| 1. | (a) | State with reasons, whether the following statements are true or false: | 2x4 | |
| | | (i) | In case of all limited companies, the statutory auditor shall comment upon whether the internal audit system is commensurate with the size and nature of business. | | (0) |
| | | (ii) | The auditor examines debit notes to vouch sales return. | | (0) |
| | | (iii) | Inventory turnover ratio is calculated by the auditor to obtain evidence concerning management’s assertion about valuation of inventory. | | (0) |
| | | (iv) | The first auditors of a public limited company appointed by the Board of directors hold office till the conclusion of its statutory meeting. | | (0) |
| | (b) | Fill up the blanks: | 1x6 | |
| | | (i) | A and B is a firm of Chartered Accountants. It holds statutory auditor post of 38 Indian companies and 2 foreign companies. It can take up audit of _____________ more Indian companies (Nil/one/two/three). | | (0) |
| | | (ii) | Existence of trademark can be verified by an auditor by ______________ . | | (0) |
| | | (iii) | It is _____________ (obligatory/optional) for the statutory auditor to examine the scope and effectiveness of the work of the internal auditor. | | (0) |
| | | (iv) | Test checks can be applied to ______________ (all/selected) transactions in a large organization. | | (0) |
| | | (v) | The statutory audit of Government companies is conducted by ______________ (auditor/Comptroller & Auditor General of India). | | (0) |
| | | (vi) | As per US GAAP, the concept of pre–operative expenses ____________ (does/does not) exist. | | (0) |
| | (c) | Match the following on the left hand side with the appropriate item on the right hand side: | (i) | Ascertainment of depreciation | (i) | Compliance audit | | (ii) | Audit with reference to some documentary evidence | (ii) | Section 227(3)(d) of the Companies Act, 1956 | | (iii) | Compliance with accounting standard | (iii) | Section 231 of the Companies Act, 1956 | | (iv) | Reading and inspection of auditor’s report | (iv) | Permitted as per US GAAP | | (v) | Investment in own shares of company | (v) | Section 350 of the Companies Act, 1956 | | (vi) | Sampling error arising from bias in estimation | (vi) | Section 233–A of the Companies Act, 1956 | | | (vii) | Voucher audit | | | (viii) | Biased error | | | (ix) | Permitted as per Indian GAAP | | | | (x) | Unbiased error |
| 1x6 | (0) |
| 2. | (a) | The claim received from the insurance company towards loss of cash whilst being remitted to the bank was credited to insurance charges paid account. As the auditor of a company, how will you deal with the same? | 3 | (0) |
| | (b) | During the course of audit, you are utilizing the services of an expert (say, valuation of certain types of assets). What are the points to be considered while using the work of an expert? | 9 | (0) |
| | (c) | Mr. Bhar has purchased goods worth Rs.1,500 on credit from XYZ Ltd., for which he has been allowed a credit period of 2 months, as is allowed to all customers of the company. Can he be appointed as auditor of the company? Will your answer be different if the value of goods purchased are for Rs.900? | 4 | (0) |
| 3. | As auditor of a company, how will you vouch/verify the following? | (a) | Recovery of bad debts written off; |
| (b) | Foreign travel expenses; |
| (c) | Investments lodged as earnest money deposits; and |
| 4x4 | (0) |
| 4. | (a) | Discuss in brief, about the need for techniques of overall assessment of data while conducting ‘balance sheet audit’. | 7 | (0) |
| | (b) | Bring out the distinctions between report and certificate. | 3 | (0) |
| | (c) | Elucidate how an auditor should satisfy himself that all income arising from the following sources are duly received and accounted for: | (i) | Rental income from several leased properties; |
| 3x2 | (0) |
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| 5. | (a) | Briefly state the situations in which summary report to top management has to be presented by internal auditor. What are the functions of such summary report? State the distinct sub–heads which a typical summary report should have. | 8 | (0) |
| | (b) | What is meant by pre–audit? Briefly explain. | 4 | (0) |
| | (c) | As a protective function, the internal audit department has a big role to play in preventing frauds in any organization. Do you agree? | 4 | (0) |
| 6. | (a) | Discuss about the impact of computerization on audit approach. | 10 | (0) |
| | (b) | Briefly compare in a tabular form, the comparative requirements of Indian GAAP and US’s GAAP in the following areas: | (ii) | Lease accounting; and |
| (iii) | Debt classification requirements. |
| 2x3 | (0) |
| 7. | Write short notes on any four of the following: | 4x4 | |
| | (a) | Disclaimer of opinion; | | (0) |
| | (b) | Intra–firm and inter–firm comparisons; | | (0) |
| | (c) | Advantages of a standard audit project | | (0) |
| | (d) | Auditing the internal auditing function; | | (0) |
| | (e) | Secret reserve; | | (0) |
| | (f) | Compliance audit. | | (0) |
| 8. | (a) | Can the accounting standards prevail over statutory provision? | 4 | (0) |
| | (b) | As an auditor of a public limited company, state how you will deal with the following: | (i) | X Ltd. having several departments with separate pay rolls and where payments of wages are spread over several days, makes lump sum deposits of estimated amounts of Provident Fund and Employees’ State Insurance dues and adjust the excess or deficit against the following month’s deposit. |
| (ii) | Counter–Guarantees for Rs.25 lakhs given by the company are outstanding at the year–end. |
| 2x2 | (0) |
| | (c) | As an auditor of a limited company, state your views of the following facts noticed by you in the course of audit: | (i) | Fixed assets acquired in exchange for the shares of the company are recorded at normal values. |
| (ii) | Proposed dividend is not adjusted in the financial statements. |
| (iii) | Government grant received as compensation for losses sustained in backward areas is credited to revenue reserve. |
| (iv) | No depreciation is charged on an equipment kept idle throughout the year. |
| 2x4 | (0) |
