ATTEMPT ANY 5 QUESTIONS FROM EACH SECTION

TIME ALLOWED: 3 HOURS

MAXIMUM MARKS: 100
ALL QUESTIONS CARRY EQUAL MARKS

SECTION AUDITING
QUESTION NO 1
Apart from Inspection, list and explain FIVE recognized audit procedures.
Explain the purpose of a management representation letter and the actions the auditor
will take if initially management refuses to provide this letter

QUESTION NO 2
Explain the term audit risk in the context of client acceptance.
Discuss the general safeguards contained within the audit professions conceptualframework.

QUESTION NO 3
Describe the responsibilities of auditors and of management in relation to the design and
operation of internal control systems, and explain the main role of Audit Committee.

QUESTION NO 4
Discuss what is meant by sufficient appropriate audit evidence

QUESTION NO 5
Explain what is meant by the following terms:
(i) Audit risk
(ii) Inherent risk
(iii) Control risk
(iv) Detection risk

QUESTION NO 6
List and explain the duties of an auditor. Discuss the relationship between auditors and company
directors? State the legal rights of an auditor of a limited company also
Discuss whether directors have the authority to dismiss auditors?

SECTION TAXATION
QUESTION NO 7
Mr. Hammad has disposed of his business to M/S hanif Limited, a Pakistani resident company.
The value of assets and liabilities as on that date were,
Assets at Cost Rs. 10,000,000
Liabilities taken over by company Rs. 6,000,000
The company issued 250,000 ordinary shares of Rs. 10 each as consideration.
Calculate the value of shares received as consideration. and also calculate the capital gain on
disposal if shares are sold as
125,000 shares @Rs. 20 per share
75,000 shares @Rs. 35 per share
50,000 shares @Rs. 15 per share

QUESTION NO 8
Mr. Arif is an employee of a company he has submitted the following information for the tax year
200X
Basic salary per annum Rs.240,000
Bonus Rs.36,000
Cost of living allowance Rs.36,000
Dearness allowance Rs.12,000
Rent free unfurnished accommodation annual value Rs.132,000
Company maintained car for personal and private use Rs.880,000
Utility allowance Rs.48,000
Leave encashment Rs.21,600
LFA provided every year Rs.21,600
Hotel bills paid by employer relating private family trip Rs.26,400
Employer contribution towards provident fund Rs.20,000
Zakat paid under zakat and ushr ordinance Rs.5,000
Tax deducted by the company from salary Rs.25,000
Required: compute the total income, taxable income and tax liability of Mr. Arif.
QUESTION NO 9
Explain the tax consequence of following categories of provident funds.
1. Government provident fund
2. Recognized provident fund
3. Unrecognized provident fund

QUESTION NO 10
Mr. Ehsan has rented out his house. Compute his taxable property income from the following
information
1. Monthly rent of house Rs.18,000
2. Security deposit received at start of year Rs.200,000
3. Repair and maintenance charges Rs.38,000
4. Property related taxes Rs.7,200
5. Rent collection charges Rs.26,400
6. Legal charges ( including Rs. 5,000 due but not paid yet) Rs.15,000

QUESTION NO 11
AA company is a partnership firm. For the tax year ended 30
th
june 200A the firm declared the net
profit of Rs.400,000. The scrutiny of the profit and loss account revealed that the following
deductions were made while preparing the financial statements
Income tax for previous year Rs.30,000
Tax at source deducted by the customer Rs.15,000
Salary paid to an employee without deduction of tax Rs.200,000
Salary paid to partner A Rs. 60,000
Salary paid to partner B Rs.5,000
Salary paid PM to an employee through cash (tax deducted at source) Rs. 20,000
Contribution to unrecognized provident fund Rs. 30,000
Donation to unapproved institutions Rs. 10,000
Donation to approved institutions Rs.20,000
Manager of the firm was paid the following amounts
Salary
Perquisites and allowances

Rs.80,000
Rs.50,000
Accounting depreciation Rs.55,000
Required:
Compute the taxable income of the firm considering that depreciation under the income tax is
Rs.45,000.

QUESTION NO 12
ABC LTD acquired a foreign currency loan amounting to US$40,000 in the beginning of year 200A.
The loan was repayable in eight half yearly installments of US$5,000.the loan was utilized for
import of a plant valuing equal to the amount of loan. at the time of obtaining the loan and
importing the plant was
1US$=Rs.50
The company incurred the following expenses in connection with the plant
Insurance and sea freight Rs. 20,000
Port expenses Rs. 5,000
Custom duty and excise duty on import Rs. 55,000
Inland freight octroi charges Rs. 10,000
Expenses on installation of plant Rs. 10,000
After payment of 4 installments the exchange rate fluctuated and became 1US$=Rs.55
Required:
Compute the cost of plant prior and after change in exchange rate and calculate depreciation for
the years 200A,200B,200C and 200D if deprecation is charged @ 15% on WDV.