Page 144 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a). Any LLP whose turnover does not exceed, in any financial year, Rs.40 Lacs or whose contribution
does not exceed Rs.25 Lacs is not required to gets its accounts audited.
(b). Any LLP whose turnover does not exceed, in any financial year, Rs.50 Lacs or whose contribution
does not exceed Rs.20 Lacs is not required to gets its accounts audited.
(c). Any LLP whose turnover exceeds Rs.25 Lacs in any financial year or whose contribution exceeds
Rs.10 Lacs in any financial year is required to gets its accounts audited.
(d). Any LLP whose turnover does not exceed, in any financial year, Rs.40 Lacs and whose contribution
does not exceed Rs.25 Lacs is not required to gets its accounts audited.
V. “In reference to para 5, which among the following is an INCORRECT trait about the Operating
Lease?
(a). The Lessee does not have the option to buy the asset during the lease period.
(b). The Lessee cannot claim Depreciation on the leased asset.
(c). The Lessee generally bears the Insurance, Maintenance and Taxes.
(d). The Lease term generally extends to less than 75% of the projected useful life of the leased asset.

55 (M22R)
SaveLives Limited is a listed Company which deals in the manufacture of Sanitizers, floor cleaners, dish
and fabric cleaners etc. In spite of spread of covid 19 in the country, the company’s sales have been very
high in the last financial year due to essential products it deals in. The Company is highly automated and
is driven by IT systems and applications that are used in the preparation of the financial statements of
the Company. The Company uses an integrated enterprise resource planning system since last five years.

KRAN & Associates has been appointed to conduct the statutory audit of the Company. The firm consists
of eight partners, and CA N has been appointed as engagement partner for the audit of SaveLives
Limited.

CA N briefed the team about the audit and also how IT would be relevant to the audit of SaveLives
Limited. The team obtained an understanding of the entity and its automated environment which
involved an understanding of how the IT department was organised, IT activities, IT dependence and
the relevant risks and controls.

One of the team members wanted to understand the importance of different types of controls in an
automated environment viz., General IT Controls, Application Controls and IT- Dependent Controls.
Same was discussed in detail along with the relationship between different controls.

The Companies Act, 2013 has placed a greater emphasis on the effective implementation and reporting
on the internal controls for a company. So, CA N decided to himself evaluate and validate the design
and operating effectiveness of Internal Financial Controls over Financial Reporting (IFC-FR) of the
company as at the Balance Sheet date. Internal Financial Controls (IFC) refers to the policies and
procedures put in place by SaveLives Limited for ensuring adequacy and also the operating effectiveness
of such controls.

The audit team decided to use the tools and techniques that audi tors use in applying the principles of
data analytics which are known as CAATs. Data analytics could also be used in testing of electronic
records and data residing in IT systems using spreadsheets and specialised audit tools viz., IDEA and ACL
to perform various functions.
I. Under which situation is IT not relevant to an audit?
a. Increased complexity of transactions
b. Hi-tech nature of business
c. Volume of transactions is low
d. Company Policy (Compliance).
II. Which of the following is a risk that arises from the use of IT systems?

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