Page 113 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
IV. "While considering the threshold limit for holding any interest or security in the company for the
Qualification for becoming an Auditor, which value is to be considered?
(a). Market Value
(b). Face Value
(c). Book Value
(d). Higher of the above"
V. "In case, Shareholding by a relative exceeds the threshold then in how many days Auditor is
required to take corrective Action?
(a). 15 Days
(b). 30 Days
(c). 45 Days
(d). 60 Days"

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"M/s CA & Co is a firm of Chartered Accountants based at Mumbai, Mr C and Mr A being the Partners
of the Firm. They are engaged, inter alia, in the Statutory Audit of Great Trading Company who is dealing
in FMCG Products and sells its products to Wholesalers and Retailers.

During the course of their primary discussion with the Accounting Personnel of the Company, Mr C
found out that the number of Transactions are very high and the value of Transactions also vary a great
length especially in the case of Sales Transactions - as their base is very large and number of sales
transactions run into Hundreds of Invoices per month.

Mr C and Mr A are thinking about checking the Sales Transactions and Balances of Account Receivables
on a Sampling basis and for that they are discussing about which of the main two approaches to
sampling would be appropriate in this case. They mostly are satisfied with the Internal Control
Procedures as far as Sales Order Processing is concerned.

After discussion, they have decided that they would divide the Sales Transactions into Value Buckets
viz. Less than 1 Lakh, 1 Lakh to 5 Lakh, 5 Lakh and above. For Accounts Receivables they would go for
Age-wise Receivables viz. up to 45 Days, 45 to 90 Days, 90 to 180 Days and Above 180 Days.

Checking of Sales and Receipts Transactions on the above basis was carried out and though the Auditors
didn’t find any major irregularity in the Sales, it was observed that most of the Receivables in Above 180
Days category were from individual Sales Bill of 1 Lakh or less and most of the parties were local ones.
So it was decided to follow-up this matter by asking for Balance confirmation from those Debtors whose
balance remained outstanding for more than 180 Days."
I. "Which of the following Statement is correct?
(a). Hundred Percent Checking will give absolute satisfaction to the Auditor about correctness of
transactions.
(b). Sampling Methods cannot be relied upon to reveal the true feature and characteristics of the
population.
(c). If drawn properly, a sample would give reasonable basis to an Auditor to draw conclusions about
the entire population
(d). Sampling should be done only when Hundred Percent Checking is not possible"
II. "Mr C and Mr A are discussing different approaches to Sampling, which are they?

(a). Statistical Sampling and Non-statistical Sampling
(b). Large Sample and Small Sample
(c). Random Sampling and Systematic Sampling
(d). Scientific Sampling and Non-Scientific Sampling
III. "Which of the following method is used by the Auditor for Drawing of the Samples?

(a). Simple Random Sampling
(b). Haphazard Sampling
(c). Systematic Sampling
(d). Stratified Sampling"

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