CA Vikalp Gupta
PRACTICAL
QUESTIONS
For Jan’26 Attempt
Audit in Simplified Way!
CA Vikalp Gupta
Practical Questions
Audit Sampling- SA 530
Q. You are auditing Pristine Retail World Ltd., a national multi-store retail chain where inventory
constitutes over 60% of total assets. Due to the extremely high SKU volume, fluctuating selling
prices, and frequent seasonal markdowns, the audit team applied Sampling approach to test
valuation and existence of inventories. The total inventory carrying amount as per books is ₹
18,750 lakh, and based on audit risk assessment the auditor established a sampling of ₹ 1,000
lakh, resulting in 40 monetary units selected for detailed testing.
During the examination, the auditor detected only two misstatements. In one case, one inventory
recorded at ₹ 25 lakh was found to have an audited value of ₹ 17 lakh, because management
had not updated the pricing file for seasonal discounts and also failed to record the NRV
reduction required under Ind AS 2. In the second case, a inventory with a book value of ₹
31.50 lakh related to a discontinued product line; management wrote off the related stock after
year-end but did not adjust the financial statements, and the auditor determined that the
audited value was ₹ 0. Management asserts that this second error is exceptional and non-
representative.
A factual misstatement of ₹ 32 lakh relating to unrecorded goods in transit was detected outside
the population. The auditor has set Tolerable Misstatement for inventory at ₹ 190 lakh.
(a) Compute the Projected Misstatement for the population based on the detected misstatement.
(b) Compute the Total Likely Misstatement of inventory.
(d) Assess the impact while comparing with Tolerable misstatement and briefly state the audit
implication.
CA Vikalp Gupta
CARO 2020
Q. During the audit, CA Kunal found that physical verification of inventories of the company has
been conducted by management at regular intervals. The following is a summary of inventory as
per physical verification conducted by management vis-à-vis its books of accounts as at the
year-end: (RTP May’25)
Particulars As per physical verification (₹ As per books of accounts (₹
in crores) in crores)
Raw material 1,160 1,180
Work-in-progress 410 430
Finished goods 2,500 2,790
Stores and spares 220 180
Total 4,290 4,580
CA Vikalp Gupta
Q. Company A has an opening loan of Rs. 100 and granted 3 more loans of Rs. 200, 300 and 400
during the year. Company extended tenure in respect of two loans (Rs. 100 and Rs. 200) when
fell due for payment. Percentage of the aggregate to the total loans or advances in the nature
of loans granted during the year for purpose of reporting under clause (iii)(e) in the instant case
would be
Q. M/s Pragati Systems Pvt. Ltd., an unlisted company, was sanctioned a Term Loan of ₹ 25
crore by Apex Bank Ltd. on 10th January 2025.
The sanction letter stated the following end-use conditions:
“The Term Loan shall be utilised exclusively for:
(a) Repayment of unsecured loans taken from promoters – ₹ 8 crore
(b) Construction and development of a new corporate office at Noida, Uttar Pradesh
(excluding land cost) – ₹ 12 crore
(c) Purchase of IT infrastructure and office equipment for the new office – ₹ 5 crore”
Company has utilized the term loan amount & following are the expenses done by the company
as under:
1. Purchase of land at Noida for proposed corporate office: ₹ 6 crore
2. Civil construction and interior work of new office building: ₹ 10 crore
3. Purchase of IT servers and networking equipment installed at the existing registered
office in Delhi: ₹ 3 crore
4. Repayment of unsecured loans:
o Promoters: ₹ 5 crore
o Directors’ relatives: ₹ 2 crore
5. Advance paid to contractor for office construction (adjustable against future bills): ₹ 2
crore
6. Investment in fixed deposit with the same bank pending utilization: ₹ 1 crore
7. Payment towards stamp duty and registration charges of land purchased: ₹ 1 crore
As statutory auditor of M/s Pragati Systems Pvt. Ltd, identify the aggregate amount which
shall be reported under clause (ix) of Para 3 of CARO, 2020 on account of utilisation of term
loans for the purpose other than for which they were obtained?
CA Vikalp Gupta
CA Vikalp Gupta
Professional Ethics- Chapter IX
Q. M/s Verma & Khanna, a Chartered Accountant firm, has been appointed as the statutory auditor
of Z Ltd., a public company with a turnover of ₹50 crore. For the current financial year, the
statutory audit fee has been fixed at ₹50 lakh. During the course of the year, as Z Ltd.
expanded its operations, the company engaged the audit firm for several additional assignments.
In parallel, an associate firm of Verma & Khanna was also approached by Z Ltd. for certain
professional services.
The following additional assignments were received by Verma & Khanna:
1. Conducting the Tax Audit under the Income-tax Act – ₹12 lakh
2. Issuing various statutory certifications required under company law– ₹5 lakh
3. Conducting training programmes for development of personnel – ₹25 lakh
Further, the associate firm was engaged for the following services:
4. Representing Z Ltd. before tax and regulatory authorities in ongoing proceedings – ₹10 lakh
5. Management Consultancy services – ₹18 lakh
Evaluate whether the he will be guilty of professional misconduct for accepting statutory audit?
CA Vikalp Gupta
Bank Audit
Q. Citywide Bank Ltd. maintains various foreign currency assets and liabilities as part of its treasury
operations. As per regulatory requirements, the bank is required to convert these balances into
INR for maintenance of CRR/SLR. Given are the following assets:
• USD 4,500
• GBP 7,000
• EUR 1,000
• AUD 2,200
• CAD 1,000
FBIL Reference Rates: Market Rates:
• INR/USD = ₹84 INR/EUR: 74
• INR/GBP = ₹100 INR/CAD: 60
New York Closing Rates:
• 1 USD = 1.20 EUR
• 1 USD = 1.50 AUD
• 1 USD = 1.40 CAD
• 1 USD = 0.80 GBP
CA Vikalp Gupta
NBFC
Q. Aurum Finance Ltd. is a non-deposit taking non-banking financial company having assets size of
₹900 Crore, registered with the Reserve Bank of India and governed by the Scale Based
Regulation Directions, 2023 having T1 capital of ₹ on 31st March 2024. The summarized
financial information of the Company as at 31 March 2025 is as under:
(A) Composition of Financial Assets
Particulars Amount (₹ crore)
Loans secured by pledge of gold jewelry 350
Unsecured personal loans 50
Loans against shares 100
Other financial assets 50
Total Financial Assets 550
(B)Calculation of NBFC Owned Fund
Particulars Amount (₹ crore)
Equity share capital 180
Share premium Account 55
Preference share which is compulsory convertible 50
General reserve 48
Capital reserve (arising from sale of land) 14
Revaluation reserve 60
Deferred Revenue Expenditure 20
Net Deferred Tax Assets 10
(c) Other Points to Consider
Particulars Amount (₹ crore)
Investment in equity shares of NBFC (other than
40
subsidiary)
Loans and advances to group companies 70
Deposits with subsidiary company 30
Perpetual debt instrument 60
General provisions on standard assets 15
Preference shares (non-convertible, redeemable after
45
6 years)
Subordinated debt 80
Hybrid debt capital instruments 25
Risk weightage assets of on balance sheet & adjusted value of off-balance sheet items are: ₹
720 Crore
You are required to calculate: Whether it complies with the minimum capital requirement as per
RBI prudential norms.
CA Vikalp Gupta