Page 186 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a) It is reasonable for the auditor to accept such wording if the auditor is satisfied that the
representations are being made by those with appropriate responsibilities and knowledge
of the matters included in the representations.
(b) Written representations should be unconditional. Such a wording is not acceptable.
(c) Such a wording dilutes intent of written representations. However, it can be accepted by
auditor only in exceptional circumstances.
(d) Qualifying language in written representations is compulsory.
V. As regards auditor’s responsibility regarding matters communicated orally with those charged
with governance, which of following is most appropriate?
(a) Matters communicated orally have to be documented by the auditor stating when and to
whom these were communicated.
(b) Matters communicated orally need not be put into writing. It is sufficient for auditor to have
communicated orally.
(c) Matters communicated orally need not be put into writing. It is not practically feasible.
(d) Matters communicated orally have to be documented by the auditor stating to whom these
were communicated

Chapter 08

87 (SM23)
M/s AB & Company is a firm of Chartered Accountants based in Mumbai. Mr. A and Mr. B are the
Partners of the Firm. The Firm is engaged in various assignments including Audits. The partners are
taking a summary of their work in order to prepare themselves to finalize the Audit and issue the audit
report to various clients. You are requested to go through the following and answer the questions that
follow:

• During the audit of M/s Persistent & Co, Mr. A found that the firm has changed the method of
Depreciation from WDV to SLM but has not given the retrospective effect. Mr. A has calculated the
difference of depreciation but M/s Persistent & Co. has stated that they don’t want to change the
financial statements and if auditor persists they may give the effect in the next financial year.

• During the audit of M/s Dubious Brothers, Mr B observed that the firm had a very large amount of
cash sales and there were no details of the customers to whom the sales were made. Further, cash
generated was not even deposited into bank regularly. When Mr. B asked the firm to give him an
opportunity to count cash, the manager of the firm said that the cash is with the owner and it cannot
be made available to the auditor for the checking purpose. The manager also declined to give an
opportunity for stock verification to Mr B.

• During the audit of M/s Honest & Associates, Mr. A came to know that the firm has changed its
method of valuation of stock. This change has a material impact on the financial statement of the
firm. The firm has made relevant disclosures in the financial statements and has given proper
accounting treatment to this exercise.
I. In case of M/s Persistent & Company, what would be an ideal Audit Opinion?
(a) Unmodified
(b) Qualified
(c) Mention the fact in Emphasis of Matter Paragraph
(d) Disclaimer
II. In case of M/s Dubious Brothers, what Audit Opinion should the Auditor give?

(a) Qualified
(b) Adverse
(c) Disclaimer
(d) Unmodified
III. According to you, what would be appropriate course to take in case of M/s Honest & Associates?

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