Page 163 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
III. Negative confirmation requests require the third party to respond in the following cases : -
(a) If there is agreement
(b) If there is disagreement
(c) In both cases of agreement as well as disagreement
(d) None of the above.
IV. Statement 1:- A failure of the confirming party to respond, or fully respond to a positive
confirmation request or a confirmation request returned undelivered is a case of Non Response.
Statement 2:- A response that indicates difference between information requested to be confirm
ed and contained in entity’s records and information provided by the confirming part is a case of
Exception.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both Statement 1 & 2 are correct
(d) None of Statement 1 & 2 is correct
V. Which of the following is correct so far as the related party transactions are concerned: -
(i) Many related party transactions are in the normal course of business.
(ii) Related party transactions may not be conducted under normal market term and conditions.
(iii) In some circumstances, related party transactions may give rise to higher risks of material
misstatement.
(a) only (i) is correct
(b) (i) & (iii) are correct
(c) (i), (ii) & (iii) are correct
(d) (i) and (ii) are correct

69. (M23M)
Aastha Ltd. has published its audited financial statements for the year ended 31st March 2023. A
shareholder of Aastha Ltd. raised a point to the promoter of the company ques toning the authenticity
of the financial statements. The Management of the Company conveyed the shareholder that the same
have been audited by a Chartered Accountant as per the provisions of Companies Act,2013.

The same shareholder then noticed that in the last year’s financial statements, there was a disclosure
regarding a legal dispute with its competitor. But in the current year’s financial statements, there is
neither such disclosure nor there is any update on the resolution of the dispute. However, the
management did not give any convincing answer regarding lack of disclosure in current year’s financial
statements.

The Management also revealed in the meeting that there were few fictitious vendors to whom
payments worth ₹ 50 lakhs were made by an employee who has been suspended from the office with
immediate effect and a case to that effect has been filed in the court of law. The same has also been
appropriately disclosed in the financial statements. The Company transferred ₹ 75 lakhs from current
year’s profit to asset replacement reserve for making another building for the operations of the
company
I. The financial statements audit is a report by the auditor:
(a) attesting to the truth and fairness of presentation of the financial statements and related
disclosures.
(b) attesting to the truth and fairness of presentation of the financial statements.
(c) attesting to the truth, transparency and fairness of presentation of the financial statements
and related disclosures.
(d) attesting to the truth, completeness and fairness of presentation of the financial statements
and related disclosures.
II. Non-disclosure of the legal dispute with the competitor of Aastha Ltd.is:
(a) Misappropriation of assets
(b) Recording fictitious Journal Entries
(c) Manipulation of accounts
www.auditguru.in 157 | P a g e