from the Institute. Later on, CA. Intelligent posted his framed photograph on his
683.00 PE 2
Website website wherein he was receiving the said award from the Institute. Comment with reference to the Chartered Accountants Act, 1949, and
(Award Schedules thereto.
Highlighting)
First Comment on the following with reference to the Chartered Accountants Act, 1949 and
Schedule,Par schedules thereto: Mr Brilliant, a chartered accountant in prac ce, created his own website in a rac ve
t I,Cl,6 -- format and highlighted the contents in blue colour He also circulated the informa on
686.00 PE 7
Website contained in the website through E-mail to acknowledge public at large about his
(Multiple exper se However, due to shortage of me, he could not in mate his website
Issues) address to the Institute
First
Schedule,Par
Mr. M, a Chartered Accountant in practice, has printed visiting cards which besides other details also carries a Quick Response (QR) code. The
t I,Cl,7 --
visiting card as well the QR code contains his name, office and residential address, contact details, e-mail id and name of the firm's website.
695.00 PE 2 Visiting Card
Comment with reference to the Chartered Accountants Act, 1949 and schedules thereto.
(Quick
Response
Code)
 First
Schedule,Par
t I,Cl,8 --
Communicat
(b)CA T, in practice, was appointed to carry out internal audit of a stock broker, listed with BSE However, he failed to intimate his appointment to
699.00 PE 4 ion (Of
the statutory auditors of the company The statutory auditor feels this is violation of professional ethics
Internal
Auditor to
Statutory
Auditor)
First
Schedule,Par
t I,Cl,11 --
CA. Aman, a practicing Chartered Accountant, took over as the executive chairman of Signora IT Ltd. on 01.04.2016. However, realizing about
Specific
719.00 PE 7 obtaining prior approval from the Council of the ICAI for engaging into other business, he applied to the Council for permission within 10 days.
Permission
Comment with reference to the Chartered Accountants Act, 1949.
(After
Accepting
Job)
First
Schedule,Par
t IV,Cl,2 --
Disrepute to (c) YKS & Co, a proprietary firm of Chartered Accountants was appointed as concurrent auditor of a bank YKS used his influence for getting some
737.00 PE 4
the Institute cheques purchased and thereafter failed to repay the loan/overdraft
(Use of
Influence to
Get Loans)

First
Schedule,Par
t IV,Cl,2 --
CA Raman who is contesting Regional Council Elections of Institute, engages his Articled Assistant for his election campaigning promising him that
737.01 PE 3 Disrepute to
he will come in contact with influential people which will help to enhance his career after completion of his training period.
the Institute
(Other Work
by Article)

Second
Schedule,Par
Lily, a chartered accountant prepares and certifies projected financial statements of his client Amazon Ltd. Amazon Ltd. forwarded the
t I,Cl,3 --
741.00 PE 2 same to their banks to secure some loans and bank, on that basis sanctioned a loan. Comment with reference to the Chartered Accountants
Financial
Act, 1949, and Schedules thereto
Forecast
(Certified)
 Second
Schedule,Par
t I,Cl,7 -- Comment on the following with reference to the Chartered Accountants Act, 1949 and schedules thereto:
755.00 PE 7 Audit Mr. D, a practicing Chartered Accountant, did not complete his work relating to the audit of the accounts of
Report Not a company and had not submitted his audit report in due time to enable the company to comply with the statutory requirements.
Filed Within
Time
Second
Schedule,Par
t I,Cl,8 -- Mr. Mohan is a practising Chartered Accountant. He issued a certificate of consumption which did not reflect the correct factual position of the
757.00 PE 2 Certificate consumption of raw material by the concerned entity. It is found that the certificate is given on the basis of data appearing in the minutes of
of meeting of the Board of Directors. Comment on above with reference to the Chartered Accountants Act, 1949, and Schedules thereto.
Consumptio
n
Second
Schedule,Par
758.00 PE 7 t I,Cl,8 -- Mr Jain, a Chartered Accountant certified the circulation of “Good Luck” a weekly magazine without examination of financial records and other
Circulation required documents
Certification
Second
Schedule,Par
t I,Cl,10 --
Did not M/s XYZ a firm of Chartered Accountants received Rs 2 lakhs in January, 2015 on behalf of one of their clients, who has gone abroad and
760.00 PE 5
keep money deposited the amount in their Bank account, so that they can return the money to the client in July, 2015, when he is due to return to India
is separate
bank
account
 Second
Schedule,Par
t I,Cl,10 --
Did not
keep money
is separate
M/s ABC, a firm of Chartered Accountants received Rs 2 lakhs in March, 2015 from a client to pay the Advance Tax However, the firm has used
762.00 PE 4 bank
that money for its own purpose and later on adjusted the same with the outstanding fee payable Comment
account (For
Advance
tax,
Adjusted
with Fees
Outstanding)

Second
Schedule,Par
t II,Cl,3 --
False
Information A Chartered Accountant in practice certified in requisite Form that an articled assistant was undergoing training with him, whereas, he
to Council was also employed in a company between 10 a.m. and 6 p.m. on a monthly salary of Rs. 17,000 and attended the office of the Chartered
769.00 PE 7
about Accountant thereafter until 7 p.m. The Chartered Accountant pleaded that the articled assistant was on audit of the company. Comment with
Article, reference to the Chartered Accountants Act, 1949.
Where
article was
employed at
company

Second
Schedule,Par
t II,Cl,3 --
Mr. P and Mr. Q are running a firm of Chartered Accountants in the name of M/s PQ & Co. On 23.05.2017, they included the name of Mr. R, a
Included
practicing Chartered Accountant, without his knowledge, as a partner while submitting an application for empanelment as auditor for Public
770.00 PE 9 name of CA
Sector Bank branches to the Institute. However, they added Mr. R as a partner to their firm offering a share of 21% of the profits, on 25.05.2017.
in
Comment with reference to the Chartered Accountants Act, 1949.
empanelmen
t without his
knowledge
 Councile
General
(c) M/s PQR, a firm of Chartered Accountants with 5 partners has accepted the audit of ABC Pvt Ltd for 2014-15 at an audit fee of Rs 2,500 ABC
Guideline
774.00 PE 4 Pvt Ltd was incorporated in
2008--
April, 2012, but had commenced operations in January, 2015
Minimum
Fees
Internal
(c) WCP & Co LLP are the internal auditors of DEF Ltd. WCP & Co LLP also agreed to undertake Goods and Service Tax (GST) Audit of DEF Ltd
782.01 PE 2 Audit + GST
simultaneously.
Audit