Page 145 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a). Direct data changes (backend changes).
(b). Limited/Monitored access.
(c). Adequate segregation of duties.
(d). Authorized access to data.
III. The relationship between two controls is such that _____________ are needed to support the
functioning of _______________, and both are needed to ensure complete and accurate
information processing through IT systems.
(a). IT Dependent Controls, General Controls
(b). Application Controls, General Controls.
(c). General Controls, IT Dependent Controls.
(d).General IT Controls, Application Controls.
IV. The term Internal Financial Controls (IFC) refers to the policies and procedures put in place by
companies for ensuring which of the following:
(a). reliability of financial transactions.
(b). effectiveness and efficiency of operations.
(c). safeguarding of human resources.
(d). prevention and detection of errors.
V. Data analytics can be used in testing of electronic records and data residing in IT systems using
spreadsheets and specialized audit tools viz., IDEA and ACL to perform which of the following:
(a). Evaluating impact of control deficiencies.
(b). Compliance with applicable laws and regulations.
(c). Authorized changes to system or programs.
(d). Providing latest information.

56 (M22R)
You are a partner in ABC & Company, a Chartered Accountant firm based in New Delhi. ABC & Company
has been appointed as the statutory auditor of onetime Limited, a public limited company which
manufactures and sells wall and table clocks and has many branches all over India. onetime Limited has
been exporting the clocks since past two years. However, the domestic sales have contributed towards
major source of revenue for the Company.

You being the engagement partner have started the audit for the year ended 31.03.2021 along with
your five team members. One of the team members, CA B started verification of inventory. In addition
to other procedures, he also checked that valuation of Inventory had been recognised in accordance
with AS -2. During detailed checking, he noticed that the amount spent on salary of administrative
employees and normal wastage on production of the clocks, had not been added to the valuation of
Inventory. The contention of XYZ Limited was that since the cost was not directly related to the
production cost and so not added to the cost of inventory.

CA B also noticed that one of the suppliers of onetime Limited, Mr AM had sent some raw material to
the Company for storage in their warehouse in March 2021. Due to renovation going on at his
warehouse, his stock could be damaged and so he had requested Onetime Limited to keep the same in
their warehouse. onetime Limited contended that since the raw material was anyway billed to the
Company the next month, so the same had been included in the valuation of stock, since physically the
stock was present in the warehouse of Onetime Limited as on 31.03.2021.

The Company had issued shares at premium, and the premium received on the shares had been
transferred to a “securities premium account”. The same was then applied in writing off the expenses
of selling the clocks, writing off the preliminary expenses of the Company and also writing off the
commission paid to the sales agents. You have verified the same in detail.

While verifying debtors, team member C noticed that there were a few trade receivables pertaining to
export sales mainly to England. Mr. C verified the same with respect to the invoices issued and other

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