Page 177 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a) She is establishing audit strategy.
(b) She is conducting preliminary engagement activities.
(c) She is designing audit plan.
(d) She is checking her compliance of ethical requirements.
VII. Consideration of number and location of branches, requirements of financial reporting
framework and expected time of completion are relevant factors primarily for which of the
following -
(a) Developing audit plan
(b) Establishing overall audit strategy
(c) Designing audit programme
(d) Designing risk assessment procedures
VIII. Taking into account description of planned inquiry and visit, which of the following statements is
TRUE?
(a) Planned inquiry and visit fall in area of audit strategy.
(b) Planned inquiry and visit are planned risk assessment procedures and fall in field of audit
plan.
(c) The said description is not related to audit planning.
(d) Planned inquiry and visit fall in scope of audit programme.
IX. What is detailed set of instructions given to assistants in engagement team known as?
(a) Audit guidelines
(b) Audit plan
(c) Audit Programme
(d) Audit Procedures
X. The issue of generation of scrap has been overlooked in detailed set of instructions given to
engagement team. What should be proper course of action by CA Simran Kaur?
(e) She should ignore this information as audit has already begun.
(f) She should modify earlier set of instructions.
(g) She should leave the matter to wisdom of engagement team.
(h) She should put the ball in court of management as she was not provided with complete
information earlier

Chapter 03

80 (SM23)
CA Paritosh is auditor of a company. The financial statements of the company have just been received
for audit. Following issues have been flagged pertaining to the financial statements of the company for
purpose of risk assessment: -
i. The revenue of company has fallen from ₹ 50 crore in last year to ₹ 5 crore in current year (for
which financial statements have been received for audit) due to lack of demand in the market
for company’s products.

ii. Due to advent of new products in the market, company’s products are fast becoming outdated.
iii. A large customer having an outstanding balance of ₹ 5 crore has failed to pay to the company
despite efforts made by the company.
iv. Inventory holding period has increased from 30 days in last year to 90 days.
v. The company also gets carried out job operations from third parties. Therefore, parts of
inventories are lying with third parties.
I. Regarding drastic fall in revenue of the company, which of the following is an audit risk?
(a) Fall in revenue would result in fall of profits for the company.
(b) Drastic fall in revenue may imply that company is not able to carry out its operations in
foreseeable future due to lack of demand in the market for company’s products. There is a
risk that going concern disclosure is omitted to be made in financial statements.
(c) The company can explore some new line of activity, if demand of its products is falling.
(d) Fall in revenue would mean lower tax liabilities for the company.
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