RTP May 2024 CA Inter Audit | Part 2 Descriptive Questions | Audit Important Questions

hello everyone hope you are doing very wellp Des question discuss question d I question M Motors limited is a leading Indian automobile manufacturer with many offerings across commercial passenger and electric vehicles the company is partnering India's electric vehicle transition and enjoy considerable advantage in one of the fastest growing automative Market gr and Associates have been appointed as statutary Auditors for financial year 2223 J and K are newly appointed audit assistants in the form and are part of the engagement team constituted for purpose of audit of M Motors limited G gr and Associate CFM as auditor however they are confused about what such an audit tends to achieve they Pur audit as a guarantee against possible errors or frauds in do you agree with perception of the both of both in this context outline objectives of an independent audit conducted in accordance with standards on auditing e regards line objetive of an overall objectives of independent auditor and conduct of an audit in accordance with standards on auditing objective to obtain reasonable Assurance whether the financial statement as a whole as a whole are free from Material misstatement or not whether due to fraud or error and thereby enabling to express an opinion on the financial statement that in allal respect are prepared in accordance with standards are prepared in accordance with applicable financial reporting framework and to report on financial statement in accordance with the auditor findings and considering the standards on auditing right this communicate auditor objective is to obtain a reasonable Assurance whether financial statement as a whole are free from material misstatement whethere to or error so reasonable Assurance Achi reasonable Assurance is to be distinguished from absolute Assurance absolute Assurance is a complete Assurance or guarantee that financial statements are free from Material misstatement reasonable Assurance high level ofur guarante absolute however reasonable Assurance is not a complete guarantee although it is a high level of assurance but it is not a complete guarantee audit of financial statement is carried out by an auditor with professional competence and skills in accordance with standards on auditing audit procedures are applied in accordance with SS audit evidence is obtained and evaluated on the basis of that conclusions are drawn and opinion is formed it leads to high level of assurance which is called a reasonable Assurance but it is not it is not an abute guarante therefore perception of both assistants is not proper auditor of financial statement does not seek to provide guarantee that financial statements are free from material misstatement that caused by fraud or errors you re simp objective or whether the perception of that articles are correct or not so percep second question standards on auditing apply in audit of historical financial information whereas standards on review engagement Sr is apply in review of historical financial information explain in detail giving examples s audit ofical financial information high level of assurance reasonable Assurance engagement limited Assurance engagement lower level of assurance then then audit right moderate level ofur so third question chapter direct question preliminary engagement activities include certain activities to be performed by an auditor while planning an audit discuss such activities briefly how performing such activities assisting auditor preliminary engagement prelimary engag whether such audit engagement to be accepted or to be continued engagement AC to chapter 2 the assistance of a c is assigned responsibility of drafting audit program relating to purchase appearing in financial statement of broad Industries a partnership form the S form is GST registered taxpayer and is engaged in manufacturing of pcking boxes from a special type of paper taxable under GST help him by drafting the sample audit program for a pures audit program in detail ing [Music] purchase question answer broad Industries name of concern finan preped by reviewed by and approved by serial number nature of procedure extent of check watch few purchase invoice of paper from purchase record of concern few purchase inves PR this invoices into account books of Pur verify few purch inv of few purchase inv of paper in stock records to ensure this have been added to stock of RA material as a re as a reip chapter three chapter three question five Sanga Foods private limited is engaged in manufacturing of vehicles the auditor of a company have planned audit procedures in respect of recognition of revenues of company despite that there is a possibility that misstatements in Revenue recognition are not identified by planned audit procedures identify and explain the particular risk in detail and explain the particular risk risk of material misstatement or detction Det question have it related risk can have an impact on audit in what different ways such risk can have impact on audit financial statements proceded second ons question seventh question for start CA Kika audited books of accounts of engineering limited for the financial year 2223 auditor used an audit procedures According to which all the documents and records maintained by the company were checked in detail to obtain audit evidence explain the audit procedure used by inspection comment on reliability of audit EV obtained by performing such an audit procedure in some situation INSP inspection involves examining records or documents whether internal or external in paper form electronic form or other Media or a physical examination of an asset in view of above it can be concluded that cika used inspection as anit physical examination of an ass INSP inspection of records and documents provides audit evidence of a varying degree of reliability depending on their nature and source and in the case of internal records and documents on the effectivess of internal control over prepar such a evidence or whether such a procedures are reliable or not examples of inspection used as a test of control is is an inspection of records for evidence of authorization test of controls so it is an example of inspection some documents represent direct audit evidence of the existence of an asset for example a document constituting a financial instrument such as an inventory or Bond inspection of such documents may not necessarily provide audit evidence about ownersh or in addition inspecting and expected sorry executed contract May provide audit evidence relevant to them and it is application of accounting policies such as Revenue recognition inspection of tangible assets May provide reliable audit evidence with respect to their existence but not necessarily about the entity rights and obligations or the valuation of asset inspection of individual inventory item May accompany the observation of inventory counting right so procedure question question C is conducting statutory audit of J limited engaged in manufacturing of Pharma products the company is fairly large one and has a well functioning internal audit Department Department while considering sending out external confirmation request to trade resales outstanding as on the date of financial statement CA has delegated the process of choosing Trad rebl designing request and receiving response from customers to internal audit Department designing of confir request sending and Confirmation request internal the responses are also received on the mail ID of internal audit Department respon re is the approach of C external external similar question test understand question n the newly appointed auditor ofn limited wants to obtain sufficient appropriate audit evidence about whether the opening balances contain misstatements that materially affect the current period's financial statements what audit procedure should perform for this purpose opening Bal appointed a initial a engagement opening second accounting policies open fin St for 10th question SP limited has been into the media business since 2001 you during the financial year 2223 many notices were received by the company for hurting public sentiments and Financial claims were filed against the sentiments as an auditor of company you requested the management for arranging the meeting with company's external legal management is of the view that such meetings are necessary in certain circumstances only manag ccum can you list down circumstances it each opinion dras private limited was established in year 20223 for manufacturing of footware as funds were needed to carry on its business activities including for purchase of different raw materials incurring of regular expenses like power and Fuel and payment of wages Etc it had got sanctioned a credit facility amounting to rupes 2 repayable On Demand from a bank against primary security of its current assets and collateral security of residential house of one of its director regular expenses like power fuel payment of wages working capital loan repayable demand shortterm Bor from Bank against primary security of current assets working capital working capital loan or collateral of it Dy signed guarantee documents by directors in favor of Bank also form part of bank's loan documentation account state statement of above facility downloaded from bank's website so debit balance of rupees 1.85 as on 31st March 202 31st March outstanding balance R 1.85 operations in above credit facilities are satisfactory operations evid in this regard identify docu sorry Norman culture of such credit facility given by Banks how would above amount of rupes 1.85 crores be reflected and classified in financial statements of the company is on 31st March bsmr froms demand right. also State specific disclosure requirement of schedule of the compies ACT 2013 relation tocl the type of credit facilities referred to in above situation given by Banks to meet working capital requirements of business which are repayable on demand are known as a cash credit facilities or overdraft facilities the amount of rupes 1.85 outstanding as on 31st March 2023 reflects borrowings of the company and it would be classified as a short-term borrowings as a loans repayable on demand from Banks under current liabilities in balance sheet of the company uh current liabilities short-term borings repayable on demand from Bank borrowing shell further subclassified as a secured loan specific disclosure requirements of short-term borrowings under schedule 3 to the companies act 13 in given situation are as under nature of security that is primary security of current aspects current assets and collateral security of residential house belonging to director shall be specified nature of security as the loans have been guaranteed by directors the agregate amount of such loans shall be dis am5 sorry mention then to be disclosed as additional regulatory information since the company has borrowings from Bank on the basis of security of current assets it shall also disclose the following whether quarterly returns or statements of a current assets filed by the company with banks or financial institutions are in agreement with books of accounts statement fin BSS if not summary of reconciliation and reasons of material discrepancies if many to be adequately next question following is extract of notes to accounts of financial statement of Stu private limited listing some ratios discuss whether disclosure given in following manner meets requirement of schedule 34 companies 2013 ignore other ratios which are not listed in requirement the disclosure given in the question does not meet requirement of schedule 3 to the companies act 13 schedule 3 requires that the company shall explain the items included in numerator and denominator for computing the ratios further explanation shall be provided for any change in ratio by more than 25% as compared to preceding year preceding in the given table the company has not explained items included in numerator and denominator for computing ratios further variations in ratios are as compared to preceding year as underation current 2.5 sorry 2.5 previous differ right 17525 above there is a change in inventory turnover ratio trade reable turnover ratio and net profit ratio by more than 25% as compared to preceding year therefore explanation for such changes have also to be provided whether there are changes by more than 25 compared toing 11 question proceedings have been initiated against Falls limited for holding benami property under law relating to Prohibition of benami transactions and the rules made there under by such but such property is not recorded in books of account as a consultant to the company what will you advise the company as far as disclosure requirement are concerned in financial statement in relation to proceedings question already already question 14 C student has understood that s a 230 requires auditor to prepare audit documentation on a timely basis while reading about sqc 1 she notices that time limit for completion of final audit file is ordinarily not more than 60 days after the date of auditor report finds it to be puzzling unable to comprehend your guidance guide her of within days from the of a 15th question discussing meaning of completion memorandum elaborate upon its importance clear 16th question important question 16th question C is a statut auditor of Dema private limited for the year 2223 the company has three plans in India is nearing completion of audit procedures relating to financial statements for the year under audit and has yet to sign audit report sign meanwhile a huge fire had broken out in the one plants of the company located near nashik on 25th June 2023 damaging substantial part of machinery and working process resulting in loss of about rupees 5 but unaware of the incident he is in process of finalizing his report in first Fortnight of July 2 procedes to be performed by him to obtain sufficient appropriate audit evidence for identifying such events also explain auditor responsibilities in this situation respons resp in the given situation a huge fire had broken out in one plants of company on 25th June 2023 destroying substantial part of machinery and wiip resulting in loss of rupes 5es the auditor has yet to sign audit report before signing audit report he should perform following audit procedures to obtain sufficient appropriate audit evidence that all such events have been identified and are appropriately reflected in financial statement aor responsibility report sign inqu of management whether any subsequent events fin repor subsequent EV events occuring after balancing procedures are nearing completion it notices that engagement partner has asked for a cash flow forecast from management for next 12 months from the date of the finan St engagement engag flow next 12 mons flow St keeping in view above answer the following discuss likely purpose of Engagement partner in the above situation elaborate upon significance of such testing being performed by engagement partner engagement partner next 12 months cash flow statement State any twoed procedures in relation to cash flow forecast likely to be performed by engagement in the given situation the engagement partner has ask for a cash flow forecast from management for the next 12 months from date of financial Str toit procedures are also nearing completion therefore purpose of Engagement partner in requiring a cash flow forecast is to obtain sufficient appropriate audit evidence regarding and to conclude appropriateness of Management's use of going CERN basis of accounting in preparation of its finan further his purpose also to conclude on basis of audit evidence obtained whether a material uncertainty exists related to events or conditions that may cast a significant doubt on ability of entity to continue as a going concern and to report in accordance with s 520 the significance of testing going concern assumption is due to effects its effects on preparation of financial statements when the usage of going concern is considered as appropriate assets and liabilities are recorded on the basis that enti will be able to realize its and discharge liabilities in normal C of business fin in case it has it is not so viewed financial statements are prepared on liquidation basis hence testing of such such an assumption provides evidence to auditor whether the use of assumption is appropriate or not prepar question two audit procedures in relation to cash flow forecast likely to be performed evaluate reliability of underlying data generated to prepare the forec there is a adequate support for assumptions underlying the forecast assumtions ex of circumstances with auditor may consider it necessary to include an emphasis of matter paragraph emphasis of matter [Music] question C while conducting audit of an entity is facing following issues he has not been provided with necessary support for attending inventory account process of an entity inv procedures manager is not providing him for present address of customers as well as the suppliers for sending external confirmation even mail IDs have not been provided on the pre text of business confidentiality external information he was not able to verify revenues of entity due to lack of complete details he has been asking for bills on Sample basis for the purpose of verifying expenses but staff has been making lame excuses the matter was brought to knowledge of fire management but no but of Noor C has come to the conclusion that the possible effects on the financial statements of undetected misstatements would be material and affecting many aspects of financial statement and ins such a case a qualification of the opinion would be inadequate to communicate the gravity of the situation situation aecting many aspects of financial statement pervasive effect material and pervasive qualification qualified opin how should the auditor proceed in such a situation from and in the given case auditor has not been able to obtain sufficient appropriate audit evidence relating to inventories datas creditors revenues and expenses the matter was brought to the knowledge of management but no result has been achieved in such a circumstances auditor should proceed as given year under if the auditor concludes that the possible effects on the financial statements of undetected misstatements if any could be both material and pervasive so that a qualification of the opinion would be inadequate to communicate the gravity of the situation aitor shall withdraw from AIT where a practicable and possible under applicable La regulation or if withdrawal from AIT before issuing aest report is not practicable or possible disclaim an opinion on the financial State Issa if auditor withdraws from from such an engagement before withdrawing auditor shall communicate pcwg any matters regarding misstatements identified during the audit that would have given rise to modification of simple similar kind of question disclaimer chapter 9 questions direct question ping is one of the Great problems in any hotel and the importance of internal control cannot be undermined explain and 21 question from a Les's perspective highlight main difference between an operating Le and finance Le only in relation to accounting treatment and tax benefits accounting treatment operating 22 question while conducting statut audit of branch of a nationalized bank it is noticed by C that credit facilities granted to a borrow consisting solely to a solely of a Term Loan have been classified as the substandard asset during the year 2022 23 due to failure of B borrow to pay emis on time such emis were outstanding for more than 90 days and account was therefore classified as a substandard asset 90 days outstanding CS also agreed to above asset classification made by Branch management what are CS responsibility regarding verification of compliance with income recognition Norms by branch in respect of above facilities Revenue recogn RBI Norms stipulates that if any advance account if any advance account become NP as at close of any year the entire interest approved or credited to income account in past period should be reversed or provided for if the same is not realized right in respect of NPS feace commission and other similar income that have accured should cease to acre in the current period and should be reversed or provided for with respect to pass periods if uned in the given case account has turned substandard asset which is the type of npm therefore auditor should make compl ofs to [Music] in next question while verifying provisions of advance of a branch of MCO Bank as a part of statutory Branch audit csz notices that credit fa facilities consisting of Term Loan of KRT Enterprises have been classified under doubtful asset D1 category asset classify outstanding balances in above Term Loan account of as on 31st March 23 is R 50 lakhs total outstanding 50 lakh value of security held in account is R 40 lakhs or 40 lakh the branch has made provision of R 7.5 lakhs is provision made by Branch proper 2 or 10ak 100 the provisions for advanc falling in D1 categories required 25% of secured proportion and 100% of unsecured proportion therefore provision in above cases arrived as under outstanding balance 50 lakhs value of security 40 lakhs unsecured of portion 10 lakhs therefore outstanding balance of rupes 50 lakhs is secured to the tune of rupes 40 lakhs and balance rupes 10 lakhs are considered as a unsecured provision 25% of secured part that is on 40 lakh 10 lakh r or 100 per on unsecured that is on 10 L that is 10 total 20.5 chances simple chapter 11 questions cax has been offered audit of financial statements of TDK Industries a partnership form prior to accepting proposed offer he insist upon obtaining an agreement of management regarding acknowledgement of its responsibility of having proper process in place to ensure that financial statements prepared are free from material misstatements partnersh fin St however management is of the view that is it is Auditor's duty to detect material misstatement in financial statement and such an insistence by auditor is totally un for whose view is proper also discuss reasons for arriving at your conclusion what should be likely proper course of action for cax agreeing the terms of audit engagement pre conditions pre conditions applicable financial reporting framework accept deals with Auditors responsibilities in agreeing the terms of audit engagement with management and where appropriate pcwg this includes establishing that certain preconditions for an audit responsibility for which rest with management and where appropriate those CH with governance are present the objective of the auditor is to accept or continue audit engagement only when the basis upon which it is to be performed has been agreed to B preconditions establishing whether preconditions for an audit are present and confirming that there is a common understanding between the auditor and management and where appropriate TCW of the terms of audit engagement one of the preconditions for an audit is to obtain the agreement of management 30 Technologies and understand its responsibility for preparation of financial statement and for such internal control as it necessary to enable preparation of financial statements that are free fromal preparation of fincial statons M in the given situation CX insisting only upon obtaining agreement of management regarding acknowledgement of its responsibility for internal control to enable preparation of financial statements that are free from Material misstatement in accordance with s 210 design implementation and maintenance of internal control to ensure preparation of reliable financial statement that are free from material misstatement is Management's responsibility internal control design impl main responsility he is insisting on obtaining agreement of management regarding acknowledgement of its responsibility therefore C's view is proper precondition in case management does not provide such agreement acknowledgement it's responsibility the auditor shall not accept proposed audit engagement unless required by low regul last question chapter 11 s 220 is premised on the basis that the form is subject to sqc one 2 what do you understand by given statement in context of a equality aity 220 AIT quality control and audit of financial statement quality control for a firms that performs audit and review of historical financial information and other Assurance engagement and related servicescity in audit of fin statement audit quality is essential to maintain confidence in independ and Assurance provided by the Auditors it is responsibility of auditor to maintain High audit quality sqc 1 and s220 both deal with quality controlive one applies to entire form as a 220 applies to particular audit simp based upon quality control system of firm established in accordance with requirements of sq1 quality control policies pertaining to audit engagements are decided by engagement team engagement partner of a team responsible for quality control procedure of a particular audit engagement in accordance with mity the audit of that particular client's audit therefore s 220 is premised on the basis that the form is subject to sqc 1 within the context of the form system of quality control engagement teams have a responsibility to implement quality control procedure that are applicable to the audit engagement simple easy question right so total 25 questions RTP 24 and comment if you have any doubt suggestion or reviews and please subscribe to thank you so much stay tuned for more videos

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Length: 58min 2sec (3482 seconds)

Published: Fri May 31 2024