Page 95 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(d). Whether those charged with governance oversee employment decisions related to internal audit
function."

9 (M20R)
"M/s JK & Associates have been appointed as auditors of Venus Ltd. for the financial year 2019-20. The
team consist of Mr. J & Mr. K both Chartered Accountants as also the engagement partners and the
audit staff consisting of 2 article assistants. While starting the audit work of Venus Ltd, the engagement
partners briefed the audit staff about the audit work, areas to be covered and the various auditing
concepts and their application in the audit of Venus Ltd along with applicable Standard on Auditing.

Various topics like audit planning, overall audit strategy, audit programme was discussed in detail. The
team was told about the purpose and implication of various statements and guidance notes issued by
the Institute of Chartered Accountants of India (ICAI) from time to time. Mr. K also briefed the team
about the concept of materiality to be applied while planning and performing audit. The team was also
explained in detail about the area where benchmark materiality can be applied in case of Venus Ltd.
Based on the above facts, answer the following:-"
I. " .........sets the scope, timing & direction of the audit and guides the development of the more
detailed plan.
(a). Audit Programme
(b). Overall Audit Strategy
(c). Completion Memorandum
(d). Audit Plan"
II. " Statement 1: The establishment of the overall audit strategy and the detailed audit plan are not
necessarily discrete or sequential process but are closely inter-related.
Statement 2: The auditor shall establish an overall audit strategy that guides the development of
audit plan.
(a). Only Statement 1 is correct
(b). Only Statement 2 is correct
(c). Both Statements 1 & 2 are correct
(d). Both Statements 1 & 2 are incorrect"

Author’s Note : ICAI answer is “a” but correct answer is “c”.

III. " ……… means the amount set by the auditor at less than materiality for the financial statements
as a whole to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatement exceeds materiality for the financial statements as a
whole :-
(a). Benchmark Materiality
(b). Materiality in Planning
(c). Performance Materiality
(d). Materiality."

Author’s Note : ICAI answer is “d” but correct answer is “c” as per SA 320.

IV. " Which of the following is not an example of benchmark that can be used in determining the
materiality in the case of financial statements:-
(a). Total Revenue
(b). Profit before tax
(c). Net Asset Value
(d). None of the above"
Author’s Note : All the three options a, b & c are examples of benchmark for materiality as per SA 320. So
correct answer is “d” but ICAI has given “b”.
V. (i)Guidance notes issued by ICAI provide guidance to members on matters which may arise in the
course of their professional work.
(ii)Statements are issued by ICAI with a view to secure compliance by members on some matters.
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