CA - IPCC (IPCC... · 2015-07-16 · Duty to comply with Auditing Standards: As per Section 143(9),...

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Book No. 15A

Auditing & Assurance

Supplementary Material_34e

Page 1

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Index For Auditing & Assurance Supplementary Material

S.No. Chapter Name Pages

1. Newly added questions / concepts 3 - 11

2. Replaced questions / concepts 12-13

3. Errata 14 - 18

IPCC_34e_Auditing & Assurance _Supplementary Material ____________________3

No.1 for CA/CWA & MEC/CEC MASTER MINDS

6. COMPANY AUDIT

Q.No.1.What are the other Duties of Companies Auditor as per Sec 143 of the Companies Act 2013?

Duty to Sign the Audit Report (sec 143 (2)): The person appointed as an auditor of the company shall sign the auditor's report or sign or certify any other document of the company, in accordance with the provisions of sub-section (2) of section 141 and the qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in the auditor's report shall be read before the company in general meeting and shall be open to inspection by any member of the company. Duty to state the reason for qualification or negative report: As per Section 143(4), where any of the matters required to be included in the audit report is answered in the negative or with a qualification, the report shall state the reasons there for. Duty to comply with Auditing Standards: As per Section 143(9), every auditor shall comply with the auditing standards. CG may prescribe the standards of auditing or any addendum thereto, as recommended by the ICAI in consultation with and after examination of the recommendations made by the National Financial Reporting Authority.

Duty to report on any other matter specified by Central Government: The Central Government may, in consultation with the National Financial Reporting Authority, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditor's report shall also include a statement on such matters as may be specified therein.

Q.No.2.Write about the Duties of Companies Auditor to Report on Fraud as per Sec 143(12) of the Companies Act 2013?

As per sub section 12 of section 143 of the Companies Act, 2013, if an auditor of a company, in the course of the performance of his duties as auditor, has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter Central Government immediately but not later than sixty days of his knowledge and after following the procedure indicated herein below:

a) Auditor shall forward his report to the Board or the Audit Committee, as the case may be, immediately after he comes to knowledge of the fraud, seeking their reply or observations within forty-five days;

b) On receipt of such reply or observations the auditor shall forward his report and the reply or observations of the Board or the Audit Committee along with his comments on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days of receipt of such reply or observations;

c) In case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he failed to receive any reply or observations within the stipulated time.

d) Further, the report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed post followed by an email in confirmation of the same. This report shall be on the letter-head of the auditor containing postal

PART- 1. NEWLY ADDED QUESTIONS / CONCEPTS


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address, e-mail address and contact number and be signed by the auditor with his seal and shall indicate his Membership Number. The report shall be in the form of a statement as specified in Form ADT-4.

e) If any auditor does not comply with the provisions of sub-section (12) of section 143, he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakh rupees)

Q.No.3 What are the other Duties of Companies Auditor as per Sec 145 of the Companies Act 2013?

Auditor to sign audit reports, etc (sec 145) : The person appointed as an auditor of the company shall sign the auditor‟s report or sign or certify any other document of the company in accordance with the provisions of sub-section (2) of section 141, and the qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in the auditor‟s report shall be read before the company in general meeting and shall be open to inspection by any member of the company.

Q.No.4 write about duties of the auditor to attend general meeting as per Sec 146 of the Companies Act 2013?

Auditors to attend general meeting All notices of, and other communications relating to, any general meeting shall be forwarded to the auditor of the company, and the auditor shall, unless otherwise exempted by the company, attend either by himself or through his authorised representative, who shall also be qualified to be an auditor, any general meeting and shall have right to be heard at such meeting on any part of the business which concerns him as the auditor

Q.No.5. Briefly discuss the provisions of the companies act, 2013 with regard to issue of shares at a discount.

Issue of Shares at a Discount: According to Section 53 of the Companies Act, 2013 except sweat equity issued as mentioned in section 54, any share issued by a company at a discounted price shall be void.

Where a company contravenes the provisions of this section the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.



19. COMPANIES AUDITOR'S REPORT ORDER (CARO), 2015

HISTORICAL BACK GROUND

S.O. 990(E) - In exercise of the powers conferred by sub-section (11) of section 143 of the Companies Act, 2013 (18 of 2013 ) and in supersession of the Companies (Auditor‟s Report) Order, 2003, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 480 (E), dated the 12th June, 2003, except as respects things done or omitted to be done before such supersession, the Central Government, after consultation with the Institute of Chartered Accountants of India, constituted under the Chartered Accountants Act, 1949 (38 of 1949).

APPLICABILITY OF CARO, 2015

It applies to every company including a foreign Company, except the following:

a) A Banking company;

b) An Insurance Company;

c) A company licensed to operate under section 8 of the Companies Act;

d) A One Person Company as defined under clause (62) of section 2 of the Companies Act and a small company as defined under clause (85) of section 2 of the Companies Act; and

e) A private limited company which satisfies all the following 4 conditions:

i) Paid-up capital (*) + reserves (Revenue & capital) - does not exceed Rs.50 Lakhs.

ii) Company does not have loan (short term/long term) outstanding of ≥Rs.25 lakhs from any bank/financial institution (total limit 25 lakhs).

iii) Company's turnover does not exceed Rs.5 crores (after deducting sales returns irrespective of the year in which sales are made & to exclude excise duty and sales tax if they are credited separately). (Relevant date is - at any time during the financial year)

Note: Companies specified in a, b, c above are exempt irrespective of whether they are public companies or private companies.

*Includes both equity and preference paid up capital or bonus shares. Excludes calls in arrears, share application money and not allotted.

This order is applicable to foreign companies and even the branches of Indian companies as well.

COMMENCEMMENT

Auditor's report to contain matters specified below. Every report made by the auditor under section 143 of the Companies Act, on the accounts of every company examined by him to which this Order applies for the financial year commencing on or after 1st April, 2014, shall contain the matters specified below.

MATTERS TO BE INCLUDED IN AUDITOR'S REPORT 1. Fixed Assets:

a) Proper Records: Whether or not the company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) Physical verification:

i) Whether these fixed assets have been physically verified by the management at reasonable intervals;



ii) Whether any material discrepancies have been observed on such verification and

iii) If so, whether the same have been properly dealt with in the books of accounts.

c) Sale: If substantial part of fixed assets have been disposed off during the year whether it has affected the going concern.

2. Inventories:

a) Physical Verification: Whether physical verification of inventory has been conducted at reasonable intervals by the management.

b) Adequacy of physical verification procedures: Whether the procedures for physical verification of inventory are adequate in relation to the size of the company and the nature of its business. If not, the inadequacies to be reported.

c) Adequate records: Whether the company is maintaining proper records of inventory.

d) Rectification of material discrepancies: Whether the material discrepancies, if any, noticed on physical verification have been properly dealt with.

3. Loans to/from Director & Interested Parties :

a) Names & Amounts involved: Has the company granted or taken any loans, secured or unsecured to/from companies, firm or other parties concerned in the register maintained under Sec.189 of the Companies Act 2013. If so, give the details (number of parties and the amounts involved in the transactions).

b) Terms and conditions of loans: Whether the rate of interest and other terms and conditions of loans taken or given by the company, secured or unsecured is prima facie prejudicial to the interests of the company.

c) Regularity of repayment: Whether the payment of the principal amount and the interest are also regular.

d) Steps for recovery/repayment of overdues: If overdue amount is > Rs.1,00,000; whether reasonable steps have been taken by the company for recovery/payment of the principal & interest

4. Internal Control System:

a) Adequacy: Is there an internal control procedure commensurate with the size of the company and the nature of business for the following transactions:

i) Purchase of inventory and fixed assets &

ii) Sale of goods.

b) Continuing failure: Whether there is a continuing failure to correct major weaknesses in internal control.

5. Public Deposits:

a) If the Company has accepted deposits from public, whether it has complied with the following:

i) Sections 73 and 76 of the Act;

ii) Directives issued by Reserve Bank of India;

iii) Rules framed under Section 73/76 of the Act.

If not, nature of contravention to be stated.

b) Has the National Company Law Tribunal (NCLT) passed any order in respect of public deposits in respect of the company? If so, whether the same has been complied with?

6. Maintenance Of Cost Records: Where maintenance of cost records has been prescribed by the Central Government under Sec.148 (1) of the Act, whether such accounts and records have been made and maintained.



7. Statutory Dues:

a) Undisputed statutory dues:

i) Is the company regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, Employee‟s State insurance, Income-tax, Sales-tax, Wealth Tax, Custom Duty, Excise duty, cess and any other statutory dues with the appropriate authorities?

ii) If not, the extent of the arrears of outstanding statutory dues as at the last day of the financial year, for a period of > 6 months from the date they became payable, shall be indicated by the auditor.

b) Disputed Statutory dues: In case dues of sales tax etc. have not been deposited on account of any dispute, then the amounts involved and the forum where dispute is pending need to be mentioned.

8. Net Worth Erosion:

a) Whether in case of a company which has been registered for a period not less than five years,

b) Its accumulated losses at the end of the financial year are not less than fifty per cent of its net worth and

c) Whether it has incurred cash losses in such financial year and in the financial year immediately preceding such financial year also.

9. Default to Bank/Fi Dues: Whether the company has defaulted in repayment of dues to a financial institution or bank or debenture holders? If yes, the period and amount of default to be reported.

10. Guarantee given: Whether the company has given any guarantee for loans taken by others from bank or financial institutions, the terms and conditions are prejudicial to the interest of the company.

11. Application of term loans: Whether term loans were applied for the purpose for which the loans were obtained.

12. Frauds noticed or reported: Whether any fraud on or by the company has been noticed or reported during the year. If yes, the nature and the amount involved is to be indicated.

Q.NO.1. SK LTD. HAS FULLY COMPUTERISED ITS ACCOUNTING OPERATIONS. THE STOCK RECORDS ARE MAINTAINED UP TO DATE WITH TIMELY ENTRIES PASSED FOR ALL RECEIPTS AND ISSUES. THE COMPANY HAS HIRED A PROFESSIONAL SECURITY AGENCY. WHICH MONITORS AND IMPLEMENTS A CLOSE VIGILANCE OVER THE OPERATIONS OF THE COMPANY. AS SUCH, THE COMPANY HAD DISPENSED WITH THE PRACTICE OF TAKING STOCK OF THEIR INVENTORIES AT THE YEAR END AS IN THEIR OPINION THE EXERCISE IS REDUNDANT, TIME CONSUMING AND INTRUSION TO NORMAL FUNCTIONING OF THE OPERATIONS.

Facts of the case: SK Ltd. had dispensed with the practice of taking stock of their inventory as it is time consuming moreover, it hired out professional security agency, which implements a close vigilance.

Provisions of law: The Companies (Auditor‟s Report) order, 2015.

Analysis and Conclusion: On the basis of the evaluation of the effectiveness of the internal controls, the auditor should carry out appropriate substantive procedures in relation to inventories. These substantive procedures include examination of records, attendance at stock - taking, examination of valuation and disclosure of inventories, carrying out analytical procedures, and obtaining confirmations

PRACTICAL QUESTIONS



from third parties and representations from the management. CARO, 2015 requires specific comment by auditor as to the adequacy, reasonableness of the physical verification of inventory it also requires auditor to comment whether discrepancy, if any observed in such a physical verification had been duly accounted for.

In view of above an auditor should insist on the company to do physical verification of inventory. Verification must be done atleast yearly, if not more frequently within a year. Dispensing with physical verification altogether is unacceptable. It is not enough that the company had installed good control procedures. If the management does not accept to the auditor‟s view the auditor may appropriately make qualifications in his audit report.

Q.NO.2.COMMENT. ABC LTD. HAS NOT DEPOSITED PROVIDENT FUND CONTRIBUTIONS OF

RS.20 LAKHS TO THE AUTHORITIES, BUT ACCOUNTED IN THE BOOKS.

The auditor‟s report under CARO, 2015 has to specifically state whether the company is regular in depositing provident fund dues with the appropriate authority and, if not, the extent of arrears of provident fund shall be indicated by the auditor. The auditor may also ascertain the period since which dues have not been paid. In this case, the failure of ABC Ltd. to deposit provident fund of Rs.20 lakhs will be reported by the auditor in CARO, 2015 issued u/s 143(11) of the Companies Act, 2013. In indicating the arrears, the period to which the arrears relate should preferably be also given.

Q.NO.3. ASS LTD PROCURING THE PACKING MATERIALS FROM M/S XY AND CO., A PARTNERSHIP FIRM CONSISTING OF MR. X AND MR.Y. MR. Y IS THE MANAGING DIRECTOR OF AAS LTD. THE TOTAL VALUE OF PURCHASES MADE FROM XY AND CO. BY AAS LTD. DURING THE YEAR 2003-04 HAD BEEN RS. 38 LAKHS.

Facts of the case: AAS Ltd. made total purchases of Rs. 38 lakhs from M/s XY &Co. Mr. Y the managing Director of AAS Ltd. is also a partner in M/s XY & Co. Provisions of law: SA 550 – Related Parties.

The companies (Auditor‟s Report) order, 2015 Transactions with Related parties.

Analysis and Conclusion: SA - 550 „Related Parties‟ establishes standards on auditor‟s responsibilities and audit procedures regarding related party transactions.

In this case, the related party relationship is absolutely clear and accordingly the auditor must examine that the disclosure requirement as laid down in As 18, „Related party Disclosures‟ has been followed, as Managing Director.

Further, the auditor has to ensure compliance with the CARO, 2015 requirements viz, transactions required to be entered into the Register pursuant to Sec 189 of the companies Act, 2013 and having regard to the fact whether such prices were reasonable or not. Accordingly, the auditor has to ensure that the AAS Ltd. has made proper disclosure in financial statements and the matter has been examined and reported in terms of CARO, 2015 also.

Q.NO.4. EXPLAIN THE MAJOR ASPECTS OF „PROPRIETY AUDIT‟ IN THE CARO, 2015.

Major aspects of “Propriety Audit” in the Companies (Auditor‟s Report) Order, 2015:

1. Has the company whether granted or taken any loans, secured or unsecured to/from companies, firms or other parties covered in the register maintained under section 189 of the Act. If so, give the number of parties and amount involved in the transactions.

2. Whether the rate of interest and other terms and conditions of loans given or taken by the company, secured or unsecured, are prima facie prejudicial to the interest of the company.

3. Whether payment of the principal amount and interest are also regular.



4. If overdue amount is more than one lakh, whether reasonable steps have been taken by the

company for recovery/payment of the principal and interest.

5. If the company is regular in depositing undisputed statutory dues including provident fund, investor education and protection fund, employees‟ state insurance, income tax, sales tax, wealth tax, custom duty, excise duty, cess and any other statutory dues with the appropriate authorities and if not, the extent of the arrears of outstanding statutory dues as at 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 by the auditors.

Q.No.5. CARO, 2015 DOESN‟T APPLY TO A FOREIGN COMPANY.

CARO, 2015 applies to all companies including foreign companies except banking, insurance, Sec. 8 Companies, One person Companies and Private Ltd. companies subject to certain conditions.

Q.No.6. CARO 2015 IS ALSO APPLICABLE TO THE AUDIT OF BRANCH OF A COMPANY, EXCEPT WHERE THE COMPANY IS EXEMPT FROM THE APPLICABILITY OF THE ORDER.

True: CARO 2015 is applicable to audit of branch (es) of the company under Sec 143(8) of companies Act, 2013. Clearly specifies that a branch auditor has the same duties in respect of audit as the company‟s auditor. It is, therefore, necessary that the report submitted by the branch auditor contains a statement on all the matters specified in the order, except where the company is exempt from the applicability of the order to enable the company‟s auditor to consider the same while complying with the provisions of the order.



20. STANDARDS ON AUDITING

Q.No.1. What are the objectives and functions of Auditing and Assurance Standard Board (AASB)?

Objectives and Functions of the Auditing and Assurance Standards Board :

The following are the objectives and functions of the Auditing and Assurance Standards Board:

a) To Review the existing and emerging auditing practices worldwide and identify areas in which Standards on Quality Control, Engagement Standards and Statements on Auditing need to be developed.

b) To formulate Engagement Standards, Standards on Quality Control and Statements on Auditing so that these may be issued under the authority of the Council of the Institute.

c) To Review the existing Standards and Statements on Auditing to assess their relevance in the changed conditions and to undertake their Revision, if necessary.

d) To develop Guidance Notes on issues arising out of any Standard, auditing issues pertaining to any specific industry or on generic issues, so that those may be issued under the authority of the Council of the Institute.

e) To Review the existing Guidance Notes to assess their relevance in the changed circumstances and to undertake their Revision, if necessary.

f) To formulate General Clarifications, where necessary, on issues arising from Standards.

g) To formulate and issue Technical Guides, Practice Manuals, Studies and other papers under its own authority for guidance of professional accountants in the cases felt appropriate by the Board.

Q.No.2. Mention any four special points which assists the auditor in accepting and continuing of relationship with the client as per SA 220.

Acceptance and Continuance of Client Relationships and Audit Engagements SQC 1 requires the firm to obtain information considered necessary in the circumstances before accepting an engagement with a new client, when deciding whether to continue an existing engagement, and when considering acceptance of a new engagement with an existing client.

Information such as the following assists the engagement partner in determining whether the conclusions reached regarding the acceptance and continuance of client relationships and audit engagements are appropriate:

a) The integrity of the principal owners, key management and those charged with governance of the entity;

b) Whether the engagement team is competent to perform the audit engagement and has the necessary capabilities, including time and resources;

c) Whether the firm and the engagement team can comply with relevant ethical requirements; and

d) Significant matters that have arisen during the current or previous audit engagement, and their implications for continuing the relationship.

In case of certain entities, such as, Central/State governments and related government entities (for 4 SQC 1. (Example, Agencies, Boards, Commissions), auditors may be appointed in accordance with statutory procedures. Accordingly, certain of the requirements and considerations regarding the acceptance and continuance of client relationships and audit engagements as set out as above may not be relevant. Nonetheless, information gathered as a result of the process described may be valuable to the auditors of such entities in performing risk assessments and in carrying out reporting responsibilities.



Q.No.3.State the significant difficulties encountered during the Audit with reference to SA 260.

Significant Qualitative Aspects of Accounting Practices. Financial reporting frameworks ordinarily allow for the entity to make accounting estimates, and judgments about accounting policies and financial statement disclosures. Open and constructive communication about significant qualitative aspects of the entity‟s accounting practices may include comment on the acceptability of significant accounting practices. Significant difficulties encountered during the audit may include such matters as:

a) Significant delays in management providing required information.

b) An unnecessarily brief time within which to complete the audit.

c) Extensive unexpected effort required to obtain sufficient appropriate audit evidence.

d) The unavailability of expected information.

e) Restrictions imposed on the auditor by management.

f) Management‟s unwillingness to make or extend its assessment of the entity‟s ability to continue as a going concern when requested.

In some circumstances, such difficulties may constitute a scope limitation that leads to a modification of the auditor‟s opinion.

Q.No.4. “The auditor may exercise his judgment to identify which risks are significant risks”. Explain the above statement as per SA-315.

Identifying Significant Risks:

Significant risks often relate to significant non-routine transactions or judgmental matters. Non-routine transactions are transactions that are unusual, due to either size or nature, and that therefore occur infrequently. Judgmental matters may include the development of accounting estimates for which there is significant measurement uncertainty. Routine, non-complex transactions that are subject to systematic processing are less likely to give rise to significant risks.

Risks of material misstatement may be greater for significant non-routine transactions arising from matters such as the following:

a) Greater management intervention to specify the accounting treatment.

b) Greater manual intervention for data collection and processing.

c) Complex calculations or accounting principles.

d) The nature of non-routine transactions, which may make it difficult for the entity to implement effective controls over the risks.

Risks of material misstatement may be greater for significant judgmental matters that require the development of accounting estimates, arising from matters such as the following:

a) Accounting principles for accounting estimates or Revenue recognition may be subject to differing interpretation.

b) Required judgment may be subjective or complex, or require assumptions about the effects of future events, for example, judgment about fair value.

SA 330 describes the consequences for further audit procedures of identifying a risk as significant. Significant risks relating to the risks of material misstatement due to fraud

SA 240 provides further requirements and guidance in relation to the identification and assessment of the risks of material misstatement due to fraud.



(The following questions are replaced against the questions given 33rd edition, so students need to study the respective question in place of questions given in 33rd edition)

Q.No.1. Mention any eight special points which you as an auditor would look in to while auditing the books of a partnership firm?

In chapter special Audit Question no 2 (Page No- 149) is replaced with following Answer:

Special Points in Audit of a Partnership Firm: Matters which should be specially considered in the audit of accounts of a partnership firm are as under:

a) Confirming that the letter of appointment, signed by a partner, duly authorised, clearly states the nature and scope of audit contemplated by the partners, specially the limitation, if any, under which the auditor shall have to function.

b) Examine the partnership deed signed by all partners and its registration with the registrar of firms. Also ascertain from the partnership deed about capital contribution, profit sharing ratios, interest on capital contribution, powers and responsibilities of the partners, etc.

c) Studying the minute book, if any, maintained to record the policy decision taken by partners specially the minutes relating to authorization of extraordinary and capital expenditure, raising of loans, purchase of assets, extraordinary contracts entered into and other such matters which are not of a routine nature.

d) Verifying that the business in which the partnership is engaged is authorised by the partnership agreement; or by any extension or modification thereof agreed to subsequently.

e) Examining whether books of account appear to be reasonable and are considered adequate in relation to the nature of the business of the partnership.

f) Verifying generally that the interest of no partner has suffered prejudicially by an activity engaged in by the partnership which, it was not authorised to do under the partnership deed or by any violation of a provision in the partnership agreement.

g) Confirming that a provision for the firm‟s tax payable by the partnership has been made in the accounts before arriving at the amount of profit divisible among the partners.

h) Also see various requirements of legislations applicable to the partnership firm like Section 44(AB) of the Income-tax Act, 1961 have been complied with.

Q.No.2. You are approached by a partnership firm to list out the advantages that will accrue to them, if the accounts are audited. State five important advantages.

In chapter special Audit Question no 2 (Page No- 149) is replaced with following Answer:

Advantages of audit of accounts of a partnership firm: Advantages are as follows (any five):

a) Audited accounts provide a convenient and reliable means of settling accounts between the partners and thereby possibility of dispute among them is mitigated.

b) On the retirement/death of a partner, audited accounts constitutes a reliable evidence for computing the amount due to the retiring partner or representative of deceased partner.

c) Audited accounts are generally accepted by the Income tax authorities for computing the assessable income.

d) Audited accounts are relied upon by banks for advancing loan.

e) Audited accounts can be helpful in the negotiation for sale or admission of a new partner.

f) It is an effective safeguard against any undue advantage being taken by a working partner as against the non working partners.

PART-2. REPLACED QUESTIONS / CONCEPTS



Q.No.3. What are the inherent limitations of internal control system?

In chapter internal controls Question no 2 (Page No- 291) is replaced with following Answer:

Internal control can provide only reasonable but not absolute assurance that its objective relating to prevention and detection of errors/frauds, safeguarding of assets etc., are achieved. This is because it suffers from some inherent limitations, such as:-

a) Management‟s consideration that cost of an internal control does not exceeds the expected benefits.

b) Most controls do not tend to be directed at unusual transactions.

c) The potential of human error due to carelessness, misjudgment and misunderstanding of instructions.

d) The possibility that control may be circumvented through collusion with employees or outsiders.

e) The possibility that a person responsible for exercising control may abuse that authority.

f) Compliance with procedures may deteriorate because the procedures becoming inadequate due to change in condition.

g) Manipulation by management with respect to transactions or estimates and judgements required in the preparation of financial statements.

h) Inherent limitations of Audit.

QNo.4. The Board Of Directors Of A Company Have Filed A Complaint With The Institute Of Chartered Accountants Of India Against Their Statutory Auditors For Their Failing To Attend The Annual General Meeting Of The Shareholders In Which Audited Accounts Were Considered.

In chapter Company Audit Question no 35 (Page No-122) is replaced with following Answer:

Fact: Statutory auditor failing to attend the annual general meeting of the share holders.

Provision: Auditors to attend general meeting All notices of, and other communications relating to, any general meeting shall be forwarded to the auditor of the company, and the auditor shall, unless otherwise exempted by the company, attend either by himself or through his authorised representative, who shall also be qualified to be an auditor, any general meeting and shall have right to be heard at such meeting on any part of the business which concerns him as the auditor.

Analysis: As per above provision it is the duty of the statutory Auditors to attend general meeting.

Conclusion: Statutory auditor failing to attend general meeting so, he is guilty of misconduct.



Chapter 1: Introduction to Auditing

S.No Page No. Q. No. Error/Given To be Rectified as

1. 27 1 In Para - 1 last line Given – Author Auditor

Chapter 2: Concepts of Auditing


1. 31 2 In point – 1(a) Given as ---“ Basic principles governing an Audit”

“Overall objective of an Independent Auditor and conduct of Audit in accordance with SA”

2. 39 12

In 1st Para : The word ‘true and fair view’

has been negatively defined in the

Companies Act. Sec 129(3) only

provides that the financial statements

shall not be deemed to be showing a

true & fair view in case any matters,

which are required to be disclosed under

Schedule III, are not disclosed.

“As per sec-129(1) of the companies act, 2013. The financial statements shall give True and fair view of the state of affairs of the company or companies comply with standards notified U/S 133 and shall be in form or forms as may be provided for”

3. 34 7 First 7 points Delete

Chapter Name 3: Audit evidence


1. 48 2 In Based on form / nature (a)Documentary Given --- vouches

Vouchers

2. 49 4 In question no.4, the words Given --- “And Appropriate”

Delete

3. 50 6 In point – 2(b): In assertion no. 4; The words “assets, liabilities”

Delete

4. 54 1 In provisions of Law :-“SA-200” “SA-505”.

5. 54 1 In analysis: - 1st paragraph Delete

Chapter Name 4: Audit Preparation


1. 64 6 “Sec 227 (1A) & sec 227 (4A)”is given Replace with sec 143 (1) & sec 143(3)

PART - 3. ERRATA



Chapter Name 5: Capital and Revenue Expenditure


1. 73 3 In Auditors duty regarding general reserves:

(i) Delete Point (b)

2. 73 3 In How to use capital profit:- In point (b), given as Sec. 78

Sec. 52 of the Companies Act,2013

3. 90 28 Delete

Chapter Name 6: Company Auditor


1. 102 13 In point –C(iii) ,”a copy there of shall be field with the Registrar”

“a copy there of shall be filed with the registrar”

2. 104 16 In this question, points-“(1),(2),(3)” “(d),(e),(f)”

3. 122 34

The question is given as MR. B, statutory auditors of Secret ltd. was not permitted by the board of directors to attend general meeting of the company on the ground that his right to attend general meetings is restricted only to those meetings at which the accounts audited by him are to be presented and discussed.

MR. B, statutory auditors of Secret ltd. was not permitted by the board of directors to give notice of attend general meeting of the company on the ground that his right to receive notice of general meetings is restricted only to those meetings at which the accounts audited by him are to be presented and discussed.

Chapter Name 7: Miscellaneous matters in company Audit


1. 134 1 In this question, Point -7 is to be disclosed as separate head and the Points-8, 9, 10,11,12.

Points -1,2,3,4,5

Chapter Name 8: special Audit


1. 158 10 In the question “audit of hire purchases transactions”

Audit of hire purchase company

2. 159 11 In the question “audit of leasing transactions”

Audit of leasing company

Chapter Name 9: Government Audit


1. No Errors



Chapter Name 10: EDP Audit


1. 181 1 In Para -3 of “ Audit around computer”, the sentence but “verifies the controls that exists”

Not Required

Chapter Name 11: Audit of share capital


1. 202 1

Should be disclosed as “share application money pending allotment” in the balance sheet after share capital and before reserves and surplus

Should be disclosed as “share application money pending allotment” in the balance sheet after share holder’s funds and before noncurrent liabilities.

Chapter Name 12: Audit of debentures & dividends


1. 205 1 In point –I Delete sec.53

Chapter Name 13: Audit of cash transactions


1. 209 1 In point –f, “ where it exceeds Rs.25” is given

Rs.25 is to be changed as Rs. 5000

2. 210 3 In point – h “ Rev sch vi” is given schedule III

3. 210 3 Point - i Delete

4. 210 4 In point – I “ Rev sch vi” is given schedule III

5. 210 4 Point - J Delete

6. 211 5 Point – K Delete

7. 211 6 Point – i Delete

8. 212 7 In point – I “ Rev sch vi” is given schedule III



11. 214 11 In point - 7“ Rev sch vi” is given schedule III

12. 214 12 In point - g“ Rev sch vi” is given schedule III


14. 217 19 point - 2 (b) Delete

15. 217 19 Point – 3 (c) Delete

16. 221 26 In point – k “ Rev sch vi” is given schedule III

17. 222 27 In point - g“ Rev sch vi” is given schedule III

18. 222 28 Point g Delete

19. 224 35 Point I Delete



Chapter Name 14: Audit of trading transactions


1. No errors

Chapter Name 15: verification & valuation of Assets


1. 248 1 In point – 12 , “Rev schedule vi” is given “schedule III”

2. 249 2 In point – m , “Rev schedule vi” is given “schedule III”



5. 251 5 In point – k , “Rev schedule vi” is given “schedule III”


7. 253 9 In point – h , “Rev schedule vi” is given “schedule III”

8. 254 11 In point – i , “Rev schedule vi” is given “schedule III”


10. 254 13 In point – g , “Rev schedule vi” is given “schedule III”





15. 257 19 In point – j , “Rev schedule vi” is given “schedule III”

16. 260 24 In point – 12, Rev schedule vi” is given “schedule III”

17. 261 25 In point – 11(b) , “Rev sch. Vi” is given “schedule III”

18. 265 34 Point – 7 Delete


20. 267 37 In point – 6 “Rev sch vi” “schedule III”

21. 267 38 In point – disclosure “ under the heading miscellaneous expenditure” is given

“other noncurrent assets”

22. 274 14

“As per CARO 2003, the auditor was required to report whether the company is maintaining reasonable records for the sale and disposal of scrap” Is given

Delete

Chapter Name 16: Verification of Liabilities


1. 280 1 In point –I “Rev Rev sch. VI” is given “schedule iii”

2. 281 2 In point –f “Rev Rev sch. VI” is given “schedule iii”

3. 281 3 In point –j “Rev Rev sch. VI” is given “schedule iii”


5. 282 5 In point –i “Rev Rev sch. VI” is given “schedule iii”

6. 282 6 In point –g “Rev Rev sch. VI” is given “schedule iii”

7. 283 7 In point –g “Rev Rev sch. VI” is given “schedule iii”

8. 284 8 In point –i “Rev Rev sch. VI” is given “schedule iii”


10. 286 11 In Point b, “Reg 86. of table A schedule I”

Table F



Chapter Name 17: Internal control


1. 296 9 In point 7 –“Rev sch Vi” is given “ Schedule III”

2. 296 9 In point 10 – “ sec 227” is given Sec 143

3. 305 6 Delete

4. 306 8 “AAS- 10” is given “ SA 600”

Chapter Name 18: Miscellaneous Topics


1. 314 2 Delete

2. 317 11 “Section 125 of companies Act 1956” is given

Sec 77 of the companies Act, 2013

3. 320 17 In point d, sub heading “experts” : Add SA 620 as a reference

4. 320 17 in point d, sub heading “other auditors” Add SA 600 as a reference

5. 320 17 In point d, sub heading “internal auditor”.

Add SA 610 as a reference

6. 321 17 In point d, sub heading “ joint auditors” Add SA 299 as a reference

7. 322 20 In Para 1 “ as per SAP-2” is given As per SA 200

Chapter Name 20: standards on Auditing


1. No Errors

THE END

Verified by: Mallikarjun Garu

Vera Anjaneyulu Garu

Praveen Garu

Sai Girish Garu

M. Lakshmi Narasinga Rao Garu

Executed by: Mr. Uday Kumar

Date post:	12-Apr-2020
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