Page 130 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(d). Non-Depreciating Intangible Fixed Asset
IV. "In example 4 in integrated case scenario above, Mr. S mentions about appropriate authority of
Very Composed Private Limited which has not taken steps for assessing impairment loss on
machinery. By appropriate authority Mr. S was referring to:
(a). Members of Very Composed Private Limited
(b). All employees of Very Composed Private Limited
(c). Management of Very Composed Private Limited
(d). Any one Director of Very Composed Private Limited
V. "The method of depreciation used by Very Composed Private Limited must be such that it
allocates amount of depreciation of a tangible fixed asset in a systematic manner over its:
(a). Complete Life
(b). Service life
(c). Economic life
(d). Useful Life

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"Vyom is a CA student who has just enrolled for his article ship training with M/s Kumar & Co., a LLP of
Chartered Accountants with Mr. Kumar & Mr. Kanwar as its designated Partners. Vyom has only
theoretical knowledge till now of accounting work and wants to gain practical knowledge of Accounting
& Auditing. He asks Mr. Kumar to take him to important assignments along with him so that he can also
get exposure to practical auditing. Mr. Kumar, sensing his ambition, advises him to proceed slowly with
less complex work in the beginning to understand the process of accounting and auditing from the core
instead of jumping directly to be a part of the engagement teams for large audits. He assigns him a small
audit of a sole trader Client ‘X’ and asks him to document each and every step of the Audit Programme
being handed over to him as a part of the audit team auditing the accounts of Mr. X. Mr X follows accrual
system of accounting.

Vyom, on advice from Mr. Kumar, reads first about the Financial Statements, their inclusions and
assertions they contain. He learns that a ‘Financial Statement Audit’ is the most common one but
different from all other audits. In preparing the financial statements, an entity’s management makes
implicit or explicit claims known as assertions regarding the completeness, existence/occurrence,
valuation/ measurement, rights and obligations and presentation and disclosure of financial statement
items. While auditing the books of Mr. X, he observes the following and documents audit evidence
gathered by him:-
• Assets have been shown at their Historical Cost in the Balance Sheet.
• Prepaid & Outstanding Expenses have not been accounted for as per accrual basis.
• Specific audit procedures to check the consistency of audit evidence obtained externally with
those generated internally have been carried out.
CA Kumar discusses the evidence collected by Vyom and tells him that they are insufficient and makes
him aware of the factors which he needs to consider in his future audits as to determine the sufficiency
of audit evidence collected."
I. "Company X’s Balance-Sheet shows Building with carrying amount of INR 5 Lakh, the auditor
gathers evidence about the Company’s ownership and control over such building. This is an
assertion w.r.t-
(a). Completeness
(b). Valuation
(c). Existence
(d). Rights & Obligations.
II. "The Advance Salary given to Mr. Y in the above case has not been accounted for properly in the
accounts of the Company and shown on payment basis only. This is a violation of assertion of:

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