CA PE - II ::Auditing : May 2005

Roll No…………………
Total No. of Questions— 8]	[Total No. of Printed Pages—3
Time Allowed : 3 Hours	Maximum Marks : 100
PD
Answers to questions are to be given only in English except in the cases of candidates who have opted for Hindi medium. If a candidate who has not opted for Hindi medium, answers in Hindi, his answers in Hindi will not be valued.
Answer Questions 1 and 2 and any four from the rest.
Marks

As an auditor comment on the following situations/statements:

(a)

Z Ltd. had the following items under the head "Reserves and Surplus" in the Balance Sheet as on 31st March, 2004:

	Amount
	Rs.in lacs
Securities Premium Account	80
Capital Reserve	60
General Reserve	90

The Company had an accumulated loss of Rs. 40 lacs on the same date, which it has disclosed under the head "Profit and Loss Account" on the assets side of the Balance Sheet.

(b)

A Ltd. has its Registered Office at New Delhi. During the current accounting year, it has shifted its Corporate Head Office to Indore though it has retained the Registered Office at New Delhi. The Managing Director of the Company wants to shift its books of account to Indore from New Delhi, as he feels that there is no legal bar in doing so.

P.T.O.

( 2 )

Marks

(c)

The Board of Directors of a Company have filed a complaint with the Institute of Chartered Accountants of India against their statutory auditors for their failing to attend the Annual General Meeting of the Shareholders in which audited accounts were considered.

(d)

The auditor of a Company wanted to see the minutes book of Directors meetings. The Chairman of the company refused for the same on the ground that matters of confidential nature were contained therein.

Give your comments on the following:

(i)	The Central Government has appointed Mr. Sushil, a retired Finance Director of a reputed company, a non-practising member of ICAI, as a special auditor of MM Ltd., on the ground that the company was not being managed on sound business principles. Mr. Ajay, MD of MM Ltd. feels, that the appointment of Mr. Sushil is not valid as he does not hold a certificate of practice.	5
(ii)	CC Ltd., a Pharmaceutical Company, while valuing its finished stock at the year end wants to include interest on Bank Overdraft as an element of cost, for the reason that overdraft has been taken specifically for the purpose of financing current assets like inventory and for meeting day to day working expenses.	5

(b)

What categories of Companies are specifically exempted from the application of Companies (auditor's Report) order, 2003?

(a)

With reference to Government Audit, what do you understand by "Audit of Commercial Accounts"?

(b)

What do you understand by:

(i)	Auditing around the computer
(ii)	Auditing through the computer

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P.T.O.

( 3 )

Marks

(a)

Explain the term "Auditor's Lien".

(b)

Discuss the concept of "True and Fair".

How will you vouch/verify the following

(a)

Advertisement expenses

(b)

Goodwill

(c)

Capital work-in-progress

(d)

Wages paid to seasonal labourer.

(a)

What special steps will you take into consideration in audit of the accounts of a hotel.

(b)

Medical Council of India organised a three-day International Conference of Doctors in Delhi. You are asked to audit the accounts of the conference. Draft the audit programme for audit of receipt of participation fees from delegates to the conference. Mention any six points, peculiar to the situation, which you will like to include in your audit programme.

(a)

Explain with reference to the relevant Auditing and Assurance standards:

(i)	Inherent Risk
(ii)	Appropriateness of going concern assumption

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(b)

State the matters to be considered for acquiring knowledge of the business of the client by the auditor.

Write short notes on the following:

(a)

Surprise check

(b)

Independence of Internal Auditor

(c)

Cost Audit

(d)

Capital Redemption Reserve.

CA PE - II :: Auditing : May 2005