CWA ICWA Inter Stage II : Auditing - June 2007

CWA ICWA Inter - Stage II • Auditing • June 2007

This Paper has 28 answerable questions with 0 answered.

I—11(ADT) Revised Syllabus
Time Allowed : 3 Hours	Full Marks : 100

The figures in the margin on the right side indicate full marks
Answer Question No. 1 which is compulsory and any five from the rest
Marks

(a)

Discuss with reasons, whether the following statements are ‘true’ or ‘false’: (Answers without reasons will not be given any credit):

(i)

Shareholders, by a majority vote, have authorised the Board of Directors to keep the books of accounts of the company in its Administrative Office, as against the earlier practice of keeping them in the Registered Office, No Government authority has been informed about this. Company contends that this practice is in order.

(0)

(ii)

As per Indian GAAP, where the company has obtained credit limits from a bank but has not availed them, the details of unused credit lines need not be disclosed in the financial statements.

(0)

(iii)

Where the accounts of the company do not present a ‘true and fair’ view, the auditor of the company can give a qualified opinion.

(0)

(iv)

Audit Committee has a two–fold relationship and has therefore, to react only with Management and Internal Auditor.

(0)

(v)

EDP Audit is the process of auditing in a computerised environment which changes the fundamental nature of auditing.

(0)

(vi)

Where, at an AGM, no auditors are appointed or reappointed, the vacancy will be filled in the next Annual General Meeting.

(0)

(b)

Z & Co., are proposed to be appointed as auditors of ABC Ltd. whose authorised capital is Rs. 50 lacs and paid up capital is Rs. 25 lacs. Z & Co. consists of two partners M and N, M is in part-time employment with a local college for teaching the subject "Auditing". The number of audits held currently are:

	No. of companies	(Rupees in lacs)
	No. of companies	Authorised Capital	Paid up Capital
M (individual)	10	50	25
M (individual)	10	30	20
N (individual)	10	40	25
Z and Co.	9	60	20

Can the firm Z & Co. be appointed as Auditors of ABC Ltd.?

Will the answer be different if the paid up capital of ABC Ltd is Rs. 20 lacs?

(0)

(c)

S Ltd. is the subsidiary of H Ltd. Ram owes S Ltd. Rs. 10000/-, Laxman has given guarantee for the same. Can Laxman be appointed as statutory auditor of H Ltd? Give reasons for your answer.

(0)

As an auditor of a company, how will you deal with the following?

4x4

(a)

The company has not provided for FBT liability of Rs. 20 lakhs.

(0)

(b)

Executive Director′s marriage expenses of Rs. 12 lacs has been charged to advertisement expenses of the company.

(0)

(c)

Plant and machinery has been shown in Balance Sheet at Rs. 10,00,000 (at cost less depreciation) against market value of Rs. 4,00,000.

(0)

(d)

Advertisement expenses of Rs. 30 lacs for a new products has been fully charged to revenue.

(0)

(a)

Subsequent to the issue of audit opinion, the auditor of a company came to know about an important matter about the company. Had he known about this earlier, he would have given a different opinion. How you will as an auditor deal under this situation?

(0)

(b)

The total turnover of ABC Ltd. during the year ended 31st March 2006 was Rs. 4.2 crores. This company had a branch office outside the State of its registered office, whose turnover during the year was Rs. 1,80,000. The audit of this branch was not carried out by the auditor. The Auditor′s Report of the said year contained no reference to the branch. As an auditor of this company for the year ended 31st March 2007, express your comments regarding liability as an auditor for 2006 and 2007.

(0)

(c)

On account of falling revenues, Y the auditor of LMN Ltd., agreed for a reduction of Audit Fee, with the condition that the company shall not insist upon extensive audit, as was done in the past. The entire body of shareholders agreed to this condition, in General Meeting. Is this proper on the part of Y?

(0)

(a)

What are the aspects to be taken into account with regard to the follow-up of the Audit Report? Also explain the need and necessity for the same.

(0)

(b)

What is meant by "Audit Programme"? What are the aspects to the borne in mind in developing an Audit Programme by the Internal Auditor?

(0)

(1)

How will you vouch/verify the following and what are the related ‘aspects to be looked into

4+4

(a)

Excise Duty;

(0)

(b)

Trade Marks.

(0)

(2)

Why and how is Internal Audit necessary to the Management?

(0)

As the Statutory Auditor of a Public Limited Company, comment on the following situations:

(a)

Company has paid interest on share capital to the shareholders, as there was a long gestation period before the company would start making profits.

(0)

(b)

The Central Government has disbursed subsidy of Rs. 2 crores to the company for setting up a factory in a notified backward area.

(0)

(c)

Briefly explain the need for Secretarial Audit.

(0)

(a)

Briefly discuss the impact of Computerisation on Audit Approach. Also state the difficulties, the auditor has to face at the time of Undertaking Audit.

(0)

(b)

What is Operational Audit? State how is it different from Financial Audit.

(0)

(a)

What do you mean by independence of an auditor? State the provisions of the companies Act, 1956, which aims to safeguard the independence of auditor.

(0)

(b)

Distinguish between:

4+4

(i)

Audit and Investigation,