Page 190 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
to pursue MBA (finance) from one of leading institutions.

During initial discussions, it transpires that company is going to launch new services in the field of
“weather-forecasting”. Such services would be available on web site of company and micro weather
information would be available on payment of charges. The company requests audit firm to be visibly
associated with their marketing blitz.

Assume that firm choses to accept the offer and writes to previous auditor, Walker & Co., to advise
whether there exist any professional reasons for them not to accept the proposed offer. However,
Walker & Co. do not reply to the request of Das & Co.

During preliminary discussions, it also became known that the said company has acquired all shares of
another company. Under relevant provisions of law, financial statements of both companies needed to
be consolidated and audited. Despite this knowledge, Das & Co. failed to advise their client regarding
audit of consolidated financial statements.

The company also offers auditors contract for providing IT services pertaining to information system of
company.
I. Considering discussion about Sukanya and Sushant, which of the following statements seems
most appropriate?
(a) The above discussion is irrelevant in context of proposed offer.
(b) The proposed offer should be accepted by firm. The engagement team may be headed by CA
Sukanya for better coordination and results.
(c) The proposed offer should be accepted by firm. The engagement team may be headed by a
different partner of the firm.
(d) The matter is too trivial to be reported by CA Sukanya to other partners of firm.
II. Keeping in view request of the company to be visibly associated with company’s new services,
identify which type of threat is being faced by audit firm.
(a) Self-interest threat
(b) Familiarity threat
(c) Self-review threat
(d) Advocacy threat
III. The previous auditors, Walker & Co., have not replied to communication of Das & Co. Which
fundamental principle of professional ethics is not followed by them?
(a) Objectivity
(b) Professional behaviour
(c) Professional competence and due care
(d) Integrity
IV. Das & Co. have failed to advise the company regarding audit of consolidated financial statements.
Which fundamental principle of professional ethics is violated by Das & Co.?
(a) Professional behaviour
(b) Integrity
(c) Objectivity
(d) Professional competence and due care
V. Which of the following statements is most appropriate regarding providing offer of work of IT
services by auditors to the company?
(a) Such offer may create a self-review threat.
(b) Such offer may create an advocacy threat.
(c) Such offer does not constitute any threat.
(d) Such offer may create self-review and advocacy threats.

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