Topics: Auditing, Financial audit, Internal control Pages: 41 (10784 words) Published: October 31, 2013
Nature of Auditing

(a) Briefly explain the relationship between Auditing and Behavioural Science. (b) “The auditor fails to obtain sufficient information to form an overall opinion on the matters contained in the financial statements.” In the light of the above statement briefly explain the circumstances and opinion expressed by an auditor, where he is unable to obtain sufficient audit evidence.


Auditors of M/s Santa Banta (P) Ltd. were changed for the accounting year 2010-11. However there was no change in the position of closing stock which remained at ` 400 lacs . The auditors of the company propose to exclude the audit of closing stock of ` 400 lacs from their audit programme on the understanding that it pertains to the preceding year which was audited by another auditor. Comment.

Basic Concepts in Auditing

Write a short note on the following
(a) Fundamental Accounting Assumptions
(b) Disclosure of Accounting Polices
(c) Auditor’s Independence


(a) XYZ Ltd sold scrap of `10,000 during the F.Y 2010-11. Auditor of the company wants to verify the sale proceeds from scrap but the accountant says that no need to verify the same because the company had a good accounting and costing system. Comment.

(b) What is “Audit Evidence”? Discuss the principles, which are useful in assessing the reliability of audit evidence.

Preparation for an Audit

Briefly enumerate the circumstances where a response to a positive confirmation request is necessary to obtain sufficient appropriate audit evidence.


Write a short note on the following
(a) Knowledge of client’s business
(b) Audit working papers
(c) Audit Notebook

Internal Control

(a) States the steps for proper internal control over stores of a large textile mill Co.

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(b) What are the special steps involved in framing a system of Internal Check? 8.

(a) “The overall objective and scope of an audit does not change in an CIS environment”. Comment.
(b) “The work of the internal auditors is likely to be adequate for the purpose of the audit”. Comment.

Vouching &Verification of Assets and Liabilities

XYZ & Co. a Manufacturing company, manufactures shirts. The Company import raw materials and manufactured shirts from the same. During the financial year 2010-11 company pays a Custom and excise duty of ` 60,00,000 and ` 40,00,000 respectively. The Company maintains proper books of accounts. As an auditor of the company how will you vouch and/or verify the same ?

10. How would you vouch/verify the following?
(a) Discounted bills receivable dishonoured
(b) Bankruptcy Dividends
(c) Payments controlled by the Companies Act, 1956
11. Write short notes on the following:
(a) Impairment of Assets
(b) Patterns, Dies, Loose Tools, etc
12. As an auditor, comment on the following situations/statements: (a) A Ltd wanted to treat the heavy advertisement expenditure incurred by them to launch a new product as Revenue expenditure. The product did not pick up and the sales were negligible. It is anticipated that no material benefit will accrue in future from such heavy advertisement expenditure.

(b) B Ltd. acquired a car for its Managing Director on hire-purchase basis. The interest payable as well as penalty for late payment of installments was added to the cost of the car.
(c) Assets purchased under hire-purchase system were reflected at their full value and the outstanding installments payable have been included under Sundry Creditors. The Company Audit
13. As an auditor, comment on the following situation/statements: (a) Mr. Hari is a part time practising chartered accountant and is the Chief Executive Officer of the XYZ Ltd. The management of the company wants to appoint Mr. Hari as its auditor in the ensuing annual general meeting.

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