CWA/ICWA Inter :: Auditing: December 2002

I-II(ADT)
Revised Syllabus
Time Allowed : 3 Hours Full Marks : 100
Answer Question No. 1 which is compulsory and any five from the rest.

Marks
1. (a) State whether the following appointments are valid :
(i)

S & Co. are the statutory auditors of 20 Public Companies, out of which 10 companies have paid-up share capital of Rs. 25 lakhs or more. They are proposed to be appointed as Statutory Auditors by SAP (P) Ltd. having paid-up share capital of Rs. 25 lakhs.

(ii)

Mr. S an Individual Cost Accountant who is not in full-time employment is proposed to be appointed as the Cost Auditor in the Annual General meeting of WAP Ltd. with the previous approval of the State Government which holds majority shares in the company.

4+4
(b) State your view on the following in connection with a company audit :
 
(i)The Directors of a company propose to transfer unclaimed dividend to Profit & Loss Account.3
(ii)In the Balance Sheet of the company. Debentures to be redeemed during the subsequent year are shown under the head "Current Liabilities and Provisions".3
(iii)The company is required to maintain cost records U/s 209(1)(d) of the Companies Act, 1956. The Managing Director insists that the Statutory Auditors should audit the cost records in fullest details.3
(iv)Interest accrued and due on Secured loans has been disclosed in the Balance Sheet under the head "Current Liabilities and Provisions" on the ground that such interest has to be paid within six months from the end of the financial year.3
2. (a) Explain the following relationships with reference to the relevant SAPs :
 (i) Internal and External Auditor;
(ii) Audit Risk and Materiality.		 8+8
3. (a) Distinguish between :
 (i) Report and Certificate;
(ii) Cost Audit and Financial Audit.		 4+4
(b) State whether the following should be treated as Capital Expenditure of Revenue Expenditure :
(i)Alternation of building so as to provide additional accommodation.
 2
(ii)Expenses for shifting of a factory.
 2
(iii)Expenses on sales promotion for a new product.
 2
(iv)Heavy repairs to the plant.
 2
4. How would you vouch/verify the following:
(a)Cash 'Bank balances:
(b)Sales of Assets:
(c)Preliminary expenses:
(d)Provision for doubtful debts.
  
4x4
 
Please turn over
 
 

( 2 )

I-II(ADT)
Revised syllabus		 Marks
5. (a) State the Inherent Control. 8
(b) "Analytical Procedures act as indicators when detailed examination is required". Explain. 8
6. (a) A Limited Company takes credit in its Profit and Loss Account for insurance claims lodged with Insurance Companies on lodgement of claims. In the year under audit a claim for a very large amount which is not settle before completion of the audit has been credited to the Profit & Loss Account. The directors of the company have stated in the Directors' Report that they expect the claim to be settle in full. The auditor however feels that the claim is not likely to be accepted by the insurence company because of certain defects in the claim. Thus the Auditor has a right or duty to report on the statement regarding the claim made in the Directors Report? 8
(b) Complex Ltd. defaulted in the repayment of deposits together with interest on the due date for more than a year and the Chief Accountant contends that the Auditor need not report on the default committed by the company-Discuss. 8
7. (a) How can a review of Internal Control be done by the Auditor? 8
(b) Explain the types of internal controls in a computer based system. 8
8. Write short notes on :
(a)
(b)
(c)
(d)		 Fundamental accounting assumptions;
Secretarial Audit;
Appointment of Auditors by Special Resolution;
Evaluation of Audit evidence.
4
4
4
4

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