CA Inter Audit RTP Sept 24

CA Inter Audit RTP Sept 24

EDU91 has created a History.

11 EDU91 Students Have Scored 90 or Above Marks in CA Inter Audit May 2024.

PART I - Multiple Choice Questions based on Case Scenarios

Case Scenario For 10 marks In Your Exams
Pluto Limited is engaged in the manufacturing and distribution of furniture. After Covid, as the number of
people working from home has gone up, this customisable range of home office furniture has gained a
lot of importance. They were able to perform very well over the years and the same has been reflected in
their financial statements.

During the year 2023-24, M/s Saha and Associates was reappointed as the auditor. The new engagement
team has CA Saha (partner) and five article assistants. Given the large volume of transactions, the
partner instructed the article assistants to review the financial statements and auditor's report from the
previous year, 2022-23, to gain a thorough understanding.

While reviewing the summary page, one of the article Kabir noticed that few points were under
discussion with the partner before finalising the audit:

The team verified the following points with respect to employee benefit expenses:
● The employee benefit expenses recorded in the books were actually incurred during the relevant
period.
● The expenses in respect of all personnel have been accounted for.
● The expenses recognised during the period are pertaining to the current accounting period.

It was also noted that dividend to equity shareholders for the year 2022-23, was declared on 15.04.2023
and was recognised as liability in the year 2022-23.

Another article Krish noticed that debtors constitute a major component of the company’s financial
statements. As part of the audit procedure, the auditor requested the client to obtain external

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confirmations from the parties. For this, a list of all the debtors were obtained and a random sampling
was performed by the auditor. The client directly obtained the selected debtor confirmations from the
customers on time.

Krish also observed addition in the assets amounting ₹ 50 lakhs during the year supported by sufficient
audit evidence. However, upon scrutiny, it was found that some of the invoices were not in the name of
the company. Further, Cash and cash equivalents were classified as balances with banks, cheques and
drafts on hand, cash on hand and earmarked balances with banks (e.g. unpaid dividend)

Based on above, answer the following questions: -

1 Which among the following assertions are discussed with respect to the employee benefit
expenses?
(i) Measurement
(ii) Occurrence
(iii) Cutoff
(iv) Completeness

Choose the correct combination from below:

(a) (i), (ii) and (iv)
(b) (ii), (iii) and (iv)
(c) (i), (iii) and (iv)
(d) (i), (ii) and (iii)
2 Whether disclosure of dividend under the liability head during the year 2022-23 is appropriate?
(a) Yes. It should be recognised in the same year irrespective of the year of declaration as the
amount of dividend belongs to year 2022-23.
(b) No. The amount should be recognised equally between two financial years.
(c) No. The amount should not be recognised as a liability. It should be disclosed in the notes to
accounts.
(d) No. The amount should neither be recognised as liability nor disclosure is required in the
financial statements
3 Krish pointed out that the method followed to obtain debtor confirmation in the previous year was
not in accordance with SA 505. Therefore, M/s Saha & Associated should reperform the same in the
correct manner.

(a) As per SA 505, confirmation should be directly obtained by the auditor. Further, for all significant
account balances as on the Balance sheet date confirmations should necessarily be collected and
for the smaller outstanding balances, random sampling could be performed.

(b) It is ok to obtain confirmation through clients as they are in constant contact with their
customers. Also, many customers may not respond to auditor’s external confirmation request mail.
Random selection can be done for all debtors irrespective of the amount in accordance with SA 505.

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(c) As per SA 505, confirmation should be directly obtained by the auditor. Whereas random
selection can be done for all debtors irrespective of the amount.

(d) Either auditor or client can obtain confirmation based on time availability. However, it is
necessary to obtain confirmation for all significant account balances as on the Balance sheet date
and for the remaining random sampling could be performed in accordance with SA 505.
4 Which assertion has been affected in the case of fixed assets?
(a) Existence
(b) Rights and obligation
(c) Completeness
(d) Measurement
5 Cash and cash equivalents were not properly classified by the client. Which of the following is
incorrect disclosure of the same?
(a) Balances with banks
(b) Cheques and drafts on hand
(c) Cash on hand
(d) Earmarked balances with banks (e.g.: unpaid dividend)

Answers of Case Scenario

1 (b) (ii), (iii) and (iv)
2 (c) No. The amount should not be recognised as a liability. It should be disclosed in the notes to
accounts.
3 (a) As per SA 505, confirmation should be directly obtained by the auditor. Further, for all significant
account balances as on the Balance sheet date confirmations should necessarily be collected and
for the smaller outstanding balances, random sampling could be performed.
4 (b) Rights and obligation
5 (d) Earmarked balances with banks (e.g.: unpaid dividend)

Explanation - Edu91 Exclusive.

1 Answer: (b) (ii), (iii) and (iv)
Explanation: The team verified the following points with respect to employee benefit expenses:
● The employee benefit expenses recorded in the books were actually incurred during the relevant
period - Address Occurrence assertion
● The expenses in respect of all personnel have been accounted for - Address Completeness
assertion
● The expenses recognised during the period are pertaining to the current accounting period -
Address Cut-off assertion

2 Answer: (c) No. The amount should not be recognised as a liability. It should be disclosed in the notes
to accounts.

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Explanation: Dividends are only recognised as a liability once they are declared by the company. In this
case, the dividend was declared on April 15, 2023, which falls in FY 2023-24, not 2022-23. Therefore, it
should not be recognised as a liability in FY 2022-23 but should be disclosed in the notes to account for
transparency and to inform shareholders and other stakeholders of the proposed or declared dividends.

3 Answer: (a) As per SA 505, confirmation should be directly obtained by the auditor. Further, for all
significant account balances as on the Balance sheet date confirmations should necessarily be collected
and for the smaller outstanding balances, random sampling could be performed.
Explanation: As per SA 505 "External Confirmations," the auditor should directly communicate with the
third parties to obtain confirmations. The process of obtaining confirmations is intended to reduce the
risk of manipulation or bias that could occur if the confirmations were obtained through the client.

4 Answer: (b) Rights and obligation

Explanation: In the given case, it was found that some of the invoices related to additions in the assets
were not in the name of the company. Rights and obligation assertion has been affected in this case.
Rights & Obligations means entity has the right to assets i.e. (whether the entity has ownership and legal
title to assets) and the liabilities recognized in FS represent all the entity’s obligations to repayment as at
a given date.

5 Answer: (d) Earmarked balances with banks (e.g.: unpaid dividend)

Explanation:
● Cash and cash equivalents shall be classified as: (a) Balances with banks; (b) Cheques, drafts on
hand; (c) Cash on hand; (d) Others (specify nature).
● Earmarked balances with banks (for example, for unpaid dividend) shall be separately stated.
● Earmarked Balances are set aside for specific purposes and cannot be used freely, such as unpaid
dividend accounts. Such balances should be disclosed separately to indicate that they are not
available for general use by the company.
● Disclosure requirement of cash and cash equivalents under Schedule III of the Companies Act,
2013 - the specific requirement is to separate earmarked balances from other cash and cash
equivalents.

General MCQs
6 CA Chatur provides accounting and book keeping services to Shiv Ganga Limited. He is also
offered an audit of the accounts to the Shiv Ganga Limited. Which threat to independence may be
involved in accepting such an engagement.

(a) Self-interest threats

(b) Self-review threats
(c) Familiarity threats
(d) Advocacy threats
7 CA Sargun is conducting statutory audit of branch of KBC Bank. During the course of audit, it is
noticed that one borrower has availed a housing loan and a car loan from the branch. Housing loan
EMIs are overdue for 120 days as on date of Balance sheet. Car loan EMIs are overdue for 60 days

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as on date of Balance sheet. Which of the following statements is appropriate?

(a) Housing Loan should be classified as “Non-Performing Asset” in accordance with RBI norms on
asset classification. However, Car loan should be classified as Standard asset
(b) Car Loan should be classified as “Non-Performing Asset” in accordance with RBI norms on
asset classification. However, Housing Loan should be classified as Standard asset.
(c) Both Housing loan as well as car loan should be classified as “NonPerforming Assets” in
accordance with RBI norms on asset classification.
(d) Both Housing as well as car loans should be classified as Standard assets.
8 Sagar Finance Corporation Limited is a government company. The audit of the company is
conducted by statutory auditors appointed by Comptroller and Auditor General of India (C&AG).
Who is empowered to conduct “supplementary audit” of Sagar Finance Corporation Ltd.?

(a) Central Government

(b) C&AG
(c) Another independent auditor appointed by C&AG
(d) Another independent auditor appointed by Ministry of Corporate Affairs

Answers of General MCQs

6 (b) Self-review threats
7 (c) Both Housing loan as well as car loan should be classified as “NonPerforming Assets” in
accordance with RBI norms on asset classification.
8 (b) C&AG

6. Answer: (b) Self-review threats

Topic: C11 - Threats to Independence
Explanation: In this case, Chartered Accountant is already rendering accounting and bookkeeping
services to the company. If he accepts the audit, he would be involved in reviewing own work. Therefore,
the same constitutes a “self-review” threat.

7. Answer: (c) Both Housing loan as well as car loan should be classified as “NonPerforming Assets” in
accordance with RBI norms on asset classification.
Topic: C10 - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to
Advances
Explanation: A non-performing asset (NPA) is a loan or an advance where interest and/ or installment of
principal remain overdue for a period of more than 90 days in respect of a term loan. Asset classification
would be borrower-wise and not facility-wise. All facilities including investments in securities would be
termed as NPA. Hence, in this case, not only the Housing loan but the Car Loan would also be treated as
an NPA because the NPA classification is Borrower wise and not Facility wise (Car & Housing Loan
individually).

8. Answer : (b) C&AG

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Topic: C9 - Govt Audit

Explanation: - Comptroller and Auditor-General of India shall within 60 days from the date of receipt of the
audit report have a right to conduct a supplementary audit under section 143(6)(a), of the financial
statement of the company by such person or persons as he may authorize in this behalf; and for the
purposes of such audit, require information or additional information to be furnished to any person or
persons, so authorised, on such matters, by such person or persons, and in such form, as the Comptroller
and Auditor-General of India may direct.

PART II – Descriptive Questions

Chapter 1 - Nature, Objective and Scope of Audit

Qno Question Topic Covered in Remarks
QB or not?
9 Kriti, a CA student, has joined articles in a reputed Assurance Similar Case based
audit firm. She considers audit engagement to be an Eng. question question and easy
“assurance engagement”. Her understanding is that given in to answer.
audit engagement is the only kind of assurance QB
engagement in which a practitioner gives a written
assurance report in appropriate form. However, her
friend Somaya, does not agree with her. She is of the
view that assurance engagements are not restricted
to audit alone. Besides, Somaya also thinks that
assurance engagements can also relate to matters
other than historical financial information. Whose
view appears to be correct? State with reasons.

Audit engagement is an assurance engagement. However, assurance engagements are not

restricted to auditing alone. There are other assurance engagements too like review
engagements, engagements providing assurance involving prospective financial information,
engagements providing assurance on internal controls in an entity.

Assurance engagements provide assurance to users. The difference is of degree. Whereas an

audit provides reasonable assurance which is a high level of assurance, review provides lower
level of assurance as compared to audit.

There are also assurance engagements which relate to matters other than historical financial
information like providing assurance on matters involving prospective financial information and
providing assurance on internal controls in an entity.

In assurance reports involving prospective financial information, the practitioner obtains sufficient
appropriate evidence to the effect that management’s assumptions on which the prospective
financial information is based are not unreasonable, the prospective financial information is

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properly prepared on the basis of the assumptions, and it is properly presented, and all material
assumptions are adequately disclosed.

In the given case, Kriti is of the view that audit engagement is the only kind of assurance
engagement in which practitioner gives a written assurance report in appropriate form whereas is
Somaya of the view that assurance engagements are not restricted to audit alone. Thus, view of
Somaya is correct.

Revise it from here - https://youtu.be/ggSKOQDay4Q?si=a88xOSGuZv3NAW2X&t=3790

Summary
● Audit engagement is a type of assurance engagement
● Other assurance engagements exist besides audits
● Examples include review engagements and internal control assurance
● Assurance engagements provide varying degrees of assurance
● Audits offer high (reasonable) assurance
● Reviews provide lower assurance than audits
● Some assurance engagements focus on non-historical financial information
● Prospective financial information assurance examines management assumptions
● Kriti's view that only audits provide written assurance reports is incorrect
● Somaya's view that assurance engagements are not limited to audits is correct

Chapter 2 - Audit Strategy, Audit Planning and Audit Programme

Qno Question Topic Covered in Remarks
QB or not?
10 CA N, engagement partner of LPS & Associates, is Preliminary Covered in This question was
planning for an audit of a large company. As part of engagement C11 QB given in ICAI Study
preliminary engagement activities being performed in activities Material- Test Your
this regard, he wants to ensure that compliance with Knowledge and also
independence requirements is adhered. How shall he asked in N23 for 3
form a conclusion that audit firm complies with marks
independence requirements?
Direct and easy to
answer.

The engagement partner, CA N shall form a conclusion on compliance with independence

requirements that apply to the audit engagement. In doing so, CA N shall: -
i) Obtain relevant information from the firm to identify and evaluate circumstances and
relationships that create threats to independence
ii) Evaluate information on identified breaches, if any, of the firm’s independence policies and
procedures to determine whether they create a threat to independence for the audit
engagement and

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iii) Take appropriate action to eliminate such threats or reduce them to an acceptable level by
applying safeguards, or, if considered appropriate, to withdraw from the audit engagement,
where withdrawal is permitted by law or regulation. The engagement partner shall promptly
report to the firm any inability to resolve the matter for appropriate action.

Revise it from here - https://youtu.be/OPqpQbS7ZtE?si=2RKJihGXBdyRO0qI&t=3401

Summary
● CA N, as engagement partner, must conclude on independence requirements
● Steps to evaluate independence:
○ Gather relevant information from the firm
○ Identify potential independence threats
○ Assess any breaches of firm's independence policies
○ Determine if breaches threaten audit engagement independence
● Actions to address independence threats:
○ Eliminate threats
○ Reduce threats to acceptable level using safeguards
○ Withdraw from audit if necessary and legally permissible
● CA N must promptly report unresolved independence issues to the firm

Chapter 3 – Risk Assessment and Internal Control

Qno Question Topic Covered in Remarks
QB or not?
11 Companies are increasingly using data analytics for C3D Covered This question was
managing their operations. Auditors can also obtain Automated asked several
good results by using data analytics. What are the Environmen times.
tools and techniques used by auditors in applying t - Data
the principles of Data Analytics and in which areas Analytics Direct and easy to
data analytics can be used by auditors? answer.

The tools and techniques that auditors use in applying principles of data analytics are known as
Computer Assisted Auditing Techniques (CAATs).

Data analytics can be used in testing of electronic records and data residing in IT systems using
spreadsheets and specialised audit tools viz., IDEA and ACL to perform the following: -
● Check completeness of data and population that is used in either test of controls or
substantive audit tests.
● Selection of audit samples – random sampling, systematic sampling.
● Re-computation of balances – reconstruction of trial balance from transaction data.
● Reperformance of mathematical calculations – depreciation, bank interest calculation.
● Analysis of journal entries
● Fraud investigation.

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● Evaluating impact of control deficiencies

Revise it from here - https://youtu.be/VptrcceHVeA?si=2uJzr_KOAS-v2AMi&t=8394

Chapter 4 – Audit Evidence

Qno Question Topic Covered Remarks
in QB or
not?
12 Quality Products Limited is engaged in SA 501 Similar Similar question
manufacturing bicycles. As part of manufacturing question was also given in
activities, it sends raw material to some business covered in ICAI Study Material
entities and procures finished components from QB - Illustration
them. As on 31st March 2024 inventories lying with
such business entities are material. Being statutory This question is
auditor of Quality Products Limited, how will you easy to answer.
obtain sufficient appropriate audit evidence
regarding existence and condition of inventories
lying with such business entities?

In accordance with requirements of SA 501,”Audit Evidence- Specific Considerations for Selected

Items”, when inventory under the custody and control of a third party is material to the financial
statements, the auditor shall obtain sufficient appropriate audit evidence regarding the existence
and condition of that inventory by performing one or both of the following

a) Request confirmation from the third party as to the quantities and condition of inventory
held on behalf of the entity.
b) Perform inspection or other audit procedures appropriate in the circumstances.

Other audit procedure may include –

● Inspecting documentation regarding inventory held by third parties
● Requesting confirmation from other parties when inventory has been pledged as collateral.
● Attending, or arranging for another auditor to attend, the third party’s physical counting of
inventory, if practicable.
● Obtaining another auditor’s report, or a service auditor’s report, on the adequacy of the third
party’s internal control for ensuring that inventory is properly counted and adequately
safeguarded.

Revise it from here - https://youtu.be/onHx9txbarY?si=islhKtaJPkE6-6T7&t=4231

Chapter 5 - Audit of Items of Financial Statements

Qno Question Topic Covered Remarks
in QB or

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not?
13 The financial statements of XYZ Limited show Audit of Covered Similar question
long-term borrowings from the banks, financial Borrowings was asked in
institutions, leasing, and hire purchase companies. MTP1 M18 & MTP2
Additionally, the company has issued debentures to N18.
its 1000 members to raise funds in accordance with
the provisions of the Companies Act, 2013. The This question is
money raised by issuing debentures is also reflected easy to answer.
in long-term borrowings. As the statutory auditor of
XYZ Limited, CA X wants to verify that all borrowings
on the balance sheet represent valid claims by
banks or other third parties. Suggest a few audit
procedures in this regard

The audit procedures required to be undertaken by CA X while auditing borrowings is as follows:

● Review board minutes for approval of new lending agreements. During review, ensure that
new loan agreements or bond issuances were authorised.
● Ensure that significant debt commitments are approved by the board of directors.
● Check the details of loans recorded (interest rate, nature and repayment terms) to the loan
agreement. Verify that borrowing limits, if any, imposed by the agreements are not
exceeded.
● Roll out and obtain independent balance confirmations (SA 505) in respect of all the
borrowings from the lender (banks/ financial institutions etc.).
● Verify the details of leases and hire purchase creditors recorded to underlying
contracts/agreements.
● In case of Debentures, examine trust deed for terms and dates of redemption, borrowing
restrictions and compliance with covenants.
● When debt is retired, ensure that a discharge is received on assets securing the debt.
● Obtain Written Representation that all the liabilities which have been recorded represent a
valid claim by the lenders.

Revise it from here - https://youtu.be/FLA67OHJuiU?si=sVvk-H2qd6hWRRQd&t=1398

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Chapter 6 – Audit Documentation

Qno Question Topic Covered Remarks
in QB or
not?
14 An important factor in determining the form, content Documentati Covered This question was
and extent of audit documentation of significant on of also asked in RTP
matters is the extent of professional judgement Significant N20, RTP N22.
exercised in performing the work and evaluating the Matters &
results. Explain stating clearly the examples of Related This is the simplest
significant matters. Significant question that can
Professional be asked, and we
Judgements expect students to
get full marks in it.

As per SA 230,”Audit documentation” judging the significance of a matter requires an objective

analysis of the facts and circumstances. Examples of significant matters include:
● Matters that give rise to significant risks.
● Results of audit procedures indicating (a) that the financial statements could be materially
misstated, or (b) a need to revise the auditor’s previous assessment of the risks of material
misstatement and the auditor’s responses to those risks.
● Circumstances that cause the auditor significant difficulty in applying necessary audit
procedures.
● Findings that could result in a modification to the audit opinion or the inclusion of an
Emphasis of Matter Paragraph in the auditor’s report.

An important factor in determining the form, content and extent of audit documentation of
significant matters is the extent of professional judgement exercised in performing the work and
evaluating the results.

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Documentation of the professional judgements made, where significant, explains the auditor’s
conclusions and reinforces the quality of the judgement.
Such matters are of particular interest to those responsible for reviewing audit documentation,
including those carrying out subsequent audits, when reviewing matters of continuing
significance (for example, when performing a retrospective review of accounting estimates).

Revise from here - https://youtu.be/mgRAnshSOfI?feature=shared&t=765

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Chapter 7 – Completion and Review

Qno Question Topic Covered Remarks
in QB or
not?
15 CA Manoj is the statutory auditor of a company. He SA 580 Not Case based
has completed the audit and issued the audit report covered question and easy
dated June 30, 2024. Before signing the audit report, to answer.
written representations dated June 29, 2024, were
obtained from the management of the company.
Discuss the significance of the date of written
representations. Also state whether the written
representations obtained on June 29, 2024 is
appropriate or not.

As per SA 580,”Written Representations” the date of the written representations shall be as near
as practicable to, but not after, the date of the auditor’s report on the financial statements.

Since written representations are necessary audit evidence, the auditor’s opinion cannot be
expressed, and the auditor’s report cannot be dated before the date of the written
representations. Furthermore, because the auditor must consider events occurring up to the date
of the auditor’s report that might require adjustment to or disclosure in the financial statements,
the written representations are dated as near as practicable to, but not after, the date of the
auditor’s report on the financial statements. In the given situation, CA Manoj obtained written

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representations dated June 29, 2024, from the management of the company before signing the
audit report on June 30, 2024.

From the above it can be concluded that written representations have been obtained
appropriately.

Revise it from here - https://youtu.be/BQg1Hq2HUIo?si=N_kF0gQt4lN3456-&t=1058

● SA 580 governs "Written Representations" in audits

● Key points about timing of written representations:
○ Should be as close as possible to auditor's report date
○ Must not be after the auditor's report date
○ Auditor's opinion cannot be expressed before obtaining representations
○ Auditor's report cannot be dated before receiving representations
● Rationale:
○ Written representations are necessary audit evidence
○ Auditor must consider events up to report date
● In this case:
○ CA Manoj obtained representations on June 29, 2024
○ Audit report was signed on June 30, 2024
○ Conclusion: Written representations were obtained appropriately

16 While conducting an audit of BYN Limited, CA Y SA 570 Similar Case based

notices that the company has lost one of its key question question and easy
markets along with important customers. covered to answer.
Additionally, several highly successful competitors in QB
have emerged, impacting business of the company.
Despite the existence of material uncertainty, CA Y
finds the use of going concern basis of accounting
appropriate for preparation of financial statements.
The company has also disclosed material
uncertainty in notes to accounts adequately. How
should he deal with the matter in the auditor's
report?

As per SA 570,”Going concern”, If adequate disclosure about the material uncertainty is made in
the financial statements, the auditor shall express an unmodified opinion and the auditor’s report
shall include a separate section under the heading “Material Uncertainty Related to Going
Concern” to: -
a) Draw attention to the note in the financial statements that discloses such matters.

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b) State that these events or conditions indicate that a material uncertainty exists that may
cast significant doubt on the entity’s ability to continue as a going concern and that the
auditor’s opinion is not modified in respect of the matter.

Revise it from here - https://youtu.be/BQg1Hq2HUIo?si=tqnQuyz4vvimT7J0&t=4703

Chapter 8 – Audit Report

Qno Question Topic Covered Remarks
in QB or
not?
17 Discuss the reporting requirements as per CARO, CARO 2020 Covered Reporting
2020, regarding: requirements for
i) Statutory Dues and these clauses were
ii) Transactions with Related Parties asked several
times.

This is the simplest

question that can
be asked, and we
expect students to
get full marks in it.

i) Reporting under CARO,2020 regarding statutory Dues [Para 3(vii)]

a) whether the company is regular in depositing undisputed statutory dues including
Goods and Services Tax, provident fund, employees' state insurance, income tax,
sales-tax, service tax, duty of customs, duty of excise, value added tax, cess and
any other statutory dues to the appropriate authorities and if not, the extent of the
arrears of outstanding statutory dues as on the last day of the financial year
concerned for a period of more than six months from the date they became
payable, shall be indicated;
b) where statutory dues referred to in sub-clause (a) have not been deposited on
account of any dispute, then the amounts involved and the forum where dispute is
pending shall be mentioned (a mere representation to the concerned Department
shall not be treated as a dispute);

Revise it from here - https://youtu.be/7QcmtzPcsiU?si=v0wVBp7nGDr3S8wM&t=10305

ii) Reporting under CARO,2020 regarding transactions with related parties [Para 3(xiii)]
Whether all transactions with the related parties are in compliance with sections 177 and
188 of Companies Act where applicable and the details have been disclosed in the
financial statements, etc., as required by the applicable accounting standards.
Revise it from here - https://youtu.be/7QcmtzPcsiU?si=695lJgHOc_zDzV-A&t=10705

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Chapter 9 – Special Features of Audit of Different Type of Entities

Qno Question Topic Covered Remarks
in QB or
not?
18 Section 77 of Multi-State Cooperative Societies Act, Multi-State Covered This question was
2002 states that the Central Government may at any Co-operative asked in SA M19
time by order direct that a special audit of the Societies for 3 marks &
Multi-State Co-Operative Society’s accounts for Act, 2002 MTP2 M23.
such period or periods as may be specified in the
order, shall be conducted. Further, it may by the Direct and easy to
same or a different order appoint either a Chartered answer.
Accountant or the Multi-State Co-Operative Society’s
auditor himself to conduct special audit. Under
which circumstances such power can be exercised
by the Central Government?

The Central government has power to order special audit of Multi-State Cooperative Society’s
Accounts where it is of the opinion: -
a) that the affairs of any multi-state co-operative society are not being managed in
accordance with self-help and mutual deed and co-operative principles or prudent
commercial practices or with sound business principles or
b) that any multi-state co-operative society is being managed in a manner likely to cause
serious injury or damage to the interests of the trade industry or business to which it
pertains or
c) that the financial position of any multi-state co-operative society is such as to endanger its
solvency

Revise it from here - https://youtu.be/08Qqol971fo?si=Y-pA7Nph3SpbhN12&t=7308

Chapter 10 – Audit of Banks

Qno Question Topic Covered Remarks
in QB or
not?
19 Compute the Drawing Power for Cash Credit A/c of Computation Similar Similar question
Kirpa Limited for the month of March 2024 with of Drawing question was asked in M22
following information: Power covered for 3 Marks.
in QB
(Amount in
This question is
₹)
easy to answer.
Stock 60,000
Debtors 55,000

Neeraj Arora | www.edu91.org CA Inter Audit ICAI RTP | Sept 24 Page No. 16
 CA Inter Audit RTP Sept 24

(Including Debtor of ₹ 15,000 for an

invoice dated 20.10.2023)
Sundry creditors 10,000
Sanctioned Limit 48,000

Margin on stock is 30% and on debtors is 40%.

Note: Debtors older than 3 months are ineligible for
calculation of DP

Computation of Drawing Power (DP) for CC A/c of Kirpa Ltd.

Particulars of current Amount (₹) DP Amt (₹)
assets
(A) Stocks
Stocks at realizable 60,000
value
Less: Unpaid stocks
- Sundry creditors 10,000
Paid for stocks 50,000
Margin @ 30% 15,000 35,000
(B) Debtors
Total Debtors 55,000
Less: Ineligible debtors 15,000
Eligible debtors 40000
Margin @ 40% 16,000 24,000
Total Drawing Power 59,000

The sanctioned limit given in the question is ₹ 48,000 whereas drawing power as per the above
working is ₹ 59,000. So, drawing power would be restricted to sanctioned limit i.e., ₹ 48,000/

Revise it from here - https://youtu.be/IQ-aVukyFHI?si=A8t7ho1Bl2sT2asi&t=4524

Chapter 11 – Ethics and Terms of Audit Engagements

Qno Question Topic Covered Remarks
in QB or
not?
20 ABC & Associates, an audit firm, has been SQC1 Not This concept was
approached by a prospective company client that covered covered in class.
has been in business for about 10 years to conduct Similar question

Neeraj Arora | www.edu91.org CA Inter Audit ICAI RTP | Sept 24 Page No. 17
 CA Inter Audit RTP Sept 24

an audit of its financial statements. Before covered in DPP for

accepting the audit engagement, the firm wants to C11
access the integrity of prospective clients. With
regard to the assessment of integrity, which Direct and easy to
matters should be considered by the audit firm? answer.

With regard to the integrity of a client, matters that ABC & Associates should considers include,
for example:
● The identity and business reputation of the client’s principal owners, key management,
related parties and those charged with its governance.
● The nature of the client’s operations, including its business practices.
● Information concerning the attitude of the client’s principal owners, key management and
those charged with its governance towards such matters as aggressive interpretation of
accounting standards and the internal control environment.
● Whether the client is aggressively concerned with maintaining the firm’s fees as low as
possible.
● Indications of an inappropriate limitation in the scope of work.
● Indications that the client might be involved in money laundering or other criminal
activities.

Revise it from here - https://youtu.be/OPqpQbS7ZtE?feature=shared&t=3676

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 CA Inter Audit RTP Sept 24

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