Principles and Practice of Auditing

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ST. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)
END SEMESTER EXAMINATION – OCTOBER 2013
B.COM – V SEMESTER
PRINCIPLES AND PRACTICE OF AUDITING
Time: 3 Hours Max. Marks: 100
SECTION – A
I) Answer ALL the following questions: (10×2=20)
1. What do you mean by an ‘Audit Programme’?
2. What are the qualifications required to become an Auditor?
3. If there is false submission of statement of accounts to the IT Department, which
section is applicable and what is the possible punishment?
4. Define ‘Auditing’.
5. What ‘Internal Audit’?
6. Name any two differences between valuation and verification.
7. Is a qualified report, a good report express your opinions?
8. Explain FIFO.
9. What do you mean by Cost Audit?
10. What do you mean by ‘Ghost Workers’? What is the effect of their inclusion?
SECTION – B
II) Answer any FOUR of the following questions: (4×5=20)
11. What are the objectives of an Audit Report?
12. What is Interim Audit? Explain the differences between Interim Audit and
Continuous Audit.
13. In a company where you are appointed as an Auditor, during your first visit you
found the presence of Internal Control System; being a prudent auditor, explain
your next course of action.
14. Explain the Verification process of Lease-hold Property.
15. Explain the problems of Auditing in a Computerized Environment.
16. Discuss the fixation of Remuneration of an Auditor.
SECTION – C
III) Answer any THREE of the following questions: (3×15=45)
17. What do you mean by the term ‘Internal Check’? Explain the principles of Internal
Check.
18. Discuss in detail the verification and valuation of Plant & Machinery and Patents.
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19. Prevention of errors and frauds is the primary objective of an Auditor in order to
give a true and fair picture of the books of accounts to the stake holders of any
organization, where the Auditor is appointed respectively. In the light of the above
explain the various types of errors and frauds that an Auditor might possibly come
across, while discharging his duties.
20. Explain the process of reviewing a computer installation in an organization where
there is intense practice of book-keeping with the help of Accounting Software
Packages.
21. Discuss the various modes of appointing an Auditor for a Company. State the
disqualification of an Auditor. Also enumerate the Civil Liabilities of an Auditor.
SECTION – D
IV) Case Study (Compulsory Question): (15marks)
22.
Zeron Company Limited purchased a plot in the year 2001, for a sum of Rs. 5,85,000/-, they
paid a brokerage charge of Rs.20,000/- and legal charges for registration of the property,
including the lawyer’s fees was Rs. 65,000. In the year 2005, the board directors had a
meeting and came to conclusion, that they should be constructing the building for the
appropriate exploitation of the commercial nature of the same plot, this was done by
passing a resolution to the same effect. An architect’s firm was contracted in August 2005.
After all the legal formalities, the plan was sanctioned in November 2005. Construction
took effect with the help of a contractor, later there was an issue with the contractor, as a
result the company’s Engineer (an in house employee) along with the labourers of the
company took over the project and successfully completed it on February 2009.
Questions:
1. In light of the above, explain the Procedure of verification of Building. (10marks)
2. While the take-over of the project happened, what are the additional changes that took
place that had to be recorded in the books of accounts? (5marks)

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – SEPT /OCT 2014

BCOM –V SEMESTER

PRINCIPLES AND PRACTICE OF AUDITING

 

Duration: 3 Hours                                                                                       Max. Marks: 100

 

SECTION – A

 

1. Answer ALL the questions. Each carries 2 marks.                                       (10 x2 =20)

 

1. What do you mean by Continuous Audit?
2. Define ‘Internal Control’.
3. List out the characteristics of a good audit report.
4. What do you understand by the term Collateral Voucher?
5. What are the instances in which the appointment of a Company Auditor takes place through a special resolution?
6. Name the advantages of Interim Audit?
7. What does Section 147 of the Companies Act, 2013 deal with?
8. Bring out the advantages of Internal audits.
9. A company has got an ‘Unqualified Report’, should the company be contended or sad about it? What does it mean to the company?
10. What is Audit Sampling?

 

SECTION – B

1. Answer any FOUR Each carries 5 marks.                                  (4×5=20)

 

11. Discuss Internal Control in regards to ‘General Financial Arrangements’.
12. What is the process of removal of a ‘Company Auditor’ under the Companies Act, 2013?
13. As per SA 300, discuss the activities to be planned by an Auditor, before commencing an Audit.
14. The auditor on good faith accepted an engagement, after accepting the engagement he got to know that there is a limitation that is imposed by the management in terms of getting one of the most important evidence required, express your opinion in terms of the consequence in such a situation.
15. What are the factors influencing the evolution of Auditing?
16. Explain the problems in EDP Auditing.

 

SECTION – C

III)      Answer any THREE questions.    Each carries 15 marks.                    (3×15=45)

 

17. Explain in detail the ‘Audit Process’.
18. What do you mean by the term ‘Internal Check’? Explain its objectives. Elaborate on the evaluation of the Internal Control system in an organization.
19. Describe the Auditor’s Report as prescribed by Law or Regulation (SA-700).
20. Elaborate on the Eligibility, Qualification and Appointment of a Company Auditor.
21. Discuss in detail the Objectives of Auditing.

 

SECTION – D

1. IV) Case study- Compulsory question.              (15 marks)

 

22. M/s Xaka Co. Ltd. appointed an Auditor to look into the affairs of the company. The company had twenty branches – 15 branches inside India and 5 in foreign Countries. The company had made a loss for the past two years, but the management of the company was confident that, it will make sufficient profits the next financial year to overcome the losses made in the previous years and also have enough profits to pay dividends to the shareholders.

 

On evaluation the auditor found that the company had investments in other company’s shares, which were sold at loss, there were dividends for two financial years declared although, the company was running under a loss. It was also found that, the directors had promised to pay one of the renowned NGO’s a donation of 10% of the profits likely to be received next financial year, without the permission of the shareholders.

 

On the auditors reporting this matter to the management, the auditors learnt that, all this happened with the permission of the Board of directors and when the auditors insisted to report this matter the government authorities, the Board promised to sponsor all the auditing staff including the main auditor a trip to the countries where the branches were located in the name of branch audits. The company also promised the auditor to pay the remuneration in the next financial year, 5% of the total profits earned by the company, as the company was currently not in a position to pay auditor’s remuneration.

 

Question: As an auditor of M/s. Xaka Co. ltd, reflect your opinions on the decision to be taken by the auditor of this company.