Page 120 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(d). The risk factor creates a perceived opportunity for the fraud and results in misstatement due to
misappropriation of assets."
V. "Issue 4 identified by the auditor is also a fraud risk factor. What is the condition created by that
fraud risk factor and what fraud does it result in?
(a). The risk factor creates a rationalization for the fraud and results in a misstatement due to
fraudulent financial reporting.
(b). The risk factor creates an incentive/pressure for the fraud and results in a misstatement due to
misappropriation of assets
(c). The risk factor creates a perceived opportunity for the fraud and results in misstatement due to
fraudulent financial reporting.
(d). The risk factor creates a perceived opportunity for the fraud and results in misstatement due to
misappropriation of assets."

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"PK & Associates, a 20-year-old CA firm was duly appointed as Statutory Auditors of one of the major
branches of KBC Bank Ltd., a Nationalised bank , as per the applicable procedure of the appointment of
auditors. The Engagement Partner, CA Raman Kumar, carries out discussions with the Engagement team
on how to plan, start & conclude this Statutory Bank Audit. He also makes them aware of the importance
of such Engagement discussion. CA Raman also discusses with other Partners of the firm regarding the
Professional Remuneration the firm will be getting against the completion of this Statutory Audit
assignment as fixed by the relevant authorities in this case.

He tells the engagement team about various reports they would be required to issue after the

conclusion of audit as the Statutory auditors such as the Statutory Report , LFAR , etc. During the course
of the audit , the audit team suspects a fraud having been committed in the Bank branch involving an
amount of INR 2.5 crores and they report of the same to the Bank’s Board of Directors (BOD) but receive
no reply against it from them and therefore proceed further as per their legal obligation as the Statutory
auditors.

They also observe that more than 80% the Bank Branch’s advances consist of Gold Loans. Also , more
than 90% of the remaining advances are overdue between 61 to 90 days but the Bank has not
categorized them accordingly."
I. "As per CA Raman’s discussions with other partners of the firm, their Professional remuneration
as per the assignment allotted in the above case is fixed by the

(a). The Shareholders of the Bank at their AGM.
(b). The Reserve Bank of India in consultation with the Central Government.
(c). The Bank through its Board of Directors.
(d). The Central Government."

II. "The Engagement Team’s discussions as held by CA Raman are a part of which of the following
phases of an audit?

(a). Audit Planning.
(b). Developing an Audit Programme.
(c). Risk Assessment.
(d). (d) Audit Reporting."

III. "Which of the following types of Audit Report do PK & Associates will have to issue to comply
with the requirements as laid down by RBI circulars as narrated by CA Raman to the Engagement
team ?
(a). Statutory Audit Report
(b). Tax Audit Report.
(c). LFAR.
(d). GST Audit Report."
IV. "In the given case , what should be CA Raman’s legal obligation & reporting requirement w.r.t.
the fraud noticed by the team during the course of the audit ?

(a). Report the nature of amount & parties involved in the fraud in his audit report .
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