Page 170 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a) Losses reflected in statement of profit and loss for year 2022-23 and 2021-22 are required to
be reported under CARO, 2020.
(b) Loss reflected in statement of profit and loss for year 2022-23 is alone required to be reported
under CARO, 2020.
(c) There is no requirement to report losses reflected in statement of profit and loss under CARO,
2020.
(d) The company’s losses reflected in statement of profit and loss in financial year 2022-23 and
2021-22 are less than prescribed percentage threshold limit of paid- up capital. Hence, these
are not required to be reported.

74 (N23M)
Sookrit, a CA student, has decided to participate in “Mega Conference of CA Students” being organized
by Student Skills Enrichment Board, (Board of Studies-Operations), ICAI to be held in a city in South
India. He has decided to try his luck for presenting a paper in one of the technical sessions of the
conference on the topic of “Nature, Objective and Scope of Audit”. He has to first submit for approval a
soft copy of the paper to the competent authority.

While preparing a draft for the presentation, he has included some paragraphs on the topic. Para A
requires filling of certain gaps to explain nature of auditing to prospective audience at the conference.
Para B and C have certain misleading and false statements which need corrections. Para D needs certain
elaborations.

Para A
An audit of financial statements provides ________ assurance to the users of financial statements. It is
a___________ level of assurance but it is not__________ assurance. The auditor has to see effect of
misstatement(s) _______. Misstatements in financial statements can arise due to frauds or ______ or
both.

Para B
Audit of financial statements should be organized adequately to cover all aspects of the entity relevant

to the financial statements being audited. The auditor makes a judgment of reliability and sufficiency of
financial information by making a study and assessment of accounting systems and internal controls.
He also carries out appropriate tests and procedures. Due to professional training and knowledge
acquired by auditor, he can authenticate genuineness of documents. However, he is not expected to
perform duties which fall outside his domain of competence. Auditor is not an official investigator.

Para C
The process of audit suffers from certain inbuilt limitations. Inherent limitations of audit may arise due
to nature of financial reporting, nature of audit procedures and need to strike a balance between
reliability of information and cost of obtaining it. The information being relied upon by the auditor
cannot lose its reliability due to historical nature of financial information presented in financial
statements. However, future events may affect an entity adversely.

Para D
The chief utility of audit lies in reliable financial statements on the basis of which the state of affairs
may be easy to understand. Its basic nature lies in providing assurance i.e., confidence to users of
financial statements. Apart from this obvious utility, there are other advantages of an audit. Some or all
of those are of considerable value even to those enterprises and organizations where audit is not
compulsory.
I. Identify appropriate words to be used in blanks to make the sentences meaningful and relevant
in context of theme of the topic

(a) absolute, high, complete, individually, uncertainties
(b) reasonable, high, complete, in totality, errors
(c) reasonable, moderate, low, in totality, errors
(d) moderate, low, complete, individually, judgments

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