CA INTERMEDIATE (AUDITING)

CHAPTER-6 :- MOCK TEST (2)

CASE STUDY
M/s KTR & Associates , with its Partners CA Kumar , CA Tina & CA Rohan have been
appointed as auditors of Vigyaan Ltd. for the financial year 2021-22. Hema , Rekha &
Jaya are respectively the Managing , Part time & Independent directors of Vigyaan
Ltd. , while Mr. Sushil Sharma is the Secretary to the CIO. Vigyaan Ltd. is an e-
commerce company and almost all the processes, operations, accounting and
decisions are carried out by using computers in the Company. The auditors
understand that there are several aspects that they should consider to determine the
level of automation and complexity in the business environment of Vigyaan Ltd.
While planning the audit work, the engagement partners discussed with the audit
staff about the various types of controls in the automated environment. The
seniormost Article Ravi is given the task of understanding , observing & documenting
how the IT department is organized in the company , the IT activities, the IT
dependencies, relevant risks and controls . CA Tina tells her Article Vidya about using
the IDEA software in Audit operations. The different types of audit tests that can be
used in audit of an automated business environment were also discussed within the
engagement team. The responsibility regarding the Internal Financial Controls was
also discussed in detail. Further the tools and techniques that can be used to deal
with the enormous data and information of Vigyaan Ltd. were briefed to the audit
staff by the engagement partners. CA Rohan observes that the IT risks have not been
considered for and not mitigated to an acceptable level thereby impacting the
business environment such that more substantive audit work is needed to be done
by them as auditors. CA Kumar finds that the Secretary to the CIO has been given
access to the information systems that enforces less or no limits on using that
system. He requests Mr. Sunil Sharma to tell him about the Company’s documented
policy with respect to the Business Continuity Plan and Disaster Recovery Plan to
recover from failure in case any unfortunate event occurs. He further tells Article
Raman to prepare a Risk & Control Matrix as per the risks identified relating to the
Company’s Automated Environment. The team carries out the audit and while
assessing their findings to be included in the Audit Report , they find a significant
deficiency in the Internal controls and discuss among themselves as to how it should
be reported.
Based on the above facts, answer the following:-
1. The powers given to Mr. Sunil Sharma by the CIO falls under the category of

(a) Data breach

(b) Segregation of Duties
(c) Super/Privileged access
(d) Centralised System Control
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2. Statement 1: Section 149(8) of the Companies Act , 2013 applies to the Company and
the director Jaya specifically.
Statement 2: Section 143(3)(i) of the Companies Act , 2013 applies to Hema , Rekha ,
Jaya & Sushil altogether.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both Statements 1 & 2 are correct
(d) Both Statements 1 & 2 are incorrect

3. The
work allocated to article Raman is of the nature of ________ as per the Guidance note
on Internal Financial Controls issued by the ICAI.
(a) Risk Assessment
(b) Understand & Evaluate
(c) Test for Operating effectiveness
(d) Reporting

4. The work being performed by the article Divya is an example of using _____ in Audit.
(a) Audit Tests
(b) Walkthrough
(c) Written representations
(d) Data Analytics

5. As per the Audit findings of the team , they should

(a) Communicate in writing to those charged with governance.
(b) Report the matter directly to the Central Government.
(c) Test the Compensating controls in the Company.
(d) Reperform the Audit Trail.

6. Raman and his team are working in compliance with

(a) SA 315.
(b) SA 240.
(c) SA 200.
(d) SA 299.

7. CA Rohan’s observations show the impact of risks in IT environment on

(a) Substantive Audit
(b) Controls
(c) Reporting
(d) No Risk impact.

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8. CA Kumar’s request to Mr. Sunil Sharma has following implications :-
Statement 1 :- It falls under the Program Change type of General Controls implemented in
the Company by the management.
Statement 2 :- His objective of the request is to ensure that access to programs and data is
authenticated and authorized to meet financial reporting objectives.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both Statements 1 & 2 are correct
(d) Both Statements 1 & 2 are incorrect

9. The
audit team finds a deficiency in internal control which means that control is designed,
implemented or operated in such a way that it is unable to ___________________
misstatements in the financial statements on a timely basis.
(a) prevent
(b) detect or correct
(c) prevent or correct
(d) prevent or detect and correct

10. Which of the following is a type of control deficiency or a combination of deficiencies in

internal controls that is important enough to merit the attention of those charged with
governance since there is a reasonable possibility that a material misstatement will not be
prevented or detected in a timely manner by management :-
(a) Significant Deficiency
(b) Material Weakness
(c) Significant Weakness
(d) Compensating Controls

ANSWERS
1. (c)

2. (a)

3. (b)

4. (d)

5. (a)

6. (a)

7. (b)

8. (d)

9. (d)

10. (b)
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