Page 112 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
Statement 2:- A response that indicates difference between information requested to be
confirmed and contained in entity’s records and information provided by the confirming part is a
case of Exception. #Unique
(a). Only Statement 1 is correct
(b). Only Statement 2 is correct
(c). Both Statement 1 & 2 are correct
(d). None of Statement 1 & 2 is correct"
V. "Which of the following is incorrect so far as the related party transactions are concerned:-
(a). Many related party transactions are in the normal course of business.
(b). Related party transactions may not be conducted under normal market term and conditions.
(c). In some circumstances, related party transactions may give rise to higher risks of material
misstatement.
(d). None of the above."

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"M/s FCA & Co (“The Firm”), Chartered Accountants is a Partnership Firm of Miss F, Miss C and Mr A
based at Delhi. Partners are also engaged in the Investing Activities - that is they Purchase and Sale
Shares of various firms and companies in their routine course of action.

In past week, few Companies have approached the Firm to become their Auditors. Before accepting the
Audits, Partners want to ensure that they are not disqualified according to the Provisions of the
Companies Act. So they are looking into this matter - Company wise - which is given below. You are
requested to go through the following and answer the ensuing questions.

Company ABC P L - Miss C owns share of ` 1000 in the Company and her Brother owns shares of Rs 50000
in the Company.

Company XYZ P L - Mr A’s father owns shares of Rs 90000 in the Company. Mr A owes the Company in
his personal capacity for the goods purchased by him to the tune of Rs 20000.

Company PQR P L - Miss F has been advising the company for its Investment for past couple of years.
Miss C is indebted to the Company to the tune of Rs 1 Lakh."
I. "Which of the following Statement is correct in respect of ABC P L (“Company”)
(a). The Firm is eligible to be appointed as an Auditor of the Company
(b). The Firm is not eligible to be appointed as an Auditor due to Shareholding of Miss C’s Brother in
the Company
(c). The Firm is not eligible to be appointed as an Auditor due to Shareholding of Miss C in the
Company
(d). The Firm is eligible to be appointed as an Auditor of the Company, but they will have to disclose
about Shareholding in Auditor’s Report."
II. "Which of the following Statement is correct in respect of XYZ P L (“Company”)

(a). The Firm is not eligible to be appointed as an Auditor due to the indebtedness of Mr A
(b). The Firm is eligible to be appointed as an Auditor of the Company
(c). The Firm is not eligible to be appointed as an Auditor due to the Shareholding of Mr A’s Father
in the Company
(d). The Firm is eligible to be appointed as an Auditor of the Company only after Mr A pays the
amount due to the Company."
III. "Which of the following Statement is correct in respect of PQR P L (“Company”)

(a). The Firm is eligible to be appointed as an Auditor of the Company
(b). The firm is not eligible to be appointed as an Auditor due to Miss C’s Indebtedness towards the
Company
(c). The firm is not eligible to be appointed as an Auditor due to Miss F’s involvement as an Advisor
to the Company
(d). The firm is eligible to be appointed as an Auditor of the Company, but it will have to disclose its
indebtedness of Miss C in the Auditor’s Report"

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