Page 159 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(c) The extensive use of IT systems in CBS environment substantially reduces need to assess
inherent and control risks.
(d) Low level of branch staff sensitisation to the control expectations of management requires
fewer audit procedures.
V. With regards to audit documentation, consider the following: -

(P) NOC from previous auditor
(Q) Management certified trial balance of branch for year under consideration
(R) KYC verification details
(S) Latest RBI master directions/circulars

Which of the following statements is correct as regards to audit documentation?
(a) Only documents stated at Q and R form part of audit documentation.
(b) Only documents stated at Q, R and S form part of audit documentation.
(c) Only documents stated at Q and S form part of audit documentation.
(d) All documents stated at P, Q, R and S form part of audit documentation.

65 (M23R/SM23)
Kaur & Associates, a sole proprietor firm of Simran Kaur, is offered appointment as auditor of a company
engaged in manufacturing of automobile components for the first time. She is fact checking about the
integrity of promoters of the company and key managerial persons. Matters such as competence of staff
to perform the engagement are also considered by her. The appointment is subsequently accepted by
her.
She is also taking into account number and location of branches of the company, requirements of
Schedule III of Companies Act, 2013 and expected time by which audit has to be completed keeping in
view statutory requirements. Initially, she has thought it proper to inquire key employees of the
company in procurement and marketing departments and planned for the same. She has also planned
to visit three plants of the company. The purpose of planned inquiry and visit is to identify and assess
risk of material misstatements.
A detailed set of instructions has been prepared by her office and it has been handed over to assistants
in engagement team. These set of instructions include details of extent of checking and nature of audit
procedures to be performed regarding purchases, sales, items of income, items of expenditure etc.
During the course of execution of above set of instructions, it has been brought to her notice that
company is also producing substantial quantities of scrap generated during manufacturing process.
However, no instructions have been given to engagement team in this regard.
I. Auditor is fact checking about promoters and key managerial persons. She is also considering
competence of staff to perform engagement. What is she trying to do?
(a) She is establishing audit strategy.
(b) She is conducting preliminary engagement activities.
(c) She is designing audit plan.
(d) She is checking her compliance of ethical requirements.
II. Consideration of number and location of branches, requirements of financial reporting
framework and expected time of completion are relevant factors primarily for which of the
following -
(a) Developing audit plan
(b) Establishing overall audit strategy
(c) Designing audit programme
(d) Designing risk assessment procedures
III. Taking into account description of planned inquiry and visit, which of the following statements is
TRUE?
(a) Planned inquiry and visit fall in area of audit strategy.
(b) Planned inquiry and visit are planned risk assessment procedures and fall in field of audit
plan.
(c) The said description is not related to audit planning.

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