Page 98 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(a). AS 18
(b). AS 28
(c). AS 26
(d). AS 10"
V. " The following expenditure should not be capitalized with respect to the intangible assets:-
(a). Expenditure during Development Phase.
(b). Expenditure during Research Phase.
(c). None of the above.
(d). Both a & b."

14
"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 the 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 out 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 sale was 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). Adverse
(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?
(a). Issue Qualified Opinion
(b). Issue Adverse Opinion
(c). Mention the fact of change in method in Emphasis of Matter Paragraph
(d). Issue Disclaimer of Opinion"
IV. " When the Auditor, after conclusion of an Audit exercise, is of the opinion that there are material
misstatements in the Financial Statements, but they are not pervasive, then what should an
Auditor do?
(a). Issue Unmodified Opinion
(b). Issue Qualified Opinion
(c). Issue Disclaimer of Opinion

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