CA Inter-Auditing and Ethics CA DEEP JAIN

SR. Chapter Name SA Covered Page

NO No
1 Nature Objective and Scope of SA 200 2-4
Audit
2 Audit Strategy, Planning and SA 300 5-7
Programme
3 Risk Assessment and Internal SA 315 +320+330 8-13
Control
4 Audit Evidence SA500+501+505+510+520+530+550+610 14-23
5 Audit Documentation SA 230 24-25
6 Audit Report SA 700+701+705+706+710+299+CARO 26-29
7 Ethics and Terms of Audit SA 210+220 30-32
Engagement
8 Completion and Review SA 560+570+580+260+265+450 33-36
9 Audit of Banks - 37-39
10 Audit of Items of F.S - 40-44
11 Audit of Different Entities - 45-48
12 Other topics 49-51

1
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 1: Nature Objective and Scope of Audit

Question 1:
Explain clearly meaning of Auditing. How would you as an auditor perform the audit.
OR
An audit is independent examination of financial information of any entity, whether profit
oriented or not, and irrespective of its size or legal form, when such an examination is conducted
with a view to expressing an opinion thereon. Explain stating clearly how the person conducting
this task should take care to ensure that financial statements would not mislead anybody.
OR
"The person conducting audit should take care to ensure that financial statements would not
mislead anybody. Explain stating clearly the meaning of Auditing."
Question 2
Discuss the types of audits required under law.
Question 3
RAG is proprietorship firm engaged in the manufacturing of textile and handloom products. It
sells its finished products both in the domestic as well as in the international market. The
company is making total turnover of Rs. 30 crores. It has also availed cash credit limit of Rs. 5
crores from Canara Bank. In the year 2017-18, proprietor of the firm is worried about the
financial position of the company and is under the impression that since he is out of India,
therefore firm might run into losses. He approaches a CA about advantages of getting his
accounts audited throughout the year so that he may not suffer due to accounting weaknesses.
Advice regarding advantages of getting accounts audited.
OR
What is the importance of having the accounts audited by independent professional auditors?
OR
Advantages of independent audit.
OR
The chief utility of audit lies in reliable financial statements on the basis of which the state of
affairs may be easy to understand. Explain stating the advantages of independent audit.
OR
Having accounts audited by independent auditor, among other advantages, acts as a moral
check on the employees from committing fraud. Explain stating the advantages of independent
audit
Question 4:
Audit is an assurance and not an guarantee. Explain in this Context
OR

2
CA Inter-Auditing and Ethics CA DEEP JAIN

CA P has been appointed as an auditor ox XYZ Limited for the Financial Year 2022-23. After
completing the audit CA P has submitted audit report to the management of XYX Limited, after
receiving report management has questioned that why auditor has not given absolute assurance.
Explain in this context.
Question 5:
Auditing is only interlinked with accounting. Comment
Question 6:
What are the qualities that a Chartered Accountant should possess for conducting audit?
Question 7:
The basic objective of audit does not change with reference to nature size or form of an entity.
Comment
Question 8:
The Purpose of Audit is to enhance the degree of confidence of intended users of Financial
statements. Comment
Question 9:
Standards collectively known as the Engagements Standards issued by AASB under the
authority of the council of ICAI – Discuss.
OR
State the Standards issued by AASB which are collectively known as engagement standards
Question 10:
Standards on Review Engagements (SREs) - to be applied in the audit of historical financial
information.
Question 11:
Explain the overall objective of the auditor as contained in SA 200.
OR
The purpose of an audit is to enhance the degree of confidence of intended users in the financial
statements. This is achieved by the expression of an opinion by the auditor on whether the
financial statements are prepared, in all material respects, in accordance with an applicable
financial reporting framework. Explain stating the objectives of audit as per SA 200.
OR
The purpose of an audit is to enhance the degree of confidence of intended users in the financial
statements. Explain stating the objectives of audit as per SA 200
Question 12:
Distinguish between absolute and reasonable assurance. Identify the type of assurance that is
expected in an audit of the financial statements, clearly outlining the reasons to justify your
point of view.

3
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 13:
Applicable financial reporting framework.
Question 14:
“Professional judgment is essential to the proper conduct of an audit.” Discuss
Question 15:
The auditor shall comply with relevant ethical requirements, including those pertaining to
independence, relating to financial statement audit engagements.
OR
Relevant ethical requirements ordinarily comprise the Code of Ethics for Professional
Accountants (IESBA Code) related to an audit of financial statements. Discuss with reference to
those fundamental principles of professional ethics.
OR
The auditor shall comply with relevant ethical requirements, including those pertaining to
independence, relating to financial statement audit engagements. Relevant ethical
requirements ordinarily comprise the Code of Ethics for Professional Accountants (IESBA
Code) related to an audit of financial statements. The Code establishes the fundamental
principles of professional ethics relevant to the auditor when conducting an audit of financial
statements. Explain
Question 16:
The auditor is responsible for maintaining an attitude of professional skepticism throughout the
audit. Do you agree with the statement?
OR
The auditor shall plan and perform an audit with professional skepticism recognizing that
circumstances may exist that cause the financial statement to be materially misstated. Discuss
any four examples of professional skepticism
Question 17:
The auditor is expected to and can reduce audit risk to zero.

4
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 2: Audit Strategy, Audit Planning and Audit Programme

Question 1:
M & Co. was appointed as auditor of IGI Ltd. As an auditor what are the factors that would be
considered in the development of overall audit plan?
OR
Elucidate the matters to be considered by an auditor in developing his overall plan for the
expected scope and conduct of audit.
Question 2:
Explain the factors an auditor would consider in establishing the overall audit strategy.
OR
Discuss the factors the auditor will consider while establishing the overall strategy
Question 3:
The engagement partner of ABC and associates, firm of Chartered Accountants appointed as
auditor of Fabric India Ltd is considering as to management of key resources to be employed to
conduct audit. Discuss how overall audit strategy would assist the auditor.
OR
The engagement partner of KC & Co., firm of Chartered Accountants appointed as auditor of
Fabric India Ltd is considering as to management of key resources to be employed to conduct
audit. Discuss how overall audit strategy would assist the auditor.
OR
The auditor T of Hand Fab Ltd is worried as to management of key resources to be employed to
conduct audit. Required How the audit strategy would be helpful to the auditor?
OR
"Overall audit strategy sets the scope, timing and direction of the audit, and guides the
development of the more detailed audit plan. The process of establishing the overall audit
strategy assists the auditor to determine such matters as for example - the resources to deploy
for specific audit areas, such as the use of appropriately experienced team members for high risk
areas or the involvement of experts on complex matters. Explain the other three such matters."
OR
Describe how the process of establishing the overall audit strategy assists the auditor in
marshalling his human resources.
Question 4:
The establishment of the overall audit strategy and the detailed audit plan are closely inter-
related. Explain.
OR

5
CA Inter-Auditing and Ethics CA DEEP JAIN

Once the overall audit strategy has been established, an audit plan can be developed to address
the various matters identified in the overall audit strategy Explain.
Question 5:
As a result of unexpected events, changes in conditions, or the audit evidence obtained from the
results of audit procedures, the auditor may need to modify the overall audit strategy and audit
plan. Explain.
Question 6:
The auditor shall document the overall audit strategy, the audit plan, and any significant
changes made during the audit engagement to the overall audit strategy or the audit plan, and
the reasons for such changes. Explain.
Question 7:
The nature, timing and extent of the direction and supervision of engagement team members
and review of their work vary depending on many factors. Explain.
OR
"The auditor shall plan the nature, timing and extent of direction and supervision of engagement
team members and the review of their work. Explain the factors due to which above varies
Question 8:
Planning is not a discrete phase of an audit, but rather a continual and iterative process. Discuss.
OR
Planning is not a discrete phase of an audit, but rather a continual and iterative process that
often begins shortly after the completion of the previous audit and continues until the
completion of the current audit engagement. Analyse and Explain.
OR
Planning is not a discrete phase of an audit, but rather a continual and iterative process that
often begins shortly after (or in connection with) the completion of the previous audit and
continues until the completion of the current audit engagement. Discuss stating clearly the
broad points you would be covering in framing plan to conduct audit in an efficient and effective
manner.
OR
Plans should be further developed and revised as necessary during the course of the audit.
Explain.
Question 9:
Explain the significant points auditor would consider while developing an audit programme.
OR
Arpan Hospitals Ltd having Gross Professional Charges of Rs 50 crores is engaged in providing
healthcare services. STP & Co., a firm of auditors is appointed as its auditors. Advise what special
points to be kept in mind for the purpose of construction of an Audit programme. Explain.

6
CA Inter-Auditing and Ethics CA DEEP JAIN

OR
State what special points you would keep in mind for the purpose of construction of an Audit
programme. Explain
OR
Discuss the points to be considered by auditor for the purpose of constructing an audit
programme.
Question 10:
All the disadvantages of audit program may be eliminated by imaginative supervision of the
work carried on by the assistants. Explain stating the advantages and Disadvantages of an audit
program.
OR
“All the disadvantages of audit program may be eliminated by imaginative supervision of the
work carried on by the assistants, the auditor must have a receptive attitude as regards the
assistants; the assistants should be encouraged to observe matters objectively and bring
significant matters to the notice of supervisor/principal.” Explain stating the advantages and
disadvantages of an audit program.
OR
Surya and Chand Ltd is a manufacturing company engaged in the production of miscellaneous
electrical goods. Trilithon and Co. has been appointed as the auditors to carry out its audit.
Auditor thinks that Planning an audit would involve establishing the overall audit strategy for
the engagement and developing an audit plan. Also, Adequate planning benefits the audit of
financial statements in several ways. Analyse and Advise explaining the benefits of adequate
planning.
OR
Planning an audit involves establishing the overall audit strategy for the engagement and
developing an audit plan. Adequate planning benefits the audit of financial statements in several
ways. Discuss
OR
Explain the benefits of planning in the audit of financial statements

7
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 3: Risk Assessment and Internal Control

Question 1:
Discuss the concept of materiality in the context of the preparation and presentation of financial
statements.
Question 2:
Determining materiality involves the exercise of professional judgment. Discuss stating the
factors that may affect the identification of an appropriate benchmark. Also give examples.
OR
With reference to SA 320, indicate the factors which may affect the identification of an
appropriate benchmark in determining materiality for the financial statement as a whole.
OR
Determining materiality involves the exercise of professional judgment. A percentage is often
applied to a chosen benchmark as a starting point in determining materiality for the financial
statements as a whole. Discuss stating the factors that may affect the identification of an
appropriate benchmark.
Question 3:
Whether misstatements of lesser amounts than materiality for the financial statements as a
whole could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial statements? Explain with examples.
Question 4:
Explain the Relationship between materiality and audit risk.
Question 5:
Materiality for the financial statements as a whole may need to be revised as a result of a change
in circumstances that occurred during the audit. Explain with the help of example.
Question 6:
Audit Risk and inter-relationship of its components.
OR
XYZ Ltd is engaged in the business and running several stores dealing in variety of items such
as readymade garments for all seasons, shoes, gift items, watches etc. There are security tags on
each and every item. Moreover, inventory records are physically verified on monthly basis.
Discuss the types of inherent, control and detection risks as perceived by the auditor.
Question 7:
The assessment of risks is a matter of professional judgment. Explain stating clearly what is not
included in Audit Risk?
Question 8:

8
CA Inter-Auditing and Ethics CA DEEP JAIN

In performing an audit of financial statements, the auditor should have or obtain knowledge of
the business. Explain in the light of SA 315 Identifying and Assessing the Risks of Material
Misstatement through Understanding the Entity and its Environment.
OR
Prince Blankets is engaged in business of blankets. Its major portion of sales is taking place
through internet. Advise the auditor how he would proceed in this regard as to understanding
the entity and its environment.
OR
'Knowledge of Client business is one of the important principles in developing an overall audit
plan. Explain.
Question 9:
The auditor of ABC Textiles Ltd chalks out an audit plan without understanding the entity’s
business. Since he has carried out many audits of textile companies, there is no need to
understand the nature of business of ABC Ltd. Advise the auditor how he should proceed.
Question 10:
Define Risk of material misstatement. Explain its components also.
OR
Risk of material misstatement consists of two components Explain clearly defining risk of
material misstatement
Question 10:
The auditor shall identify and assess the risks of material misstatement at both levels to provide
a basis for designing and performing further audit procedures. For the purpose of Identifying
and assessing the risks of material misstatement the auditor shall Identify risks, assess the
identified risks, relate the identified risks and consider the likelihood of misstatement. Explain
the above in detail.
Question 11:
What are the various assertions an auditor is concerned with while obtaining audit evidence
from substantive procedure?
OR
Risk of material misstatement at the assertion level for classes of transactions, account balances
and disclosures need to be considered. Explain stating the different categories of assertions used
by the auditor.
OR
In the context of SA-3l5, state the assertions used by auditor to consider the different types of
potential mis-statements that may occur w.r.t. classes of transactions and events for period
under audit.
OR

9
CA Inter-Auditing and Ethics CA DEEP JAIN

Assertions used by auditor to consider potential misstatements about presentation and

disclosure at the period end.
OR
Assertions used by auditor to consider potential misstatements about presentation and
disclosure at the period end.
OR
What does the Valuation assertion mean in respect of Assets, liabilities and equity balances?
Explain with the help of example in respect of Inventory.
Question 12:
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.
Question 13:
Explain the concept of Internal Control. Also state the objectives of Internal Control.
OR
"Internal control over safeguarding of assets against unauthorised acquisition, use, or
disposition may include controls relating to both financial reporting and operations objectives.
Explain stating clearly the objectives of Internal Control."
Question 14:
Explain the purpose of Internal Control
Question 15:
The auditor shall obtain an understanding of the information system, including the related
business processes, relevant to financial reporting, including the classes of transactions in the
entity’s operations that are significant to the financial statements, controls surrounding journal
entries etc. Explain the other considerations in this regard.
Question 16:
What are the specific risks related to internal control in an IT environment?
OR
Which are specific risks to the company's internal control having IT environment?
Question 17:
Factors relevant to the auditor’s judgment about whether a control, individually or in
combination with others, is relevant to the audit may include such matters as materiality, the
significance of the related risk etc. Explain in detail

10
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 18:
Write short note on the use of flowcharts in evaluation of internal control.
Question 19:
Explain briefly the technique of Internal Control Questionnaire to facilitate the accumulation of
information necessary for proper evaluation of internal control.
Question 20:
What is check list? Give few examples of check list instruction.
Question 21:
Briefly discuss the limitations of Internal Control.
OR
Internal control can provide only reasonable but not absolute assurance that its objective
relating to prevention and detection of errors/frauds, safeguarding of assets etc., are achieved.
In view of above, briefly state some of the inherent limitations of Internal Control System.
OR
Internal Control System can provide only reasonable but not absolute assurance that its
objective relating to prevention and detection of errors/frauds, safeguarding of assets etc., are
achieved. Briefly explain the inherent limitations that the system suffers.
Question 22:
So far as the auditor is concerned, the examination and evaluation of the internal control system
is an indispensable part of the overall audit programme. The auditor needs reasonable
assurance that the accounting system is adequate and that all the accounting information which
should be recorded has in fact been recorded. Internal control normally contributes to such
assurance. Explain stating clearly the benefits of evaluation of internal control to the auditor.
OR
The examination and evaluation of internal control system is an indispensable part of the overall
audit programme. State the areas which the 'Review of Internal controls' will enable the auditor
to know
Question 23:
The auditor’s determination of materiality is a matter of professional judgment, and is affected
by the auditor’s perception of the financial information needs of users of the financial
statements. In this context, What are the basic assumptions auditor can make about users of
Financial Statements.
Question 24:
Writ a Note on Performance Materiality
Question 25:
XYZ Ltd is engaged in the business and running several stores dealing in variety of items such
as ready made garments for all seasons, shoes, gift items, watches etc. There are security tags

11
CA Inter-Auditing and Ethics CA DEEP JAIN

on each and every item. Moreover, inventory records are physically verified on monthly basis.
Discuss the types of inherent, control and detection risks as perceived by the auditor.
Question 26:
A Partnership Firm of Chartered Accountants HT and Associates was appointed to audit the
books of accounts of Wind and Ice Limited for the financial year 2022-23. There was a risk that
HT and Associates would give an inappropriate audit opinion if the financial statements of Wind
and Ice Limited are materially misstated. State the Risk mentioned in the question
Question 27:
Wear & Tear Private Limited is a “start-up” engaged in providing holistic solutions to problem
of paddy stubble burning mainly catering to needs of farmers of North western India. Due to
importance given by governments to this issue, companies have entered in the market in past
few years. Many of these companies have not been successful and have gone bust. As an auditor
of the company, can you spot the component of risks of material misstatement involved in
above?
Question 28:
One of the team members of auditors of Highly Capable Limited was of the view that Materiality
and Audit Risk are only considered at planning stage of an audit. Comment as an auditor
Question 29:
Discuss relationship between “General IT controls” and “application controls” in an automated
environment.
Question 30:
What are the risks that arises from use of IT Systems.
Question 31:
What are the points that an auditor should consider to obtain an understanding of the
company’s automated environment.
Question 32:
What are the different types of IT Controls.
Question 33:
Data analytics can be used in testing of electronic records and data residing in IT systems using
spreadsheets and specialised audit tools. Explain
Question 34:
Explain the meaning of automated environment. Also discuss the key features of an automated
environment.
OR
With the increasing adoption of information technology, business today relies on software
systems and applications more than ever. Many of these IT systems generate and process data
that is used in the preparation of financial statements of a company. The auditors also often rely

12
CA Inter-Auditing and Ethics CA DEEP JAIN

on the data and reports that are generated from these systems. Explain stating clearly the
meaning of Automated environment with example.
Question 35:
"Objective of Data Centre and Network Operations is to ensure that production systems are
processed to meet financial reporting objectives. Discuss the activities performed by Data
Centre and Network operations. Also explain the meaning of General IT Controls in detail."

13
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 4: Audit Evidence

Question 1:
Audit evidence includes both information contained in the accounting records underlying the
financial statements and other information. Discuss.
OR
What is “Audit Evidence”?
OR
Auditing is a logical process. An auditor is called upon to assess the actualities of the situation,
review the statements of account and give an expert opinion about the truth and fairness of such
accounts. This he cannot do unless he has examined the financial statements objectively. He
needs evidence to obtain information for arriving at his judgment. Discuss explaining clearly
the detailed meaning of audit evidence.
Question 2:
Comment on the following in relation to SA: - Information regarding the competence, capability
and objectivity of the management’s expert may come from a variety of sources.
Question 3:
What are the various audit procedures to obtain audit evidence? Mention the same in brief.
OR
Mr. A was appointed statutory auditor of P Ltd., but he was not able to gather the sufficient audit
evidences. Discuss how he should proceed to gather more audit evidences.
OR
What are the audit procedures to be performed by the Auditor to obtain Audit Evidence to draw
reasonable conclusions on which he can base the audit opinion
OR
Inquiry is one of the audit procedures to obtain audit evidence.
OR
Evaluating responses to inquiries is an integral part of the inquiry process. Explain
OR
“Inquiry consists of seeking information of knowledgeable persons, both financial and non-
financial, within the entity or outside the entity. Inquiry is used extensively throughout the audit
in addition to other audit procedures”. Explain.
OR
Inquiry is used extensively throughout the audit in addition to other audit procedures. Explain.
Question 4:
The quantity of audit evidence needed is affected by the auditor’s assessment of the risks of
misstatement. Auditor’s judgment as to sufficiency may be affected by few factors. Explain

14
CA Inter-Auditing and Ethics CA DEEP JAIN

OR
The quantity of audit evidence needed is affected by the auditor’s assessment of the risks of
misstatement (the higher the assessed risks, the more audit evidence is likely to be required)
and also by the quality of such audit evidence (the higher the quality, the less may be required).
Obtaining more audit evidence, however, may not compensate for its poor quality. Analyse and
Explain stating clearly the factors affecting the auditor’s judgement as to sufficiency of audit
evidence.
OR
What do you mean by the term 'sufficient Appropriate Audit Evidence? State various factors
that help the auditor to ascertain as to what is sufficient appropriate audit evidence.
OR
General factors which may influence the auditor’s judgment as to what is sufficient and
appropriate audit evidence.
OR
State various factors that help the auditor to ascertain as to what is sufficient and appropriate
audit evidence
Question 5:
The auditor of a limited company has given a clean report on the financial statement on the
basis of xerox copies of the books of accounts, vouchers and other records which were taken
away by the Income Tax Department in search under section 132 of the I.T. Act, 1961. Comment.
OR
Discuss the principles, which are useful in assessing the reliability of audit evidence.
OR
Even when information to be used as audit evidence is obtained from sources external to the
entity, circumstances may exist that could affect its reliability. Explain. Also state clearly
generalisations about the reliability of audit evidence.
OR
State the generalisations about the reliability of audit evidence
OR
The reliability of information to be used as audit evidence, and therefore of the audit evidence
itself, is influenced by its source and its nature, and the circumstances under which it is
obtained, including the controls over its preparation and maintenance where relevant.
Therefore, generalisations about the
reliability of various kinds of audit evidence are subject to important exceptions. While
recognising that exceptions may exist, state the generalisations about the reliability of audit
evidence that may be useful.
OR

15
CA Inter-Auditing and Ethics CA DEEP JAIN

With reference to SA 500, Audit Evidence, discuss the different sources and their reliability, of
audit evidence.
OR
Audit evidence is influenced by its source, nature, and the circumstances under which it is
obtained. Elucidate the guiding principles which are useful in assessing the reliability of audit
evidence
Question 6:
While conducting audit of a bank, you find that the bank has advanced loan for purchase of
machinery on the basis of valuation report prepared by a civil engineer. Will you approve the
action taken by bank? Justify the answer.
OR
“The management has obtained a certificate from an actuary regarding provision of gratuity
payable to employees”. Comment as an auditor.
Question 7:
ABC Ltd is engaged in manufacturing of different type of yarns. Ongoing through its financial
statements for the past years, it is observed that inventory is material to the financial statements.
You as an auditor of the company wanted to obtain sufficient appropriate audit evidence
regarding the existence and condition of the inventory as appearing in the financial statements.
Discuss, how would you proceed as an auditor.
OR
Krishna Cycles Ltd is engaged in manufacturing of different type of Bicycles. On going through
its financial statements for the past years, it is observed that inventory is material to the financial
statements. You as an auditor of the company wanted to obtain sufficient appropriate audit
evidence regarding the existence and condition of the inventory as appearing in the financial
statements. Discuss, how would you proceed as an auditor.
OR
How would an auditor proceed to obtain sufficient appropriate audit evidence regarding the
existence and condition of inventory? Also state reporting requirements for the same in the case
of a company.
OR
Write a short note on Physical attendance by auditor during inventory taking.
OR
While vouching, Aman auditor of Vee Ltd, found that some goods are lying with third party from
a long period, Advise Aman how will he vouch/verify them.
Question 8:
Paramount Exports Ltd is a manufacturer exporter having its own production capacity and also
gets the job

16
CA Inter-Auditing and Ethics CA DEEP JAIN

work done through various job workers. The auditor of Paramount Exports Ltd. Considers that
inventory held with job workers is material to the financial statements. Suggest the audit
procedures in the given case.
Question 9:
Briefly mention the matters that are relevant in planning attendance at physical inventory
counting.
OR
Explain clearly the examples of matters relevant in planning attendance at physical inventory
counting
Question 10:
Pride India Ltd is a manufacturer of various FMCG (fast moving consumable goods) range of
products. The company is having several cases of litigation pending in courts. The auditor
wanted to identify litigation and claims resulting to risk of material misstatements. Suggest the
auditor with reference to SAs.
OR
"P India" Ltd. is a manufacturer of various sports products. The company is having several cases
of litigation pending in courts. The auditor wanted to identify litigation and claims, which may
give rise to risk of material misstatements. Suggest the audit procedures in the given case.
Question 11:
TRM Ltd. is a company engaged in manufacture of beauty products. It has hair care segment,
skin care segment and kids’ beauty products. The auditor wants to obtain sufficient appropriate
audit evidence regarding the presentation and disclosure of segment information in accordance
with the applicable financial reporting framework. Suggest the audit procedures in the given
case.
Question 12:
Point out any eight areas where external confirmation are used as an audit procedure.
OR
What is meant by external confirmation? Mention four situations where external confirmation
may be useful for auditors.
OR
The auditor should determine whether the use of external confirmation is necessary to obtain
sufficient appropriate audit evidence to support certain financial statement assertions. Explain
stating clearly the meaning of external confirmation. Also mention four situations where
external confirmation may be useful for auditors.
OR
Write short notes on External confirmation as audit procedures
OR

17
CA Inter-Auditing and Ethics CA DEEP JAIN

External confirmation procedures frequently are relevant when addressing assertions

associated with account balances and their elements but need not be restricted to these items.
Explain.
Question 13:
Discuss external confirmation procedure as per SA-505
OR
"When using external confirmation procedures, the auditor shall maintain control over external
confirmation requests including sending the requests, including follow -up requests when
applicable, to the confirming party. Explain the other points as to when using external
confirmation procedures, the auditor would be required to maintain control over external
confirmation requests."
Question 14:
What are the factors that are to be considered while designing a confirmation request?
Question 15:
CA Rohit is appointed as an auditor of Grace Ltd., he wants to design a suitable Confirmation
request letter for a few debtors of Grace Ltd. As a senior auditor of the firm, explain to him with
reference to SA505 "External Confirmation" all the conditions that should be present to use
Negative Confirmation requests as the sole substantive audit procedure to address an assessed
risk of material misstatement at the assertion level.
Question 16:
While conducting the audit of Jay Kay Ltd, the auditor K of KLM and Associates, Chartered
Accountants observes that there are large number of Trade payables and receivables standing
in the books of accounts as on 31st March. The auditor wanted to send confirmation request to
few trade receivables but the management refused the auditor to send confi1 SA 505
Management refuse to sent External Confirmation to Particular groups of Debtors Confirmation
request. Required, How would the auditor proceed?
Question 17:
Discuss the objective of Auditor with respect to Opening balances – in conducting an initial
audit engagement.
OR
M/s PQR and associates are the statutory auditors of TUV Ltd. for the FY 2020- 21-. They have
been appointed as statutory auditors of TUV Ltd. for the first time. What is the objective of the
engagement partner in terms of SA 510?
Question 18:
M/s Pankaj & Associates, Chartered Accountants, have been appointed as an auditor of ABC
Limited. CA Pankaj did not apply any audit procedures regarding opening balances. He argued

18
CA Inter-Auditing and Ethics CA DEEP JAIN

that since financial statements were audited by the predecessor auditor therefore he is not
required to verify them. Is CA Pankaj correct in his approach?
OR
Discuss with reference to SA 510, “Initial Audit Engagement – Opening Balances”, the
procedures the auditor should undertake in respect of opening balances for a new audit
engagement.
OR
Explain Audit Procedures in respect of Opening Balances for a New Audit Engagements with
reference to relevant SA.
Question 19:
An auditor is not concerned with consistency of accounting policies relating to opening balances.
State true or false with reason
Question 20:
Define Analytical Procedures.
OR
What do you mean by Analytical procedures? How such procedures are helpful in auditing?
OR
Routine checks cannot be depended upon to disclose all the mistakes or manipulation that may
exist in accounts, certain other procedures also have to be applied like trend and ratio analysis.
Analyse and Explain stating clearly the meaning of analytical procedures
Question 21:
Explain techniques available as substantive analytical procedures.
OR
Ratio analysis is useful for analysing asset and liability accounts as well as revenue and expense
accounts. An individual balance sheet account is difficult to predict on its own, but its
relationship to another account is often more predictable (e.g., the trade receivables balance
related to sales). Explain stating the techniques available as substantive analytical procedures.
OR
The design of a substantive analytical procedure is limited only by the availability of reliable
data and the experience and creativity of the audit team. Explain clearly stating the techniques
available as substantive analytical procedures.
OR
Discuss the techniques available as Substantive Analytical Procedures.
OR
Explain the commonly used technique in the comparison of current data with the prior period
balance or with a trend in two or more prior period balances.

19
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 22:
Analysis by computation of ratios includes the study of relationships between financial
statement amounts. State Commonly used ratios
Question 23:
"When designing and performing substantive analytical procedures, either alone or in
combination with tests of details, as substantive procedures in accordance with SA 330, the
auditor shall determine the suitability of particular substantive analytical procedures for given
assertions, taking account of the assessed risks of material misstatement and tests of details, if
any, for these assertions. Explain the other relevant points in this context."
Question 24:
The reliability of data is influenced by its source and nature and is dependent on the
circumstances under which it is obtained. Accordingly, explain the factors that are relevant
when determining whether data is reliable for purposes of designing substantive analytical
procedures.
OR
What are the factors that determine the extent of reliance that the auditor places on results of
analytical procedures? Explain with reference to SA-520 on Analytical procedures.
OR
Extent of Reliance on Analytical Procedures.
OR
CA A, auditor of ABC Ltd. wants to design substantive analytical procedure and for that he wants
to check whether the data is reliable or not. Mention the relevant points which he has to consider
whether data is reliable for purpose of designing the substantive analytical procedures.
Question 25:
The statutory auditor of MNO Ltd., CA Kishore identifies certain inconsistencies while applying
analytical procedures to the financial and non-financial data of MNO Ltd. What should CA
Kishore do in this case with reference to SA 520 on “Analytical Procedures”?
OR
If analytical procedures performed in accordance with SA 520 identify fluctuations or
relationships that are inconsistent with other relevant information or that differ from expected
values by a significant amount, explain how the auditor would investigate such differences
Question 26:
CA Amar wants to verify the payments made by XYZ Ltd. on account of building rent during the
FY 2020-21. The rent amounts to Rs.50,000/- per month for the year. The monthly rent
payments are consistent with the rent agreement. However, the other companies in the similar
industry are paying rent of Rs. 10,000/-per month for a similar location. How will applying the
analytical procedures impact the verification process of such rental payments by XYZ Ltd.?

20
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 27:
While planning the audit of S Ltd. you want to apply sampling techniques. What are the risk
factors you should keep in mind.
OR
The auditor is faced with sampling risk in both tests of control and substantive procedures.
Comment on this statement with reference to SA 530 on Audit Sampling.
OR
"Sampling risk can lead to erroneous conclusions". Justify.
OR
Sampling risk is the risk that the auditor’s conclusion based on a sample may be different from
the conclusion if the entire population were subjected to the same audit procedure. Sampling
risk leads to erroneous conclusions. Explain in detail distinguishing it from non-sampling risk
with examples
Question 28:
State the requirements relating to audit sampling, sample design, sample size and selection of
items for testing.
OR
With reference to Standard on Auditing 530, state the requirements relating to audit sampling,
sample design, sample size and selection of items for testing
Question 29:
Whatever may be the approach non-statistical or statistical sampling, the sample must be
representative. Discuss explaining Statistical and Non-Statistical sampling approaches.
Question 30:
Advantages of Statistical sampling in Auditing.
OR
What are the advantages of Statistical sampling technique in auditing?
OR
CA X is not sure about the kind of Sampling method to be used for audit of a company. Advise
him the method of sampling to be used. Also explain briefly the advantages of the Sampling to
be used by him in auditing.
Question 31:
Random selection ensures that all items in the population or within each stratum have a known
chance of selection. Explain.
OR
What is the meaning of Sampling? Also discuss the methods of Sampling. Explain in the light of
SA 530 Audit Sampling.
OR

21
CA Inter-Auditing and Ethics CA DEEP JAIN

The extent of the checking to be undertaken is primarily a matter of judgment of the auditor.
It is in the interest of the auditor that if he decides to form his opinion on the basis of a part
checking, he should adopt standards and techniques which are widely followed Explain. Discuss
the methods of Sampling in the light of SA 530.
OR
Write a short note on Random sampling.
OR
Stratified sampling
OR
Haphazard sampling
OR
Explain the sampling method which involves selection of a block(s) of contiguous items from
within the population. Also give example
Question 32:
The auditor is required to project misstatements for the population to obtain a broad view of the
scale of misstatement. Explain
OR
The auditor is required to project misstatements for the population to obtain a broad view of the
scale of misstatement, but this projection may not be sufficient to determine an amount to be
recorded. Explain
Question 33:
Discuss the factors that should be considered for deciding upon the extent of checking on a
sampling plan.
OR
Factors that should be considered for deciding upon the extent of checking on a sampling plan.
Question 34:
The nature of related party relationships and transactions may, in some circumstances, give rise
to higher risks of material misstatement of the financial statements than transactions with
unrelated parties. Explain with the help of at least three examples.
Question 35:
There are specific accounting and disclosure requirements for related party relationships,
transactions and balances to enable users of the financial statements to understand their nature
and effects on the financial statements. Analyse and explain stating the responsibility of auditor
in this regard.
Question 36:
The auditor has a responsibility to perform audit procedures to identify, assess and respond to
the risks of

22
CA Inter-Auditing and Ethics CA DEEP JAIN

material misstatement arising from the entity’s failure to appropriately account for related party
relationships, transactions or balances. During the audit, the auditor should maintain alertness
for related party information while reviewing records and documents. He may inspect the
records or documents that may provide information about related party relationships and
transactions. Explain in detail with examples
Question 37:
Explain the meaning, objectives and scope of internal audit functions as per SA 610. Also discuss
who can be appointed as Internal Auditor?
OR
Explain the activities of the Internal Audit function.
OR
One of the directors of Stability Establishment Limited was of the view that Internal Audit has
no relation with Internal Control of a company. Comment
Question 38:
What are the factors that auditor can consider before relying on the work of Internal Auditor?
Question 39:
What precautions External auditor should take care before obtaining Direct assistance from
Internal Auditor?

23
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 5: Audit Documentation

Question 1:
Define audit documentation. Also give some examples.
OR
The audit working papers constitute the link between the auditor’s report and the client’s
records. Explain clearly stating the definition and purpose of audit documentation
OR
Audit documentation provides evidence of the auditor’s basis for a conclusion about the
achievement of the overall objectives of the auditor and evidence that the audit was planned and
performed in accordance with SAs and applicable legal and regulatory requirements. Explain
stating clearly purpose of audit documentation.
OR
Audit Working Papers.
OR
Discuss the meaning and nature of Audit Documentation.
OR
The audit working papers constitute the link between the auditor’s report and the client’s
records. Explain clearly stating the definition and purpose of audit documentation.
Question 2:
Explain in briefly the utility of Working Papers to an auditor.
OR
Importance of Working Papers.
OR
Explain the advantages of Audit Working Papers.
Question 3:
While documenting the nature, timing and extent of audit procedures performed in case of audit
of PQR Ltd, explain the important matters its auditor should record.
Question 4:
M/s Health Zone, a partnership firm, running a nursing home have decided to discontinue you
as an auditor for the next year and requests you to handover all the relevant working papers of
the previous year.
OR
R.K. & Company are the auditors of PQR Company Ltd. The Managing Director of the Company
demands copies of the working papers from the auditors. Are the auditors bound to oblige the
Managing Director?
Question 5:

24
CA Inter-Auditing and Ethics CA DEEP JAIN

Should branch auditor of a company comply with the request of the principal auditor of the
company to give photocopy of the working papers pertaining to the branch audit? Explain.
Or
The working papers of the branch auditor are also the property of the Principal Auditor and the
Management of the Company, so they have right to access them. State the relevant SA and
comment.
Question 6:
Discuss with reference to SA-230, factors affecting form, contents and extent of audit
documentation.
OR
State the factors affecting form, content and extent of working papers.

25
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 6: Audit Report

Question 1:
Companies exempted from reporting under Companies (Auditor’s Report) Order, 2020.
OR
Discuss which class of companies are specifically exempt from the applicability of CARO 2020.
OR
CARO, 2020 applies to all companies. Discuss.
OR
What are the various types of companies covered under Companies (Auditor’s Report) Order,
2020 [CARO, 2020]?
Question 2:
Ashu Pvt. Ltd. has fully paid capital and reserves of Rs 50 lakh. During the year, the company
had borrowed Rs 70 lakh each from a bank and a financial institution independently. It has the
turnover of 900 lakh.

Question 3:

Discuss the reporting requirements regarding Fixed Assets under CARO, 2020.
OR
Explain the Reporting requirements the auditor should ensure under CARO 2020 related to
fixed assets.
Question 4:
State the matters to be included in the auditor's report as per CARO, 2020 regarding-
(i) Plant, Property & Equipment
(ii) Statutory dues
Question 5:
M Ltd. has given certain loans to related parties and also has accepted certain deposits. As an
auditor, how you include the above items in paragraph 3 of CARO, 2020?
Question 6:
State the matters to be included in the auditor's report as per CARO, 2020 regarding-
(i) Default in repayment of loans or borrowing to a financial institution, bank etc.
(ii) Fraud by the company or on the Company by its officers or employees.
Question 7:
The company has raised funds by issuing fully convertible debentures. These funds were raised
for the expansion and diversification of the business. However, the company utilized these funds
for repayment of long-term loans and advances.” Advise the auditor regarding reporting
requirements under CARO, 2020.
Question 8:
26
CA Inter-Auditing and Ethics CA DEEP JAIN

The practice of appointing Chartered Accountants as joint auditors is quite widespread in big
companies and corporations. Explain stating the advantages of the joint audit.
OR
Explain the concept of joint audit. Discuss its advantage and disadvantage
Question 9:
A Joint Auditor is not bound by the views of the majority of the joint auditors regarding matters
to be covered in the report. Justify this statement in the light of responsibilities of Joint Auditors
under SA 299.
OR
Short Notes on Joint Audit
OR
In Joint Audit, Each Joint Auditor is responsible only for the work allocated to him.
OR
Write a short note on responsibilities of Joint auditors.
Question 10:
If there is difference of opinion among the joint auditors with regard to any matter, majority
joint auditors’ opinion will prevail while reporting.
Question 11:
In order to form the audit opinion as required by SA 700, the auditor shall conclude as to
whether the auditor has obtained reasonable assurance about whether the financial statements
as a whole are free from material misstatement, whether due to fraud or error. Explain the
conclusions that the auditor shall take into account. Also explain the objective of auditor as per
SA 700.
OR
The auditor shall form an opinion on whether the financial statements are prepared, in all
material respects, in accordance with the applicable financial reporting framework. Explain.
Question 12:
What constitutes a 'true and fair' view, is the matter of an auditor's judgement in the particular
circumstances of a case. In order to ensure 'true and fair' view, auditor has to review certain
points. Mention any such 5 (five) points in brief.
OR
The concept of True and Fair is a fundamental concept in auditing. Discuss.
OR
Discuss the concept of True and Fair.
OR
What constitutes true and fair view is a matter of auditor’s judgement, but some specific points
must be seen by the auditor to ensure true and fair view.

27
CA Inter-Auditing and Ethics CA DEEP JAIN

OR
The auditor R of GR and Co., a firm of Chartered Accountants is conducting audit of B Industries
Ltd. State the specific points must be seen by the auditor to ensure true and fair view.
Question 13:
The Auditor is fully satisfied with the audit of an entity in respect of its systems and procedures
and wants to issue a report without any hesitation. What type of opinion can be given and give
reasoning.
OR
When does an auditor issue unqualified opinion and what does it indicate?
Question 14:
State the basic elements of the Auditor’s Report.
Question 15:
While drafting report of LK Ltd, what are the matter to be included by auditor in introductory
paragraph?
Question 16:
The first section of the auditor’s report shall include the auditor’s opinion, and shall have the
heading “Opinion.” The Opinion section of the auditor’s report shall also Identify the entity
whose financial statements have been audited. Apart from the above, explain the other relevant
points to be included in opinion section
Question 17:
The auditor’s report shall include a section with a heading “Responsibilities of Management for
the Financial Statements.” SA 200 explains the premise, relating to the responsibilities of
management and, where appropriate, those charged with governance, on which an audit in
accordance with SAs is conducted. Explain
OR
State in brief, the management’s responsibilities relating to the audit of financial statements.
Question 18:
As an auditor of listed company, what are the matters that the auditor should keep in mind while
determining Key Audit Matter".
Question 19:
Communicating Key Audit Matter is not a substitute for disclosure in the Financial Statements
rather Communicating key audit matters in the auditor’s report is in the context of the Auditor
having formed an opinion on the financial statements as a whole. Analyse.
Question 20:
Discuss the objective of the auditor as per Standard on Auditing (SA) 705 Modifications to The
Opinion in The Independent Auditor’s Report
Question 21:

28
CA Inter-Auditing and Ethics CA DEEP JAIN

State the circumstances which could lead to Qualified Opinion in an Auditor’s Report
Question 22:
Define the term pervasive in the context of misstatements. What are the effects of pervasive
misstatements on the financial statements of an enterprise?
Question 23:
Distinguish between an adverse opinion and a qualified opinion. Also draft an opinion
paragraph for both types of opinion.
Question 24:
Delightful Ltd. is a company engaged in the production of smiley balls. During the FY 2020-21
the company transferred its accounts to computerised system (SAP) from manual system of
accounts. Since the employees of the company were not well versed with the SAP system, there
were many errors in the accounting during the transition period. As such the statutory auditors
of the company were not able to extract correct data and reports from the system. Such data was
not available manually also. Further, the employees and the management of the company were
not supportive in providing the requisite information to the audit team. The auditor believes
that the possible effects on the financial statements of undetected misstatements could be both
material and pervasive. Explain the kind of audit report that the statutory auditor of the
company should issue in this case.
Question 25:
Define Emphasis of Matter paragraph. When the auditor shall include an Emphasis of Matter
paragraph in the auditor’s report? Also explain how the auditor would include an Emphasis of
Matter in the auditor’s report.
OR
Define Emphasis of Matter Paragraph and how it should be disclosed in the Independent
Auditor's Report?
OR
What is an Emphasis of Matter paragraph, when it is used, and manner of its use in an audit
report?
Question 26:
What is Emphasis of Matter Paragraph? Also give some examples of it.
Question 27:
The nature of the comparative information that is presented in an entity’s financial statements
depends on the requirements of the applicable financial reporting framework. There are two
different broad approaches to the auditor’s reporting responsibilities in respect of such
comparative information: corresponding figures and comparative financial statements. Explain
clearly stating the essential audit reporting differences between the approaches. Also define
comparative information and audit procedures regarding comparative information

29
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 7: Ethics and Terms of Audit Engagement

Question 1:
Explain preconditions for an audit as per SA 210. Discuss how would an auditor proceed to
establish the presence of pre-conditions for an audit
Question 2:
The agreed terms of the audit engagement shall be recorded in an audit engagement letter or
other suitable form of written agreement. Explain stating its contents.
OR
What is the purpose of a Letter of Engagement? What are the important contents of a Letter of
Engagement?
OR
State the purpose of a ‘Letter of Engagement’
Question 3:
R & Co, a firm of Chartered Accountants have not revised the terms of engagements and
obtained confirmation from the clients for last 5 years despite changes in business and
professional environment.
OR
“It is not mandatory to send a new engagement letter in recurring audit, but sometimes it
becomes mandatory to send new letter”. Explain those situations where new engagement letter
is to be sent
Question 4:
“The auditor should not agree to a change of engagement where there is no reasonable
justification for doing so.” Discuss.
OR
As an auditor, how would you consider the acceptance of a change in audit engagement?
OR
An auditor who before the completion of the engagement is requested to change the engagement
to one which provides a lower level of assurance should consider the appropriateness of doing
so. Discuss.
OR
An auditor who, before the completion of the engagement, is requested to change the
engagement to one which provides a lower level of assurance, should consider the
appropriateness of doing so. Explain stating the factors based on which client can request the
auditor to change the engagement.
Question 5:

30
CA Inter-Auditing and Ethics CA DEEP JAIN

X, a Chartered Accountant was engaged by PQR & Co. Ltd. for auditing their accounts. He sent
his letter of engagement to the Board of Directors, which was accepted by the Company. In the
course of audit of the company, the auditor was unable to obtain appropriate sufficient audit
evidence regarding receivables. The client requested for a change in the terms of engagement.
Question 6:
Y, is the auditor of X Pvt. Ltd. In which there are four shareholders only, who are also the
Directors of the company. On account of bad trade and for reducing the expenses in all
directions, the directors asked Y to accept a reduced fee and for that he has been offered not to
carry out such full audit as he has done in the past. Y accepted the suggestions of the directors.
Question 7:
The firm’s system of quality control should include policies and procedures addressing each and
every element of system of quality control. State those elements.
Question 8:
As per SA 220, the engagement partner shall take responsibility for the overall quality on each
audit engagement to which that partner is assigned. While taking responsibility for the overall
quality on each audit engagement, analyse and explain the emphasis of the actions of the
engagement partner and appropriate messages to the other members of the engagement team.
Also define engagement partner.
OR
The engagement partner shall take the responsibility for the overall quality on each audit
engagement to which that partner is assigned. Discuss with reference to SA 220 "Quality Control
for an audit of financial statement".
Question 9:
As per SA 220, Quality Control for an Audit of Financial Statements the auditor should obtain
information considered necessary in the circumstances before accepting an engagement with a
NEW client, when deciding whether to continue an existing engagement and when considering
acceptance of a NEW engagement with an existing client. Explain
OR
Mention any four information which assists the auditor in accepting and continuing of
relationship with the client as per SA 220.
OR
“The auditor should obtain information considered necessary in the circumstances before
accepting an engagement with a new client.” Explain. Also mention any four information which
assists the auditor in accepting and continuing of relationship with the client as per SA 220.
OR

31
CA Inter-Auditing and Ethics CA DEEP JAIN

CA Raj, an engagement partner wants to take decision, regarding acceptance and continuance
of an audit engagement Which information’s, he should obtain before accepting an
engagement?
Question 10:
The firm should establish policies and procedures designed to provide it with reasonable
assurance that the policies and procedures relating to the system of quality control are relevant,
adequate, operating effectively and complied with in practice. Such policies and procedures
should include an ongoing consideration and evaluation of the firm’s system of quality control,
including a periodic inspection of a selection of completed engagements. Explain in the above
context the purpose of monitoring compliance with quality control policies and procedures.
Question 11:
M/s Suresh Chandra & Co. has been appointed as an auditor of SC Ltd. for the financial year
2014-15. CA. Suresh, one of the partners of M/s Suresh Chandra & Co., completed entire routine
audit work by 29th May, 2015. Unfortunately, on the very next morning, while roving towards
office of SC Ltd. to sign final audit report, he met with a road accident and died. CA. Chandra,
another partner of M/s Suresh Chandra& Co., therefore, signed the accounts of SC Ltd., without
reviewing the work performed by CA. Suresh. Required State with reasons whether CA. Chandra
is right in expressing an opinion on financial statements the audit of which is performed by
another auditor

32
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 8: Completion and Review

Question 1:
Explain the meaning of the term subsequent events as used in the SA 560.
Question 2:
SA 560, “Subsequent Events” deals with the auditor’s responsibilities relating to subsequent
events in an audit of financial statements. Financial statements may be affected by certain
events that occur after the date of the financial statements. Many financial reporting
frameworks specifically refer to such events. Explain those events and also define subsequent
events
Question 3:
The auditor shall perform audit procedures designed to obtain sufficient appropriate audit
evidence that all events occurring between the date of the financial statements and the date of
the auditor’s report that require adjustment of, or disclosure in, the financial statements have
been identified. Explain.
OR
Indicate briefly the procedures to identify subsequent events requiring adjustment of or
disclosure in the financial statements.
OR
The auditors should consider the effect of subsequent events on the financial statement and on
auditor’s report– Comment according to SA 560.
Question 4:
"The auditor has no obligation to perform any audit procedures regarding the financial
statements after the date of the auditor’s report. However, when, after the date of the auditor’s
report but before the date the financial statements are issued, a fact becomes known to the
auditor that, had it been known to the auditor at the date of the auditor’s report, may have
caused the auditor to amend the auditor’s report. Explain the auditor’s obligation in the above
situation."
Question 5:
On the basis of which assumption, the financial statements of a company are prepared. Explain.
Also describe the objectives of the auditor regarding going concern.
OR
When the use of the going concern basis of accounting is appropriate, assets and liabilities are
recorded on the basis that the entity will be able to realize its assets and discharge its liabilities
in the normal course of business. Explain stating also the objective of the auditor regarding
going concern.
Question 6:

33
CA Inter-Auditing and Ethics CA DEEP JAIN

As described in SA 200, the potential effects of inherent limitations on the auditor’s ability to
detect material misstatements are greater for future events or conditions that may cause an
entity to cease to continue as a going concern. Explain stating the auditor’s responsibilities with
regard to going concern
Question 7:
Explain with reference to the relevant Standard on Auditing - Appropriateness of going concern
assumption
OR
"Operating Conditions" that may cast doubt about going concern assumption.
OR
Give six examples of operating Conditions that may cast doubt about going concern assumption.
Question 8:
M/s ANS & Associates has been appointed as the statutory auditors of MNO Ltd. The company
has been suffering losses due to the emergence of highly successful competitor, thereby leading
to negative net-worth. Also, the sales head, key management personnel, of the company left the
company due to health issues. When CA Amar, the engagement partner discussed the scenario
with the management of the company, he did not get any satisfactory reply from the
management. What is the responsibility of M/s ANS & Associates with regard to SA 570?
OR
TT Ltd. has suffered recurring losses due to steep fall in production and has negative net worth.
Its production head, an expert, has also left the company. Reply of the management is
inadequate to these developments and there is no sound action plan to mitigate these situations.
Comment
Question 9:
While doing audit of ABC Pvt Ltd, on the basis of sufficient and appropriate evidence, auditor
comes to a conclusion that use of the Going Concern Basis of Accounting is appropriate, but a
material uncertainty exists. Discuss the implications for auditor’s report if:
(a) Adequate Disclosure of a Material Uncertainty is Made in the Financial Statements
(b) Adequate Disclosure of a Material Uncertainty is Not Made in the Financial Statements
Question 10:
When performing risk assessment procedures as required by SA 315, the auditor shall consider
whether events or conditions exist that may cast significant doubt on the entity’s ability to
continue as a going concern. In so doing, the auditor has determined that management of XYZ
Ltd has already performed a preliminary assessment of the entity’s ability to continue as a going
concern. Explain how would auditor of XYZ Ltd proceed in the above case. Also explain how
would the auditor proceed if such an assessment has not yet been performed by the management
Question 11:

34
CA Inter-Auditing and Ethics CA DEEP JAIN

Briefly explain Management Representation

Question 12:
Auditor of AAS Ltd. was unable to confirm the existence and valuation of imported goods lying
with the transporter and accepted a certificate from the management without obtaining other
audit evidence. Comment
OR
Explain clearly objective of the auditor regarding written representation.
OR
Audit evidence is all the information used by the auditor in arriving at the conclusions on which
the audit opinion is based. Written representations are necessary information that the auditor
requires in connection with the audit of the entity’s financial statements. Accordingly, similar
to responses to inquiries, written representations are audit evidence. Explain stating clearly
objectives of the auditor regarding written representation.
Question 13:
The Partner of Vansh and Vaibhav, Chartered Accountants, asked the management to provide
statements from the creditors as part of audit evidence and also required written representation
from the management but the management did not provide the requested written
representations. Discuss how the auditor would proceed.
OR
What do you mean by "Written Representations"? As an auditor, how you will deal if
management does not provide requested written representations?
OR
The Partner of Ashish Surjeet and Company, Chartered Accountants, asked the management to
provide statements from the creditors as part of audit evidence and also required written
representation from the management but the management did not provide the requested
written representations. Discuss how the auditor would proceed.
OR
Written representations are to be provided by the management to the auditor when requested.
Comment.
Question 14:
List out some matters that auditor may consider in determining whether a deficiency or
combinations of deficiency in internal control system constitutes significant deficiency
Question 15:
In what ways an effective two way communication between auditor and those charged with
governance is important
Question 16:

35
CA Inter-Auditing and Ethics CA DEEP JAIN

Discuss documentation requirements for an auditor regarding misstatements identified during

audit as per SA 450

36
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 9: Audit of Banks

Question 1:
There are different types of banks prevailing in India. Explain giving examples of such banks.
Question 2:
In case of a Bank, explain the meaning of Funded loans. Also give examples.
Question 3:
The engagement team of FRN & Co.- Auditors of Bank of Baroda held discussions to gain better
understanding of the bank and its environment, including internal control, and also to assess
the potential for material misstatements of the financial statements. The discussion between the
members of the engagement team and the audit engagement partner are being done on the
susceptibility of the bank’s financial statements to material misstatements. These discussions
are ordinarily done at the planning stage of an audit. Analyse and Advise the matters to be
discussed in the engagement team discussion.
OR
The· discussion between members of the engagement team members and the audit engagement
partner should be done on the susceptibility of the bank's financial statements to material
misstatements. Briefly discuss the points ordinarily included in discussion of the engagement
team.
OR
You are appointed as an auditor of Banking Co. and hold discussions with engagement team.
List out matters which you would discuss at the planning stage of an audit to gain better
understanding of the bank and its environment.
Question 4:
Mr. Piyush, the Bank Manager develops controls to aid in managing key business and financial
risks. Discuss the various requirements for an effective risk management system in a bank
Question 5:
Write a short note on reversal of income under bank audit.
OR
In view of the significant uncertainty regarding ultimate collection of income arising in respect
of non-performing assets, the guidelines require that banks should not recognize income on
non-performing assets until it is actually realised. When a credit facility is classified as non-
performing for the first time, interest accrued and credited to the income account in the
corresponding previous year which has not been realized should be reversed or provided for.
This will apply to Government guaranteed accounts also. Analyse and Explain.
Question 6:

37
CA Inter-Auditing and Ethics CA DEEP JAIN

Ramjilal & Co. had been allotted the branch audit of a nationalized bank for the year ended 31st
March, 2023. In the audit planning, the partner of Ramjial & Co., observed that the allotted
branches arepredominantly based in rural areas and major portion of the advances were for
agricultural purpose.”
Now he needs your assistance on the following points so as to incorporate them in the audit
plan:
(i) for determination of NPA norms for agricultural advances
(ii) for accounts where there is erosion in the value of security /frauds committed by the
borrowers.
Question 7:
N Ltd. has been sanctioned a Cash Credit Facility by XYZ Bank Ltd. for INR 1 crore and drawing
power as per the Stock Statements furnished for the last quarter is INR 80 Lakh. Outstanding
balance in the account is INR 75 lakh. Interest charged to the account is INR 3.5 Lakh and total
credit into the account for the quarter is INR 2.5 Lakh. As an auditor how will you report this
account in your report
Question 8:
Explain "Advances under Consortium" in the context of Prudential Norms on Income
Recognition, Asset Classification and Provisioning pertaining to Advances
Question 9:
"There is no difference in provisioning of NPA as regards to categories of NPA, whether the debt
is secured or unsecured." Critically evaluate the statement on the basis of provisioning norms of
NPA of nationalised bank.
Question 10:
Advances generally constitute the major part of the assets of the bank. There are large number
of borrowers to whom variety of advances are granted. The audit of advances requires the major
attention from theauditors. In carrying out audit of advances, the auditor is primarily concerned
with obtaining evidence about, among other points, the amounts included in balance sheet in
respect of advances are outstanding at the date of the balance sheet. Explain
Question 11:
The auditor can obtain sufficient appropriate audit evidence about advances by study and
evaluation of internal controls relating to advances. Explain in the context of Audit of Banks.
Question 12:
Your firm of Chartered Accountants has been appointed as the Auditor of two branches of OBC
which are located in the Industrial area. Considering that the location of the branches of bank
in industrial area, these would be advances oriented branches and audit of advances would
require the major attention of the auditors. Advise how would you proceed to obtain evidence
in respect of audit of advances.

38
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 13:
In carrying out an audit of interest expense, the auditor is primarily concerned with assessing
the overall reasonableness of the amount of interest expense. Analyse and explain stating the
audit approach and procedure in regard to interest expense.
Question 14:
Mr. A approaches a bank for financial assistance for his upcoming project. The Bank Branch
Manager, after verifying the proposal, is agreeable to financing Mr. A, but asks for the security
to be offered to the bank. Discuss the nature of securities required to be offered to the bank
Question 15:
Depending on the nature of the item concerned, creation of security may take the form of a
mortgage, pledge, hypothecation, assignment, set-off or lien. Explain with specific reference to
Audit of Banks.
Question 16:
Explain the audit approach you would follow to check the Operating Expenses of a Bank
Question 17:
You are appointed as Statutory Auditor of DEF Bank Limited for the year 2019-20. As an Auditor
how will you verify Provisions created by DEF Bank Limited?
OR
Your firm of Chartered Accountants has been appointed as auditor of a Nationalised bank.
Explain how will you proceed to carry out audit of provisions and contingencies.
Question 18:
In the case of a nationalised bank, the auditor is required to make a report to the Central
Government. The report of auditors of State Bank of India is also to be made to the Central
Government and is almost identical to the auditor’s report in the case of a nationalised bank.
Explain what would the auditor state in his report.
Question 19:
“If an accounting professional, whether in the course of internal or external audit or in the
process of institutional audit finds anything susceptible to be fraud or fraudulent activity or act
of excess power or smells any foul play in any transaction, he should refer the matter to the
regulator. Any deliberate failure on the part of the auditor should render himself liable for
action”. Analyse and explain the above RBI Circular regarding liability of accounting and
auditing profession.
Question 20:
What are the different legal and regulatory framework that are applicable to the bank?

39
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 10: Audit of items of Financial Statements

Question 1:
Any share issued by a company at a discounted price shall be void. Explain also stating the audit
procedure in this regard.
OR
Validity and consequence of issue of shares at discount, check with respect to the provisions of
the Companies Act, 2013.
Question 2:
ABC Ltd. has issued shares for cash at a premium of Rs 450, that is, at amount in excess of the
nominal valueof the shares which is Rs 10 for cash. Section 52 of the Companies Act, 2013
provides that a Company shall transfer the amount received by it as securities premium to
securities premium account. Advise the means in which the amount in the account can be
applied.
OR
Y Ltd. utilised its securities premium to declare 45% dividend. State the provisions related to
application of securities premium account and comment on the statement given.
OR
Securities premium can be utilized only for certain purposes laid down in the Companies Act,
2013.
OR
Premium received on issue of shares prior to the date of Balance Sheet has been transferred to
Statement of Profit and Loss for arriving at the figure of commission payable to the managing
director.
OR
The securities premium account may only be applied by the company towards the issue of
unissued shares of the company to the members of the company as fully paid bonus shares.
Comment.
Question 3:
BNP Ltd has reduced its Share Capital to a greater extent in the year for which you are
conducting the audit. State how will you proceed for verifying the reduction of Capital.
Question 4:
Write short notes on Sweat Equity Shares.
OR
What audit points are to be borne in mind in case of issue of Sweat Equity Shares by a limited
company?
Question 5:

40
CA Inter-Auditing and Ethics CA DEEP JAIN

Reserves are amounts appropriated out of profits whereas on the contrary, provisions are
amounts charged against revenue. Discuss explaining the difference between the two and also
clearly explain revenue reserve and capital reserve.
OR
Explain the difference between reserves and provisions.
OR
Specific reserves may sometimes be created under contractual obligation or legal compulsion.
Explain with examples.
Question 6:
Ongoing through the financial statements of PQR Ltd, its auditors Kamal Gagan and Associates
observed that company has taken Loans from banks and financial institutions. Further, the
audit team discusses the following about Liabilities: Liabilities are the financial obligations of
an enterprise other than owners’ funds. Liabilities include loans/ borrowings, trade payables
and other current liabilities, deferred payment credits and provisions. Verification of liabilities
is as important as that of assets, for, if any liability is omitted (or understated) or overstated, the
Balance Sheet would not show a true and fair view of the state of affairs of the company. Advise
clearly stating the audit procedures generally required to be undertaken for verification of
existence of Borrowings.
Question 7:
Verification of liabilities is as important as that of assets, considering if any liability is omitted
(or understated) or overstated, the Balance Sheet would not show a true and fair view of the
state of affairs of the entity. Explain also stating criteria for a liability to be classified as current
liability.
Question 8:
Liabilities include trade payables and other current liabilities, deferred payment credits and
provisions. Verification of liabilities is as important as that of assets, considering if any liability
is omitted (or understated) or overstated, the Balance Sheet would not show a true and fair view
of the state of affairs of the entity. Advise clearly stating the audit procedure to establish the
existence of trade payables and other current liabilities as at the period-end.
Question 9:
The auditor A of ABC & Co.- firm of auditors is conducting the audit of XYZ Ltd and while
performing testing of additions wanted to verify that all PPE (Property Planed and Equipment)
purchase invoices are in the name of the entity he is auditing. For all additions to land, building
in particular, the auditor desires to have concrete evidence about ownership. The auditor is
worried about whether the entity has valid legal ownership rights over the PPE claimed to be
held by the entity and recorded in the financial statements. Advise the auditor.
Question 10:

41
CA Inter-Auditing and Ethics CA DEEP JAIN

Explain with examples the audit procedure to establish the existence of intangible fixed assets
as at the period- end.
Question 11:
You are an auditor of PQR Ltd. which has spent 10 lakhs on Research activities of the product
during period under audit. Board of Directors want to recognize it as an internally generated
intangible assets. Advise and discuss the conditions necessary to be fulfilled to recognize the
intangible assets in the financial statements
Question 12:
“Trade receivable are an essential part of any organisation's balance sheet. Often referred to as
debtors, these are monies which are owed to an organisation by a customer. The most common
form of an accountreceivable is a sale made on credit, via an invoice, to a customer.” It is
important to carry out compliance procedures in the sales audit as part of the debtors’ audit
procedure. Verify to ensure that the system for receivables has the necessary features.
Question 13:
Write the audit Procedure for verification of existence of Trade Receivables.
Question 14:
ABC Limited has a closing balance of work in progress of inventories aggregating ` 850 lakhs in
their balance sheet as at March 31, 2020. As Statutory Auditor of ABC Limited, explain various
audit procedures which need to be performed to confirm Work-in-progress of inventories have
been valued appropriately and as per generally accepted accounting policies and practices.
Question 15:
CA "X" while conducting an audit of Joyful Ltd. found a considerable increase in sales as
compared to the previous year, he doubts that few fictitious sales have been recorded by the
company to overstate its revenues. Discuss any four audit procedures to be undertaken by the
auditor to ensure revenue from sales of goods and services performed during the period is not
overstated?
Question 16:
As a Statutory Auditor of the company list out audit procedure required to be undertaken for
the recognition of following other income:
i. Interest income from fixed deposit
ii. Dividend income
iii. Gain/(loss) on sale of investment in mutual funds.
Question 17:
Discuss the audit procedure to be considered by an auditor while performing analytical
procedure to obtain audit evidence as to overall reasonableness of purchase quantity and price.
OR

42
CA Inter-Auditing and Ethics CA DEEP JAIN

While auditing purchases which types of analytical procedures will be performed by the auditor
to obtain audit evidence as to overall reasonableness of purchase quantity and price
Question 18
Mention any five attributes to be considered by an auditor while verifying for a depreciation and
amortisation expenses
Question 19:
While the auditor may choose to analyse the monthly trends for 5 expenses like rent, power and
fuel but for other expenses, an auditor generally prefers to verify other attributes.” Mention
those attributes.
Question 20:
Explain the audit procedure to vouch/verify:
(i) Rent expenses
(ii) Power and Fuel expenses
Question 21:
"Evidence is the very basis for formulation of opinion and an audit programme is designed to
provide for that by prescribing procedures and techniques. Analyse and explain with the help of
example of evidence in respect of Sales."
Question 22:
As statutory auditor of the company list out audit procedures required to be undertaken for the
following: Dividend income.
Also indicate disclosure requirements of above as per Companies Act, 2013
Question 23:
Expenses which are essentially of a revenue nature if incurred for creating an asset or adding to
its value for achieving higher productivity are regarded as expenses of a capital nature. Describe
any five such expenses.
OR
At the time of scrutiny of General Ledger, the Auditor observes that certain expenses essentially
of a revenue nature are wrongly treated as capital expenditure. State examples of such expenses
and the duties of auditor in this regard.
Question 24:
How will you vouch/verify provision for tax
Question 25:
How will you vouch and/or verify payment of taxes?
Question 26:
How will you vouch or verify Foreign travel expenses.
Question 27:
How will you vouch/verify the Goods sent on consignment

43
CA Inter-Auditing and Ethics CA DEEP JAIN

Question 28:
How will you vouch and/or verify the Goods sent out on Sale or Return Basis.
Question 29:
Sale of Scrap.

44
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 11: Audit of different Types of Entities

Question 1:
Mr. M, has served as an auditor in the Co-Operative Department of a Government, is appointed
as a statutory auditor by a Co-Operative Society that has receipts over Rs 3 crores during the
financial year. He is not a Chartered Accountant. Mr. D, Chartered Accountant is appointed to
conduct tax audit of the society under section 44AB of the Income Tax Act, 1961. Comment.
Question 2:
Briefly explain the provisions for qualification and appointment of Auditors under the Multi-
State Co-operative Societies Act, 2002.
OR
Multi-State Co-operative Societies Act, 2002 states that a person who is a Chartered Accountant
within the meaning of the Chartered Accountants Act, 1949 can only be appointed as auditor of
Multi-State co-operative society. Explain stating also the persons who are not eligible for
appointment as auditors of a Multi-State co-operative society.
Question 3:
Explain the powers and duties of auditors under the Multi -State Co-operative Societies Act,
2002.
Question 4:
"As per Multi-state Co-operative Societies Act, 2002, the auditor shall make a report to the
members of the Multi-State co-operative society on the accounts examined by him and on every
balance-sheet and profit and loss account and on every other document required to be part of
or annexed to the balance-sheet or profit and loss account. Explain"
Question 5:
Central Govt. hold 55% of the paid-up share Capital in Kisan Credit Co-operative Society, which
is incurring huge losses. Advise when the Central Government can direct Special Audit under
Section 77 of the Multi State Co-operative Society Act
Question 6:
Define Government Audit & explain its objective’s
Question 7:
Explain in detail the duties of Comptroller and Auditor General of India
Question 8:
An audit of Expenditure is one of the major components of Government Audit. In the context of
‘Governmen1Mt Expenditure Audit’, write in brief, what do you understand by:
(i) Audit against Rules and Orders
(ii) Audit of Sanctions
(iii) Audit against Provision of Funds

45
CA Inter-Auditing and Ethics CA DEEP JAIN

(iv) Propriety Audit

(v) Performance Audit.
OR
Audit of government expenditure is one of the major components of government audit
conducted by the office of C&AG. The basic standards set for audit of expenditure are to ensure
that there is provision of funds authorised by competent authority fixing the limits within which
expenditure can be incurred. Explain those standards.
OR
The audit of Government expenditure is one of the major components of Government audit.
Briefly explain the basic standards set in relation to audit of Government expenditure.
Question 9:
Audit against the propriety seeks to ensure that expenditure confirms to certain principles.
OR
What are the focus points in doing propriety audits by C&AG as regards government
expenditure?
OR
Write a Short notes Propriety audit
OR
Public moneys should not be utilised for the benefit of a particular person or section of the
community. List out the exceptions to this rule while audit against propriety.
Question 10:
Write short notes on Performance audit under government accounting system.
OR
Write a short note on Performance Audit
Question 11:
Audit of the accounts of stores and inventories has been developed as a part of expenditure audit
with reference to the duties and responsibilities entrusted to C&AG. Discuss.
Question 12:
What role is played by Comptroller and Auditor General of India in the audit of a Government
company?
Question 13:
State the important objectives of local body’s audit.
Question 14:
Advise any six special points in an audit of hospital.
OR

46
CA Inter-Auditing and Ethics CA DEEP JAIN

The general transactions of a hospital include patient treatment, collection of receipts,

donations, capital expenditures. You are required to mention special points of consideration
while auditing such transactions of a hospital?
OR
You have been appointed auditor of Mis. Divine Children Hospital. Discuss any four important
points that would attract your attention while audit
Question 15:
What steps would you take into consideration in auditing the receipts from patients of a
Hospital?
Question 16:
Mention any ten special points to be examined by you in the audit of Income and Expenditure
of a Charitable Institution running a hospital.
Question 17:
Mention the special points to be examined by the auditor in the audit of a charitable institution
running hostel for students pursuing the Chartered Accountancy Course and which charges only
Rs 500 per month from a student for his lodging/boarding.
Question 18:
What special steps will you take into consideration in auditing the accounts of a hotel?
OR
As an auditor, what would be your areas of consideration while auditing the element of ROOM
SALES during the audit of a 5-Star Hotel.
Question 19:
What special steps will you take into consideration in auditing the accounts of a hotel?
OR
As an auditor, what would be your areas of consideration while auditing the element of ROOM
SALES during the audit of a 5-Star Hotel.
Question 20:
BPL Ltd. is running a “RAGHU PALACE CINEMA.” Your firm of Chartered Accountants has
been appointed to get its accounts audited. Assistant appointed on the job to conduct audit asks
the audit in charge as to how to go about conducting an audit and seeks your guidance on it.
Keeping in view the above you are required to explain to the assistant special steps (any five)
involved in the Audit of Cinema.
OR
What special steps are involved in audit of a Cinema Hall?
OR

47
CA Inter-Auditing and Ethics CA DEEP JAIN

Cinescreen Multiplex Ltd. is operating cinemas in different locations in Mumbai and has
appointed you as an internal auditor. What are the areas that need to be verified in relation to
receipts from sale of Tickets ?
Question 21:
Mention any eight important points which an auditor will consider while conducting audit of a
club?
OR
Draft an Audit Programme to audit the accounts of a Recreation Club with facilities for indoor
games and in-house eating.
Question 22:
Discuss the matters which should be specially considered in the audit of accounts of a
partnership.
OR
There are certain points which are required to consider specially in the audit of accounts of a
partnership. Discuss any three points briefly.
Question 23:
State six important advantages of audit of accounts of a Partnership firm
Question 24:
Explain the audit procedure for conducting the audit of a Non-Governmental Organisation
(NGO).
OR
You have been appointed as an auditor of an NGO, briefly state the points on which you would
concentrate while planning the audit of such an organisation?
OR
In the case of audit of a charitable institution, what attentions should be paid by auditor
regarding audit of expenditure items?
Question 25
Tomo Construction Engineering LLP approached CA K to understand various returns to be
maintained and filed by them. Guide/Discuss the various returns to be maintained and filed by
them.
Question 26:
What is the procedure adopted by auditor in respect of leasing transactions entered by the
leasing company?

48
CA Inter-Auditing and Ethics CA DEEP JAIN

Chapter 12: Other SA

Question 1:
What do you understand by the term ‘fraud’? Provide its meaning given under Auditing
Standard 240.

OR

Although fraud is a broad legal concept, for the purposes of the SAs, the auditor is concerned
with fraud that causes a material misstatement in the financial statements. Explain.
Question 2:
Fraudulent financial reporting involves intentional misstatements including omissions of
amounts or disclosures in financial statements to deceive financial statement users. Explain
stating clearly how it can be accomplished.
OR

Write a short note on Fraudulent financial reporting.

OR

Fraudulent financial reporting often involves management override of controls that otherwise
may appear to be operating effectively. Explain some techniques by which fraud can be
committed by management overriding controls.

Question 3
Detection of manipulation of accounts with a view to presenting a false state of affairs is a task
requiring great tact and intelligence. Explain stating clearly how this type of fraud is generally
committed
Question 4
Misappropriation of assets involves the theft of an entity’s assets and is often perpetrated by
employees in relatively small and immaterial amounts. However, it can also involve
management who are usually more able to disguise or conceal misappropriations in ways that
are difficult to detect. Misappropriation of assets can be accomplished in a variety of ways.
Explain those particular ways.
Question 5:
Fraud, whether fraudulent financial reporting or misappropriation of assets, involves incentive
or pressure to commit fraud, a perceived opportunity to do so and some rationalization of the
act. Explain with examples.
Question 6:
Fraud Risk Factors are the events or conditions that indicate an incentive or pressure to commit
fraud or provide an opportunity to commit fraud. Further, the nature of the industry or the

49
CA Inter-Auditing and Ethics CA DEEP JAIN

entity’s operations also provides opportunities to engage in fraudulent financial reporting. List
out some of the cases from where these opportunities may arise.
OR
"Inadequate internal control over assets may increase the susceptibility of misappropriation of
those assets." State any three example of such occurrence of misappropriation of such assets.
Question 7:
"Discrepancies in the accounting records, including transactions that are not recorded in a
complete or timely manner or are improperly recorded as to amount, accounting period,
classification, or entity policy is one of the examples of circumstances that indicate the
possibility of fraud. Explain at least four other such examples relating to discrepancies in the
accounting records."
Question 8:
Write any five circumstances of conflicting or missing evidence that indicate the possibility of
fraud.
Question 9:
Factors which induce management/employees to commit fraud
Question 10:
Write the circumstances that indicate the possibility of fraud due to problematic or unusual
relationship between the auditor and management.
Question 11:
Fraud can be committed by management overriding controls using such techniques as engaging
in complex transactions that are structured to misrepresent the financial position or financial
performance of the entity. In view of the above-mentioned circumstances of management fraud,
explain briefly duties and responsibilities of an auditor in case of material misstatement
resulting from such Management Fraud.
Question 12:
Explain how would you deal as an auditor if, as a result of a misstatement resulting from fraud
or suspected fraud, you encounter exceptional circumstances that bring into question your
ability to continue performing the audit.
OR
You notice a misstatement resulting from fraud or suspected fraud during the audit and
conclude that it is not possible to continue the performance of audit. As a Statutory Auditor,
how would you deal?
Question 13:
Intelligent Ltd. entered into an agreement with Mr. Intellectual on 15th March, 2017, whereby
it agreed to pay him Rs 2 lakhs per month as retainership fee for consultation in IT department.
However, no amount was actually paid and Rs 24 lakhs was provided in the Statement of Profit

50
CA Inter-Auditing and Ethics CA DEEP JAIN

and Loss for the year ending on March 31st, 2017. Management of the company uttered that
need-based consultation was obtained throughout the year. However, on investigation, no
documentary or other evidence of receipt of such service was found. As the auditor of Innocent
Ltd., what would be your approach? Would your approach be different if the amount involved
is Rs 1 crore or above?

51