Page 172 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
I. After studying description of the company and its nature of operations, which of following
statements is most appropriate?

(a) Inherent risk for revenue and profit assertions is likely to be lower.
(b) Inherent risk for revenue and profit assertions is likely to be higher.
(c) Inherent risk for revenue and profit assertions cannot be assessed from given situation.
(d) There does not exist inherent risk for revenue and profit assertions in described situation.
II. The case scenario describes a situation of leaving of experienced faculties, high employee
turnover and absence of training programmes for staff of the company. Such indicators are an
example of ?
(a) Unsatisfactory risk assessment process used by the company
(b) Unsatisfactory control environment of the company
(c) Unsatisfactory performance reviews carried out by the company
(d) Unsatisfactory system of segregation of duties in the company
III. The auditor is planning to test company’s system for booking revenue in its books of accounts.
Identify the correct statement in this regard: -
(a) He is likely to place greater reliance on controls relating to booking of revenue.
(b) He is likely to place lower reliance on controls relating to booking of revenue.
(c) Reliance placed by him on controls relating to booking of revenue would be unaffected due
to reduction in contractual costs by company.
(d) Reliance placed by him on controls relating to booking of revenue would be unaffected due
to shrinking number of aspirants.
IV. The auditor has increased area of “substantive checking” in the company. It is due to the reason
that
(a) he wants to lower detection risk
(b) he wants to lower control risk
(c) he wants to raise sample risk
(d) he wants to lower inherent risk
V. The auditor does not want to suffer from probable adverse publicity or loss of professional
goodwill. Such a situation is indicative of ?
(a) audit risk
(b) auditor’s business risk
(c) auditor’s detection risk
(d) non-sampling risk

76 (N23M)
You are a partner in ABC & Company, a firm of Chartered Accountants based in New Delhi. ABC &
Company have been appointed as the statutory auditors of Onetime Limited, a public company which
manufactures and sells wall and table clocks and has many branches all over India. Onetime Limited has
been exporting the clocks since past two years. However, the domestic sales have contributed towards
major source of revenue for the Company.

One of the team members, CA B noticed that one of the suppliers of Onetime Limited, Mr AM had sent
some raw material to the Company for storage in their warehouse in March 2023. Due to renovation
going on at his warehouse, his stock could be damaged and so he had requested Onetime Limited to

keep the same in their warehouse. Onetime Limited contended that since the raw material was anyway
billed to the Company the next month, so the same had been included in the valuation of stock, since
physically the stock was present in the warehouse of Onetime Limited as on 31.03.2023.

While verifying the debtors, team member C noticed that there were a few trade receivables pertaining
to export sales mainly to England. Mr. C verified the same with respect to the invoices issued and other
supporting documents. The amount booked as on 31.03.2023 was based on the exchange rate as on the
date of the invoice.

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