Auditing

Assignment A
1. Discuss the advantages and disadvantages of internal check.

        
2. Discuss the advantages of internal audit and also its limitations.

3. Write types of audit.

        
4.  Write short note on any three of the following.
Internal check
Verification and valuation of asset and liabilities
Audit planning    

    
5. What is continuous audit and what are the precautions should be taken to avoid the disadvantages of continuous audit?    

6.  Define basic principle of governing audit.    

7. Write the preliminary steps before commencing a Company Audit.    

8. Differentiate between auditing and accountancy.

Assignment B
Case Detail:
Read the case and answer the following questions:
An XYZ Real Estate Ltd. is a company offering estate agency services to the public through a network of branches all over the country. The board consists of six people, a part-time chairman, a chief executive, two other full time executives and two representatives of the owners. The company is jointly owned by a foreign bank and the City Property Group. The company has an internal audit department consisting of Sanjeev is a young chartered accountant and Rajeev who is an accounting expert. They have also a secretary, Ritwika. They report their activities monthly in detail to the audit committees of the foreign bank and the City Property Group. 

What work would the internal audit department do?
In what ways may the external auditors place reliance on their work

3.  Draw up a checklist, which the external auditor could use to assess the internal auditors as potentially being capable of Producing work on which the external auditors may rely.

Assignment c

Question No: 1
The main object of an audit is ___
Expression of opinion
Detection and Prevention of fraud and error
Both (a) and (b)
Depends on the type of audit.
Question No: 2
The title of AAS2 issued by Council of ICAI is ___
Objective and Scope of the Financial Statements
Objective and Scope of the Audit of Financial Statements
Objective and Scope of Business of an Entity
Objective and Scope of Financial Statements Audit

Question No: 3
Both auditing and accounting are concerned with financial statements. Which of the following:
    
 
Auditing uses the theory of evidence to verify the financial information made available by Accountancy  
Auditing lends credibility dimension and quality dimension to the financial statements prepared by the accountant.  
Auditor should have through knowledge of accounting concepts and convention to enable him to express an opinion on financial statements  
All of the above.

Question No: 4
Audit of banks is an example of –
Statutory audit
Balance sheet audit
Concurrent audit 
All of the above  
    
Question No: 5
Concurrent audit is a part of    
Internal check system
Continuous audit
Internal audit system
None
    
Question No: 6
In India, balance sheet audit is synonymous to    
Annual audit 
Continuous audit
Detailed audit
Statutory audit
    
Question No: 7
Audit in depth is synonymous for
Complete audit
Completed audit
Final audit
Detailed audit
    
Question No: 8
Balance sheet audit includes verification of_
Assets
Liabilities
Income and expense accounts where appropriate
All of the above
    
Question No: 9
Which of the following affects audit effectiveness?    
Risk of over reliance
Risk of incorrect rejection
Risk of incorrect acceptance
Both (a) and (c)
    
Question No: 10
Which of the following Auditing Assurance Standard deals with Audit Planning?    
AAS7   
AAS8  
AAS9
AAS3  
    
Question No: 11
Audit programme is prepared by
    
 
the auditor
the client 
the audit assistants
the auditor and his audit assistants
    
Question No: 12
The auditor’s permanent working paper file should not normally, include
extracts from client’s bank statements
past year’s financial statements
attorney’s letters
debt agreements
    
Question No: 13
For what minimum period should audit working papers be retained by audit firm?
For the time period the entity remains a client of the audit firm.
For a period of ten years
For a period auditor opines them to be useful in servicing the client
For the period the audit firm is in existence

Question No: 14
Which of the following is not true with regard to verification of assets?
It invoices substantiation of occurrence of transactions 
Its objective is to establish existence, ownership, possession, valuation and disclosure of
Assets
The auditor has to form an opinion on different aspects
All are true
    
Question No: 15
Which of the following statements is not true?
    
Valuation of assets is the responsibility of management
The auditor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in the balance sheet
The auditor should value the asset as per generally accepted accounting principle
Valuation is no part of auditor’s duty
    
Question No: 16
Which of the following is not a proper third party to hold investments on behalf of the client?
Regional level custodian
National level custodian
India trills – National level stock broking firm
AEZ Securities Ltd. a stock broking firm

Question No: 17
Which of the following would give the assurance that debtors mentioned on the date of balance sheet actually exist?
Sending debtor’s confirmation letters
Reviewing subsequent collection
Verify debtors against sales document
Both (a) and (b)
    
Question No: 18
Which of the following is not an inherent limitation of internal control system?
Management override
Collusion among employees
Inefficiency of internal auditor
Abuse of authority
    
Question No: 19
An auditor should study and evaluate internal controls to
    
determine whether assets are safeguarded
Suggest improvements in internal control
Plan audit procedures
express and opinion

Question No: 20
XYZ Ltd. Conducts quarterly review of operations. It discovers that unrest in a south east
Asian country may affect the supply of raw materials to it the next quarter. This is an example of:
risk assessment
control procedure
supervision
control environment
    
Question No: 21
The definition of auditing states that the auditor
objectively obtains evidence
is independent
must evaluate internal control
none of the above

Question No: 22
Various types of quality audits are:    
product
process 
management (system) 
All of above

Question No: 23
When the auditor is an employee of the organization being audited (auditee), the audit is classified as an........ quality audit.
internal
external
compliance
Both A & B

Question No: 24
The most comprehensive type of audit is the ......... system audit, which examines suitability and effectiveness of the system as a whole.
quantity
quality
Preliminary
sequential

Question No: 25
Each of the three parties involved in an audit ......................... plays a role that contributes to its success.
the client, the auditor, and the auditeer
the client, the auditor, and the audite
 the client, the moderator, and the auditee
the client, the auditor, and the auditee

Question No: 26
An audit is usually conducted in three steps:
(1) A pre-examination or opening meeting with the auditee marks the beginning of the process.
(2) Involves a suitability audit of the documented procedures against the selected reference standard.
(3) The auditor examines in depth the implementation of the quality system.
True
False

Question No: 27
The audit final report should include, at a minimum, the following:
(Choose the one NOT required)
1. Type of audit conducted
2. Characteristics of audit
3. Identification of involved parties: auditor, auditee, and third party
4. Audit team members
5. Critical nonconformities and other observations
6. Audit standards and reference documents used
7. Determination of proper corrective action(s)
8. Duration of audit
1
2
4
8

Question No: 28
The time required and costs involved in an external audit are much higher as compared to internal audits.
True
False

Question No: 29
Audit is a fact-finding process that compares actual results with......................
specified standards and plans
expected results
premature results
preliminary results

Question No: 30
The ......... is also expected to provide the resources needed and select staff members to accompany the auditors.
auditor
client
internal auditor
auditee

Question No: 31
For the benefit of the organisation, quality auditing should only report non-conformances and corrective actions, but should not highlight areas of good practice.
True 
False

Question No: 32
How many principles are listed in AAS1 which govern auditor’s professional obligation?
Nine
Fourteen
Seven
Eight

Question No: 33
An auditor assesses control risk because it
affects the audit risk
affects the level of detection risk that auditor may accept
helps him to fix materiality level for each financial assertion
is directly related to inherent risk
    
Question No: 34
The most difficult type of misstatement to detect fraud is based on:
Related party purchases
Related party sales
The restatement of sales
Omission of a sales transaction from being recorded.
    
Question No: 35
Which of the following statements is correct concerning the required documentation in working papers of fraud risk assessment undertaken by the auditor?
All risk factors as mentioned in AAS4, should be considered and documented along with response to them.  
Document the identification of fraud risk factors along with response to them. 
Document material fraud, risk factors and response to them.
No documentation in required.

Question No: 36
Which of the following is the most appropriate potential reaction of the auditor to his assessment that the risk of material misstatement due to fraud is high in relation to existence of inventory?    
Visit location on surprise basis to observe test counts
Request inventory count at a date close to yearend
Vouch goods sent on approval very carefully
Perform analytical procedures.

Question No: 37
Which of the following is not likely to be a fraud risk factor relating to management’s characteristics
Tax evasion
Failure to correct known weakness in internal control system
Adoption of conservative accounting principles
High management turnover

Question No: 38
The term 'scope of an audit' refers to the audit procedures deemed necessary in the circumstances:       
In order to cover auditor liability
As required by IFRSs
To achieve the objective of the audit
As required by IASs

Question No: 39
Bookkeeping as a support mechanism for the determination of ______, or as a decision support system for achieving ______, was basically unknown in ancient cultures like the Mesopotamian, Egyptian, Greek or Roman.
Assets, valuation of assets
Liabilitities, liquidity analysis
Profit or wealth, profit maximization
Tax liabilities, tax avoidance

Question No: 40
Which of the following is not a benefit of international auditing standards?
Encourage and assist developing nations to adopt national standards
Foreign investors are more likely to channel funds into a developing country
Investors can more readily comprehend a set of financial statements drawn up in another country
Financial statement disclosure is more consistent
    

.