Advanced Auditing, Assurance and Professional Ethics - July 2020 MTP

15th March, 2020, the directors of Phony Ltd. instructed their accountant to enter purchases amounting Rs. 1.02 crores from a company incorporated dated 11th March, 2020. However, no amount was actually paid and Rs. 1.02 crore was provided in the books of account as purchases for the year ending on 31st March, 2020. On inspection, no documentary or other evidence of such purchases was found. As the auditor of Phony Ltd., what would be your approach regarding reporting of such…

(a) Choti Limited had definite plan of its business being closed within a short period from the close of the accounting year ended on 31 stMarch, 2019. The Financial Statements for the year ended 31/03/2019 had been prepared on the same basis as it had been in earlier periods with an additional note that the business of the Company shall cease in near future and t he assets shall be disposed off in accordance with a plan of disposal as…

(a) Ceta Ltd is a company in which 58% of the paid up share capital is held by Rajasthan Government. The company is engaged in the business of providing consultancy services in relation to construction projects. The audit of the financial statements of Ceta Ltd for the financial year ended 31 March 2019 got completed with lot of intervention of Comptroller & Auditor General of India, wherein C&AG was giving directions to the auditors on the manner in which audit…

Co LLP, a firm of Chartered Accountants, was appointed as auditor of an NBFC. The audit work has been completed. The audit team which was involved in the fieldwork came across various observations during the course of audit of this NBFC and have also limited understanding about the exceptions which are required to be reported in the audit report. They would like to understand in detail regarding the obligations on the part of an auditor in respect of exceptions in…

CAS & Associates have been appointed as one of the statutory central auditors of FDMH Bank., for the Financial Year 2019-20. During the course of the audit, the auditor found that the bank has a balance with a Zurich based bank. The auditor understands that such balance is a matter of important consideration in the audit of the bank. Being head-in-charge of the assignment, while planning, you distributed the work among your team members and assigned Mr. Ansh for verification…

Lamba, Malhora and Khandelwal are partners in a firm sharing profits and losses in the ratio 2:2:1. The partners have agreed to take Mr. Jain as a partner with effect from 1st April, 2019 as 1/4th partner. What are the important steps involved while conducting investigation on behalf of Mr. Mistri, the incoming partner? (5 Marks) (b) You are appointed as an auditor of Azad Limited, a listed company which is a main supplier to the USA building and construction…

A significant deficiency exists in the process of flow of approval of travel re-imbursements of the officials. This was communicated in the previous year to those charged with Governance and no remedial action was taken on the same so far. The auditors are of the opinion that it need not be communicated again. Is the opinion of the auditors on not to communicate the deficiency in internal control reported in the previous year correct? (a) Yes, the auditor is not…

MEA Bank Ltd. has sanctioned overdraft limit of Rs.34 crore to Bharat Ltd. on the working capital of the company as on 31 st March 2017. As per bank norms the drawing power in the overdraft account need to be reviewed on quarterly basis as per the audited stock statement of the company. As a central statutory auditor for the year 2018-19, while verifying the advances for the year ending 31st March 2019, you noticed that the bank has not…