2021

MUHAMMAD HAMZA AYAZ

Article-ship
Interview
Guide

QUESTIONS AND ANSWERS

 Muhammad Hamza Ayaz mhamzaayaz.com

Index
Sr. Subject Page
1. Audit and Assurance 2-9
2. Company Law 10 - 12
3. Taxation 13 - 14
4. Financial Accounting and Reporting 15 - 16
5. Economics and Finance 17
6. Business Management and Behavioral Studies 18 - 19

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Muhammad Hamza Ayaz | mhamzaayaz.com
AUDIT AND ASSURANCE
What is an Assurance Engagement?
What is Limited Assurance?
What is Reasonable Assurance?
What are the Limitations of Audit?
What is Applicable Financial Reporting
Framework?
What are the Responsibilities of
Management?
What is Expectation Gap?
What is Professional Judgement?
What is Professional Skepticism?
What is Independence in the context
of an auditor?
What is Audit Evidence?
What is Sufficient and Appropriate
Evidence?
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Link to Index
BASICS OF AUDITING
An assurance engagement is an engagement in which a practitioner obtains
evidence about evaluation of a subject matter against a suitable criterion
and expresses his conclusion to enhance the confidence of the intended
users.
It is a moderate level of assurance which is expressed in a negative form.
It is a high, but not absolute, level of assurance expressed in a positive form.
1. Testing is performed on sampling basis due to time and cost limitations.
2. Fraud involving collusion and complex techniques is harder to detect.
3. Some accounts in financial statements involve estimates and
judgements which are difficult to calculate and verify.
4. Management may not provide complete information to the auditor.
5. Auditors do not have specific legal powers.
It is the financial reporting framework adopted by the management
considering legal and regulatory requirements, nature of entity and
financial statements, and purpose of financial statements.
1. Preparation and presentation of financial statements.
2. Designing and implementing necessary internal controls for fair
preparation of financial statements.
3. Providing unrestricted access to all relevant information necessary for
obtaining audit evidence.
It is the difference between the public perception and statutory role and
responsibilities of the external audit.
Professional Judgement is the application of knowledge, training and
experience in the context of accounting, audit and ethical standards to
reach an appropriate course of action.
Professional skepticism is the use of a questioning mind, being alert to
conditions which may indicate a possible misstatement and critical
assessment of audit evidence.
Independence of an auditor means that the audit should be free from any
bias and influence to perform his duties.
Audit evidence is the information used by the auditor to arrive at a
conclusion on which the audit opinion is based. Audit evidence should be
sufficient and appropriate.
Sufficiency deals with the quantity of the audit evidence. It is affected by
factors such as:
- Materiality and complexity of an item;
- Assessed risk of material misstatement;
- Auditor’s knowledge and experience of the business;
- Quality of audit evidence; and
- Strength of internal controls
Appropriateness is the measure of quality of the audit evidence. It is
affected by the relevance and reliability of the information.
Relevance deals with the logical connection between the assertion and
procedure performed.
 Muhammad Hamza Ayaz mhamzaayaz.com

Reliability deals with the source, nature and circumstances under which the
information is obtained. Examples include:
- Original documents over photocopies
- Documentary evidence over oral form
- Externally obtained evidence over internal evidence
- Directly obtained information over indirectly obtained evidence
What is an Audit Procedure? Audit procedures are methods and techniques used by the auditors to
obtain evidence. They include analytical procedures, external confirmation,
inquiry, inspection, observation, reperformance and recalculation.
What is/are:
1. Analytical Procedures Analytical procedures are the evaluation of financial information through
comparison and plausible relationships between financial and non-financial
data.
2. External Confirmation External confirmations are a process of obtaining information from third
parties through direct written communication.
3. Inquiry Inquiry is the seeking of information from knowledgeable persons within or
outside the entity.
4. Inspection Inspections involves examining records or documents or physical
verification of assets.
5. Observation Observation is the process of looking at a process or procedure being
performed by others.
6. Reperformance Reperformance is the independent performance of a process or procedure
that were originally performed by the entity as part of its internal controls.
7. Recalculation Recalculation consists of checking mathematical accuracy of documents or
records.
What are Risk Assessment Procedures? These are procedures performed by the auditor to obtain understanding of
the entity and its internal controls to assess the risk of misstatement at
assertion and financial statement level.
These include:
- Inquiries of management and others within the entity
- Observation and inspection of documents and procedures
- Analytical procedures
What is Risk at Financial Statement It is the risk that effects the financial statements pervasively and affects
Level? many assertions.
Examples: Risk of Fraud, Going Concern Issues, and Lack of Competence
and Integrity of management.
What is Risk at Assertion Level? It is the risk that affects specific identifiable assertions.
Examples: Risk that precious and portable assets may be misappropriated,
risk that complex transactions may not be accurately recorded and risk that
large transactions at year end may not have occurred.
How does an auditor address risk at Auditor designs and implements an overall response by:
financial statement level? - Increased level of professional skepticism
- Assigning more experienced and specialized staff
- Increased supervision and review of audit work
- Incorporating unpredictability in the nature, extent and timing of audit
procedures
- Performing more audit procedures at year end than at interim date
How does an auditor address risk at The auditor performs test of controls and substantive procedures to
assertion level? address such risk.
What are Tests of Controls? Tests of controls are procedures performed to confirm the operating
effectiveness of internal controls in preventing, detecting and correcting
misstatements at assertion level.
What are Substantive Procedures? Substantive procedures are procedures performed by the auditor to detect
material misstatement at assertion level

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Muhammad Hamza Ayaz | mhamzaayaz.com
What are Assertions?
What are the assertions for Account
Balances?
What are the assertions for Classes of
Transactions and Events?
What is Audit Documentation?
What is an Audit Report?
When is an audit report issued?
Who signs an audit report?
What is Scope Limitation?
What is Materiality?
Define Pervasive.
Why is an Emphasis of Matter
paragraph included in the audit
report?
What are some examples of situations
in which an Emphasis of Matter
paragraph is included in the audit
report?
Why is an Other Matter paragraph
included in the audit report?
What are some examples of situations
in which an Other Matter paragraph is
included in the audit report?
PRELIMINARY ENGAGEMENT ACTIVITIES
What is the Tenure of the Auditors?
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Link to Index
Assertions are representations by management embodied in the financial
statements. These are used by the auditor to assess the different types of
misstatements that may occur. Two categories of assertions are ‘Account
balances’ and ‘Classes of Transactions’.
1. Existence
2. Rights and obligations
3. Accuracy, Valuation and Allocation
4. Completeness
5. Classification and Presentation
1. Occurrence
2. Accuracy
3. Cutoff
4. Completeness
5. Classification and Presentation
It is the written record of audit procedures performed, evidence obtained
and conclusions reached by an audit during an audit.
An audit report is a document that contains an audit opinion on whether a
company's financial statements are presented fairly in all material aspects
as per IFRS or applicable law.
An audit report is issued after the auditor has obtained sufficient and
appropriate evidence and the financial statements are approved by the
BOD.
The auditor himself in case of an individual and a partner of a firm
Scope limitation is the difficulty imposed that disables the auditor to obtain
sufficient and appropriate evidence regarding a matter.
Items are considered material if they, individually or in aggregate, could
reasonably be expected to influence the economic decisions of the users
taken on the basis of financial statements.
The term is used to describe the effects of misstatement and scope
limitation. The effects of such are not confined to specific elements of the
financial statements rather effect the financial statements as a whole.
An Emphasis of Matter paragraph is included in the audit report if the
auditor considers it necessary to draw attention of the users to a matter of
significance disclosed in the financial statements.
1. Exceptional Litigation
2. Early application of a new accounting standard
3. Major disaster
4. Significant subsequent event
5. Revision of financial statements/audit report after issuance
An Other Matter paragraph is included in the audit report if the auditor
considers it necessary to communicate a matter which is not required to be
disclosed in the financial statements but is relevant to the understanding of
the users.
1. Different auditor for prior year’s financial statements
2. Auditor is reporting on more than one sets of financial statements
3. Auditor restricting the distribution of audit report
The tenure of auditors is from the date of their appointment till the
conclusion of the next AGM.
 Muhammad Hamza Ayaz mhamzaayaz.com

How are auditors removed before
expiry of tenure?
When are First Auditors appointed?
When are Subsequent Auditors
appointed?
How are Subsequent Auditors
appointed?
Auditors can be removed before expiry of their tenure by members through
a special resolution.
First auditors are appointed within 90 days from incorporation of a
company.
Subsequent auditors are appointed at each AGM of the company.
Subsequent auditors are appointed by the members in an AGM.
The Board of directors recommend the incoming auditors along with the
notice of the AGM. Consent of the incoming auditors must be obtained
before such notice and the retiring auditors must be notified as well.
Registrar must be intimated within 14 days of appointment.

Members having shareholding of 10% or more can propose auditors after

When are auditors appointed in case
of a Casual Vacancy?
What are the Rights of the Retiring
Auditors?
What are the Responsibilities of the
Retiring Auditors?
What are the Statutory Rights of the
Auditors?
sending a notice for the resolution 7 days before the AGM.
Casual vacancy is filled within 30 days by the directors of the company.
Retiring auditors have the right to make a representation in writing to the
company at least 2 days before the AGM. Such representation must be read
out at the AGM before taking up the agenda for appointment of auditors.
In case a representation is made to the company 2 days before the AGM,
the retiring auditor is required to attend the AGM by himself or a person
authorized by him in writing. Furthermore, a copy of the representation
must be sent to ICAP as well.
Rights to Information:
- Right of access to the company’s books, accounts and vouchers
- Right of access to copies of books and accounts of a branch
- Right to require information and explanation from a director, officer or
an employee of the company or its subsidiary

Rights with regard to General Meetings:

- Right to receive all notices of a general meeting
- Right to attend and speak at general meetings
- Right to make a representation if a change in auditors is proposed
Who is Qualified to act as an auditor? For a public company, its subsidiaries and a private company with paid up
capital of 3 million or above a Chartered Accountant with a valid certificate
of practice from ICAP is qualified to act as an auditor.
In any other case, a Chartered Accountant and Cost and Management
Accountant with valid certificates of practice may act as an auditor.
In the context of the Principles of
Ethics, what is:
1. Integrity A chartered accountant should be straight forward, honest and fair in his
professional dealings.
2. Objectivity A chartered accountant should not compromise his professional judgement
due to bias, undue influence or conflict of interests.
3. Confidentiality A chartered accountant acquiring confidential information should not:
i. Disclose such information to a third party
ii. Use the information for his or a third party’s personal
advantage
4. Professional Competence and A chartered accountant should attain and maintain professional knowledge
Due Care and skill at a required level to ensure clients receive a quality service.
Furthermore, he must act diligently with applicable standards and
requirements on timely basis.

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Muhammad Hamza Ayaz | mhamzaayaz.com
5. Professional Behavior
What is:
1. Self-Interest Threat
2. Self-Review Threat
3. Familiarity Threat
4. Intimidation Threat
5. Advocacy Threat
What is an Engagement Letter?
What are the Contents of an
Engagement Letter?
What are the Benefits of Audit
Planning?
What is an Audit Plan?
What is Interim Audit?
What is Final Audit?
What is Performance Materiality?
What are the Benchmarks of
Materiality?
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Link to Index
A chartered accountant should comply with relevant laws and regulations,
and avoid actions that may discredit the profession. He should always
behave with courtesy in professional dealings.
A self-interest threat exists if the auditor holds a direct or indirect financial
interest in the company.
A self-review threat exists if the auditor is auditing his own work or work
that is done by others in the same firm.
It is a threat that an assurance team member will be too accepting of the
work of client because of a long or close relationship.
It is a threat that a chartered accountant will compromise his objectivity
due to threats and pressure of the client.
An advocacy threat exists if the auditor is involved in promoting the client
to the point where his objectivity is potentially compromised.
An engagement letter is a written agreement between the auditor and
client which states the terms and conditions of the audit engagement.
Contents of the engagement letter include:
1. Objective and scope of audit.
2. Responsibilities of the auditor.
3. Responsibilities of the management.
4. Identification of the applicable financial reporting framework.
5. Expected form and contents of report to be issued.
6. Inherent limitations of an audit and internal controls.
7. Fee or basis or fees.
8. Expectation that management will provide written representations.
PLANNING OF AN AUDIT
Planning helps to:
1. Complete the engagement effectively and efficiently
2. Identify and resolve potential problems on timely basis
3. Pay attention to important areas of audit
4. Assist in selection of appropriate team
5. Perform direction, supervision and review of engagement team
6. Coordinate on timely basis with component auditor or experts
Audit plan includes nature, timing and extent of audit procedures to be
performed by engagement team members on each area of the financial
statements.
An interim audit is that part of audit which takes place before the year end.
Final audit takes place after the year end and concludes with the auditor
forming and expressing an opinion on financial statements for the whole
year.
Performance materiality is an amount less than the level of overall
materiality. It is used to reduce the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
1. Net Profit
2. Total Expenses
3. Total Revenue
4. Net Assets
5. Net Current Assets
 Muhammad Hamza Ayaz
What is Transaction-Based Audit?
What is System-Based Audit?
What are Walk-Through Tests?
What is Inherent Risk?
What is Control Risk?
What is Detection Risk?
What is Audit Risk?
What is a Not-for-Profit Organization?
What are Internal Controls?
What are the Limitations of Internal
Controls?
What are the Components of Internal
Controls?
What is Segregation of Duties?
What is Management Letter?
What is an Audit Trail?
What is a System Log?
What is Encryption?
What are:
1. Preventive Controls
2. Detective Controls
3. Corrective Controls
What is Check Digit?
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It is an approach for an audit under which no reliance is placed upon entity’s
internal controls. The auditor solely performs test of details.
If the internal controls are assessed as effective in the walk-through tests,
the auditor may rely on the internal controls and perform test of controls
to determine the level of substantive testing. This is a system-based audit.
It is a procedure performed by the auditor which traces a transaction step-
by-step through the accounting system from its inception to the final
disposition.
It is the susceptibility of an assertion to a misstatement that could be
material before considering any related controls.
It is the risk that entity’s controls may not prevent, detect or correct
material misstatements.
It is the risk that procedures performed by auditors will fail to detect a
material misstatement.
It is the risk that the auditor will express an inappropriate opinion.
It is an organization with an objective to provide services to the society. It
does not generate profits and no part of its income is distributed to its
members, directors or officers.
Internal controls are processes and procedures implemented by the
management to ensure achievement of an organization's objectives in
operational effectiveness and efficiency, reliable financial reporting, and
compliance with laws and regulations.
1. Breakdown caused by human error
2. Management override of controls and collusion
3. Lack of segregation of duties in small entities
4. Non routine transactions are not subject to internal controls
5. Judgements involved in implementation may be faulty
1. Control Environment
2. Information Systems
3. Entity’s Risk Assessment Process
4. Control Activities (Authorization – Performance Reviews – Information
Processing Controls – Physical Controls – Segregation of Duties)
5. Monitoring of Controls
Segregation of duties is division of work between multiple workers to
reduce the risk of error and fraud.
It is a document prepared by the auditor to communicate significant
deficiencies in internal controls to the management.
An audit trail is the ability of users to trace a transaction through all of its
processing stages.
A system log is a record of events that take place in performance of system.
Encryption is the conversion of data into coded form using a program to
make it unreadable to everyone except its intended users.
Controls designed to stop errors or irregularities from occurring.
Examples: segregation of duties, authorization, restricting access through
passwords/firewalls
Controls designed to identify errors or irregularities that may occur.
Examples: reconciliations, periodic audits, exception reports, review of
system logs
Controls designed to correct errors or irregularities that have been
detected.
Examples: backup and recovery procedures, disciplinary mechanisms
Check digit is a validation check on key numerical codes. It is calculated from
the original data and added to the end.
Muhammad Hamza Ayaz | mhamzaayaz.com
What is Audit Software?
What is Test Data?
What is Negative Confirmation?
What is Positive Confirmation?
What are Related Parties?
What is Sampling?
What are the Sample Selection
Methods?
What is Stratification?
What is Sampling Risk?
What is Tolerable Misstatement?
What is Tolerable Rate of
Deviation?
What is an Internal Audit?
What is an Auditor’s Expert?
When does an auditor use an
Expert?
What is an Error?
What is Fraud?
What is Management Override of
Controls?
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It is a computer program used by auditors to extract and interrogate
financial information in client’s IT system for use in audit work.
It is a set of dummy transactions developed by an auditor and processed by
the client’s IT system.
PERFORMANCE OF AN AUDIT
A negative confirmation request asks for a reply from a third party only if they
disagree with the information provided by the auditor.
A positive confirmation request asks the confirming party to respond to the
auditor in all cases whether they agree or disagree with the information
provided.
Related parties are individuals or organizations that might have an undue
influence over the company being audited.
Sampling is the application of audit procedures to less than 100% of the items
in a population.
1. Systematic Selection
2. Random Selection
3. Haphazard Selection
4. Block Selection
The process of dividing a population into subpopulations, each of which is a
group of sampling units with similar characteristics.
Sampling risk is the risk that auditor's conclusion based on the sample might
be different from the conclusion if the entire population was tested.
It is the amount by which a financial statement line item can differ from its true
amount without impacting the fair presentation of the entire financial
statements.
A rate of deviation from prescribed internal control procedures set by the
auditor in respect of which the auditor seeks to obtain an appropriate level of
assurance that the rate set is not exceeded by the actual rate of deviation in
the population.
Internal audit is a part of the entity that is appointed by TCWG to assist them
in ensuring good governance of the entity.
An expert is a person who has expertise in a field other than accounting or
auditing and is used by the auditor to obtain evidence.
An auditor uses an expert for the following:
1. Actuarial Calculations
2. Engineering Data
3. Legal Opinions
4. IT Expertise
5. Valuations
An error is an unintentional misstatement.
Fraud is a deliberate act by one or more individuals by use of deception to gain
an unfair personal or financial advantage.
Management override of controls refers to the ability of management to
overrule the prescribed policies and procedures to prepare fraudulent
financial statements.
 Muhammad Hamza Ayaz
REPORTING AND POST REPORTING ISSUES
What are Written Representations?
What is a Qualified Opinion
What is an Adverse Opinion
What is a Disclaimer of Opinion
What are Key Audit Matters?
REVIEW AND RELATED SERVICES
What is an Audit?
What is a Review Engagement?
What are Compilations?
What are Agreed Upon Procedures?
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They are a written statements provided by management to confirm certain
matters or to support other audit evidence.
A qualified opinion is expressed when the auditors obtain sufficient and
appropriate evidence that material misstatement or scope limitation exists but
is not pervasive to the financial statements. The auditor states in his report
that the financial statements are fairly presented, except for a specified issue.
An adverse opinion is expressed when the auditors obtain sufficient and
appropriate evidence that a material and pervasive misstatement exists. The
auditor states in his report that the financial statements are not fairly
presented.
A disclaimer of opinion is expressed when the auditors are unable to obtain
sufficient and appropriate evidence due to scope limitation and conclude that
the effect of such is both material and pervasive to the financial statements.
The auditor states in his report that they were unable to obtain sufficient
appropriate evidence to form an opinion.
Matters that, in the auditor’s judgment, were of most significance in the audit
of the financial statements are Key Audit Matters. These are selected from
matters communicated to Those Charged with Governance during the audit.
An audit is an independent examination of the financial statements. It is a
type of engagement is which reasonable assurance is provided.
A review is a type of assurance engagement in which limited assurance is
provided.
In this engagement the practitioner assists the management in preparation
and presentation of historical financial information.
In Agreed Upon Procedures the auditor carries out procedures of audit
nature to report on factual findings. No assurance is provided in this case.
The procedures are mutually agreed between the entity, third parties and
auditor.
Muhammad Hamza Ayaz | mhamzaayaz.com
What is a Company?
What is Doctrine of Corporate
Personality?
What is a Fiduciary Relationship in
context of the directors of a
company?
What is a Holding Company?
What is a Subsidiary Company?
What is Memorandum of
Association?
What are Articles of Association?
What is an Ordinary Resolution?
What is a Special Resolution?
What is Share Capital?
What is:
1. Authorized Share Capital
2. Issued Share Capital
3. Paid-Up Share Capital
What is a Prospectus?
What are Debentures?
What is:
1. Pledge
2. Mortgage
3. Charge
What is a General Meeting?
What is a Statutory Meeting?
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COMPANY LAW
A company is an organization which is registered as a separate legal entity
under companies act or any other law relating to incorporation of companies.
Doctrine of corporate personality is that a company is considered as an
artificial person having separate legal status from its owners.
Fiduciary means an ethical or legal relationship of trust between parties.
Directors and members have a fiduciary relationship as directors work in the
best interests of the company.
A company which:
i. Holds 50% or more voting rights; or
ii. Controls the composition of the board of another company.
A company whose:
i. 50% or more voting rights; or
ii. composition of the board is controlled by another company.
It is the constitution of a company which includes its name, place, principal
line of business, liability and capital clauses.
Articles of association contain rules and regulation on internal affairs of a
company. They include rules regarding transfer of shares, proxies, general
meetings, dividends and reserves.
Ordinary Resolution is a decision in a general meeting which is passed by a
simple majority of members present in person, or by proxy, or through postal
ballot.
A special resolution is a decision which is passed by a majority of 3/4 of the
members present in person, or by proxy, or through postal ballot and for
which a 21 days’ notice has been given.
It is the total amount invested by the members of a company.
It is the maximum amount of share capital that can be issued. This amount is
mentioned in the Memorandum of Association and can only be changed
through a special resolution.
It is the amount of share capital that is issued to the shareholders. It cannot
exceed the authorized share capital.
It is that part of issued share capital which is actually paid up.
A prospectus is a document which invites the general public for subscription
of securities (shares or debentures).
Debentures are securities issued by a company to borrow money. They are
debt instruments and include bonds and term finance certificates.
It is the bailment of goods as a security for a debt. Goods are physically
transferred to the lender.
It is an interest created on property of a borrower as security. The property
is not physically transferred but title documents are transferred to the
lender.
It is a kind of security for a debt in which neither the property nor its title
documents are transferred to the lender.
A general meeting is a meeting of those shareholders who are entitled to
attend and vote.
It is the first general meeting of a public company in which members approve
statutory report and discuss matters relating to formation of the company.
 Muhammad Hamza Ayaz
What is a Statutory Report?
What is an Annual General Meeting?
When is an AGM conducted?
What is an Extraordinary General
Meeting?
Quorum of a General Meeting of a:
1. Listed Company
2. Unlisted Company
3. Other companies
Minimum number of Directors in a:
1. Single Member Company
2. Private Company
3. Unlisted Company
4. Listed Company
How are Directors appointed?
What is the Tenure of Directors?
What are the procedures of
appointing directors in the General
Meetings?
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It should be held within 9 months of incorporation or 180 days from
commencement of business, whichever is earlier.
It is an indicative of financial startup of a company. It includes matters such
as:
- Number of shares allotted and cash received
- Summary of receipts and payments
- Particulars of directors, chief executive, auditors and legal advisors
- Overview of company’s affairs and its business plan
Every company holds a general meeting every year in which members discuss
ordinary business. This is an AGM.
Ordinary business includes consideration of Financial Statements, Directors
Report, Audit Report, approval of dividend, appointment of directors and
auditors.
Firm AGM is conducted within 16 months from date of incorporation and
subsequent AGMs are conducted within 120 days from the close of financial
year.
A company may hold a general meeting to discuss special business at any
time during the year. This is an EOGM.
Special business includes alterations of MOA and AOA, Investments in
associates and removal of Chief Executive.
10 members with 25% voting powers.
2 members with 25% voting powers.
As per their Articles of Association.
One
Two
Three
Seven
The first directors are appointed by subscribers to the Memorandum of
Association.
Subsequent directors are appointed by members in the general meetings.
In case of a casual vacancies the existing directors have to appoint a director
within 90 days.
The first directors hold office till the first AGM.
Subsequent directors hold office for a period of 3 years.
Directors appointed to fill casual vacancies hold office for the remainder of
the term of outgoing directors.
1. Directors of the company fix the number of directors to be appointed at
least 35 days before the General Meeting.
2. A notice is sent to the members for a general meeting at least 21 days
before the date of such meeting. The notice must include the number of
directors to be elected and the names of retiring directors.
3. Persons seeking to contest in the elections may file a notice in writing at
least 14 days before the general meeting.
4. All such notices are sent to the members and published in newspapers
(Daily English and Urdu with wide circulation) at least 7 days before the
meeting.
5. Directors are elected unopposed in case the number of candidates is
equal or less than the fixed number. If not, a poll for election is
conducted.
6. Every member shall have total votes equal to:
Number of Shares X Number of directors to be elected
Muhammad Hamza Ayaz | mhamzaayaz.com
What is the Quorum of a Board
Meeting?
What is the Frequency of Board
Meetings?
What is a Chief Executive?
What is an Independent Director?
What is an Associated Company?
What is Dividend? What are its
types?
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Candidates with the highest votes are declared as elected until the fixed
number of directors to be elected is reached.
For a listed company the quorum is one-third of the total directors or 4,
whichever is higher. For any other companies the quorum is as per the
Articles of Association.
The board of a public company shall meet at least once in each quarter of a
year.
A chief executive is an individual who is given whole or substantial powers of
management of affairs of a company, subject to control and directions of the
directors. A chief executive is appointed by the directors.
It is a director who is not involved in executive management of a company.
Such a director is expected to give an objective view in decision making of
the board.
Associated Company means any legal entity of which a person or company
has direct or indirect control by:
- Common shareholding of 20% or more
- Common management/control
- Management of a Modaraba
Dividend is any payment by a company to its shareholders out of its
distributable profits.
Types of Dividends:
1. Interim Dividend: Paid before the year end. Approved/declared by
directors
2. Final Dividend: Paid after the year end. Proposed by directors and
approved by shareholders.
 Muhammad Hamza Ayaz mhamzaayaz.com

TAXATION

What is Tax? Tax is a collection of a share of a person’s income by a government under

What is Direct Tax?
What is Indirect Tax?
What is Tax Avoidance?
What is Tax Evasion?
What is Minimum Tax Regime?
What is:
1. Normal Tax Year
2. Special Tax Year
3. Transitional Tax Year
When are the following treated as a
Resident?
1. Individual
2. AOP
3. Company
What are the Heads of Income?
What is a Capital Asset?
What is the tax treatment of a Limited
Liability Partnership?
What is a Tax Credit?
authority of law.
A tax paid directly to the government by the person on which it was
imposed.
A tax levied on the production or consumption of goods and services.
It is a legal use of the tax laws to one’s own advantage to reduce the
amount of tax payable.
It is an illegal practice of unlawfully avoiding payments of tax. It is an act of
intentional concealment of true state of affairs to tax authorities.
Certain types of incomes are subject to minimum tax. The purpose is to
assure that a certain amount is paid by the tax payers regardless of their
taxable income. In this case tax is charged on the basis of turnover.
It is a period of 12 months ending on 30th June. It is denoted by the
calendar year in which the closing date falls.
It is a period of 12 months different from the normal tax year. It is
denoted by the calendar year relevant to the normal tax year in which the
closing date falls.
When a person changes their tax year, the period between the closing
date of last tax year prior to change and the opening date of the changed
tax year is known as a transitional tax year.
An individual is a resident if he is:
- Present in Pakistan for an aggregate period of at least 183 days
- An employee of a Federal or Provincial Government
An AOP is a resident if the control and management of its affairs is
situated wholly or partly in Pakistan at any time during the tax year.
A Company is a resident if:
- it is incorporated or formed under any law in force in Pakistan;
- the control and management of its affairs is situated wholly in
Pakistan any time during the tax year;
- it is a Provincial or Local Government.
1. Income from Salary
2. Income from Business
3. Income from Property
4. Capital Gain
5. Income from Other Sources
Property of any kind held by a person, including jewelry, work of art,
antiques etc. but excluding:
- Stock-in-Trade
- Any property for which a depreciation/amortization deduction is
allowed under Income from Business
- Moveable property held for personal use
An LLP is not treated as an AOP for tax purposes. Partners of an LLP are
taxed individually on their share from the profits of an LLP.
It is a type of concession that a taxpayer can subtract directly from the tax
payable.

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Muhammad Hamza Ayaz | mhamzaayaz.com Link to Index

What are the Allowances available to a Allowances are available for the following:
person? 1. Zakat
2. Worker’s Welfare Fund
3. Worker’s Participation Fund
4. Profit on Debt
5. Educational expenses
6. Medical expenses
7. First year allowances on depreciation
Who is required to charge Sales Tax? Every person making taxable supplies is required to collect sales tax.
What is Input Tax? It is the tax paid by registered person on the taxable goods and services
purchased or acquired. This also includes the sales tax paid on imports.
What is Output Tax? It is the sales tax charged on the supply of goods or services on which
sales tax is leviable.

TAX RATES:

Corporate Tax Rate Tax Rate for Small Companies Tax Rate for Banking Companies
TY 2022 29% 21% 35%
TY 2023 29% 20% 35%

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 Muhammad Hamza Ayaz
FINANCIAL ACCOUNTING AND REPORTING
What is Accounting?
What is Matching Concept?
What is Prudence Concept?
What is Going Concern?
What is an Asset?
What is Depreciation?
What is Impairment?
What is NRV?
What is Capital Expenditure?
What is Revenue Expenditure?
What is a Liability?
What is Equity?
What is Negative Goodwill?
What is a Lease?
What is an Operating Lease?
What is a Finance Lease?
What is a Bad Debt?
What are the Five Steps for Revenue
Recognition?
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Accounting is the process of recording financial transactions.
Matching concept is an accounting concept which states that revenues
and their related expenses should be recognized in the same accounting
period they occur in.
It is an accounting concept that states that an entity must not overstate
its assets, revenues and profits, and must not understate its liabilities,
expenses and losses.
The going concern concept of accounting implies that the business entity
will continue its operations in the future and will not liquidate or be forced
to discontinue operations due to any reason.
An asset is:
- a resource controlled by the entity;
- as a result of past events; and
- from which future economic benefits are expected to flow to the
entity.
The systematic allocation of the depreciable amount of an asset over its
useful life.
An asset is said to be impaired when its recoverable amount is lower
than its carrying value.
Net realizable value is the value for which an asset can be sold, minus the
estimated costs of selling or discarding the asset.
It is expenditure made to acquire or improve long term assets that are
used by the business for a number of years:
It is a short-term expenditure for operations in the current period.
A liability is:
- a present obligation of an entity
- arising from past events
- the settlement of which is expected to result in an outflow of
resources that embody economic benefits.
Equity is the amount of capital invested in an entity. It represents the net
assets of the entity.
When a company acquires another company or its assets for a
significantly lower price than its fair market value the balancing amount is
called negative goodwill. It is recorded as an income on date of
acquisition.
A lease is an agreement to grant the right to use an asset for a specified
time against periodic rentals.
A lease that does not transfer substantially all the risks and rewards
incidental to ownership of an underlying asset.
A lease that transfers substantially all the risks and rewards incidental to
ownership of an underlying asset.
Bad debt refers to loans or outstanding balances owed that are no
longer deemed recoverable and must be written off.
1. Identify contract(s) with customer.
2. Identify separate performance obligations in the contract(s).
3. Determine the transaction price.
4. Allocate the transaction price between the performance obligations.
5. Recognize revenue as and when the performance obligations are
satisfied.
Muhammad Hamza Ayaz | mhamzaayaz.com
What is Deferred Tax?
What is a Temporary Difference?
What is a Taxable Temporary
Difference?
What is a Deferred Tax Liability?
What is a Deductible Temporary
Difference?
What is a Deferred Tax Asset?
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Link to Index
It is an accounting measure used to match the tax effects of transactions
with their accounting impact to produce less distorted results.
It is the difference between the carrying amount of an asset/liability
within the Statement of Financial Position and its tax base.
Carrying Amount: As per IFRSs in Financial Statements
Tax Base: As per Tax Authorities
A temporary difference that will yield amounts that are taxable in the
future when determining taxable profit or loss.
The amounts of income taxes payable in future periods in respect of
taxable temporary differences.
A temporary difference that will yield amounts that are deductible in the
future when determining taxable profit or loss.
The amounts of income taxes recoverable in future periods in respect of
deductible temporary differences or unused tax losses and tax credits.
 Muhammad Hamza Ayaz
ECONOMICS AND FINANCE
What is Finance?
What is Capital?
What is Opportunity Cost?
What is a:
1. Market Economy
2. Planned Economy
3. Mixed Economy
What is a Modaraba?
What is a Giffen Good?
What is Price Elasticity of
Demand?
What are Economies of Scale?
What are Diseconomies of
Scale?
What is a Monopoly?
What is Price Discrimination?
What is Collusion?
What is GDP?
What is Inflation?
What is Deflation?
What is Economic Growth?
What is Fiscal Policy?
What is Monetary Policy?
What is Balance of Payments?
What is a Capital Market?
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Finance is the management of money with the goal to increase wealth.
Capital is the wealth in a form of money or other assets held by a person or
organization.
The cost of one economic decision expressed in terms of the next best
alternative foregone.
1. An economic system in which production and prices are determined by
unrestricted competition between privately owned businesses.
2. An economy in which production, investment, prices, and incomes are
determined centrally by the government.
3. An economic system combining private and state enterprise.
Modaraba is a profit-sharing contractual arrangement between an investor and
a managing trustee.
A good where quantity demanded increases when price rises.
A measure of the extent of changes in the market demand for a good in
response to a change in price.
Factors which lead to the overall decrease in unit cost, as output increases.
These are usually costs which have similar characteristics to fixed costs, and can
be spread out amongst ever greater units, hence reducing the average cost.
Factors which lead to the overall increase in unit cost, as output increases. These
are often a result of managers/staff losing control/motivation as
production gets greater.
A market structure where there is just one firm supplying to the whole market.
The action of selling the same product to different groups of buyers at different
prices in order to maximise profits.
Collusion is a non-competitive, secret, and sometimes illegal agreement
between rivals which attempts to disrupt the market's equilibrium. The aim is to
gain an unfair market advantage.
GDP stands for Gross Domestic Product. It is the total monetary value of all the
goods and services of a country produced and rendered within a specific period.
A continuous increase in the general price level.
A continuous fall in the general price level.
Economic growth is a long-term expansion of a country’s production potential.
Fiscal policy is government policy on taxation, spending and government
borrowing.
Monetary policy consists of the management of money supply and interest rates
to achieve macroeconomic objectives such as controlling inflation, consumption
and growth.
The balance of payments measures the financial transactions made
between consumers, businesses and the government in one country with
others.
The financial market which is largely used to raise long-term finance and capital.
Muhammad Hamza Ayaz | mhamzaayaz.com
BUSINESS MANAGEMENT & BEHAVIORAL STUDIES
What makes a Good Leader?
What are the Styles of Leadership?
What are Leadership qualities?
What is the difference between a leader
and a manager?
What is Management?
What are the Five Steps of
Management?
What are Managements Skills?
What is a Business Environment?
What are the Environmental Factors?
What are Stakeholders?
What is Outsourcing?
What is Downsizing?
What is SWOT analysis?
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Link to Index
A good leader has a clear vision. He acts with integrity and honesty. He
gets the best out of his subordinates and help them reach their goals.
1. Authoritarian - continually gives orders and instructions without
offering any consultation
2. Democratic - offers guidance and encouragement and participates
actively
3. Laissez-faire - gives the knowledge needed to work, but does not
participate
A leader would take the first step. He would work with his subordinates
instead of dictating what needs to be done. He would act wisely and be
an inspiration for everyone. Some essential qualities of a leader include
communication, vision, empathy, accountability and gratitude.
A leader is a person who guides, leads and motivates his subordinates
while a manager is a person who assigns tasks to his subordinates and
gets the work done. A leader works closely and communicates directly
with all of his team to inspire effort. A manager delegates responsibility
and operates through a chain of command. A leader is people focused
but a manager is task focused.
Management is the process of dealing with and controlling people and
resources to achieve a specific purpose.
Management is a five-step process and comprises of planning,
organizing, directing, coordinating, and controlling the work of a group
of employees.
Management skills include:
1. Leadership 5. Information gathering
2. Time and stress management 6. Negotiation
3. Innovation and creativity 7. Coaching
4. Communication 8. Gathering
Business Environment encompasses the ‘climate’ or set of conditions,
economic, social, political or institutional in which business operations
are conducted.
P – Political and legal factors
E – Economic factors
S – Social, cultural and demographic influences
T – Technological factors.
E – Ecological
L – Legal
A stakeholder in an organization is a person who has an interest in what
the organization does, and who might therefore try to influence the
decisions and actions of the organization.
Outsourcing is the business practice of hiring a party outside a company
to perform services and create goods.
Downsizing means the reduction in size of a business organization. It
means that its business activities are conducted by a smaller number of
people.
SWOT analysis is an analysis of strengths, weaknesses, opportunities and
threats. It is a simple but useful technique for analyzing strategic
position.
 Muhammad Hamza Ayaz
What are the Factors of Michael Porter’s
Five Forces Model?
(Factors that determine
competitiveness)
What is a Value Chain?
What are Primary and Secondary Value
Chain activities?
What is an Organization?
What is an Organizational Structure?
What are the types of Organizational
Structures?
What is Organizational Change?
How will you implement change?
What is a Team?
What is a Workgroup?
What is Negotiation?
How would you Resolve a Conflict?
What is an ERP?
What is Corporate Social Responsibility?
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1. Threats from potential entrants
2. Threats from substitute products or services
3. The bargaining power of suppliers
4. The bargaining power of customers
5. Competitive rivalry within the industry or market.
A value chain is a series of activities, each of which adds value. These
activities within and around an organization create a product or service.
Primary Value Chain activities: Secondary Value Chain activities:
1. Inbound logistics 1. Purchasing
2. Operations 2. Technology support
3. Outbound Logistics 3. Corporate Services
4. Marketing and Sales 4. Human resource
5. Service
An organization is a social arrangement for the controlled performance
of collective goals.
An organizational structure is the formal arrangement within an
organization that defines how activities and tasks are formally divided
and how processes and information would flow within this structure.
1. Entrepreneurial – the entrepreneur is the sole decision maker
2. Functional – Small to Medium Sized Organization – groups of people
performing similar tasks
3. Matrix – multiple commands systems - dual reporting relationships
4. Divisional – Large entities – Divisions of activities operating like a
standalone entity - Specific centralized tasks
Organizational Change refers to changes in strategy, resource allocation
and asset disposals along with significant reengineering of the
organizational structure as a standard part of many change efforts.
I would start by persuading the employees that a change is necessary. I
will look to compensate the employees with an incentive to motivate
them to adopt to the proposed change. I would manage between
resources to ensure a successful implementation of change. Once the
change is implemented, I will encourage the employees to carry on with
the new way of doing things.
A team is a group of people using shared resources in order to achieve
common goals.
Workgroups are groups formed by individuals to perform a common
goal or promote similar thoughts and purpose.
A formal process that occurs when parties are trying to find a mutually
acceptable solution to a complex conflict.
I would communicate with the other person and invite them to share
their point of view while I share mine on the conflicting matter. I would
ensure that the interests of the firm are not compromised due to our
personal interests. Based upon the arguments presented I would seek to
find a mutually beneficial solution for such a conflict.
In case the matter remains unsolved, I would look to ask a senior to
mediate.
Enterprise resource planning (ERP) is a software that allows an
organization to use a system of integrated applications to manage the
business and automate many back-office functions related to
technology, services and human resources.
Corporate Social Responsibility is a management concept whereby
companies integrate social and environmental concerns in their business
operations and interactions with their stakeholders.