Page 105 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a). M/s Arun Karun & Associates need not waste its time in production analysis as the same is the
responsibility of the cost auditor of the company.
(b). M/s Arun Karun & Associates should perform production analysis and discuss the reasons of
variation with the management of HKM Ltd.
(c). M/s Arun Karun & Associates should mention in its audit report regarding the fact of noticed
variation in the production analysis. Also they need to mention separately that the management
along with the cost auditor is responsible for such analysis.
(d). M/s Arun Karun & Associates should ensure that the cost auditor of HKM Ltd. mentions the fact
regarding the production analysis in their cost audit report which is to be filed with the Board of
Directors and the Central Government."
II. " With respect to the audit of cash balance of HKM Ltd. which is the correct course of action for
M/s Arun Karun & Associates?
1. The cash balance with the cashier, petty cashier, and imprest balances with the employees
should be checked simultaneously.
2. The cashier should be present while cash is being counted and he should sign the statement
prepared containing the details of the cash balance so counted.
3. Since the company is having more than one cash balances i.e. with cashier, petty cashier, and
imprest balances with employees, CA Arun should ask the management to get the cash balance
verified by the main cashier and furnish cashier’s report to him.
4. CA Arun should ask any of the cashiers to verify the cash balances and provide him with a report
on the same.

(a). Statement 1 & 2
(b). Statement 1 & 4
(c). Statement 1,3 & 4
(d). Statement 1 & 3

III. " Verification of all the travelling expenses of HKM Ltd. by the audit team addresses the following
assertion related to the Income Expense account:
(a). Valuation
(b). Completeness
(c). Measurement
(d). Existence"
IV. " Verifying whether employee benefit expense of HKM Ltd. has been fairly allocated between the
operating expense incurred in production activities and general expense addresses which of the
following assertions?
(a). Completeness
(b). Presentation and Disclosure
(c). Measurement
(d). Occurrence"
V. " Which of the following is correct with respect to the provisions relating to revenue reserves of
HKM Ltd?
i. Revenue Reserves of HKM Ltd. can be used to supplement divisible profits in lean years.
ii. Revenue Reserve cannot be used to augment the working capital of the business of HKM Ltd.
iii. Revenue Reserve cannot be used to finance an extension of the business of HKM Ltd.
iv. Revenue Reserve can be used to generally strengthen the company’s financial position.
(a). ii & iii are correct
(b). i & iv are correct
(c). i, ii, iii are correct
(d). i, ii, iii, iv are correct"

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