CWA/ICWA Inter :: Auditing: December 2004

Point out with brief reasons, statutory variations or in-consistencies in the following:

In Kiran Alloys Ltd., 20% of the share capital is held by West Bengal State Government and 10% by Unit Trust of India. M/s. Raj & Co. were re-appointed as statutory auditors by an ordinary resolution passed in the annual general meeting.

V.S. Ltd., appoints X & Co., a partnership firm as its statutory auditors. The firm has six partners, four of whom are practicing Chartered Accountants in India and two other partners are based at Singapore. The appointment has been made in the firm's name.

Mr. Ram and Rahim even appointed as joint statutory auditors of X Ltd. Ram resigns. The Board of directors fills up the vacancy and appoints Mr. Wilson to fill the vacancy.

Mr. Ajay Goopta was the statutory auditor of X Ltd. Before the expiry of his terms as auditor, all the members of the company present in the extra-ordinary general meeting of the company, gave their approval for his removal.

Mr. Bhar has accepted appointment as statutory auditor of thirty companies of which ten are private limited companies and he paid up share capital of twelve companies is rupees thirty lakhs or more.

Mr. Chandran is sought to be appointed as the auditor of a public limited company. His wife holds 10,000 equity share in the company.

State with reasons Whether each of the following statements is correct or not:

Know-how relating to Manufacturing Process is added to cost to be depreciated annually.

Sweat shares are shares given to the Directors of the company at discount or for consideration other than cash.

In the absence of declaration of dividend, there is no need to provide for depreciation in the accounts of companies.

Audit planning commences soon after the current year's audit is began.

The overall objectives and scope of an audit change drastically in an EDP environment.

As an auditor of XYZ Ltd., state your views on the following points noticed by you in the course of audit:

Interest charges and commitment fees on working capital loan taken during the period of construction stand capitalised in the accounts.

The branch auditor has given a qualified report on the accounts of the branch. Discuss with reference to the powers and duties of the company auditor thereof.

Company has changed the method of accounting from cash basis to accrual basis from the middle of the accounting year.

Company has given a loan of rupees ten lakhs to a private limited company which is one of its subsidiaries.

Should all public companies constitute an audit committee under the Companies Act 1956? Briefly state the provisions relating to an audit committee.

Mention briefly the important points to be kept in view in establishing/evaluating a system of Internal control for applications processed at a Computer Service Bureau.

As the Chief Internal Auditor of a large manufacturing company, what are the factors to be borne in mind in the process of selection of internal audit staff?

Explain as to how you would treat the following events occuring after the date of Balance Sheet in the financial statements.

(i)	The dispute with the workmen on the issue of Bonus was before the arbitrator and an award was given in favour of workmen for rupees five lakhs.
(ii)	The Board of Directors have agreed to increase the terminal benefits to the employees involving annual increase of provision by rupees four lakhs, in the future.