CA Inter Audit Lec 31 & 32 (SA 520 & 530)

530.10

As the number of transactions of WY Limited for the financial year 2018-19 were in very large number, the auditor of WY Limited decided to use the technique of Audit Sampling. Before selecting the sample from Repair and Maintenance Expenses, the auditor of WY Limited wished that entire data of Repair and Maintenance Expenses of WY Limited for financial year 2018-19 should have three characteristics. These three characteristics are:

• a) Simple, Completeness, Relevant.

• b) Appropriateness, Simple, Relevant.

• c) Reliable, Simple, Relevant.

• d) Appropriateness, Completeness, Reliable.

520.7

What is the primary objective of analytical procedures used in the overall review stage of an audit?

• a) To help to corroborate the conclusions drawn from individual components of financial statements

• b) To reduce specific detection risk

• c) To direct attention to potential risk areas

• d) To satisfy doubts when questions arise about a client’s ability to continue

520.16

When significant risk had been identified by the auditor, then:

• a) Audit evidence obtained solely from substantive analytical procedures is sufficient.

• b)  Audit evidence obtained solely from substantive analytical procedures is unlikely to be sufficient.

• c) Auditor will perform test of details also.

• d) Both b and c

Incs.19.1

While performing the audit procedures, Mr. Ram did production analysis and calculated the expenditure per unit and compared the same with the previous year and the present year industry trends. When Mr. Ram asked the management about the reasons for variations, he was told that such reasons have already been explained to the cost auditors and the statutory audit team need not spend their time on matters which are of concern for the cost auditor. Mr. Ram was convinced and agreed to the suggestions of the management of HKM Ltd.

" With respect to the contention of the management of HKM Ltd. regarding the production analysis and the related variances, which of the following is correct?

• (a). M/s Arun Karun & Associates need not waste its time in production analysis as the same is the responsibility of the cost auditor of the company.

• (b). M/s Arun Karun & Associates should perform production analysis and discuss the reasons of variation with the management of HKM Ltd.

• (c). M/s Arun Karun & Associates should mention in its audit report regarding the fact of noticed variation in the production analysis. Also they need to mention separately that the management along with the cost auditor is responsible for such analysis.

• (d). M/s Arun Karun & Associates should ensure that the cost auditor of HKM Ltd. mentions the fact regarding the production analysis in their cost audit report which is to be filed with the Board of Directors and the Central Government.

Incs.27.1

Which of the following Statement is correct?

• (a). Hundred Percent Checking will give absolute satisfaction to the Auditor about correctness of transactions.

• (b). Sampling Methods cannot be relied upon to reveal the true feature and characteristics of the population.

• (c). If drawn properly, a sample would give reasonable basis to an Auditor to draw conclusions about the entire population

• (d). Sampling should be done only when Hundred Percent Checking is not possible

Incs.38.2

"When auditor decides to select less than 100% of the population for testing, the auditor is said to be using___________________

• (a).Audit sampling

• (b).Representative sampling

• (c).Test Checking

• (d).Internal Audit

Incs.38.4

"The application of audit sampling is such that all sampling units have a chance of selection in order to draw conclusion about the _______.

• (a). Entire population

• (b). Selective population

• (c). Audited population

• (d). Universe

530.1

Which of the following is source of Non Sampling risk:

• a) Human Mistakes

• b) Applying audit procedures not appropriate to the objectives of audit

• c) Misinterpreting the sample results

• d) All of the above

Incs.38.1

"Sampling risk can lead to two types of erroneous conclusions one of them is when test of control appears to be more effective than they actually are which affects ________________and is more likely to lead to an inappropriate audit opinion.

• (a). audit efficiency

• (b). audit effectiveness

• (c). audit quality

• (d). none of the above

Incs.16.5

         I. " Consider the below stated steps in relation to audit sampling. What is the most likely logical order of these steps to be followed by auditors of this company?

Step I—Performing audit procedures

Step II ---- Projecting Misstatements

Step III---- Sample design and selection of items for testing

Step IV-- Investigating Nature and cause of deviations

Step V--- Evaluating results of audit Sampling

• (a). Step I, Step II, Step III, Step IV and Step V

• (b). Step II, Step I, Step III, Step V and Step IV

• (c). Step III, Step I, Step IV, Step II and Step V

• (d). Step I, Step II, Step III, Step V and Step IV