Page 93 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(b). report the matter to the audit committee constituted under section 177 within such time and in
such manner as prescribed.
(c). report the matter to the audit committee constituted under section 177 and also to the Board
within such time and in such manner as prescribed.
(d). report the matter to the Board within such time and in such manner as prescribed."
IV. " Owing to the _______ limitations of an audit, there is _________ risk that some material
misstatements of the financial statements will not be detected, even though the audit is properly
planned and performed in accordance with the SAs.
(a). Inherent, unavoidable
(b). Inherit, complete
(c). Management, unavoidable
(d). Regulatory, control"
V. " As an auditor what conclusion can Mr Laxman draw looking at the huge cash reserve of the
company and corresponding bank loan? #Unique
(a). Report this matter to the Central Government u/s 143(12) as there is a possibility of fraud
(b). Obtain sufficient and appropriate audit evidence of existence of fraud
(c). Report the matter under CARO, 2020
(d). There is nothing to report as it’s a normal financial decision"

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"Consumer needs directly to the customer. They are in the process of appointing an audit firm for the
audit of their accounts for the financial year 2019-20. Moon Group is a South Indian based consumer
store having a total of 16 outlets across 4 cities in South India.

Sumant & Co. is appointed as the principal auditor for the entire group. Companies Act 2013 prescribes
in detail the terms of this audit engagement. Further, there are many branch auditors appointed for the
outlets in the other citiFes. The company also has an internal audit function conducted on quarterly
basis by Ram & Co. Following are the observations during the course of the statutory audit:
a. One of the discounts offered by the store is in the form of payback cards where reward points are
accumulated, and the customer can redeem the same on subsequent purchase. The management
and internal auditors are of the opinion that the points redeemed are to be treated as trade
discount. The external auditors are doubtful on the matter.
b. One of the outlet in Chennai region is in the verge of getting closed and is only left with low value
stock to be cleared before closure. During the year, the sales were only around ` 1,40,000/- and
the auditor considers this component immaterial. All other outlets are performing well with good
revenue share.
c. The gratuity valuation of the employees of the retail chain is done by an external valuer. The
auditor, considering the quantum involved appoints an external auditor’s expert for the
verification of the actuarial calculation of gratuity.

From the above facts, answer the following questions by choosing the correct answer:"
I. " As per SA 210 – Agreeing the Terms of Audit Engagement, which of the following statement is
correct?
(a). Though law prescribes in sufficient detail the terms of the audit engagement, the auditor still
needs to record them in a written agreement and also seek written agreement from management
that it acknowledges and understands that it has responsibility for the preparation of financial
statements.
(b). Since law prescribes in sufficient detail the terms of the audit engagement, the auditor need not
record them in a written agreement except for the fact that law or regulation applies and also
seek written agreement from management that it acknowledges and understands that it has
responsibility for the preparation of financial statements.
(c). The auditor has to take an extract of the law prescribing the details of the terms of the audit
engagement and obtain the counter signature of the management in it.
(d). Though law prescribes in sufficient detail the terms of the audit engagement, the auditor still
needs to record them in a written agreement, however it need not seek written agreement from

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