Auditing and Ethics - May 2023

State with reasons whether the following statements are correct or incorrect. (Answer any seven) (a) The "documentation of the overall audit strategy" is a record of the audit evidence considered necessary to properly plan the audit and to assign various audit functions to the engagement team. (b) Communicating key audit matters in the auditor's report is a separate opinion on individual matters. (c) Amortization represents systematic allocation of the depreciable amount of an item of Property, Plant and Equipment (PPE)…

(a) While designing an audit sample, the auditor shall determine a sample size sufficient to reduce the sampling risk to an acceptably low level. In this context, explain sampling risk and non-sampling risk. (4 Marks) (b) You are appointed as an auditor of Gama Ltd. Your audit assistant wants to understand the meaning of Audit Risk. Explain him the meaning of Audit Risk with example. Also guide him as to what is not included in Audit Risk. (4 Marks) (c)…

(a) CA P is the auditor of MN Ltd. While scrutinising the accounts of MN Ltd., he observed that the company had large volume of Trade payable outstanding in the Balance sheet as on 31st March, 2023 for which external confirmations are not available, CA P wants to send external confirmation request to selected Trade payables but management of MN Ltd . refused for the same. Discuss how CA P should deal in this regard as per relevant Standard on…

(a) CA D has been appointed as an auditor of LMP Ltd. Before developing an overall audit plan, CA D wants to get an understanding and knowledge of the Client's business including applicable financial reporting framework. Guide CA D in understanding of the same with reference to the relevant Standard on Auditing. (4 Marks) (b) ABC Ltd. is a public company, which has availed various loans and cash credit facilities from Banks and other financial institutions. The company has defaulted…

(a) S Ltd., a large textile manufacturing company, due to heavy recession in the market was unable to collect amount of huge receivables in time and also holding large amounts of stock of raw materials and finished goods since last 9 months of the Financial Year 2022-23. From your primary observations of audit evidence, you feel that there is a material uncertainty existing about going concern. How will you deal in your audit report? What will be the effect on…

(a) ATM Ltd. is a public company, with a paid-up capital of ` 12 crore. The company has made a turnover of ` 105 crore in the Financial Year 2021-22. The outstanding loan as on 31-03-2022 was ` 32 crore. Whether ATM Ltd. is required to constitute an Audit Committee in the financial year 2022-23? Analyse the provisions of Companies Act, 2013 and give your comments. (4 Marks) (b) SK & Co, a Chartered Accountant firm has been appointed an…