Auditing and Ethics - May 2022

State with reasons whether the following statements are correct or incorrect. (Answer any seven). (a) Pervasive is a term used, in the context of misstatements, to describe the effects on the financial statements of misstatements or the possible effects on the financial statements of misstatements, if any, that are detected by obtaining sufficient appropriate audit evidence. (b) Audit findings and control deficiencies can be evaluated or assessed arbitrarily. (c) Inappropriate management can override internal controls of any organization. (d) Once…

G Pvt. Ltd. had fully paid up Capital and Reserves of ` 1.20 crore as at the end of F.Y. 2020-2021. During the F.Y 2021-2022, business was interrupted due to Covid restrictions and therefore the company incurred losses to the tune of ` 25 lacs. During the year, the company also borrowed ` 55 lakh each from a bank and a financial institution independently. It had a turnover of ` 850 lakh (other than revenue of ` 250 lakh from…

(a) P Ltd. is a company from a business group "ABCD" and is engaged in trading of garments. The promoters of the company are promoters and directors of some other group companies also. You have been appointed as an auditor of P Ltd. P Ltd has entered into various inter company transactions (within group companies) during the year which are outside its normal course of business. What will be your duties as an auditor in relation to those transactions? (4…

(a) CAB, an auditor of DBF Limited engaged in the manufacturing and trading of hardware products, while auditing got aware of some secrets of the company. The auditor acted in an unlawful way in order to deceive or gain an advantage over others and also he encouraged and assisted directors to do something wrong, in particular to commit crime. Now company has requested you to guide it as to how such acts are covered under Companies Act, 2013 and what…

(a) CA G, auditor of Sports Ltd., while auditing documented all the papers. He retained some of the documents of the company on which he has not worked along with the documents which were his working papers saying that as he was the auditor of the Company, so he has the right to retain all the documents as he may require them for future references. Comment on the action of the auditor. (4 Marks) (b) Proceedings have been initiated against…

(a) D Ltd. is a company engaged in publishing business magazines. CA P is the statutory auditor of the company. The company takes property in the barter deal from its real estate customers against publication of their advertisements. The properties obtained during the year through such barter deals have been considered in the books of accounts on the basis of possession letter only and have been included in PPE in the financial statements. Considering this matter of such importance that…