Auditing: March / April 2024

Section A
1. Answer any five of the following questions
a) Who is auditor?
An auditor is a professional person who is responsible for examining and
evaluating financial information to ensure its accuracy and compliance with relevant
standards, laws, and regulations.
b) Qualifications of auditor
Sub-section (1) of section 141 provides that a person shall be eligible for appointment as
an auditor of a company only if he is a chartered accountant.
c) .What is audit risk?
The risk that the auditor expresses an inappropriate audit opinion when the
financial statements are materially misstated.
d) Objectives of valuation of assets
i) To determine the real value of assets
ii) To ensure about transactions of assets are recorded.
e) company auditor
An auditor is a person who makes an independent report to a company's shareholders
('members') to show whether the company has prepared its financial statements
according to company law and other financial reporting rules.
f) What is qualified audit report?
A qualified report expresses an auditor's qualified opinion of a company's
financial standing. This shows that a company has not followed all the standards set by
the GAAP
g) What is internal check?
An internal check is a continuous process of the accounting system to check for errors
or fraud in bookkeeping operations for early detection and prevention
Section B
2) Rights of Auditor
a. Right of Access to Books of Accounts:
b. Right to obtain Information and Explanations
c. Right to Correct any Wrong Statement
d. Right to visit Branches:
e. Right to Signature on Audit Report
f. Right to receive Notice and other Communications relating to General Meeting
and attend them:
3) Objectives of Internal Check
a) To protect business from carelessness, inefficiency and fraud.
b) To ensure and produce adequate and reliable accounting information.
c) To keep moral pressure over staff.
d) To minimize the chances of errors and frauds and to detect them easily on early
stage if it is committed.
e) To divide the work in such a way that no business transaction should be left
unrecorded.

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 f) To fix the responsibility of every clerk according to the division of work.
4) Professional ethics of company auditor
a) Integrity
b) Objectivity
c) Confidentiality
d) Professional Competence and Due Care
e) Professional Behavior:
5) Types of audit report
The 4 types of audit opinions
a) Unqualified opinion – clean report.
b) Qualified opinion – qualified report.
c) Disclaimer of opinion – disclaimer report.
d) Adverse opinion – adverse audit report.
6) Audit financial investments
The auditor can verify investments through various procedures, including
a) transaction verification,
b) physical inspection,
c) examination of valuation
d) disclosure of recorded transactions
e) Analytical review procedures
However, the nature, timing, and extent of audit procedures to be performed
depend on the auditor's professional judgment.
Section C
7) Vouching : Vouching is concerned with examining documentary evidence to ascertain the
authenticity of entries in books of entries in books of accounts.
OBJECTIVES OF VOUCHING
a) To ensure recording of all transactions.
• To verify that all transactions recorded in the books of accounts are supported by a
documentary evidence.
• To verify the validity of the vouchers which support the entries and to ascertain whether
these are authentic, addressed to the business and properly dated.
• To verify that no fraud or error has been committed while recording the transactions in the
books of accounts.
• To ensure that the vouchers have been processed carefully through various stages of
internal check system.
• To verify whether every transaction recorded has been adequately authenticated by a
responsible person.
• To know that while recording the transaction whether distinction has been made between
capital and revenue items.
• To ensure whether accuracy has been observed while totaling, carrying forward and
recording and amount in the account
• To verify that all the transactions connected with the business have been recorded in the
books of accounts.

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• To check vouchers which support entries are legal, valid, authentic, addressed to the
business and properly dated.
• To have greater precision in reporting the financial information as true and fair.
• To ensure reliability of figures entered in the books of accounts.
• To confirm that no transaction has been recorded in the books of accounts which are not
related to the entity under audit.
8) a) Audit of Machinery : Nature of Industry, Related Parties, Internal Control Environment,
Financial Reporting System etc.,
b) Stock / Inventory : 1) Counting of Physical Inventory 2) Finished goods/ work in Progress
3) Freight cost 4) Overhead transactions 5) Inventory in transit 6) High value stock testing 7)
Inventory counting reconciliation 8) Schedule the items to be audit 9) Record the findings
and 10) Reporting findings
9) Audit of Educational Institutions : a) Study of deed / registration copies b) Examine the
previous year’s financial statements c) evaluation of internal control system d) Authorisation of
fees structure e) Bifurcation of capital receipts / revenue receipts f) Examination of capital
expenditure & revenue expenditure g) Examination of bank pass books h) Reporting any errors
i) Ownership of fixed assets j) Cross check all entries of recorded transactions
10) Elements of audit report
a) Title b) Report’s addressee’s c) Opinion paragraph d) Basis for opinion e) Key
audit matters that are relevant to the client f) Responsibilities of the
management and those with governance for the financial statements g) The
auditor’s responsibilities h) Signature of the firm and the engagement
partner h) Date
Specimen of audit report :
Independent Auditors' Report
To
Board of Directors and The Shareholders,
Company ABC,
Address.
Report On The Financial Statements
We XYX have audited the accompanying balance sheets of ABC Company as of March
31, 2024, and the related statements of income, earnings, and cash flows for the years then
ended, and the related notes to the financial statements.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with ...
Opinion
In our opinion, the financial statements referred to previously present justly, in all material
respects, the true financial position of ABC Company as of March 31, 2024 and the results of
its operations and its cash flows for the years then ended in conformity with the accounting
principles that are generally accepted in principles in India.

(Signature)
(Date)

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[Link]. 11 Compulsory Question / Case Study

a)
Error of Principle ತಾತ್ವಿ ಕ ತಪ್ಪು
Car A/c …………Dr. XXX ---
To purchase / Goods A/c… --- XXX
( Being purchase account is credited due
to error.)
b)
Error of Commission ಬರೆಯುವಾಗ ಸಂಭವಿಸುವ ತಪ್ಪು
Purchase A/c …………Dr. 200000 ---
To Vendors A/c… --- 200000
( Being made the correction of entry .)

c)
Error of Principle ತಾತ್ವಿ ಕ ತಪ್ಪು
Wages A/c …………Dr. 60000 ---
To General Expenses A/c… --- 60000
( Being made the correction of entry .)

d)
Error of Omission ಬರೆಯದೆ ಬಿಟ್ಟಿ ರುವ ತಪ್ಪು
Cash A/c …………Dr. 25000 ---
To Sales A/c… --- 25000
( Being made the transaction of omitted
cash sales.)

e)
Error of Principle ತಾತ್ವಿ ಕ ತಪ್ಪು
Printing A/c …………Dr. 4000 ---
To Salary A/c… --- 4000
( Being made reverse transaction salary.)

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