Auditing and Ethics - December 2021

State with reasons whether the following statements are correct or incorrect. (Answer any seven) (a) Internal control cannot eliminate risk of material misstatements in the financial statements. (b) When Profit before tax from continuing operations is non-volatile, other benchmarks will be appropriate. (c) When inventory under the custody and control of a third party is material to the financial statements, the auditor can obtain sufficient appropriate audit evidence regarding the existence and condition of that inventory by taking written representation…

(a) CA S is requested to accept the appointment as an auditor of Luck Ltd. With reference to SA 210, what should the auditor determine in order to establish whether the preconditions for an audit are present? (4 Marks) (b) M/s TP & Co., a firm of Chartered Accountants, is auditor of KSR Ltd. for many years. KSR Ltd. has diversified their business into newer areas during the last year. The senior member of the audit team handed over the…

CA K is re-appointed as the auditor of B Ltd. He wants to re-confirm certain matters and has asked the management to give written representations for the same. Under what circumstances can an auditor ask the management to reconfirm its acknowledgement an d understanding of responsibilities in written representation? (4 Marks) (b) CA R is the statutory auditor of QRS Ltd. While performing testing of additions during the year, he wanted to verify that: (i) All PPE (property, plant and…

Auditors of TRB Ltd. observed various instances when either the TDS required to be deducted has not been deducted or deducted at lower than prescribed rates resulting in non-compliance of Income Tax provisions. Besides this, non-compliance under other acts like Labour Laws was also noticed by the auditor. What type of policies and procedures will you implement to assist in prevention and detection of non-compliance with laws and regulations? (4 Marks) (b) State the auditor’s reporting responsibilities under CARO 2016…

S & Associates are the Statutory Auditors of Real Ltd., a company engaged in the business of manufacturing of garments. The auditor has completed the audit and is in the process of forming an opinion on the financial statements for the F.Y. 2020 -2021. CA K, the engagement partner, wants to conclude that whether the financial statements as a 10 INTERMEDIATE (NEW) EXAMINATION: DECEMBER, 2021 whole are free from material misstatements, whether due to fraud or error. What factors he…

CA R is the statutory auditor and Mr. P is the cost auditor of DEF Ltd., a company engaged in the production of tyres. Mr. P noticed a fraud of INR 1.25 crores done by the senior manager of the company and immediately informed the audit committee even before CA R was aware of the fraud. State the duty of CA R under section 143(12) of the Companies Act on reporting on frauds already detected and reported. (4 Marks) PAPER…