Detention charges not to be capitalised

FOR ques 1(A) Apply AS 10 , WHICH STATES THAT DETENTION EXPENSES CANT BE CAPITALISED . 

AUDIT PAPER ANALYSED & ANSWERED

Question 1 –

(a) AS 10 – Answer – Cannot be capitalized

(b) SA 500 & 501 – Question not on External Confirmations but on relying on Sufficient appropriate audit evidences and management representation. Auditor – Guilty

(c) SA 450 – Uncorrected Material Misstatement – Direct Question

(d) SA 250 – Responsibility on compliance with laws and regulations – Direct Question

Question 2 –

(a) Risk Assessment and Response to the assessed risk – SA 315 & 330 (also covered in SA 240 Frauds)

(b) Audit of CIS environment – SA 315

(c) SA 330 – Selection of Samples (Random, Haphazard, Systematic…)

(d) SA 300 – Audit Planning with risk assessment at assertion level

Question 3

(a) CARO – It is not a due just a show cause notice hence not to be reported as a statutory dues

(b) SA 510 - Opening Balance – Initial Engagements, with last year report being qualified, auditor to report in case of company not making a rectification

(c) SA 240 – Resignation of auditor due to limitation imposed by management, auditor to communicate to mgt, TCWG, if required to shareholders and regulatory bodies.

(d) SA 230 – Documentation and Guidance Note on Other seeking access to working papers – Auditor can refuse except if it is a legal requirement

Question 4

(a) CARO Applicability – Not applicable

(b) SA 4410 – Compilation of Financial Statements – Auditor cannot accept management view as identified misstatements to be reported even in case of compilation arrangements

(c) CARO – Default in repayment of dues to FI – Auditor to report alongwith a disclosure that it has been settled after the BS date

(d) SA 550 – Related parties – Transaction prima facie having risk of misstatement auditor to extend procedures…direct question

Question 5

(a) Tax Audit – Payments beyond 20000

(b) Insurance company audit – Verification of Outstanding claims…direct question…include how to check and disclosure requirements

(c) SA 260 & SA 700 - Reporting to SH and TCWG

(d) SA 705 & 706 – Qualification and Matter of Emphasis

Question 6

(a) CA Not guilty under Clause 4 of Part I of Schedule II (NO opinion hence substantial interest not relevant)

(b) CA Guilty – Confidentiality Clause 1 of Part I of Schedule II

(c) CA Guilty – Misappropriation of clients money & not keeping in separate bank account – Clause 10, Part I, Schedule II

(d) CA not guilty – Clause 1, Part II, Schedule II. Loan from article / relative prohibited but no prohibition to accept loan from company where article father is MD

Question 6

(a) Stock Brokers – Circuit Filters..Direct question

(b) Restriction of Shareholding in Cooperative society – maximum 1/5th or 1000 Rs by one member

(c) SA 210 – Acceptance of Audit Engagement – Checking Client Integrity before acceptance of audit (KYC)

(d) AS 26

(e) Cost audit short note – direct questions