Page 103 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
due to fraud, mistake and errors, thereby enabling the auditor to express an opinion on whether the
financial statements are prepared, in all critical respects, in accordance with financial reporting
framework and to report on the financial statements and corroborate as required by the SAs, in
accordance with auditor’s findings.” (Para 1)

SAs require the auditor to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatements. Reasonable assurance is a high level of assurance. It is
obtained when the auditor has obtained complete and correct audit evidence to reduce audit risk i.e.
(the risk that the auditor expresses an appropriate opinion when the financial statements are critically
misstated) to an acceptable level. (Para 2)

Audit risk is a function of risks of material misstatements and detection risk. Detection risk relates to
nature, timing and extent of audit plans to reduce audit risks. The assessment of risk is a matter of
professional judgment. Risk of material misstatement may exist at level of overall financial statement
level and assertion level for transactions, account balances and disclosures. Further, risk of material
misstatement at assertion level consists of inherent risk and control risks. These are dependent upon
audit of financial statements. In case auditor believes that risk of material misstatements is less, the less
would-be detection risk that can be accepted. (Para 3)

The auditor can eliminate audit risk and most of the audit evidence on which auditor draws conclusions
and bases the auditor’s opinion are conclusive in nature. Further, the matter of difficulty, time or cost
involved is not in itself a valid basis for the auditor to be satisfied with evidence that is less than
conclusive. (Para 4)

The SAs, taken together, provide the standards for the auditor’s work in fulfilling the overall objectives
of the auditor. The SAs deal with general rights of the auditor as well as further considerations relevant
to application of those rights to specific topics. The SAs are paramount and these are to be strictly
followed irrespective of laws and regulations that govern audit of financial statements. The SAs are not
relevant for certain government entities like agencies, boards and commissions. (Para 5)"
I. " On perusal of para 1, given below is combination of options which would rectify errors, if any.
Which is of the combinations is most appropriate?
Option
Probable errors
Appropriate combination #Unique
(a). Embrace, level of confidence, in all critical aspects, whether due to fraud, mistake and errors,
corroborate Enhance, degree of confidence, in all material respects, whether due to fraud,
mistake or error, satisfy
(b). Embrace, level of confidence, in all critical aspects, whether due to fraud, mistake and errors,
corroborate Enhance, degree of confidence, in all material respects, whether due to fraud and
error, satisfy
(c). Embrace, level of confidence, in all critical aspects, whether due to fraud, mistake and errors,
corroborate Enhance, degree of confidence, in all material respects, whether due to fraud or
error, communicate
(d). Embrace, level of confidence, in all critical aspects, whether due to fraud, mistake and errors,
corroborate Enhance, degree of confidence, in all material respects, whether due to fraud or
mistake, communicate"
II. " Identify the meaningful and correct statement as per SA-200 in place of underlined subject
matter in para 2.
(a). It is obtained when the auditor has obtained complete and meaningful audit evidence to reduce
audit risk i.e. (the risk that the auditor expresses an appropriate opinion when the financial
statements are materially misstated) to an acceptable level.
(b). It is obtained when the auditor has obtained complete and exact audit evidence to reduce audit
risk i.e. (the risk that the auditor expresses an appropriate opinion when the financial statements
are materially misstated) to an acceptable level.
(c). It is obtained when the auditor has obtained sufficient and necessary audit evidence to reduce
audit risk i.e. (the risk that the auditor expresses an inappropriate opinion when the financial
statements are materially misstated) to an acceptable low level.

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