Page 99 - CA Inter MCQ Book

CA RAVI TAORI CA INTER AUDIT MCQs
(d). Mention it in Emphasis of Matter Paragraph"
V. " When the Auditor concludes that the financial statements are prepared, in all material respects,
in accordance with the applicable financial reporting framework, Auditor shall give:
(a). Modified Opinion
(b). Qualified Opinion
(c). Disclaimer of Opinion
(d). Unmodified Opinion"

15 (M21M/N22M)
"Sun Private Limited is a newly formed private limited company, engaged in the manufacturing of solar
panels. Company has appointed M/s M&S Associates, a Partnership Firm of Mr Meticulous and Mr
Sincere - as their First Auditors. M/s M&S Associates accepted the assignment and Mr Meticulous being
the engagement Partner, started their Audit.

During the course of Audit, Mr Meticulous asked the Management for name of the companies operating
in similar business so that they can compare the Company’s Figures. During this procedure, Mr
Meticulous found that the Gross Margin of the Company is lower than the Industry Standard / Fellow
Companies. He prepared an Interim Report dealing with this matter and asked the Management about
the reasons for this deviation. Management asked him to give all the working along with the Working
Papers as they believed it is the Company’s Property. Mr Meticulous advised them that he can provide
working but cannot give them the working papers as they are the property of the Firm.

Management agreed to that and asked Mr Meticulous to go into detail and tell him the reasons for
lower Gross Margin to which he agreed. During the detailed audit, Mr Meticulous came to know about
the fact that the company dispatched its solar panels to its Distributors on Delivery Challans and once
the goods were accepted, Sales bills were raised. Checking each Challan against Sales Invoices, Mr
Meticulous found that there were many challans for which no Invoices were raised and thus Sales was
grossly understated and there was no mechanism where unbilled Challans were recorded or tracked.
Company employed a person to reconcile all the Challans and prepared a list where Bills are yet to be
sent to the Customers. In addition, Company was also asked to seek Confirmation of Balances from all
its Customers. The Management assured Mr Meticulous that Inventories are physically verified and
hence there will be no impact on them."
I. " Mr Meticulous asked about other Companies, he was intending to perform which audit
procedure?
(a). Analytical Procedures
(b). Substantive Procedures
(c). Random Sampling
(d). Statistical Sampling"
II. " What was the initial procedure carried on by Mr Meticulous?
(a). Trend Analysis
(b). Ratio Analysis
(c). Statistical Modelling
(d). Random Sampling"
III. " Who has the right to retain the audit working papers of the Company in current case?

(a). Audit Committee
(b). Board of Directors
(c). Auditor
(d). Chairman of the Audit Committee"
IV. " When Mr Meticulous decided to go in detail checking of Sales, which Audit Procedure he applied
to obtain the evidence? #Unique
(a). Test of Transactions
(b). Test of Balances
(c). Both (a) and (b)
(d). Analytical Procedures"
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