Page 101 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(b). Most populations from which audit samples are drawn are structured in such a way that items in
a sequence can be expected to have similar characteristics to each other but different
characteristics from items elsewhere in population. Hence, it is not used ordinarily in audit
sampling.
(c). Block sampling has characteristics of simplicity and economy.
(d). It is generally an appropriate sample selection technique when auditor intends to draw valid
inferences about the entire population based upon sample."
V. " Consider the below stated steps in relation to audit sampling. What is the most likely logical
order of these steps to be followed by auditors of this company?
Step I—Performing audit procedures
Step II ---- Projecting Misstatements
Step III---- Sample design and selection of items for testing
Step IV-- Investigating Nature and cause of deviations
Step V--- Evaluating results of audit Sampling
(a). Step I, Step II, Step III, Step IV and Step V
(b). Step II, Step I, Step III, Step V and Step IV
(c). Step III, Step I, Step IV, Step II and Step V
(d). Step I, Step II, Step III, Step V and Step IV"

17
"One audit team is conducting statutory audit of Delta Robotics Limited for financial year ending 31st
March 2020 under Companies Act,2013. The revenue from operations of company during year 2019-20
is ` 89,40,60,300. Certain observations and information stated as under have been noted during the
course of audit-by-audit team: -
(A) The said company is availing working capital credit facility to meet its normal operating cycle
requirements amounting to ` 7.50 crores from a scheduled bank and outstanding balance as on
31st March 2020 is ` 6,49,20,120. The financial statements disclose this outstanding balance in
financial statements under the head “Long-term borrowings”. Further, the said credit facility is
secured against equitable mortgage of an immovable property located at NOIDA. The said
facility is guaranteed by all directors of the company, some of relatives of directors and two
persons viz. Mr. Krishnamurthy and Mr. Ramalingam who are not related to directors in any
manner.
(B) The company has made current investments in Ceekay Limited to the tune of ` 1,10,00,000 by
way of equity instruments. Further, the company has also made investment in a partnership
firm to the tune of ` 25,00,000. The said partnership concern is in an upcoming and promising
line of business activity.
(C) It was observed that company had received some export orders during the year under audit
and these orders had resulted in fructifying export turnover of ` 3,88,25,000. During the year
under consideration, the company has reflected net loss in respect of foreign currency
transactions amounting to ` 5,50,000. Further, the company has also imported components and
spare parts having FOB value of ` 10.00 lacs (CIF ` 11.25 lacs) during the year.
(D) The trade payables of the company include dues to micro and small enterprises amounting to `
1,40,36,740.
(E) Printing and stationery expenses, travelling expenses and fair participation expenses are `
74,320, ` 88,38,250 and 1,63,26,260 respectively.

Based upon above, answer following questions keeping in view classification and disclosure
requirements of Schedule III of Companies Act, 2013: -"
I. " Consider the following statements: -
Statement I--- The company has correctly classified and disclosed outstanding balance of working
capital credit facility under the head “Long- term borrowings.”
Statement-II--- Nature of security for availing working capital credit facility needs to be disclosed.
Which of the following is correct?

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