Page 117 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
Also, Sigma Ltd received a grant of ₹50 lakhs under the PM Make in India Subsidy Scheme for acquiring
machinery for setting up new plant. The entire grant received was credited to Profit and Loss Account.
Mr Ram and Mr Sham (two partners of ARG & Associates) differ on an audit point relating to audit of
Sigma Ltd. Mr Ram is of the view that it will attract qualification however Mr Sham disagreed with his
opinion.

Based on above facts, you are required to answer below questions which require special attention while
preparing the Audit report of Sigma Ltd."
I. "The auditor shall express ________________ when the auditor concludes that the financial
statements are prepared, in all material respects, in accordance with the applicable financial
reporting framework.

(a). qualified opinion
(b). adverse opinion
(c). unmodified opinion
(d). disclaimer of opinion"
II. "In relation to grant of ₹50 lakhs, while preparing the audit report, the auditor needs to:
(a). qualify the report stating the fact that the income has been overstated to the extent of the
amount of grant net of proportionate credit that would have been worked out.
(b). qualify the report stating the fact that the income has been understated to the extent of the
amount of grant net of proportionate debit that would have been worked out.
(c). express unmodified opinion as Accounting Standard-12 allow the recognition of grant received as
income.
(d). None of the above"
III. "The auditor shall express __________________ when the auditor, having obtained sufficient
appropriate audit evidence, concludes that misstatements, individually or in the aggregate, are
both material and pervasive to the financial statements.
(a). qualified opinion
(b). adverse opinion
(c). unmodified opinion
(d). disclaimer of opinion"
IV. "Assume Mr Ram and Mr Sham from two different joint auditor’s firms. How audit report should
be made in circumstances where two joint auditors have difference of opinion in relation to a
specific issue -
(a). The view of Mr Ram will prevail because of prudence
(b). Joint Auditors should come at a common point and give opinion accordingly
(c). The matter should be referred to a senior joint auditor firm
(d). Mr Ram and Mr Sham would issue separate audit reports"
V. "Communicating key audit matters in the auditor’s report is
(a). not a substitute for disclosures in the financial statements that the applicable financial reporting
framework requires management to make, or that are otherwise necessary to achieve fair
presentation.
(b). a substitute for the auditor expressing a modified opinion when required by the circumstances of
a specific audit engagement in accordance with SA 705.
(c). a substitute for reporting in accordance with SA 570 when a material uncertainty exists relating
to events or conditions that may cast significant doubt on an entity’s ability to continue as a going
concern;
(d). a separate opinion on individual matters."

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"Ravish and Co, a chartered accountancy firm, has been auditing the books of PQ groups of banks, from
the past 6 years. Ravish and Co. has a good standing reputation as auditor and there are regular quality
control activities performed by the firm’s engagement partner. The recent weekly meeting of the firm’s
staff included discussions on each of the element of the firm’s system of quality control as per SQC 1
and code of ethics as per SA 200.
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