Page 118 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs

During the 7th year of audit, there have been some changes in the bank due to which the firm is
considering revision of audit terms as per SA 210. Also, new laws and updates in the field of accounting
makes the auditor feel that the financial reporting framework used by the bank is not acceptable as per
law and is considering the impact of this on his audit report.

Owing to the changes, Mr. Ravish instructs his articles to go through the audit programme once again
and make necessary changes to it. He also reviews the audit plan developed for the bank.
After the above exercise of re-planning and revision in terms of the engagement as per SA 210, Mr.
Ravish and Co. carries on the audit of the 7th year and observes the following issues:
a. As per the Income Tax Act 1961, the banks are to report certain high value transactions to the
department. On verification of certain records, the auditor suspects that there is non-compliance
with the law and in his judgment; the effect of the suspected non-compliance may be material to
the financial statements. On discussion with management, he does not get sufficient information
supportive that the bank is in compliance with the law.
b. The management of the bank shows recent investigation reports by external authorities to the
auditor wherein red flags have been raised in the internal control system of the bank. The
management blames the auditor that he has not audited the entity’s internal system correctly and
threatens to hold the auditor responsible for the same.

Considering the above facts, answer the following questions by choosing the correct answer."
I. "Which among the following is NOT an element of firm’s system of quality control?

(a). Ethical Requirements
(b). Acceptance and continuance of client relationships and specific engagements
(c). Engagement review
(d). Monitoring"
II. "When conducting an audit of financial statement, which of the following is NOT a fundamental
principle of professional ethics?

(a). Integrity
(b). Professional Skepticism
(c). Confidentiality
(d). Objectivity"

III. "Which of the following statement is incorrect considering the context of revision in audit terms
as per SA 210?
(a). Indication that the entity has misunderstood the objective and scope of the audit
(b). A significant change in ownership of the bank
(c). A change in legal or regulatory requirements
(d). Significant change in the audit team"
IV. "The auditor has found that the financial reporting framework provided by law or regulation is
unacceptable. What should be the impact of this on his report?
(a). Issue an adverse opinion owing to unacceptable financial reporting framework
(b). Include an “Emphasis of Matter Paragraph” drawing user’s attention to additional disclosures
other than those as per law.
(c). Include an “Other Matter paragraph” drawing user’s attention to additional disclosure other than
those as per law.
(d). No need of any mention in report as law or regulation has prescribed the framework and law
holds highest authority.
V. "Which among the following best defines an Audit Programme?
(a). An audit programme consists of a series of verification procedures to be applied to the financial
statements and accounts of a given company for the purpose of obtaining sufficient evidence to
enable the auditor to express an informed opinion on such statements.
(b). An audit programme is a statement containing the details of the hours worked, work done, and
output achieved by the staff of the audit firm used by the principal for review purpose
(c). An audit programme is a checklist developed by the audit firm covering verification aspects which
are common to clients handled by the audit firm.
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