{"id":18616,"date":"2023-03-24T16:01:50","date_gmt":"2023-03-24T10:31:50","guid":{"rendered":"https:\/\/gstguntur.com\/?p=18616"},"modified":"2023-03-24T16:02:53","modified_gmt":"2023-03-24T10:32:53","slug":"audit-reports-ca-final-audit-question-bank","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/audit-reports-ca-final-audit-question-bank\/","title":{"rendered":"Audit Reports \u2013 CA Final Audit Question Bank"},"content":{"rendered":"

Audit Reports \u2013 CA Final Audit Question Bank<\/a> is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

Audit Reports \u2013 CA Final Audit Question Bank<\/h2>\n

Audit Reports<\/strong><\/p>\n

Question 1.
\nDistinguish between Notes on Accounts and Qualifications.
\nAnswer:
\nNotes on Accounts vs. Qualifications<\/p>\n\n\n\n\n\n\n\n
Notes on Accounts<\/td>\nQualifications<\/td>\n<\/tr>\n
Notes represents management’s stand on a matter and assessment on ail matters involving difference of opinion between them and the auditors.<\/td>\nQualification represents auditor disagreement on the matters with Management.<\/td>\n<\/tr>\n
Notes of a qualificatory nature appear in the ac\u00adcounts and forms part of Financial Statements.<\/td>\nQualifications are stated by auditor in the auditor\u2019s report<\/td>\n<\/tr>\n
Management may insist upon the auditor for not modifying his audit opinion considering the man\u00adagement has disclosed full facts and assessment of the matter through notes on the F.S.<\/td>\nAuditor needs to exercise his professional judg\u00adment to determine whether the disclosures in the notes alone would suffice ora qualification is needed in audit report.<\/td>\n<\/tr>\n
Notes on accounts includes information which is necessary to make the financial statements under\u00adstandable by the users.<\/td>\nQualification mustbe expressed bythe Auditor in a clear and unambiguous manner.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\"Audit<\/p>\n

Report vs Certificate<\/strong><\/p>\n

Question 2.
\nWrite a short note on Certificate for Special Purpose vs. Audit Report.
\nOr
\nDifferentiate between audit report and audit certificate. [May 17 (4 Marks)]
\nAnswer:
\nReport and Certificate:
\nAudit Report: An audit report is a formal statement usually made after an enquiry, examination or review of specified matters under report and includes the reporting auditor\u2019s opinion thereon.<\/p>\n

While issuing an audit report, auditor is responsible to ensure that his opinion is in due accordance with facts, and that it is arrived at by the application of due care and skill.<\/p>\n

Meaning of Certificate: A certificate is a written confirmation of the accuracy of the facts stated therein and does not involve any estimate or opinion. Such certificates are often required by Government authorities in support of statements or other information prepared by an enterprise. Such certificates represent that the auditor has verified certain figures and is satisfied about their accuracy.<\/p>\n\n\n\n\n\n\n\n\n
Report<\/td>\nCertificate<\/td>\n<\/tr>\n
It is an expression of opinion on true and fair view of financial statements and books of account.<\/td>\nIt is a confirmation of correctness and accuracy of subject matter for which certificate is being issued.<\/td>\n<\/tr>\n
Report is based on practitioner professional judgment.<\/td>\nCertificate is based on actual facts and figures.<\/td>\n<\/tr>\n
Scope of audit is wide and generally covers an opinion on complete set of financial statements.<\/td>\nScope of certificate is narrow and restricted to subject matter only.<\/td>\n<\/tr>\n
Audit report is generally issued annually as per the requirements of statute.<\/td>\nCertificates are issued as per the specific re\u00adquirements of law.<\/td>\n<\/tr>\n
Auditor\u2019s responsibility in case any misstatement is not being identified, is subject to his negligence in performance of his duties.<\/td>\nIn case of wrong certification, auditor is held liable irrespective of due diligence.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\"Audit<\/p>\n

Question 3.
\nWhat are the contents of reports and certificates for special purposes.
\nAnswer:
\nContents of Report and Certificates for Special Purposes:
\nIn some cases, contents of Reports and Certificates are specified by law and cannot be changed. However, in other cases, reporting auditor is free to draft his report or certificate in a manner he likes. While drafting such report or certificate, the auditor should consider the following:<\/p>\n

(a) Identification of specific elements, accounts or items covered by the report or certificate.<\/p>\n

(b) Stating the manner in which the audit was conducted, e.g., by the application of generally accepted auditing practices, or any other specific tests.<\/p>\n

(c) limitation on scope, if any, should be clearly mentioned.
\n(d) Fundamental Assumptions on which the special purpose statement is based should be clearly indicated.
\n(e) Information and explanations obtained during the course of work should be included.
\n(f) The title of the report or certificate should clearly indicate its nature.<\/p>\n

(g) Extent to which reliance has been placed on the report of other auditor, who have carried out audit of general purpose financial statements.<\/p>\n

(h) Where a report requires the interpretation of statute, the reporting auditor should clearly indicate the fact that he is merely expressing his opinion in the matter.<\/p>\n

(i) An audit report or certificate should ordinarily be a self-contained document and should not confine itself to a mere reference to another report or certificate.<\/p>\n

(j) Extent of responsibility assumed by the reporting auditor should be clearly indicated.<\/p>\n

\"Audit<\/p>\n

Question 4.
\nDraft an audit report under following circumstances:<\/p>\n

    \n
  1. Under the Payment of Bonus Act, 1965, a \u2018report\u2019 on the computation of bonus payables.<\/li>\n
  2. Auditor\u2019s Report in accordance with Regulation 55 of the SEBI (Mutual Fund) Regulation, 1996. [May 15 (4 Marks)]<\/li>\n<\/ol>\n

    Answer:
    \nDraft Audit Report under the Payment of Bonus Act, 1965, a \u2018report\u2019 on the computation of bonus payables.<\/p>\n

    “We have reviewed the figures in the above computation in comparison with the books and records produced to us, the audit of which has already been completed by us and report that subject to the notes given on face of the computation in our opinion, and to the best of our knowledge and belief and according to the information and explanation given to us, the above computation is in due accordance therewith and has been made on a basis reasonably consistent with the provisions of the Payment of Bonus Act, 1965.\u201d
    \nPlace : ForAB&Co.
    \nDate : Chartered Accountants<\/p>\n

    Auditor\u2019s Report in accordance with Regulation 55 of the SEBI (Mutual Fund) Regulation, 1996.<\/p>\n

    AH Mutual funds shall be required to get their accounts audited in terms of a provision to that effect in their trust deeds. The Auditor’s Report shall form a part of the Annual Report.<\/p>\n

    \"Audit<\/p>\n

    The auditor shall state whether:<\/p>\n

      \n
    1. He has obtained all information and explanations which, to the best of his knowledge and belief, were necessary for the purpose of His audit.<\/li>\n
    2. The Balance Sheet and the Revenue Account are in agreement with the books of account of the fund.<\/li>\n<\/ol>\n

      The auditor shall give his opinion as to whether:<\/p>\n

        \n
      1. The Balance Sheet gives a true and fair view of the scheme wise state of affairs of the fund as at the balance sheet date, and<\/li>\n
      2. The Revenue Account gives a true and fair view of the scheme wise surplus\/deficit of the fund for the year\/period ended at the balance sheet date.<\/li>\n<\/ol>\n

        “ICAI Examiner Comments”
        \nCandidates were lacking knowledge in drafting of Auditor\u2019s Report in accordance with Regulation 55 of the SEBI (Mutual fund) Regulations, 1996.<\/p>\n

        \"Audit<\/p>\n

        Miscellaneous<\/strong><\/p>\n

        Question 5.
        \nDistinguish Reasonable assurance engagement from limited assurance engagement. [May 18 – New Syllabus (4 Marks)]
        \nOr
        \nList out the key differences between “Reasonable Assurance” and “Limited Assurance” engagements. [Nov. 18-Old Syllabus (4 Marks)]
        \nAnswer:
        \nLimited and Reasonable Assurance:
        \nGuidance Note on Reports or certificates for special purpose defines the term assurance engagement as “An engagement in which a practitioner aims to obtain sufficient appropriate evidence in order to express an opinion\/conclusion, designed to enhance the degree of confidence of the intended users, other than the responsible party about the subject matter information (that is, the outcome of the measurement or evaluation of an underlying subject matter against criteria)”.<\/p>\n

        Each assurance engagement is classified on two dimensions: either a reasonable assurance engagement or a limited assurance engagement.<\/p>\n

        Reasonable assurance engagement: An assurance engagement in which the practitioner reduces engagement risk to an acceptably low level in the circumstances of the engagement, as the basis for the practitioner\u2019s opinion. The practitioner\u2019s opinion is expressed in a form that conveys the practitioner\u2019s opinion on the outcome of the measurement or evaluation of the underlying subject matter against the criteria.<\/p>\n

        Limited assurance engagement: An assurance engagement in which the practitioner reduces engagement risk to a level that is acceptable in the circumstances of the engagement but where that risk is greater than for a reasonable assurance engagement, as the basis for expressing a conclusion in a form that conveys whether, based on the procedures performed and evidence obtained, a matter(s) has(have) come to the practitioner’s attention to cause the practitioner to believe that the subject matter information is materially misstated.<\/p>\n

        The NTE of procedures performed in a limited assurance engagement is limited compared with that necessary in a reasonable assurance engagement but is planned to obtain a level of assurance that is, in the practitioner\u2019s professional judgment, meaningful.<\/p>\n

        \"Audit<\/p>\n

        Question 6.
        \nA 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. [May 19-New Syllabus (4 Marks)]
        \nAnswer:
        \nLimitations associated with such special purpose report or certificates:<\/p>\n

        Whenever a practitioner is required to give a ”certificate\u201d or a “report” for special purpose, the practitioner needs to undertake a careful evaluation of the scope of the engagement, i.e., whether the practitioner would be able to provide reasonable assurance or limited assurance on the subject matter. A practitioner is expected to provide either a reasonable assurance or a limited assurance, since it is difficult to reduce engagement risk to zero due to inherent limitations.<\/p>\n

        The inherent limitations could arise from:
        \n(a) the nature of financial reporting;
        \n(b) the use of selective testing;
        \n(c) the inherent limitations of internal controls;
        \n(d) the fact that much of the evidence available to the practitioner is persuasive rather than conclusive;
        \n(e) the nature of procedures to be performed in a specific situation;
        \n(f) the use of professional judgment in gathering and evaluating evidence and forming conclusions based on that evidence;
        \n(g) in some cases, the characteristics of the underlying subject matter when evaluated or measured against the criteria; and
        \n(h) the need for the engagement to be conducted within a reasonable period of time and at a reasonable cost.<\/p>\n

        \"Audit<\/p>\n

        Question 7.
        \nXYZ Ltd. has significant operations in a foreign country. Due to civil and political unrest in that country physical verification of inventory and fixed assets could not carried out and you are not in a position to obtain audit evidence through other audit procedures also. The value of fixed assets and inventory forms part of 80% of the asset value of the company. As the auditor of XYZ Ltd. what factors do you consider in your reporting responsibility. Also draft a suitable report that will be incorporated in the main audit report (Reporting under CARO need not be considered). [May 13 (8 Marks)]
        \nAnswer:
        \nFactors to be considered in Audit reporting;
        \nAuditor is required to consider the following factors:<\/p>\n

          \n
        1. Inventories and the Fixed Assets constitute 80% of the assets and hence having a pervasive effect.<\/li>\n
        2. Auditor is not being able to attend physical verification of the inventories and fixed assets due to civil and political unrest in the foreign country, where the inventory and fixed assets are located.<\/li>\n
        3. Auditor failed to obtain proper and sufficient audit evidence, even by alternative audit procedures.<\/li>\n<\/ol>\n

          Relevant Draft to be incorporated in the main audit report:
          \n“Our responsibility is to express an opinion on these financial statements based on our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India.<\/p>\n

          Because of the matters described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.<\/p>\n

          Basis for Disclaimer of Opinion
          \nWe were appointed as auditors of the Company and we report that we could not observe the counting of physical inventories and physical verification of fixed assets due to civil and political unrest in foreign country where the company has significant operation. We were also unable to satisfy ourselves by alternative means concerning the inventory quantities and fixed assets of the company held at March 31st 20XX, which are stated in the Balance Sheet at \u20b9 XXX and \u20b9 XXX, respectively.<\/p>\n

          \"Audit<\/p>\n

          Disclaimer of Opinion
          \nBecause of the significance of the matters described in the Basis for Disclaimer of Opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements.<\/p>\n

          Report on Other Legal and Regulatory Requirements
          \nAs required by section 143(3) of the Companies Act, 2013, we report that:<\/p>\n

          As described in the Basis for Disclaimer of Opinion paragraph, we were unable to obtain all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.<\/p>\n","protected":false},"excerpt":{"rendered":"

          Audit Reports \u2013 CA Final Audit Question Bank is designed strictly as per the latest syllabus and exam pattern. Audit Reports \u2013 CA Final Audit Question Bank Audit Reports Question 1. Distinguish between Notes on Accounts and Qualifications. Answer: Notes on Accounts vs. Qualifications Notes on Accounts Qualifications Notes represents management’s stand on a matter …<\/p>\n

          Audit Reports \u2013 CA Final Audit Question Bank<\/span> Read More »<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[169],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/18616"}],"collection":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/comments?post=18616"}],"version-history":[{"count":1,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/18616\/revisions"}],"predecessor-version":[{"id":18620,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/posts\/18616\/revisions\/18620"}],"wp:attachment":[{"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/media?parent=18616"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/categories?post=18616"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gstguntur.com\/wp-json\/wp\/v2\/tags?post=18616"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}