CA Final – Advanced Auditing (Mock Test Series – May 2019 Exams)

Mock Test II – Company Audit Module (Chapter 6-Chapter 12)

Test – Company Audit (Chapter 6-Chapter 12)

M.M.: 30 Marks
Time: 60 Minutes
Instructions: All Questions are Compulsory.

Marks
1 Select the appropriate answer and give the brief reasons thereof: 10
(i) ABC & Co. is a firm of Chartered Accountants has three partners, A, B & C. The firm is
holding audit of 55 companies which include 10 small companies, 5 government public
companies, 5 listed companies, 5 OPC, 15 public companies and 15 private companies
having paid up capital more than ₹100 crores. Firm has been offered the appointment as
auditors of 30 companies. Of the 30 companies, 5 are private companies having paid up
capital of each company is below ₹100 crores and the remaining 25 companies are public
companies.
(a) Firm can accept audit of all 30 companies.
(b) Firm can accept audit of 25 companies including 5 private companies.
(c) Firm can accept audit of 20 companies including 5 private companies.
(d) Firm can accept audit of 15 companies including 5 private companies.
(ii) M/s IO Ltd. is registered with Registrar of Companies on 1st of May 2016. The company’s
27% of paid up share capital is held by Central Government; 28% by State Government and
the remaining 45% by public. The Investment committee of the company makes a
contribution ₹2.5 lacs during the financial year ended 31.03.2019 to a political party for
running a school for blinds.
Average profit earned by the company in the preceding financial years was ₹30 Lacs.
(a) Contribution made is in the accordance with provisions of Sec. 181 of Companies Act,
2013.
(b) Contribution made is in violation of provisions of Sec. 181 of Companies Act, 2013.
(c) Contribution made is in the accordance with provisions of Sec. 182 of Companies Act,
2013.
(d) Contribution made is in the accordance with provisions of Sec. 182 of Companies Act,
2013.
(iii) As per Sec. 143(3)(f) of Companies Act, 2013, auditor’s report shall also state” the
observations or comments of the auditors on financial transactions or matters which have
any adverse effect on the functioning of the company”. The word “observations or
comments” as used in the clause (f) refers to:
(a) EOM Paragraphs and the situations leading to modification in the auditor’s report.
(b) Key Audit matters communicated in the audit report.
(c) Matters covered under Sec. 143(1) relating to propriety aspects.
(d) Material uncertainty as to going concern which requires a separate section in the audit
report titled “Material uncertainty relating to Going concern”.
(iv) In case of inadequacy or absence of profits in any year, a company may declare dividend
out of reserves of the company subject to:
(a) total amount to be drawn from the reserves shall not exceed 10% of the paid-up equity
capital and free reserves of the company.
(b) The balance of reserves after such withdrawal shall not fall below 15% of its paid-up
equity capital as appearing in the latest audited financial statements.
(c) Both (a) and (b) above.
(d) None of the above.

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 CA Final – Advanced Auditing (Mock Test Series – May 2019 Exams)
Mock Test II – Company Audit Module (Chapter 6-Chapter 12)

(v) X Ltd. has issued its prospectus for raising capital, which includes a statement which is
untrue or misleading in form or context in which it is included. It was found that such
statement was made with authorisation of Mr. X, who is Chartered Accountant and engaged
with the company to manage their public issue.
(a) Mr. X is liable to be punished u/s 147 of Companies Act, 2013.
(b) Mr. X is liable to be punished u/s 447 of Companies Act, 2013.
(c) Mr. X is liable to be punished under sections 147 as well as 447 of Companies Act,
2013.
(d) Mr. X is not liable for any punishment.

2 Clause (xii) of Para 3 of Companies Auditor’s Report Order, 2016 requires the auditor to report 5
“whether all transactions with the related parties are in compliance with sections 177 and 188 of
Companies Act, 2013 where applicable and the details have been disclosed in the financial
statements etc. as required by the applicable accounting standards”.
You are required to briefly explain the audit procedure to be followed by the auditor and suggest
the reporting pattern as recommended by Guidance Note on CARO, 2016 issued by the Institute of
Chartered Accountants of India.

3 You are appointed as an auditor of Najib Limited, a listed company which is a main supplier to the 5
USA building and construction market. With a turnover of ₹1.9 billion, the company operates
through 11 business units and has nearly 170 branches across the countries.
While carrying audit of consolidated financial statements of Najib Limited, how will you proceed in
the following situations:
(I) When the Component(s) Auditor Reports on Financial Statements under an Accounting
Framework Different than that of the Parent?
(II) When the Component(s) Auditor Reports under an Auditing Framework Different than that of
the Parent?

4 P Limited is a listed Company in which no code of conduct is laid down for its board members and 5
senior members. As an auditor of P Limited:
(i) Briefly explain the compliance requirements with respect to Code of Conduct as per Listing
Order Disclosure Requirement (LODR) Regulations.
(ii) What will be your role in compliance of above-mentioned Code of Conduct as per LODR
Regulations?

5 CA. X is a partner in M/s AB & Associates and M/s MN & Associates simultaneously. M/s AB & 5
Associates has completed its tenure of 10 years as an auditor in XYZ Ltd. immediately preceding
the current financial year. It may be noted that the provisions for applicability of rotation of
auditors are applicable to XYZ Ltd. Now, the company wants to appoint M/s MN & Associates as
auditor for 5 years.
(a) Whether M/s MN & Associates is allowed to accept the appointment as auditor of XYZ Ltd.?
(b) Would your answer be different from above if CA. X, being in-charge of M/s AB & Associates
and certifying authority of financial statements of XYZ Ltd., retires from the partnership in M/s
AB & Associates and joins M/s MN & Associates?

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