CA Inter Audit Lec 67 & 68

ICS.1

The management of Magoo Ltd. has developed a strong internal control in its accounting system in such a way that the work of one person is reviewed by another. Since no individual employee is allowed to handle a task alone from the beginning to the end, the chances of early detection of frauds and errors are high. CA. Olive has been appointed as an auditor of the company for current Financial Year 2017-18. Before starting the audit, she wants to evaluate the internal control system of Magoo Ltd. To facilitate the accumulation of the information necessary for the proper review and evaluation of internal controls, CA. Olive decided to use internal control questionnaire to know and assimilate the system and evaluate the same. Which of the following questions need not be framed under internal control questionnaire relating to purchases?

• a) Are authorized signatories for purchases limited to elected officials?

• b) Are payments approved only on original invoices?

• c) Does authorized officials thoroughly review the documents before signing cheques?

• d) Are monthly bank reconciliations implemented for each and every bank accounts of the company ?

Incs.59.5

Which among the following is incorrect with reference to last para of the case study regarding the auditor to obtain an understanding of the major activities that the entity uses to monitor internal control over financial reporting :

• a) It involves assessing the efficiency of controls on a timely basis and taking necessary remedial actions.

• b) Management accomplishes it through ongoing activities, separate evaluations etc.

• c) Management’s monitoring activities may include using information from communications from external parties.

• d) In small entities, management’s monitoring of control is often accomplished by management’s or the owner-manager’s close involvement in operations.

Incs.41.3

. "The second team member of team helping Mr. W suggested a method in which complete description of internal control in operation is recorded. This method is known as :

• a) Narrative Record.

• b) Flow Chart.

• c) Questionnaire.

• d) Check List.

Incs.41.4

"The third team member of team helping Mr. W suggested a method in which internal control of company is presented in graphic form. This method of gathering information so that internal control can be evaluated is known as :

• a) Check List.

• b) Questionnaire.

• c) Flow Chart.

• d) Narrative Record.

Incs.41.2

First team member of team helping Mr. W suggested that they should follow a method, according to which number of instructions were required to be followed to collect information about internal control.

"The first team member of team helping Mr. W suggested a method according to which, number of instructions were required to be followed to collect information about internal control. This method is called as :

• a) Flow Chart.

• b) Check List.

• c) Narrative Record.

• d) Questionnaire.

Incs.41.5

The fourth team member of team helping Mr. W suggested a method in which a series of questions were required to be answered which would provide information for internal control. After analysing all the suggestions Mr. W was satisfied with the suggestion of the third team member because according to Mr. W the suggestion of third team member was suitable from WN and Associates point of view and also from the point of view of Healthy and Talented Private Limited. Keeping the basic concepts of Internal Control in mind, answer the following multiple choice questions:"

"The fourth team member of team helping Mr. W suggested a method in which a series of questions were required to be answered to gather information for internal control. This method of gathering information so that internal control can be evaluated is called as :

• a) Questionnaire.

• b) Flow Chart

• c) Narrative Record.

• d) Check List.

610.1

CA M is internal auditor of Crayon Products Limited. Which of the following is not TRUE about scope of internal audit?

• a) Internal audit is an independent assurance activity.

• b) Internal audit helps in improving internal control of the company.

• c) Internal audit cannot review non-financial activities of company.

• d) Internal audit can review compliance of company with various laws and regulations

Incs.59.1

The audit team consisting of CA A and five more members prepared an audit strategy and audit plan before commencing the audit. CA A was aware of the fact that the understanding of the internal control of the organisation would assist the team in various ways. So, it was decided that the team would first obtain an understanding of the internal control relevant to the audit before commencing th e audit.

CA A was aware of the fact that the understanding of the internal control of the organization would assist the team in various ways. Which of the following is not achieved by an understanding of the internal control system?

• a) Identifying breakdown due to human error.

• b) identifying types of potential misstatements.

• c) designing the nature, timing, and extent of further audit procedures.

• d) identifying factors that affect the risks of material misstatement.

Incs.55.4

The Companies Act, 2013 has placed a greater emphasis on the effective implementation and reporting on the internal controls for a company. So, CA N decided to himself evaluate and validate the design and operating effectiveness of Internal Financial Controls over Financial Reporting (IFC-FR) of the company as at the Balance Sheet date. Internal Financial Controls (IFC) refers to the policies and procedures put in place by SaveLives Limited for ensuring adequacy and also the operating effectiveness of such controls.

The term Internal Financial Controls (IFC) refers to the policies and procedures put in place by companies for ensuring which of the following:

• a) reliability of financial transactions.

• b) effectiveness and efficiency of operations.

• c) safeguarding of human resources

• d) prevention and detection of errors.

Incs.45.1

Statement 1: Government audit provides public accounting of operational, management programme and policy aspects of public administration as well as accountability of officials administering them. Statement 2: Government audit is equipped and intended to function as an investigating agency, to pursue every irregularity or misdemeanour to its logical end.

• a) Only statement 1 is correct

• b) Only statement 2 is correct

• c) Both 1 & 2 are correct

• d) Both 1 & 2 are incorrect