| 1. |
(a) |
Discuss with reasons, whether the following statements are 'true' or 'false': (Answers without reasons will not be given any credit): |
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| (i) | In auditing, the concept of materiality can be jedged only in the relative context. |
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1 |
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| (ii) | All expenses/losses incurred during construction period should be capitalized, including abnormal losses. |
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1 |
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| (iii) | The system of propriety audit is applied in respect of private companies. |
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2 |
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| (iv) | A flow chart enables one to understand even a complicated system easily |
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2 |
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| (v) | Loss of major markets means that ‘Going Concern’ assumption is lost. |
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2 |
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| (vi) | An auditor can place reliance on the work of an expert. |
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2 |
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| (vii) | While designing audit sample, auditor should consider only on the specific audit objectives and none else. |
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2 |
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| (viii) | For calculating minority interest there is a need to distinguish between capital and revenue profits of the subsidiary. |
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2 |
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(b) |
| (i) | XLW has a branch office in Malaysia. The company has appointed Mr. X, who is qualified to audit accounts as per Malasian laws. Mr. Z, the statutory auditor objects to the same, contending that he alone can audit the branch office accounts. Discuss. Can Mr. Z visit the branch? |
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4 |
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| (ii) | The share capital of X Ltd. Are held by the following entities:
| % of Authorised
Share Capital | % of Subscribed
Share Capital |
Central Government
State Government
Y Ltd. (Government Company)
Canara Bank (Nationalised Bank) |
10%
8%
10%
3% | 8%
6%
8%
2% |
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4 |
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A director contends that the appointment of the statutory auditor of the company can be done only by a special resolution and not by ordinary resolution. Discuss the correct position. |
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| 2. |
(a) |
Briefly state the objects or aim of working papers. |
5 |
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(b) |
Briefly narrate the steps suggested by you for proper internal control over stores of a large manufacturing concern. |
11 |
| 3. |
As an auditor of a company, state your views on the following: |
4x4 |
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(a) |
Company has capitalized sundry expenses like postage, stationery, etc. incurred during construction period. |
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(b) |
The directors wanted the auditor to submit a confidential report to them about the realizable value of securities for loans granted and that in the report to the shareholders they can state that there is difficulty in realization of such securities. |
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(c) |
The company wants to destroy its books of accounts, vouchers, etc, for the period prior to the last six years. |
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(d) |
The Records of the company were seized by the income tax department. The directors require the auditors to issue a qualified report to the share holders explaining the position. |
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