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CA IPCC : Question Paper (with Answers) - AUDITING & ASSURANCE Nov 2010

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CA IPCC
Tilak Vidyalaya Higher Secondary School (TVHSS), Kallidaikurichi

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PAPER 6 : AUDITING AND ASSURANCE Question No.1 is compulsory. Attempt any five questions from the remaining six questions. Question 1 Comment as an auditor on the following situations: (a) Mr. X, a partner in X & Co., a firm of a Chartered Accountants, died on 31-3-2010 after completing routine audit work of XYZ Company Ltd.. Mr. Y another partner of the firm of Chartered Accountants signed the financial statements of XYZ Company Ltd., without reviewing the finalization work done by the assistants. (5 Marks) (b) Government of India has appointed Mr. M, a retired Finance Director and a nonpractising member of the Institute of Chartered Accountants of India, as an auditor to conduct special audit of ABC Ltd. on the ground that the company was not being managed on sound business principles. The Managing Director of the company contends that the appointment of Mr. M is not valid because he does not hold a certificate of practice. (5 Marks) (c) M.N.P.Company Ltd. purchased a machinery for ` 1.00 crore. The State Government granted the company a subsidy of ` 40 lakhs to meet partial cost of machinery. The company credited the subsidy received from the State Government to its Profit and Loss Account for the year ended March 31, 2010. (5 Marks) (d) Sri & Company, a firm of Chartered Accountants was appointed as statutory auditors of Aaradhana Company Ltd.. Aaradhana Company Ltd. holds 51 % shares in Sarang Company Ltd. Mr. Sri, one of the partners of Sri & Company, owed ` 1,500 as on the date of appointment to Sarang Company Ltd. for goods purchased in normal course of business. (5 Marks) Answer (a) Relying on work performed by others SA-200 on Basic Principles Governing an Audit , states that when the auditor delegates work to assistants or uses work performed by other auditors/experts he will continue to be responsible for forming and expressing his opinion on the financial statements. However, he will be entitled to rely on the work performed by others, provided he exercises adequate skill and care and is not aware of any reason to believe that he should not have so relied. The auditor should carefully direct supervise and review work delegated to assistants. He should obtain reasonable assurance that work performed by other auditors/experts and assistants is adequate for his purpose. Conclusion: In the instant case, Mr. X, a partner of the firm had completed routine audit work and died on 31 March, 2010. Mr. Y another partner of the firm has signed the financial statement of XYZ Company Ltd, without reviewing the finalization work done by the assistants. Mr. The Institute of Chartered Accountants of India

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