Page 175 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
IV. All of them also discussed about benefits of auditing. Which of the following is not a likely benefit
of auditing?
(a) Since auditing is connected to future events, audited information can be easily relied upon
by users.
(b) Errors or frauds may be discovered during audit.
(c) Government authorities can make use of audited accounts for different purposes.
(d) It can help in bringing out deficiencies in maintenance of financial records.
V. Goreti told her friends that she had read a news report about how a company had misled its
auditors by producing some fabricated documents. Which of following statements seems to be
appropriate in this regard?
(a) It was wrong on the part of auditor to rely upon fabricated documents. He must have
discovered it as the same falls within the scope of his duties.
(b) Although it was wrong on the part of auditor to rely upon fabricated documents, he cannot
do anything in the matter. He has to report on the basis of documents provided to him. He
has no duty in this regard.
(c) Auditor has to conduct audit by exercising professional skill. But he is not an expert in
discovering genuineness of documents. Hence, management consisting of dishonest persons
may have led him to rely upon fabricated documents deliberately.
(d) Management cannot mislead auditor due to high level of knowledge and expertise
possessed by him. The above is an outlier case-one of the rare, odd cases.

78 (SM23)
Me and You Private Limited has been newly incorporated. The plant of the company has recently started
production with the help of funds provided by a bank for purchase and installation of machinery.
Further, the company is also utilizing working capital credit facilities from the same bank for meeting its
day to day working capital requirements like for purchase of raw materials, labour payment etc.
However, just within six months of its operations, the management feels that working capital funds are
inadequate and situation is creating liquidity issues in the company.

The management of the company has approached its bankers and requested for enhancement in
working capital credit facilities. The bank manager is insisting upon financial statements of the company
for half year along with report providing assurance in this respect duly signed by Chartered Accountant

as audit is far away. It also requires projected financial statements for coming years along with a report
from CA providing assurance regarding these projections to consider request of management.

The management approaches CA P, who has qualified recently and started practising. Reports providing
assurance for half yearly results and projected financial statements are sought from CA P. The
Management provides necessary information and records to him in this regard.

Assume, in above case, the company only provides trial balance, financial statements in
draft/preliminary form along with accompanying records for the relevant half year to CA P and requests
him to provide duly signed financial statements with a report for mutually agreed professional fees.
I. The management of company has engaged CA P to issue a duly signed report for half year. Which
of the following standards, if any, issued by ICAI are relevant for CA P?

(a) Standards on Review Engagements
(b) Standards on Auditing
(c) Standards on Related Services
(d) There are no standards for issuing report in such situation.
II. Which of the following statements is MOST APRROPRIATE in given case situation?
(a) CA P can assist management in preparation of financial statements of the company.
However, issue of a report in such a case is outside the scope of work.
(b) CA P can assist management in preparation of financial statements of the company and he
can issue an audit report.

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