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Monday, July 20, 2009

CA Final June 2009 Question Paper with Hints

1. As an auditor, how would you deal with the following:

(a) In the audit of an Organisation whose objects are charitable or religious, holds that the Accounting Standards are not applicable to it, since only a very small proportion of its activities consist of business in nature (Refer Para 3.5, Chapter 5).

(b) During the audit for the year ended on 31st March, 2009 of XYZ Ltd. you come across certain personal expenses of employees have been debited to Profit and Loss account. (Refer Section 227(1A), Chapter 1)

(c) While conducting the audit of ABC Ltd. for the year ended on 31st March, 2009, you find that the company has disposed off substantial part of the fixed assets, but the management of the company represents to you that they will continue in business. (Refer AAS 11, AAS 16 and Clause 4(i) of CARO)

(d) A Ltd. has not made provisions for proposed dividends in its accounts but proposes to charge the dividends to Profit & Loss account as and when paid. (Refer AS 4 and Schedule VI)

2. Comment on the following with reference to the Chartered Accountants Act, 1949 as amended by the Chartered Accountants (Amendment) Act, 2006 and Schedules thereto:

(a) Mr. B, a practicing Chartered Accountant, expressed his opinion on the financials of M/s ABC Ltd. for the year ended on 31st March, 2009. It was later found that the closing stock was valued arbitrarily by Management which was accepted by him without verification and large amount of revenue expenditure was capitalised. (Refer Part I, Clause 7, Second Schedule)

(b) Mr. A was appointed by H Ltd. to audit the PF trust maintained by the company. While conducting the audit he noticed that large amount of loans have been given out of the trust to the employer company in contravention of the rules of the PF trust. He had disclosed the irregularities to the trustees and to the company but not to the individual subscribers of the PF. When queried on his omission to disclose, he explained that he owed no duty to the individual members.(Refer Part I, Clause 5 & 6, Second Schedule, The audit report is made to trustees and it is for the trustees to forward that report to individual members)

(c) Mr. B was appointed as auditor of XYZ Ltd. in place of Mr. A. Mr. B had sent a letter of communication to Mr. A under certificate of posting and proceeds to conduct the audit. Mr. A makes a complaint to the Institute on the basis of non-receipt of communication. (Refer Part I, Clause 8, First Schedule)

(d) A Chartered Accountant firm pays share in the profits to a widow of its deceased partner. (Refer Part I, Clause 2, First Schedule)

3. (a) State the points in an investigation of frauds through suppliers ledger. (Refer Chapter 10)

(b) State the circumstances that may warrant the introduction of Cost Audit. (Refer Chapter 6)

(c) State your views on reference to an expert in the Auditor’s report (Refer AAS 9)

4. (a) State the internal controls in the area of Loans and Advances of Banks. (Refer Chapter 12)

(b) What shall comprise the auditor’s report of Mutual Funds. (Refer Chapter 18)

5. (a) State briefly the communication/ reporting requirements as per AAS 21 on non-compliance in an audit of financial statement:

(i) To the management

(ii) To the users of the auditor’s report on the financial statements.

(iii) To the regulatory and enforcement authorities (for all parts Refer AAS 21, Q. 4)

(b) State the reporting requirement regarding books of account (prescribed, maintained and examined), in Form No. 3CD of Tax Audit under Section 44AB of the Income Tax Act, 1961. (Refer Form 3CD Clause 9, Chapter 5)

6. (a) State the audit procedures for verification of outstanding premium and agents’ balances of General Insurance Companies. (Refer Chapter 13)

(b) When should an auditor make a disclaimer opinion in his Audit report? (Refer AAS 28)

(c) What are the general principles that propriety audit need to conform? (Refer Chapter 9)

7. (a) “When the computer information systems are significant, the auditor should obtain an understanding of the CIS environment and whether it may influence the assessment of inherent and control risk.” What factors an auditor has to consider in such risk assessment? (Refer AAS 29)

(b) In an operational audit performance evaluation, what factors can cause unsatisfactory production performance? (Refer Chapter 7)

8. Write short notes on any four of the following:

(a) Usefulness of careful and adequate audit planning. (Refer AAS 8)

(b) Verification of Margin Deposit Book in the audit of Members of Stock Exchanges. (Refer Chapter 19)

(c) Professional Negligence. (Refer Part I, Clause 7, Second Schedule)

(d) Purposes for which analytical procedures are used by auditors. (Refer AAS 14)

(e) Unqualified opinion in the context of the Auditor’s report. (Refer AAS 28)

(f) Assessing the reliability of Audit evidence. (Refer AAS 5)

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