Page 176 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(c) CA P can assist management in preparation of financial statements of the company and he
can issue a compilation report in this respect.
(d) The responsibility of preparation of financial statement is of company's management. CA P
cannot assist management in preparation of financial statements of the company. However,
he can issue a review report.
III. In the above said scenario for issuance of signed financial statements for half year by CA P, as
discussed in last para of Case Study, identify the MOST APPROPRIATE statement: -
(a) Standard on Quality control (SQC 1) is not applicable as CA P cannot issue audit report.
(b) Standard on Quality Control (SQC l) is not applicable as CA P cannot issue review report.
(c) Standard on Quality Control (SQC 1) is applicable in such type of engagement.
(d) Standard on Quality Control (SQC 1) is not applicable as CA P is barred from issuing any report
in such type of engagement.
IV. The banker of company has also requested for projected financial statements for coming years
along with a report from CA regarding these projections to consider request of management.
Which of the following standards issued by ICAI are relevant for CA P in such a situation, if any?

(a) Standards on Review Engagements
(b) There are no standards for issuing such type of reports.
(c) Standards on Related Services
(d) Standards on Assurance Engagements
V. Suppose CA P also accepts work of issuing projected financial statements with a report to be
signed by him. The management has projected turnover of ?700 core for the next year, ?150 crore
& ?200 crore for following years respectively as compared to present turnover of ?25 crore in
current half year. Identify the MOST APPROPRIATE statement in this situation: -
(a) CA P has to satisfy himself regarding arithmetical accuracy of projected data.
(b) CA P has to satisfy himself regarding reasonableness of assumptions underlying projected
turnover and its consistency with actuals.
(c) CA P has to satisfy himself regarding arithmetical accuracy of data along with its proper
presentation to banker.
(d) CA P has to satisfy himself regarding reasonableness of assumptions underlying projected
turnover, its consistency with actuals, disclosure and presentation.

Chapter 02

79 (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.
VI. 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?

www.auditguru.in 170 | P a g e