Page 114 - CA Final PARAM Digital Book.

Part 1- SA 500

QNO Inquiry Old Course – (PM17, M17E, M21E)
57.000 TITANIUM CNO--SA500.040
‘Inquiry' as one of the methods of collecting audit evidence.
OR
During the course of audit of a Limited company, the statutory auditors collected written representations

from the Management. The audit was finalized in addition to other audit procedures but, without making
any inquiries, as the statutory auditors were short of time. In the light of this information, state the
importance of inquiry as one of the methods of collecting Audit Evidence.
Answer • Definition
Inquiry consists of seeking information of knowledgeable persons, both financial and non- financial,

within the entity or outside the entity.

• Written or Oral
Inquiry is used extensively throughout the audit in addition to other audit procedures. Inquiries may
range from formal written inquiries to informal oral inquiries.

• Responses
Evaluating responses to inquiries is an integral part of the inquiry process. Responses to inquiries
may provide the auditor with information not previously possessed or with corroborative audit
evidence. Alternatively, responses might provide information that differs significantly from other
information that the auditor has obtained, for example, information regarding the possibility of
management override of controls. In some cases, responses to inquiries provide a basis for the
auditor to modify or perform additional audit procedures.

• Evidence about Management’s Intent
Although corroboration of evidence obtained through inquiry is often of particular importance, in
the case of inquiries about management intent, the information available to support management’s
intent may be limited. In these cases, understanding management’s past history of carrying out its
stated intentions, management’s stated reasons for choosing a particular course of action, and
management’s ability to pursue a specific course of action may provide relevant information to
corroborate the evidence obtained through inquiry. In respect of some matters, the auditor may
consider it necessary to obtain written representations from management and, where appropriate,
those charged with governance to confirm responses to oral inquiries.

QNO Evaluating work of Management's Expert Old Course – (M04E, M09E, M11E, N11E, M12R, N12M, M13M,
58.000 TITANIUM CNO--SA500.100 N15R, M16E, PM17, N18M,M18E, N20M, N20E)

CA. Needle had been appointed as an Auditor of M /s Fahric Ltd In the course of audit, it had been observed
that inventory including work -in¬ process had been valued by Management by using experts hired by
them. Analyse relevant factors to decide as to whether or not to accept the findings from the work
of Management expert in valuation of inventories.
OR
The auditor of CROX Ltd. accepted the gratuity liability valuation based on the certificate issued by a

qualified actuary. However, the auditor noticed that the retirement age adopted is 65 years as against
the existing retirement age of 60 years. The company is considering a proposal to increase the
retirement age to 65 years. Comment.
OR
Explain the responsibility of auditors, in case, report made by Mr Y’s actuary, found faulty
OR
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