Auditing and Ethics - January 2021

Explain whether the following statements are correct or incorrect, with reasons/ explanations/ examples (Answer any seven out of eight) (a) The Complexity of a business environment depends on the level of automation i.e., if a business environment is more automated, it is likely to be less complex. (b) The Auditor is expected to, reduce audit risk to zero and can therefore obtain absolute assurance that the financial statements are free from material misstatement due to fraud or error. (c) Determining…

(a) Explain the fundamental principles of professional ethics relevant to the auditor when conducting an audit of financial statements in accordance with Code of Ethics issued by ICAI. (4 Marks) (b) CA Raj, an auditor was removed by PQR Ltd. before the expiry of his term. Discuss the procedure to be taken by PQR Ltd to appoint an auditor other than retiring auditor under Sec. 140(4) of the Companies Act, 2013. (4 Marks) PAPER – 6: AUDITING AND ASSURANCE 3…

(a) Depreciation and amortisation expense generally constitute an entity's significant part of overall expenses and have direct impact on the profit/loss of the entity. What are the attributes, the Auditor needs to consider while verifying Depreciation and amortisation expense. (4 Marks) (b) Explain how Internal Financial Control and Internal controls over financial reporting differ? (4 Marks) (c) As an Auditor of XYZ Bank Limited, how would you assess the Risk of Fraud including Money Laundering in line with SA 240…

(a) In the context of SA 530 ‘Audit Sampling’, explain the terms ‘Sampling Risk’ and ‘NonSampling risk’. (4 Marks) (b) Discuss the common methods applied by the auditor when testing in an automated environment is done by him. (4 Marks) (c) As a Statutory Auditor of the company list out audit procedure required to be undertaken for the recognition of following other income: i. Interest income from fixed deposit ii. Dividend income iii. Gain/(loss) on sale of investment in mutual…

(a) Management's assessment of the entity's ability to continue as a going concern involves making a judgement about inherently uncertain future outcomes of events or conditions. What are relevant factors to that judgement? (4 Marks) (b) What an auditor should state in "Basis for opinion" section of auditor's report and when the auditor modifies the opinion on the financial statements, what amendments he should make in this section ? (4 Marks) (c) Explain the techniques available as Substantive Analytical procedures.…

(a) As an Auditor of NGO, how do you check/verify atleast four receipts of income during the year? (4 Marks) (b) You have been appointed as internal auditor of 'City Club' in Delhi. The receipts of the club were 50 lakhs during the previous year ending 2019-20. You are required to mention special points of consideration while auditing such receipts of the club. (4 Marks) Explain "Advances under Consortium" in the context of Prudential Norms on Income Recognition, Asset Classification…