Page 60 - CA Inter Audit PARAM

CA Ravi Taori
OR
State assertions that are implied in the extract of financial statement given below: (Rs.)
Plant & Machinery (at Cost) 400,000
Less: Depreciation: Up to Previous year 1,40,000
For the year 26,000 1,66,000
2,34,000
(i) Indicate assertions in respect of transactions and events for the period relating to Fixed Assets.
(ii) State specific assertions relating to the above extract of financial statement.

Answer ➢ Assertions about classes of transactions and events for the period under audit:
Occurrence—transactions and events that have been recorded have occurred and
pertain to the entity.
Completeness—all transactions and events that should have been recorded have been
recorded.
Accuracy—amounts and other data relating to recorded transactions and events have
been recorded appropriately.
Cut-off—transactions and events have been recorded in the correct accounting period.
Classification—transactions and events have been recorded in the proper accounts.

➢ The specific assertions are as follows:
the firm owns the plant and machinery;
the historical cost of plant and machinery is Rs. 4 lacs;
the plant and machinery physically exists;
the asset is being utilised in the business of the company productively;
total charge of depreciation on this asset is Rs. 1,66,000 to date on which Rs. 26,000
relates to the year in respect of which the accounts are drawn up; and
the amount of depreciation has been calculated on recognised basis and the calculation
is correct

Significant Risk Old Course --
QNO Bhaskar CNO- SA315-P1.120 (P16M/N17M/M17R/M18R/N18R/N
315.25
19R/N21R/N22M/M23E/N23M)
The auditor may exercise his judgement to identify which risks are significant risks. Explain the above in
context of SA-315.
OR

As part of the risk assessment, the auditor shall determine whether any of the risks identified are, in the
auditor’s judgment, a significant risk. In exercising judgment as to which risks are significant risks, state
the factors which shall be considered by the auditor. Explain the above in context of SA-315.
Answer ➢ Identification of Significant Risks:
SA 315 “Identifying and Assessing the Risk of Material Misstatement through understanding the
Entity and its Environment” defines ‘significant risk’ as an identified and assessed risk of
material misstatement that, in the auditor’s judgment, requires special audit consideration.

As part of the risk assessment, the auditor shall determine whether any of the risks identified
are, in the auditor’s judgment, a significant risk. In exercising this judgment, the auditor shall
exclude the effects of identified controls related to the risk.
In exercising judgment, as to which risks are significant risks, the auditor shall consider at least
the following:
(CFO-CSR)

• Whether the risk is related to recent significant economic, accounting, or other
developments like Changes in regulatory environment, etc., and, therefore, requires
specific attention
• Whether the risk is a risk of Fraud;
• Whether the risk involves significant transactions that are Outside the normal course
of business for the entity, or that otherwise appear to be unusual.

www.auditguru.in 3.15