| 1. | As an Auditor, comment on the following: | | |
| | (a) | Company has debited Rs. 1,75,000 to Discovery Van Account received from a customer against credit sales of Rs. 1,50,000 to him who is now is not able to pay the amount. The Delivery Van has not been registered in the name of the company with R.T.O till date of Finalisation of accounts. | 5 | (0) |
| | (b) | PQ Ltd. has given donations of Rs. 50,000 each to a charitable school and a trust for blinds, during the year ended 31.3.2007. The average net Profit of the company during last three Financial years amounts to Rs. 12 lacs. | 5 | (0) |
| | (c) | AAS Limited has provided for doubtful debts to the extent of Rs. 23 lakhs during the year 2004–05. The amount had since been collected in the year 2006–07. Another debt of Rs. 25 lakhs had been identified to be doubtful during the year 2006–07. The company made an additional provision of Rs. 2 lakhs during the year. The Profit and Loss account for the year ended 31.3.2007 disclosed in Debit side — provision for doubtful Debts Rs. 2 lakhs. | 4 | (0) |
| | (d) | Alagar Limited is a company engaged in the business of chassis building and bus transportation services. It accounts all expenses and income in Profit and Loss account under various heads explaining clearly the nature of the operations. The auditor of the company requires that the Profit and Loss account should depict the Profit or Loss from the businesses of assembly as well as of operation of bus service separately. | 4 | (0) |
| 2. | Comment on the following: | | |
| | (a) | M/s Seeman & Co. had been the company auditor for Amudhan Company Limited for the year 2006–07. The company had three branches located at Chennai, Delhi and Mumbai. The audits of branches—Chennai, Delhi where looked after by the company auditors themselves. The audit of Mumbai branch had been done by another auditor M/s Vasan & Co., a local auditor situated at Mumbai. The branch auditor had completed the audit and had given his report too. After this, but before finalization, the company auditor wanted to visit the Mumbai branch and have access to the inventory records maintained at the branch. The management objects to this on the grounds of the company auditor is transgressing the scope of audit areas agreed. | 5 | (0) |
| | (b) | "AB & Associates" the Auditor of Ajanta Ltd: refused to deliver the Books of account of the company, which were given to them for the purpose of audit, as the audit fees in not paid to them in full. | 4 | (0) |
| | (c) | Mr. A was appointed as an auditor of X Ltd. for the year ended 31.3.2008 in the AGM held on 16.8.2007. Mr. A had indebted to the company for a sum of Rs. 2,500 as on 1.4.2007, the opening date of the accounting year which had been the subject to his audit. Upon learning that he might be appointed as the auditor, he repaid the amount on 14.8.2007. Mr. B, a shareholder complained that the appointment of Mr. A as auditor was invalid and he incurred disqualification under Section 226 of the Indian Companies Act, 1956 and his independence had been vitiated in relation to the accounting year of his audit. | 4 | (0) |
| | (d) | The Financial Controller of AS Limited refuses to provide for proposed dividend in books of accounts for the year ended 31.3.2007 on the ground that it is pending approval of shareholders in Annual General Meeting to be held on 16th September 2007. | 6 | (0) |
| 3. | (a) | | (i) | Explain, what do you mean by Analytical procedures. How such procedures are helpful in auditing? |
| (ii) | Explain concept of 'Materiality' and factors which act as a guiding measure to this concept. |
| 4+4 | (0) |
| | (b) | Give your assertions for the following items appearing in Balance–sheet of a Limited Company: | Rs. | (i)
(ii)
(iii)
(iv) | Cash on hand
Investments
Secured Loans
Machinery: | 10,000
1,00,000
10,00,000 | | Opening cost
Less: depreciation
Current depreciation | 13,00,000
1,30,000 | 11,70,000 |
| 8 | (0) |
| 4. | How will you vouch/verify the following ? | 4x4=16 | |
| | (a) | Advance given to a director of a Company. | | (0) |
| | (b) | Repayment of amount of foreign loan for purchase of an asset. | | (0) |
| | (c) | Grant received for reimbursement of revenue expenditure. | | (0) |
| | (d) | Deferred Tax Liability. | | (0) |
|
| 5. | (a) | From where and how auditor can obtain knowledge of Client's business to enable him to develop an overall Audit Plan? | 8 | (0) |
| | (b) | What are the focus points in doing propriety audits by C & A G as regards government expenditure? | 8 | (0) |
| 6. | (a) | How does an audit programme help to plan and perform the audit? | 8 | (0) |
| | (b) | Draft an audit programme to audit the receipts of a cinema theatre owned by a partnership firm. | 8 | (0) |
| 7. | (a) | What are audit working papers? Discuss various contents of Permanent Audit File and Current File. | 8 | (0) |
| | (b) | What is clean audit report? Explain, how it is different from qualified report affecting Auditor's opinion. | 8 | (0) |
| 8. | Write short notes on the following: | 4x4=16 | |
| | (a) | Change in Accounting Policies. | | (0) |
| | (b) | Management representation as an audit evidence. | | (0) |
| | (c) | Audit Risks. | | (0) |
| | (d) | Cut – off Arrangement. | | (0) |
