Page 135 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a). Only statement 1 is true
(b). Only statement 2 is true
(c). Both the statements are true
(d). None of the statements is true
IV. “With respect to the inventory of ABC Ltd. kept in warehouse, which audit procedures can the
audit team perform to obtain sufficient and appropriate audit evidence?
(a). Checking of warehouse receipt with the inventory record of ABC Ltd.
(b). Obtaining direct confirmation with respect to quantity & condition of inventory of ABC Ltd. from
the warehouse.
(c). Both a & b
(d). Seeking a management representation regarding inventory valuation and mentioning the fact
regarding inventory being kept at the warehouse in the audit report.
V. “Is management correct in asking the debtors to provide the reply of confirmation request of
auditor to the General Manager of accounts department of the company?
(a). Yes, the management has correctly asked the debtors to respond directly to the GM of accounts
department.
(b). No, management is not correct in asking for a direct response to GM of accounts department as
external confirmation is the response obtained directly by the auditor.
(c). Yes, the management is correct in advising direct response to the GM of accounts department as
this will ensure that only correct confirmation are provided to the auditors.
(d). No, management is not correct as this is the option of the auditor to see if the response to
external confirmation is to be obtained by management or auditor himself.

48 (M21M)
RRM & Associates have been appointed as the statutory auditors of UVW Ltd. for the FY 2019-2020. The
engagement partner is CA Raj and his engagement team consists of 2 article assistants. CA Raj briefed
his audit team regarding the factors affecting the sample selection and the sample size. The team was
also told that the tolerable error should be zero and sample size should be selected accordingly. CA Raj
gave a detailed audit programme to his team. The audit programme with respect to the checking of
accounts receivable and accounts payable consists of checking the accounts on sample basis. CA Raj
asked the engagement team to divide the accounts receivables and account payable balances into
separate groups and to take sample from each of them.
During the course of audit, the audit team noticed that certain internal control system with respect to
the accounts receivable were not in place at few instances during the FY 2019-20.
Also while checking the payment transactions on sample basis, the engagement team noticed that on
9th and 10th of every month, the miscellaneous expense vouchers were not signed by the authorised
personnel. The engagement team discussed the implications of the same on their audit procedures to
be performed in this regard.
Based on the above facts, answer the following:-
I. “Which of the following factors should not be considered by CA Raj in deciding the extent of
checking while making the sample plan in case of UVW Ltd.?
(a). The size of UVW Ltd.
(b). The state of the internal control system of UVW Ltd.
(c). The tolerable error range decided in case of UVW Ltd.
(d). The competence of the engagement team.
II. “With respect to the weakness in internal control system of accounts receivable during the FY
2019-20, the audit team:-
(a). Should consider a larger sample size or 100% examination of accounts receivables.
(b). Should consider a smaller sample size of accounts receivables.
(c). Should not consider applying sampling techniques.
(d). Should give a disclaimer of opinion.
III. Statement 1: While conducting an audit, it is obligatory for the auditor to apply sampling.

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