Final Audit Super 100 Questions - May 2023 Exams

CA Final
Advanced Auditing & Professional Ethics
SUPER 100
Relevant for May 2023 Exams
Compiled by: CA. Pankaj Garg

© Pankaj Garg
All Rights reserved.

This compilation is not for Sale and is being prepared exclusively for
the benefits of students appearing in May 2023 Exams
CA Final – Advanced Auditing
(Important Questions for May 2023 Exams)
Chapter 1 – Quality Control & Engagement Standards

Q.1: MB & Associates is a partnership firm of the Chartered Accountants which was
established seven years back. The firm is getting new clients and has also been offered
new engagement services with existing clients. The firm is concerned about obtaining
such information as it considers necessary in the circumstances before accepting an
engagement with a new client and acceptance of a new engagement with an existing
client. The firm is looking to work with only select clients to adhere to the Quality
Control Standards.
Guide MB & Associates about the matters to be considered with regard to the integrity
of a client, as per the requirements of SQC 1. (5 Marks)
Q.2: NK & Co., Chartered Accountants were appointed as Statutory Auditors of Fresh Juice
Limited for the FY 2022-23. The previous year's audit was conducted by LP &
Associates. After the audit was completed and reports submitted, it was found that
closing balances of last financial year i.e., 2021-22 were incorrectly brought forward.
It was found that NK & Co. did not apply any audit procedures to ensure that correct
opening balances have been brought forward to the current period. Accordingly, a
complaint was filed against NK & Co. in relation to this matter.
You are required to inform what policies are required to be implemented by NK & Co.
for dealing with such complaints and allegations as required by Standard on Quality
Control (SQC). (5 Marks)
Q.3: T & Co., a firm of Chartered Accountants has not revised the terms of engagements
and obtained confirmation from the clients for last 5 years despite changes in business
and professional environment. Please elucidate the circumstances that may warrant
the revision in terms of engagement. (4 Marks)
Compiled by: CA. Pankaj Garg 1 |P a g e

Q.4: Ace Ltd. (manufacturer of textile goods) got an order of manufacturing of PPE kits in
December 2022. But there was shortage of machinery and manpower to accomplish
the ordered requirement of PPE kits. Ace Ltd. approached another manufacturing unit
Jack Limited for purchase of the unit. Jack Limited was interested in the sale of
unit, so the deal went through and Ace Limited acquired ninety five percent shares of
Jack Limited. The new management of Jack Limited proposed and appointed NKB
Associates, Chartered Accountants, (already auditors of Ace Limited) as new auditors
of Jack Limited. NKB Associates accepted the assignment without considering
information whether the conclusions reached regarding the acceptance and continuance
of client relationships and audit engagements are appropriate.
Comment with respect to appropriate Standard of Auditing what type of information
assists the engagement partner in determining whether the conclusions reached
regarding the acceptance and continuance of client relationships and audit engagements
are appropriate or not? (5 Marks)
Q. 5: You are the team leader of 10 members for an audit of a Multinational Company. All
the team members are concerned about audit documentation in order to provide
evidence that the audit complies with SAs. Hence, the team members wish to document
every matter concerned.
In your opinion it is neither necessary nor practicable for the auditor to document
every matter considered or professional judgment made in an audit. Further you feel
that it is unnecessary for the auditor to document separately compliance with matters
for which compliance is demonstrated by documents included within the audit file.
Illustrate by giving examples with reference to relevant Standard on Auditing.
(5 Marks)
Q.6: M/s Honest Limited has entered into a transaction on 5th March, 2023, near year-
end, whereby it has agreed to pay ₹ 5 lakhs per month to Mr. Y as annual retainer-
ship fee for "engineering consultation". No amount was actually paid, but ₹ 60 lakhs
is provided in books of account as on March 31, 2023.

Your inquiry elicits a response that need-based consultation was obtained round the
year, but there is no documentary or other evidence of receipt of the service. As the
auditor of M/s Honest Limited, what would be your approach? (4 Marks)
Q.7: CA. Yusuf has been appointed as an auditor of Ajanta Ltd., a textile entity. While
going through the employee records of the company, CA. Yusuf identified that most
of the labour employed are of the age between 11-12 years. On enquiring the same,
the management argues that there is no such boundation with regard to employment
of such lower age children and contends that it is out of the scope of audit as well to
check such compliance.
Comment in the context of relevant standard on auditing whether the contention of
management is tenable. (4 Marks)
Q.8: During the course of Audit of POP Ltd., you as an auditor while performing the audit
procedures become aware of the existence of certain instances which seem to be an
indication of non-compliance with Laws and regulations. List out any five such instances
identified by you as an auditor, suggestive of non-compliance with Laws and
regulations. (5 Marks)
Q.9: Auditors are required to obtain an understanding of internal control relevant to the
audit when identifying and assessing its effectiveness and risk of material
misstatement. During the course of audit of ABC Ltd., you observed that significant
deficiency exists in the internal control system and you want to ascertain the same.
Elucidate the various indicators of significant deficiencies which will help you in
assessing the efficiency of internal control system of the organization. (4 Marks)
Q.10: Excellent Bank Ltd. is a Public Limited Company. The said Bank has various branches
all over India. The Bank appoints 3 Joint Auditors for the financial year ending
31/03/2021. All the 3 Joint Auditors divide the work with mutual consent. Verification
of Consolidation, however, remained undivided.

All branches and zones were divided amongst the 3 Joint Auditors. During audit of
zones, CA. Z, one of the joint auditors expressed a concern about internal control in
one of the large corporate branches situated in his zone. The irregularity was not
reported in the final accounts as the other 2 Joint Auditors were not in favour of
reporting and decision of not reporting the same was taken on the basis of majority.
Subsequently, fraud has been detected in the said branch which was audited by CA.
Z. The Bank seeks your advice about the responsibility of the 3 Joint Auditors in the
above situation. (5 Marks)
Q.11: AB & Associates, a Chartered Accountant firm, was appointed auditors of KEY
Company Ltd. for the financial year ended 31st March 2023. Being the first year of
audit, the audit firm AB & Associates, as per its system of quality control, involve
senior partner of the firm to review the overall audit strategy prepared by the team
members. What additional matters would be considered in initial audit engagement by
the senior partner in establishing the overall audit strategy and audit plan of KEY
Company Ltd.? (4 Marks)
Q.12: One of the components of an adequate system of internal control is entity's risk
assessment process. Risk relevant to reliable financial reporting include external and
internal events, transactions or circumstances that may occur and adversely affect an
entity's ability to initiate, record, process and report financial data consistent with
the assertions of management in the financial statements.
In view of the above. Briefly state any six circumstances of entity's risk assessment
Process component under which risks may arise or change. (3 Marks)
Q.13: As an auditor of RST Ltd. Mr. P applied the concept of materiality for the financial
statements as a whole. On the basis of obtaining additional information of significant
contractual arrangements that draw attention to a particular aspect of a company’s
business, he wants to re-evaluate the materiality concept. Please guide him.
(4 Marks)

Q.14: In the course of audit of Z Ltd., its auditor wants to rely on audit evidence obtained
in previous audit in respect of effectiveness of internal controls instead of retesting
the same during the current audit. As an advisor to the auditor kindly caution him
about the factors that may warrant a re-test of controls. (4 Marks)
Q.15: ENN Limited is availing the services of APP Private Limited for its payroll operations.
Payroll cost accounts for 65% of total cost for ENN Limited. APP Limited has provided
the Type 2 report as specified under SA 402 for its description, design and operating
effectiveness of control.
APP Private Limited has also outsourced a material part of payroll operation M/s SMP
& Associates in such a way that M/s SMP & Associates is sub-service organization to
ENN Limited. The Type 2 report which was provided by APP Private Limited was based
on carve-out method as specified under SA 402.
CA Raman while reviewing the unmodified audit report drafted by his assistant found
that, a reference has been made to the work done by the service auditor. CA Raman
hence asked his assistant to remove such reference and modify report accordingly.
Comment whether CA Raman is correct in removing the reference of the work done by
service auditor? (4 Marks)
Q.16: PDJ Ltd. has engaged an actuary to ascertain actuarial valuation of defined benefit
obligations viz. Gratuity and Leave Encashment liabilities. As an auditor of PDJ Ltd.
you would like to use the report of the actuary as audit evidence. How would you
evaluate the work of the actuary? (4 Marks)
Q.17: Crush Ltd. is a dealer in fast moving consumer goods. The Company has warehouses
throughout the country where the stocks are stored. The Auditor of the Company
normally conduct physical verification of stocks along with the Management at the end
of the financial year. However, the Auditor could not be physically present during
stock-tacking at two places on account of certain disturbances in the region.

In the light of the above facts:
(i) How sufficient appropriate audit evidence regarding the condition and existence
of inventory may be obtained?
(ii) How an Auditor is supposed to deal when attendance at physical inventory counting
is impracticable? (4 Marks)
Q.18: Moon Limited replaced its statutory auditor for the financial year 2022-23. During
the course of audit, the new auditor found a credit item of ₹ 5 lakhs. On enquiry,
the company explained him that it is, a very old credit balance. The creditor had
neither approached for the payment nor he is traceable. Under the circumstances, no
confirmation of the credit balance is available. (4 Marks)
Q.19: In an initial audit engagement the auditor will have to satisfy about the sufficiency
and appropriateness of ‘Opening balances’ to ensure that they are free from
instatements, which may materially affect the current financial statements. Lay down
the audit procedure, you will follow, when financial statements are audited for the
first time.
If, after performing the procedure, you are not satisfied about the correctness of
‘Opening Balances’, what approach you will adopt in drafting your audit report?
(5 Marks)
Q.20: In audit of DEF Limited, the auditor had made use of certain analytical procedures
with regard to certain key data in the statement of profit and loss. The results
obtained showed inconsistencies with other relevant information. State the course of
action that the Auditor should take to ensure that the risk of Material misstatement
would be contained to a low level fixed as per materiality level. (4 Marks)
Q.21: In the course of your audit assignment of Indraprastha Ltd., you want to guide your
audit assistants in selecting sample items in such a way that sample can be expected
to be representative of the population and all items have an opportunity of being
selected. Guide your assistants with principal methods of collecting samples.
(3 Marks)

Q.22: A Pvt. Ltd. is engaged in the business of real estate. The auditor of the company
requested the information from the management to review the outcome of accounting
estimates (like estimated costs considered for percentage completion etc.) included in
the prior period financial statements and their subsequent re-estimation for the
purpose of the current period.
The management has refused the information to the auditor saying that the review of
prior period information should not be done by the auditor. Please advise.
(4 Marks)
Q.23: The financial statements of Beta Ltd. have been prepared by the Management with
due disclosures for related parties and transactions with them. However, as the
auditor of the Company, you are not sure of the reliability of the said disclosures.
Mention the documents and records that may be helpful in gathering information about
related party relationships and transactions. (4 Marks)
Q.24: Comment on the following: A Co. Ltd. has not included in the Balance Sheet as on
31.03.2022 a sum of ₹ 1.50 crores being amount in the arrears of salaries and wages
payable to the staff for the last 2 years as a result of successful negotiations which
were going on during the last 18 months and concluded on 30.04.2022. The auditor
wants to sign the said Balance Sheet and give the audit report on 31.05.2022. The
auditor came to know the result of the negotiations on 15.05.2022. (4 Marks)
Q.25: TUV Ltd. is a company engaged in the business of manufacture of spare parts. Saroj
& Associates are the statutory auditors of the company for the FY 2022-23. During
the course of audit, CA Saroj noticed that the company had a major customer, namely,
Korean Mart from South Korea. Owing to an outbreak of war and subsequent
destruction leading to government ban on import and export in South Korea, the demand
from Korean Mart for the products of TUV Ltd. ended for an unforeseeable time
period. When discussed with the management, CA Saroj was told that the company is
in the process of identifying new customers for their products.

CA Saroj understands that though the use of going concern assumption is appropriate
but a material uncertainty exists with respect to the identification of new customers.
This fact is duly reflected in the financial statements of TUV Ltd. for the FY 2022-
23. How should CA Saroj deal with this matter in the auditor’s report for the FY
2022-23? (4 Marks)
Q.26: In the course of audit of K Ltd., its auditor Mr. 'N' observed that there was a
special audit conducted at the instance of the management on a possible suspicion of
a fraud and requested for a copy of the report to enable him to report on the fraud
aspects. Despite many reminders it was not provided. In absence of the special audit
report, Mr. 'N' insisted that he be provided with at least a written representation in
respect of fraud on/by the company. For this request also, the management remained
silent. Please guide Mr. 'N'. (4 Marks)
Q.27: Smart Ltd. is a manufacturing unit and you are External Auditor of the company.
Internal auditors are also appointed as per the provisions of the Companies Act, 2013.
As an external auditor you want to use the internal auditors to provide direct
assistance for the purposes of audit. State the circumstances where the internal
auditors cannot be used to provide direct assistance. What would you include in the
audit documentation? (4 Marks)
Q.28: Mr. A is appointed as statutory auditor of XYZ Ltd. XYZ Ltd. is required to appoint
internal auditor as per statutory provisions given in the Companies Act, 2013 and
appointed Mr. B as its internal auditor. The external auditor Mr. A asked internal
auditor to provide direct assistance to him regarding evaluating significant accounting
estimates by the management and assessing the risk of material misstatements.
(a) Discuss whether Mr. A, statutory auditor, can ask direct assistance from Mr.
B, internal auditor as stated above in view of auditing standards.

(b) Will your answer be different, if Mr. A ask direct assistance from Mr. B,
internal auditor with respect to external confirmation requests and evaluation of
the results of external confirmation procedures? (4 Marks)
Q.29: X Ltd. had a net worth of INR 1300 crores because of which Ind AS became applicable
to them. The company had various derivative contracts – options, forward contracts,
interest rate swaps etc. which were required to be fair valued for which company got
the fair valuation done through an external third party. The statutory auditors of the
company involved an auditor’s expert to audit valuation of derivatives. Auditor and
auditor’s expert were new to each other i.e. they were working for the first time
together but developed a good bonding during the course of the audit. The auditor did
not enter into any formal agreement with the auditor’s expert. Please advise.
(4 Marks)
Q.30: O Ltd. is in the business of manufacturing of steel. The manufacturing process requires
raw material as iron ore for which large stock was maintained by the company at year
end – 31 March 2021. The nature of raw material is such that its physical verification
requires involvement of an expert. Management hired their expert for stock take and
auditors also involved auditor’s expert for the stock take.
The auditor observed that the work of the auditor’s expert was not adequate for
auditor’s purposes and the auditor could not resolve the matter through additional
audit procedures which included further work performed by both the auditor’s expert
and the auditor.
Basis above, the auditor concluded that it would be necessary to express a modified
opinion in the auditor’s report because the auditor has not obtained sufficient
appropriate audit evidence. However, the auditor issued a clean report and included
the name of the expert in his report to reduce his responsibility for the audit opinion.
Comment. (5 Marks)
-------------------

Chapter 5 – Professional Ethics
Q.31: The audit team is preparing to conduct audit for ABC Company for the period ending
31.3.2023. However, the audit team has not received its audit fees from ABC Company
for its audit concluded for ended 31.3.2022. The audit team might be tempted to
issue a favourable report so that ABC Company is able to secure a loan to settle the
fees outstanding for their 31.3.2022 audit. The audit team is not complying the
fundamental principles of auditing hence hindering the Auditor's Independence. Explain
the types of threats that may hinder Auditor's Independence while issuing Audit
Report. (4 Marks)
Q.32: A professional accountant in public practice is always subject to various threats in
compliance with fundamental principles of his profession and you, as a professional
accountant, is worried about threats in your audit assignment of M/s Soft Ltd. and
want to implement some measures to eliminate and reduce the same. Enumerate some
safeguards which you may introduce to ward off such threats. (4 Marks)
Q.33: Mr. S, a practicing CA agreed to provide “Portfolio management Services” to his client
M/s. D Limited. Comment with reference to the Chartered Accountants Act, 1949.
(4 Marks)
Q.34: Mr. K, Chartered Accountant in practice as a sole proprietor at Chennai has an office
in the suburbs of Chennai. Due to increase in the income tax assessment work, he
opens another office near the income tax office, which is within the city and at a
distance of 30 kms. from his office in the suburb. For running the new office, he has
employed a retired Income Tax Commissioner who is not a Chartered Accountant.
Comment. (4 Marks)

Q.35: CA. P is a newly qualified Chartered Accountant in practice and in order to increase
his professional practice and client base, entered into an agreement with Mr. A, a
qualified and experienced registered valuer to share 20% professional fees for all
cases of valuation referred to him by CA. P. Based on this, CA. P received ₹ 1,20,000
during the year 2022-23 from Mr. A. Is CA. P guilty of misconduct under the
Chartered Accountants’ Act, 1949? (4 Marks)
Q.36: During the opening ceremony of a new branch office of CA. Young, his friend CA. Old
introduced to CA. Young, his friend and client Mr. Rich, the owner of an Export House
whose accounts had been audited by CA. Old for more than 15 years. After few days,
Mr. Rich approached CA. Young and offered a certification work which hitherto had
been done by CA. Old CA. Young undertook the work for a fee which was not less
than fee charged by CA. Old in earlier period.
Comment whether CA. Young had done any professional misconduct. (4 Marks)
Q.37: Comment on the following with reference to the Chartered Accountants Act, 1949 and
schedules thereto: A Chartered Accountant in practice, empanelled as IP (Insolvency
Professional) has mentioned the same on his visiting cards, letter heads and other
communications also. Mr. A, who is residing in his neighbourhood has filed a complaint
for professional misconduct against the said member for such mention of insolvency
professional on circulations. (4 Marks)
Q.38: A company has appointed a practicing Chartered Accountant as an independent director

on its board. The said company publishes description about the Chartered Accountant's
expertise, specialisation and knowledge in any particular field or add appellations or
adjectives to his name in the prospectus or public announcements issued by this
company. Whether the said publication will be covered under Code of Ethics? What
should be the role of the Chartered Accountant in this regard? (4 Marks)
Q.39: CA B, is appointed to carry out internal audit of Stock brokers, AKA Finstock Ltd.,
listed with NSE. CA B started his work and submitted his first monthly report. CA
S, a partner of ASA & Co., statutory auditors of AKA Finstock Ltd., during his first
visit got to see the internal audit report of CA B. CA S feels that since CA B did not
inform about his appointment as an internal auditor to ASA & Co., this is violation of
professional ethics. Comment with reference to the Chartered Accountants Act, 1949
and Schedules thereto. (4 Marks)

Q.40: M/s. AWE & Co, Chartered Accountants were appointed as Auditors of WOW Ltd.
for the F.Y. 2022-23. Since they declined to accept the appointment, the Board of
Directors appointed M/s GDC & Co., a CA firm as the auditor in the place of M/s.
AWE & Co. This was accepted by M/s GDC & Co. Discuss this with reference to
Chartered Accountants Act, 1949 and Companies Act, 2013. (4 Marks)
Q.41: Mr. Joe, a practicing chartered accountant, has accepted an appointment as auditor
of cooperative society and agreed to charge fees @ 7% of the profits of the society
during the financial year 2022-23. Comment on action of Mr. Joe with reference to
the Chartered Accountants Act, 1949 and Schedules thereto. (4 Marks)
Q.42: C.A. Ajitnath is Special Executive Magistrate. He also took over as the Executive
Chairman of Software Company on 1.4.2022. He is also a leading income tax
practitioner and consultant for derivative products. He resides in Chennai near to the
ION commodity stock exchange and does trading in commodity derivatives. Every day,
he invests nearly 40% of his time to settle the commodity transactions. He has not
taken any permission for becoming Special Executive Magistrate. However, he has got
special permission of Council of ICAI for becoming Executive Chairman. Is C.A.
Ajitnath liable for professional misconduct? (4 Marks)
Q.43: Mr. 'A' is a practicing Chartered Accountant working as proprietor of M/s A & Co.
He went abroad for 3 months. He delegated the authority to Mr. 'Y' a Chartered
Accountant his employee for taking care of routine matters of his office. During his
absence Mr. 'Y' has conducted the under mentioned jobs in the name of M/s A & Co.
(i) He issued the audit queries to client which were raised during the course of
audit.
(ii) He issued production certificate to a client under GST Laws.
(iii) He attended the Income Tax proceedings for a client as authorised
representative before Income Tax Authorities.
Comment on eligibility of Mr. 'Y' for conducting such jobs in name of M/s A & Co.
and liability of Mr. 'A' under the Chartered Accountants Act, 1949. (5 Marks)

Q.44: Tiger Ltd. has applied to a bank for loan facilities. The bank on studying the financial
statements of the company notices some discrepancies in the books of the company.
Upon discussion with the auditor of the company, the bank manager requested for
detailed information regarding a few items in the financial statements. The information
is available in the working paper file of the auditor. What should be the response of
the auditor in this regard? (4 Marks)
Q.45: Comment with the reference to the Chartered Accountants Act, 1949 and schedules
thereto: D, a practicing Chartered Accountant examined and reported on the
prospective financial statements for one of his clients to obtain a cash credit facility
of ₹ 75 lakhs from a Private Bank. The bank has sanctioned the cash credit facility
for ₹ 60 lakhs to his client. Consequent to the sanction of loan by Bank, he charged
a fee of ₹ 60,000 based on 1% of the credit facility sanctioned. (4 Marks)
Q.46: AP & Co., a firm of Chartered Accountants, was appointed by D Ltd., to evaluate the
cost of a new product manufactured by it for their information system and fixation
of fair market price. Partner ‘P’ of the CA firm is a non-executive director of the
Company. Comment with reference to Chartered Accountants Act, 1949 and
Regulations thereto. (4 Marks)
Q.47: In the course of his assignment in M/s Bailey Ltd., CA Soft came to know that the
company, due to financial crunch and unable to meet employees salary, has taken a
loan of ₹ 50 lacs from Employees Gratuity Fund. The said loan was not reflected in
the books of account of the company and the auditor ignored this transaction in his
report.
Comment with reference to the Chartered Accountants Act, 1949 and Regulations
thereto. (4 Marks)
Q.48: You were the statutory auditor of Speed Ltd., a PSU, for the year 2020-21. In the
course of your audit, you did not observe any fraud having been committed during that
year. However, the C & AG audit staffs during their routine inspection found that
chief cashier of the Company have committed a fraud in Debtor’s ledger and absconded
with the amount. Investigation made in the fraud revealed that the Auditor did not
exercise proper skill and care and performed his work in an improper way.

Director of the Company, intends to file disciplinary proceeding against the Auditor
with the ICAI. Discuss the position of the auditor with regard to the disciplinary
proceeding under CA Act, 1949 and Regulations thereto. (4 Marks)
Q.49: Mr. Kushal, a practicing Chartered Accountant has signed the GST Audit Reports, Tax
Audit Reports u/s 44AB of the Income-tax Act, 1961 for the financial year 2021-
22 that are filed online using Digital Signature and without generating UDIN on the
ground that there is no field for mentioning UDIN on digitally signed online reports.
Is the contention of Mr. Kushal valid? Give your comments with reference to the
Chartered Accountants Act, 1949 and schedules thereto. (4 Marks)
Q.50: AJ & Associates and PK & Co., chartered accountant firms have joined the Network
firm A to S & Affiliates registered with Institute. AJ & Associates was statutory
auditor of B Ltd. for last 10 years. Due to rotation of auditor as per section 139(2)
of Companies Act, 2013, B Ltd, retires AJ & Associates and appoints PK & Co, as
auditor for the year 2022-23. Comment as per Chartered Accountant Act, 1949 -
Guidelines for Networking. (4 Marks)
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Ch. 6 – Company Audit & Ch. 11 – Corporate Governance

Q.51: On the advice of Management of M/s Quick Ltd., the auditor of the Company
overlooked and did not report on shifting of certain current year’s sales transactions
to the next year. The National Company Law Tribunal (NCLT) wants to take action
against you. Describe the powers of the NCLT under Section 140(5) of the Companies
Act, 2013 for such action and consequences to the auditor. (4 Marks)
Q.52: Dharam & Karam Company Ltd. had prepared its financial statements for the financial
year 2022-23 which were approved by the Board of Directors of the company and
thereafter they were signed by the Chairperson of the company as authorized by the
Board, as well as by its CEO, CFO and CS, respectively. Also, its board report was
signed by its Managing Director as well as by an Executive Director. You are required
to comment whether financial statements and the Board’s report of the company have
been signed by the persons mandatorily required to sign, as prescribed by the relevant
Act. (4 Marks)
Q.53: Mr. BK, Partner in M/s. BK and Associates, as part of their audit presentation to the
Audit Committee of M/s. XYZ Limited, a listed company, highlighted the following:
• Difficulties faced during the audit
• Disagreements with the management
• Management Letter Points
• Draft Management Representation letter to be provided by the Company in
connection with the audit.

Some of the Audit Committee members were not happy with the above presentation
and asked Mr. BK to take it back and submit directly to the Board. They believe that
Audit Committee is not the forum for discussing such problems and this has to be
sorted out between auditors and the management. Please comment on the above.
(4 Marks)
Q.54: You have been appointed as a statutory auditor of ABC Ltd., a listed company. As an
auditor, state the points to be considered by you in verification of approval of
remuneration to directors of ABC Ltd. under Regulation 17(6) of the Securities and
Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations,
2015. (4 Marks)
Q.55: Kayask Ltd. is a public company which got listed on BSE and NSE in the F.Y. 2015-
16 and is amongst the top 500 listed entities on the basis of market capitalization.
JP Bhuj & Co., a CA firm, has been appointed as its statutory auditor for the F.Y.
2022-23.
Mr. Pankaj Bhuj was assigned its audit as an engagement partner and he was verifying
the composition of the Board of Director because of some changes in the same. The
present composition of the Board of Kayask Ltd. is as follows:
(1) There are 9 directors out of which there are 4 non-executive directors and 3
independent directors. The board has only one woman director and she is an
executive director.
(2) Mr. Madhusudan Mehra has been appointed as the non-executive chairperson of
the Board. He is brother in law of the Managing Director of Kayask Ltd.
Whether present composition of the board of Kayask Ltd. complies with the
requirement of the provisions of SEBI LODR Regulations? (4 Marks)
-------------------

Chapter 7 – Audit Reports
Q.56: A professional accountant is often required to give certificates or report for special
purposes required by various authorities and statute and he needs to take careful
evaluation of such engagement. However, issuing such special purpose certificates or
reports has some inherent limitations which could limit his review and evaluation.
Enumerate some of the limitations associated with such special purpose report or
certificates. (5 Marks)
Q.57: CA S has been appointed as Statutory Auditor of SRT Ltd. for the financial year
2022-23. The Company while preparing financial statements for the year under audit
prepared one additional profit and loss account that disclosed specific items of
expenditure and included the same as an appendix to the financial statements. CA. S
has not been able to understand this as the additional profit and loss account is not
covered under applicable FRF.
Guide him as to how he should deal with this issue while reporting on the financial
statements of SRT Ltd. (4 Marks)
Q.58: CA. Amar has come across certain key matters while auditing the accounts of PR Ltd.
for the financial year 2022-23. He, being the associate of your firm, seeks your
advice on “Communicating Key Audit Matters” in the Auditor’s report. Guide him.
(4 Marks)

Q.59: MNO Ltd. is a power generating company having its plants in the north eastern states
of the country. For the FY 2022-23, M/s PRT & Associates are the statutory auditors
of the company. During the course of audit, the audit team was unable to obtain
sufficient appropriate audit evidence about a single element of the consolidated
financial statements. That is, the auditor was also unable to obtain audit evidence
about the financial information of a joint venture investment (in XYZ Ltd.) that
represents over 90% of the entity’s net assets. What kind of opinion should the
statutory auditor’s issue in such case? (4 Marks)
Q.60: GS & Co., Chartered Accountants, have been appointed Statutory Auditors of MAP
Ltd. for the F.Y 2022-23. The audit team has completed the audit and is in the
process of preparing audit report Management of the company has also prepared draft
annual report.
Audit in-charge was going through the draft annual report and observed that the
company has included an item in its Annual Report indicating downward trend in market
prices of key commodities/raw material as compared to previous year. However, the
actual profit margin of the company as reported in financial statements has gone in
the reverse direction. Audit Manager discussed this issue with partner of the firm
who in reply said that auditors are not covered with such disclosures made by the
management in its annual report, it being the responsibility of the management.
Do you think that the partner is correct in his approach on this issue?
Discuss with reference to relevant Standard on Auditing the Auditor's duties with
regard to reporting. (4 Marks)
---------------

Chapter 8 – CARO, 2020
Q.61: Under CARO, 2020, how as a statutory auditor would you comment on the following:
X Pvt. Ltd. is a subsidiary of a listed entity. The management of the company believes
that since X Pvt. Ltd. is a private company and satisfies all conditions under CARO,
2020, reporting under CARO is not applicable. (4 Marks)
Q.62: ABC Ltd. owns a piece of Land and Building situated at IP road, Mumbai which was
purchased before 30 years. The title deeds for the same are deposited with State
Bank of India for obtaining credit facilities by the company.
As the statutory auditor of the company, what are the audit procedures to be followed
and what is the reporting under CARO, 2020? (4 Marks)
Q.63: H Ltd. granted unsecured loan of ₹ 1 crore @ 15% p.a. to two of its subsidiaries
during the current financial year. Before the year end both the companies repaid the
loan. The management of H Ltd. is of the opinion that since no balance is outstanding
as at the end of financial year, these loans are not required to be reported in CARO,
2020. Comment and draft a suitable report. (4 Marks)
Q.64: As an auditor, how will you report under CARO in each of the following situation?
(i) Since more than seven months, payment of electricity bills to company established
under statute is outstanding.
(ii) The company had imported goods 5 years back and were placed in bonded warehouse
till the end of financial year under Audit.

The company has not paid import duty as goods have not been removed from such
warehouse. The company has also not paid rent and interest expenditure payable on
the amount of customs duty.
(iii) The company has received income tax assessment order along with demand notice
from Assessing Officer. The company has not paid dues payable as the same is not
acceptable to the company. The company has neither preferred appeal against the
order nor an application for rectification of mistake has been made. The company
has just merely represented to the Assessing Officer.
(iv) The company in view of voluminous pay-roll data consistently follows the method of
making lump sum deposit of estimated amount of ESI collections and adjust the
excess or deficit against next following months’ deposit and the difference of the
said amount always remains insignificant. (6 Marks)
Q.65: Under CARO how, as a statutory auditor how would you comment on the following: A
Term Loan was obtained from a bank for ₹ 75 lakhs for acquiring R&D equipment, out
of which ₹ 12 lakhs were used to buy a car for use of the concerned director, who
was overlooking the R&D activities. (4 Marks)
-----------------

Chapter 9 – Audit of Consolidated F.S.;
Ch. 10 – Audit of Dividend; Ch. 12 – Liabilities of Auditor
Q.66: M & B Investments Ltd. is a company having paid up share capital of ₹ 1 Crore. It has
a subsidiary, Investors Fund Management Ltd., major business of M & B Investments
Ltd. is to pool money from investors on a collective basis and invest this money in
various funds. This company pooled ₹ 10 Crores from a number of clients, which
represent the Company's shareholders.
While auditing books of account of M & B Investments Ltd. CA. X observed that whole
amount of ₹ 10 Crores pooled has been invested in shares and debentures of various
companies and profit earned due to appreciation of the prices of these shares has
been distributed to various shareholders of the company.
Now, CA. X raised an issue while auditing financial statements of M & B Investments
Ltd. whether the consolidated financial statements are required as per Sec. 129(3)
of the Companies Act, 2013? Analyse the above issue and give your opinion.
(5 Marks)
Q.67: Parent Ltd. acquired 51% shares of Child Ltd. during the year ending 31.03.2022.
During the financial year 2022-23 the 20% shares of Child Ltd. were sold by Parent
Ltd. Parent Ltd. while preparing the financial statement for the year ending
31.03.2022 and 31.03.2023 did not consider the financial statements of Child Ltd.
for consolidation. As a statutory auditor how would you deal with it? (4 Marks)

Q.68: The adjustments required for preparation of consolidated financial statements are
made in memorandum records kept for the purpose, by the Parent. The auditor should
review the memorandum records to verify the adjustment entries made in the
preparation of consolidated financial statements. Elucidate the other points, apart
from reviewing the memorandum records, the auditor should verify while consolidation
of adjustments for current period. (4 Marks)
Q.69: R Ltd. owns 51% voting power in S Ltd. It however, holds and discloses all the shares
as “Stock-in-trade” in its financial statements since the shares are held exclusively
with a view to their subsequent disposal in the near future. R Ltd. represents that
while preparing Consolidated Financial Statements, S Ltd. can be excluded from the
consolidation. As the Statutory Auditor of R Ltd., how would you deal when the
consolidated financial statements are to be drawn up in compliance with Ind AS.
(4 Marks)
Q.70: What will be the liability of Mr. X, an auditor in the following situation:
(a) As an auditor, not appropriately dealing with a misstatement appearing in
financial statements amounting to ₹ 9.84 lakhs. Misstatement does not involve
public interest. (3 Marks)
(b) What will be the liability of Mr. X, an auditor in the following situation:
Mr. X has appeared before the Income Tax Authorities as an authorized
representative of his Auditee and submitted to the Income Tax Authorities a
false declaration. (2 Marks)
---------------

Ch. 13 – Internal Audit & Ch. 14 – Mngt and Operational Audit
Q.71: One of the independent directors sought information regarding the appointment of
internal auditors for following Group Companies in accordance with the Companies Act,
2013 of which certain Financial Information are given below:
Figures are in ₹ crore and correspond to the previous year.
Name Nature Equity Share Turnover Loan from Public
Capital Bank & PFI Deposits
AADI Ltd. Listed 100 190 50 24
AJIT Ltd. Unlisted Public 60 190 50 24
NEMI Ltd. Unlisted Private 60 190 50 -
You are required to evaluate the requirements of the Companies Act, 2013 regarding
the appointment of internal Auditors for the Group Companies. Discuss. (3 Marks)
Q.72: The Managing Director of X Ltd is concerned about high employee attrition rate in his
company. As the internal auditor of the company, he requests you to analyze the
cause for the same. What factors would you consider in such analysis? (4 Marks)
Q.73: Somi-Kraft Paper Ltd. is a Public Limited company. There is a proper system of
Operational Audit in the company. You as an advisor to the company have suggested
desirability of Management Audit. Management is of the strong opinion that there is
no difference between management audit and Operational Audit. Elaborate.
(4 Marks)

Q.74: Employees of GIG Ltd. have to travel frequently for business purposes, so the company
entered into a contract with a Simony Travels Ltd. for managing booking, cancellation
and other services required by their employees. As per contract terms, Simony travels
has to raise its monthly bills for the tickets booked or cancelled during the period and
the same are paid by GIG Ltd. within 15 days of the bill date. The bills raised by
Simony travels were of huge amount, so the management of GIG Ltd. decided to get
an audit conducted of the process followed for booking/cancellation of tickets and
verify the accuracy of bills raised by the travel agency. Which audit do you feel the
management should opt for? Also briefly discuss the qualities the auditor should
possess for such audit. (4 Marks)
Q.75: “In reviewing any System or Procedure, the management auditor must concern himself
with its purpose as well as its design.” Elucidate how you as a management auditor will
study system and procedural functions? (4 Marks)
-----------------

Ch. 15 – Tax Audit & Ch. 16 – Due Diligence, Investigation and
Forensic Audit
Q.76: Concession Ltd. is engaged in the business of manufacturing of threads. The company
recorded the turnover of ₹ 10.13 crore during the financial year 2022-23 before
adjusting the following:
Discount allowed in the Sales Invoice ₹ 8,20,000
Cash discount (other than allowed in Cash memo/sales invoice) ₹ 9,20,000
Trade discount ₹ 2,90,000
Commission on Sales ₹ 6,00,000
Sales Return (F.Y. 2021-22) ₹ 1,60,000
Sale of Investment ₹ 6,60,000
You are required to ascertain the effective turnover to be considered for the
prescribed limit of tax audit and guide the company whether the provisions relating to
tax audit applies. (4 Marks)
Q.77: You are the Tax auditor of BL & Co., a partnership firm engaged in the business of
plying of Goods Carriages for the financial year 2022-23 having a turnover of ₹ 20
crores. How would you deal and report on the following?
(i) Payment of ₹ 50,000 in cash to Mr. R on 10th Sep., 2022 towards settlement of
invoice for expenses accounted in financial year 2021-22.
(ii) Payments of 3 invoices of ₹ 15,000 each made in cash to Mr. Y on 8th, 9th,
10th, July, 2022 respectively. (4 Marks)

Q.78: Mr. KK is a contractor dealing in food catering, flower decorating and light decorating
activities. He has received contract in respect of food catering and flower decorating
from one NGO for holding Annual Talent evening event to celebrate completion of 25
years of their establishment. For the said event Mr. KK has received in cash ₹
1,85,000 for food catering and ₹ 1,25,000 for flower decoration. As a tax auditor
how would you deal and report on the above? (4 Marks)
Q.79: K Ltd. is intending to acquire M Ltd. Your firm of Chartered Accountants is appointed
to conduct due diligence. While reviewing hidden liabilities list out any five areas which
will be specifically examined by you in your due diligence exercise. (4 Marks)
Q.80: M/s GSB Limited is into the business of construction for the past 25 years.
Management of the Company came to know that building material sent to construction
sites are of substandard quality whereas the payment released by the accounts
department of the Company are on the higher side. Forensic Auditor was asked to
carry out detailed investigation. Forensic auditor completed his investigation and now
preparing his report. What are the broad areas of information that needs to be
incorporated in the report of forensic auditor? (4 Marks)
-----------------

Ch. 17 – Peer Review & Ch. 4 – Automated Environment
Q.81: CA. M appointed as a Peer Reviewer for M/s. K Associates has asked for all the
compilation and the Due Diligence engagements carried out by M/s. K Associates for
her peer review during the period considered for peer review purposes by the board.
She has also sent out a mail to Peer Review Board regarding her selections. Mr. K,
the managing partner of the firm seeks your advise on this matter. (4 Marks)
Q.82: The elements of skill, experience and independence of reviews are ensured before
initiating them in Peer Review process. In the above light, state few eligibility criteria
fixed for a person to be empaneled and also for being appointed as a peer Reviewer.
(4 Marks)
Q.83: CA Vipin has been appointed as Statutory Auditor by IG Insurance Co. Ltd. for 3 of
its branches for the F.Y. 2022-23. Insurance Company is using a software called
"Applied Epic" wherein all transactions (policy issuance, premium receipts, expense of
insurance company, incomes, assets and liabilities) are recorded and financial
statements generated at the end of the financial year. CA Vipin not technically
equipped and well versed with technology, decided to follow traditional manual auditing
approach and started the audit.
He is of the view that understanding and using the auditee's automated environment
is optional and not required. Do you agree with the approach and views of CA Vipin?
(4 Marks)

Q.84: “Generating and preparing meaningful information from raw system data using
processes, tools, and techniques is known as Data Analytics and the data analytics
methods used in an audit are known as Computer Assisted Auditing Techniques or
CAATs.” You are required to give a suggested approach to get the benefit from the
use of CAATs. (4 Marks)
Q.85: The auditors are required to understand, evaluate and validate the entity level controls
as a part of audit engagement, the result of which has an impact on the nature, timing
and extent of other audit procedures. In evaluating the effect of such control,
existence, effectiveness and assessment of the whistle-blower policy in the company
is very important. Specify the procedure you would perform for an understanding and
evaluation of such whistle-blower policy. (4 Marks)
-----------------

Ch. 18 – Audit of Banks
Q.86: You are auditing a small bank branch with staff strength of the manager, cashier and
three other staff S1, S2 and S3. Among allocation of work for other areas, S1 who
is a peon also opens all the mail and forwards it to the concerned person. He does not
have a signature book so as to check the signatures on important communications. S2
has possession of all bank forms (e.g. Cheque books, demand draft/pay order books,
travellers’ cheques, foreign currency cards etc.). He maintains a record meticulously
which you have test checked also. However, no one among staff regularly checks that.
You are informed that being a small branch with shortage of manpower, it is not
possible to always check the work and records. Give your comments. (4 Marks)
Q.87: ABN Bank was engaged in the business of providing Portfolio Management Services to
its customers, for which it took prior approval from RBI. Your firm has been appointed
as the statutory auditors of the Bank’s financial statements for the year 2022-23.
Your senior has instructed you to verify the transactions of Portfolio Management
Services (PMS). While verifying the transactions you noticed that the bank has not
maintained separate record for PMS transactions from the Bank’s own investments.
As a statutory auditor what methodology will be adopted by you for verification of
PMS transactions? (4 Marks)
Q.88: M/s Sri & Co., Chartered Accountant have been allotted the branch audit of a
nationalized bank for the year ended on 31st March, 2023. You are part of audit
team and have been instructed by your partner to verify the following areas:

(i) Fulfilment of the criteria prescribed for NPA norms for the advances given for
agricultural purposes.
(ii) Drawing power calculation from stock statements in respect of working capital
accounts.
What may be your areas of concern as regards matters specified above?
(4 Marks)
Q.89: While doing the audit of a Nationalised bank branch, your audit assistant informed
you that he suspects some irregularities in Guarantees issued by the Bank. What
should be your guidance in the matter to check the same? (4 Marks)
Q.90: You have been appointed as Concurrent Auditor of a nationalized bank branch. The
main business at the branch is dealing in foreign exchange. Suggest the main areas of
coverage in regard to foreign exchange transactions of the said branch under
concurrent audit. (4 Marks)
-----------------

Ch. 19 – Audit of NBFC
Q.91: HG & Co. is the statutory auditor of KFN NBFC Ltd. While planning the audit
procedures to be done during the audit of entity, there was a difference of opinion
between Mr. H and his partner Mr. G. Mr. G is of the opinion that evaluation of
Internal control system and verification of registration with RBI should not be the
part of audit procedure, as it is the part of internal audits only. Is the contention of
Mr. G correct? Also state what broad areas should mandatorily become part of the
audit procedure of HG & Co. for conducting the audit of KFN NBFC Ltd.?
(4 Marks)
Q.92: R and Associates, a firm of chartered accountants, is appointed as auditor of NBFC.
During the audit, audit team comes across various observations/exceptions and Mr. A,
a junior member of audit team, due to his limited understanding about exceptions
which are required to be reported in the audit report, would like to understand in
detail, the obligations on the part of an auditor in respect of exceptions in the audit
report so that he can conclude his work. Discuss. (4 Marks)
Q.93: As per CARO, 2020 the auditor is required to report “whether the company is required
to be registered under section 45-IA of the Reserve Bank of India Act, 1934 and if
so, whether the registration has been obtained.” Mention the Audit procedures and
reporting for the same. (4 Marks)
Q.94: Mr. G has been appointed as an auditor of LMP Ltd., a NBFC registered with RBI.
Mr. G is concerned about whether the format of financial statements prepared by
LMP Ltd. is as per notification issued by the Ministry of Corporate Affairs (MCA)
dated October 11, 2018. The notification prescribed the format in Division III under
Schedule III of the Companies Act, 2013 applicable to NBFCs complying with Ind-
AS. Mr. G wants to know the differences in the presentation requirements between
Division II and Division III of Schedule III of the Companies Act, 2013. Help Mr.
G. (4 Marks)

Ch. 20 – Audit of Insurance Business & Ch. 21 – Audit of PSU

Q.95: Discuss Solvency Margin in case of an Insurer carrying on General Insurance Business.
(4 Marks)
Q.96: CA. M has been appointed as an auditor of Life Secure Insurance Ltd. He observed
that few insurance policies have been sold by the company in the last month of the
financial year ending 31st March, 2023. While recognizing income in the income
statement of the company, it is the responsibility of CA. M to make an assessment
of the reasonability of the risk pattern managed by the management. Also, it is to
be ensured by him that Life Secure Insurance Ltd. should not issue policies, if the
risk is not established before the closure of the F.Y. 2022-23.
Indicate the circumstances when the company should not issue the policy documents.
(4 Marks)
Q.97: You have been appointed as an auditor of ABC Insurance Co. Ltd. and found that
M/s PQR Ltd. got their plant & Machinery insured on 01-10-2022 but the amount
of premium has been paid by them on 15-10-2022. In the meanwhile, on 10-10-
2022 a fire has broken out in the factory and the company filed a claim for damages
of plant & machinery with the Insurance company. Advise the insurance company in
this regard. (4 Marks)
Q.98: You are an auditor of XYZ Insurance Company Ltd. which offers variety of risk
management products to business entities wishing to protect their business activities
against losses due to various probable risks. XYZ Insurance Company Ltd. is in the
process of offering to ABC Ltd., a multinational group having worldwide market,
“Trade Credit Insurance Policy” to cover domestic risk, export risk and political risk.

You as an auditor of Insurance Company have been requested to ensure that all the
requirements have been met by XYZ Insurance Company Ltd. before Trade Credit
Insurance Product is offered to ABC Ltd. List down those requirements.
(4 Marks)
Q.99: The reports of the Comptroller and Auditor General of India on the audit of PSUs
are presented to the Parliament and to various State Legislatures to facilitate a
proper consideration. Enumerate the contents of Audit Report presented by C & AG.
(4 Marks)
Q.100: C&AG appointed a chartered accountant firm to conduct Performance audit of COP
Ltd., a PSU of Govt. of India. The firm conducted the audit with a view to check
all the expenses of the unit are in conformity to the public interest and publicly
accepted customs. The audit report submitted by audit firm was rejected by C&AG.
Give your opinion on the action of C&AG. (4 Marks)
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Final Audit Super 100 Questions - May 2023 Exams

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CA Final

Advanced Auditing & Professional Ethics

Compiled by: CA. Pankaj Garg

All Rights reserved.

(Important Questions for May 2023 Exams)

Chapter 1 – Quality Control & Engagement Standards

Compiled by: CA. Pankaj Garg 1 |P a g e

Associates, Chartered Accountants, (already auditors of Ace Limited) as new auditors

of Jack Limited. NKB Associates accepted the assignment without considering

of client relationships and audit engagements are appropriate.

Comment with respect to appropriate Standard of Auditing what type of information

assists the engagement partner in determining whether the conclusions reached

are appropriate or not? (5 Marks)

every matter concerned.

Illustrate by giving examples with reference to relevant Standard on Auditing.

is provided in books of account as on March 31, 2023.

Compiled by: CA. Pankaj Garg 2 |P a g e

auditor of M/s Honest Limited, what would be your approach? (4 Marks)

check such compliance.

Comment in the context of relevant standard on auditing whether the contention of

management is tenable. (4 Marks)

procedures become aware of the existence of certain instances which seem to be an

identified by you as an auditor, suggestive of non-compliance with Laws and

assessing the efficiency of internal control system of the organization. (4 Marks)

of Consolidation, however, remained undivided.

Compiled by: CA. Pankaj Garg 3 |P a g e

above situation. (5 Marks)

members. What additional matters would be considered in initial audit engagement by

Company Ltd.? (4 Marks)

the assertions of management in the financial statements.

Process component under which risks may arise or change. (3 Marks)

statements as a whole. On the basis of obtaining additional information of significant

contractual arrangements that draw attention to a particular aspect of a company’s

business, he wants to re-evaluate the materiality concept. Please guide him.

Compiled by: CA. Pankaj Garg 4 |P a g e

in previous audit in respect of effectiveness of internal controls instead of retesting

about the factors that may warrant a re-test of controls. (4 Marks)

on carve-out method as specified under SA 402.

service auditor? (4 Marks)

evaluate the work of the actuary? (4 Marks)

stock-tacking at two places on account of certain disturbances in the region.

Compiled by: CA. Pankaj Garg 5 |P a g e

of inventory may be obtained?

confirmation of the credit balance is available. (4 Marks)

would be contained to a low level fixed as per materiality level. (4 Marks)

to be representative of the population and all items have an opportunity of being

selected. Guide your assistants with principal methods of collecting samples.

Compiled by: CA. Pankaj Garg 6 |P a g e

purpose of the current period.

related party relationships and transactions. (4 Marks)

auditor came to know the result of the negotiations on 15.05.2022. (4 Marks)

in the process of identifying new customers for their products.

Compiled by: CA. Pankaj Garg 7 |P a g e

special audit conducted at the instance of the management on a possible suspicion of

silent. Please guide Mr. 'N'. (4 Marks)

audit documentation? (4 Marks)

auditor to provide direct assistance to him regarding evaluating significant accounting

estimates by the management and assessing the risk of material misstatements.

B, internal auditor as stated above in view of auditing standards.

Compiled by: CA. Pankaj Garg 8 |P a g e