Page 136 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
Statement 2: There may be sometimes where test checking or sampling may not be suitable.
(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 selecting sample for accounts receivable and accounts payable which method of
selecting of sample is advised by CA Raj to the engagement team?
(a). Stratified Sampling method
(b). Monetary Unit Sampling method
(c). Haphazard Sampling method
(d). Interval Sampling
V. “With respect to the deviation identified by the auditor occurring on 9th and 10th of every month,
what course of action should the audit firm adopt?
(a). RRM & Associates should ignore such deviation as it exists only on a very few instances during
the entire year under audit.
(b). RRM & Associates should extend its audit procedures to such deviated transactions.
(c). RRM & Associates shall investigate the nature and causes of such deviations as such deviations
may be intentional and may indicate the possibility of fraud.
(d). Both b & c

49 (N21R)
Ms. Rhea was among the promoters who set up a public company by the name "Aksham Ltd". The
company appointed CA Rajendra as the auditor of Aksham Ltd. CA Rajendra is the brother of one of the
directors of Aksham Ltd. After setting up of company, the company had a dispute with one customer of
the company in year 2019-20 who took the company to court. There are probable chances that company
will have to shelve out `50 lakhs as compensation but the case will likely to be finalised in year 2021-22.

CA Rajender considers the fact that Askham Ltd has a present obligation and it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation and that a
reliable estimate i.e. ` 50 Lakhs can be made of the amount of the obligation.

Aksham Ltd. declared dividend of ` 10 per equity share on 10th April,2021. The financial statements
were approved on 30th June,2021. Askham Ltd took loan of ` 65 lakhs from Saksham Bank for a period
of 10 years; the loan amount was guaranteed by Mr. Pramod, one of the directors of Aksham Ltd. The
loan was completely secured against the fixed assets of the company. Aksham Ltd drew designs of one
of the products of the company and this product constituted 90 % sales of the company. The designs of
the product were such that the sale of the company will increase every year for the next 5 years. Aksham
Ltd booked the designs of the company at a value of ` 1 crore in the books of account of the company
as intangibles at its cost.

Based on the above information, answer the following questions:
I. “State whether appointment of CA Rajendra is correct in law.
(a). Yes, it is correct in law as per Companies Act, 2013
(b). It is incorrect in law as per Companies Act, 2013 as the relative of director is not allowed to be
appointed as an auditor of the company.
(c). It is correct in law as per Companies Act, 2013 because brother is not covered under the definition
of relative.
(d). It is correct as appointment of auditor is not governed by any law in India.
II. “Advise the company regarding the course of action Aksham Ltd will have to follow for the court
case for financial statements prepared for year ending 31st March, 2021

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