Page 154 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(d) SMA 0 (accounts not yet due for payment), SMA 1 (Overdue between 0-45 days) and
SMA 2 (Overdue between 46-90 days)

II. Creation of security of Aquabrass Private Ltd. and Prism Works was in the form of:

(a) Mortgage and Hypothecation.
(b) Lien and Set-off.
(c) Hypothecation and Pledge.
(d) Pledge and Assignment.

III. In your opinion is Trustworthy a standard asset or a substandard asset?
(a) Though it is due for 90 days, it is 100% secured so it is a standard asset.
(b) Since it is due for 90 days, it is a substandard asset irrespective of the security.
(c) Since it is not due for more than 90 days, it is a standard asset irrespective of the security.
(d) Since it is not due for more than 90 days and it is 100 % secured, it is a standard asset.
IV. Is Super40 correctly classified as a standard asset?
(a) Yes, since the recoveries in both term loan and cash credit were regular and outstanding
balance in the cash credit was less than the sanctioned limit.
(b) No, since the outstanding balance of the cash credit facility exceeded the drawing power for
more than 90 days, so both the advances, that is, the term loan and cash credit facility will be
classified as NPA.
(c) No, since the outstanding balance of the cash credit facility exceeded the drawing power for
more than 90 days, the cash credit facility will be classified as NPA and term loan as standard.
(d) Yes, since the recoveries in both term loan and cash credit were regular, there is no relevance of
sanctioning power/drawing power.
V. Which among the following is a non- funded loan?
(a) Demand Loans
(b) Bills Discounted and Purchased
(c) Letter of Credit
(d) Participation on Risk Sharing basis

62 (N22M)

GSR & Company have been appointed as the statutory auditors of Raj Textiles Ltd. for the FY 2021-22.
The engagement partner, CA Rahul Dhawan established the overall audit strategy and made the detailed
plan with respect to the audit assignment of Raj Textiles Ltd. after discussing the same with the
engagement team.

The strategy adopted by GSR & Company consisted of relying on the internal control system of the
company and the audit plan and program were developed accordingly and the audit team started to
work in accordance with the developed audit plan and program. During the course of audit, the
engagement partner, CA Rahul Dhawan found that some internal controls implemented by the company
were not operating effectively. So,he decided not to rely on the internal control system of the company
& accordingly changed the overall audit strategy, audit plan & audit program.

While conducting the audit, the engagement partner also discussed with his team regarding the audit
procedures to be performed to verify the debtors’ balances of the company. CA Rahul Dhawan asked
for the addresses of various debtors from the management of Raj Textiles Ltd. for the purpose of sending
balance confirmation request to such debtors. The management provided such addresses to the audit
team. However, the management of Raj Textiles Ltd. asked the debtors to send the responses of such
confirmation requests to General Manager of accounts department of the company, who will in turn
provide such responses to the audit team.

Further, the audit team found that a legal case has been filed against the company on account of
customer complaint. CA Rahul Dhawan discussed with his team regarding the audit procedures that can

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