Page 155 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
be performed by the audit team to verify the implications of such litigation on the financial statements
of the company.

One of the audit team members, Mr. Girish had the following understanding with respect to the audit
file to be maintained by the audit team with respect to the audit assignment:

Point no. 1: The completion of assembly of final audit file after the date of the a uditor’s report is an
administrative process involving the performance of new audit procedures or drawing of new
conclusions.

Point no. 2: After the assembly of the final audit file has been completed, the auditor shall not delete or
discard audit documentation of any nature before the end of its retention period.

CA Rahul Dhawan briefed his engagement team regarding the documents to be included in the audit file
with respect to the audit assignment of Raj Textiles Ltd. and also discussed with his team in detail
regarding the various aspects of audit file
I. Is CA Rahul Dhawan right in changing the overall audit strategy and plan after the audit team has
started working as per the earlier strategy established & plan so developed?
(a) CA Rahul Dhawan is not right as once the audit team has started the audit work, it is not correct
to change the audit strategy and plan.
(b) CA Rahul Dhawan is not right as once the overall audit strategy has been established the same
cannot be changed. Audit plan however can be revised.
(c) CA Rahul Dhawan is right in making changes to the overall audit strategy and the audit plan.
(d) CA Rahul Dhawan can change the overall audit strategy and audit plan only after taking due
permission from the management of Raj Textiles Ltd.
II. Which of the following audit procedures should the audit team perform with respect to verification
of debtors’ balances?
GSR & Company can compare the debtors’ balance reflected in financial statements with invoices,
debit notes, credit notes, monthly accounts statement sent to the customers.
(b) GSR & Company can obtain direct balance confirmation from the debtors as this is external
evidence which is most reliable and relevant.
(c) GSR & Company can obtain management representations with respect to the debtors’ balances
from the management of ABC Ltd and need not perform other audit procedure as obtaining written
representation from management constitutes sufficient and appropriate audit evidence.
(d) Both a & b.
III. Is management correct in asking the debtors to provide the reply of confirmation request directly
to the General Manager of accounts department of the company?
(a) Yes, the management has correctly asked the debtors to respond directly to the GM of accounts
department.
(b) No, management is not correct in asking for a direct response to GM of accounts department as
external confirmation is the response obtained directly by the auditor.
(c) Yes, the management is correct in advising direct response to the GM of accounts department as
this will ensure that only correct confirmation is provided to the auditors.
(d) No, management is not correct as this is the option of the auditor to see if the response to external
confirmation is to be obtained by management or auditor himself.
IV. For confirming/verifying the litigation going against the company which of the following audit
procedures is not correct??
(a) GSR & Company can enquire the management including in house legal counsel.
(b) GSR & Company should review the minutes of meetings of those charged with governance.
(c) GSR & Company can review the legal expense account.
(d) GSR & Company need not perform audit procedures with respect to litigation claims of the
company except for obtaining written representation from the management in this regard.
V. Is the understanding of Mr. Girish regarding the assembly of audit fi le with respect to an audit
assignment, mentioned as point no. 1 & point no. 2 in the case scenario, correct?

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