Page 148 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
and on receipt of such reply or observations, the auditor shall forward his report and the reply or
observations of the Board or the Audit Committee along with his comments (on such reply or
observations of the Board or the Audit Committee) to the Central Government within 15 days
from the date of receipt of such reply or observations.
(c) Report the matter only to the Board since the amount of fraud is not less than 1 crore.
(d) Report the matter either to the audit committee constituted under section 177 or the Central
Government since the amount of fraud is neither less nor more than 1 crore.
IV. Sub-rule (4) of Rule 13 of the Companies (Audit and Auditors) Rules,2014 states that the auditor is
required to disclose in the Board’s Report details of each of the fraud reported to the Audit
Committee or the Board under sub-rule (3) during the year. Which of the following details is not
required to be disclosed in the Board’s Report
(a) Nature of Fraud with description.
(b) Parties involved, if remedial action taken.
(c) Approximate Amount involved
(d) Remedial actions taken.
V. For reporting under clause (xi) of paragraph 3 of Companies (Auditor’s Report) Order,2020, which
of the following points the auditor may consider?
(a) Fraud by the company or on the company by its officers, employees or third parties to be
reported.
(b) Only suspected frauds shall be included here and not the noticed frauds.
(c) Principles of materiality outlined in Standards on Auditing.
(d) The auditor’s withdrawal from the engagement and the reasons for the withdrawal.

58 (M22M/N22R)
SAM & Company, a Chartered Accountant firm, is in the process of finalising the audit of Health is
Wealth Limited which is a Company listed on the Bombay Stock Exchange. Since the past decade, Health
is Wealth Limited has made its presence felt in over 10 countries, including India, making it a leader in
the global fitness industry. It runs a chain of fitness centres that offers energetic group workouts and
multiple workout formats to choose from. It also offers the best equipment, knowledgeable staff and
personal advice in a welcoming environment.

SAM & Company being a very reputed firm, was appointed for the statutory audit of Health is Wealth
Limited. The Engagement Partner CA A and her team of 8 members have conducted the audit in an
efficient and effective manner. The senior manager in the team, CA K is of the opinion that they have
obtained sufficient appropriate audit evidence, which concludes that misstatements, individually or in
the aggregate, are material, but not pervasive, to the financial statements. One of the article clerks, Mr
N, is a fresher and this audit is his first experience as an auditor in a limited company. He is a sharp boy
and has grasped all the concepts and techniques very well. However, the term “pervasive” confused
him so CA K patiently explained to Mr N the pervasive effects on the financial statements as per the

auditor’s judgement. Mr. N understood the term well and thanked CA K for clearing all his doubts.

CA A disagreed with CA K that they have obtained sufficient appropriate audit evidence, which
concludes that misstatements, individually or in the aggregate, are material, but not pervasive, to the
financial statements. So, the entire team held various meetings and discussions, and finally reached to
a conclusion. They concluded that they have obtained reasonable assurance that the financial
statements as a whole are free from material misstatement, whether due to fraud or error. That
conclusion took into account:

(a) Whether sufficient appropriate audit evidence had been obtained;
(b) Whether uncorrected misstatements were material, individually or in aggregate;
(c) The evaluations.

The Auditor’s Report was prepared in writing and it was decided that an unmodified opinion would be
expressed. The first section of the auditor’s report included the auditor’s opinion, and had the heading

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