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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018

LIST OF IMPORTANT AND GOOD QUESTIONS


Questions in BLUE suggests important questions
Questions in in Black are Good questions
Points not covered here are all OK (can skip for last
day)

Chapter 1-Nature of Auditing


STANDARD RELADED QUESTIONS
SA 200 (Revised) “Overall Objectives of the Independent Auditor and Conduct of Audit in
accordance with SAs”
1) Explain the Overall Objectives of Independent auditor.
2) Comment on the following: “The Auditor shall comply with relevant ethical requirements
including independence”
3) SA 200 requires that the auditor shall and perform an audit with professional skepticism. Explain
the statement.
4) Comment on the following: “The auditor shall exercise professional judgment in planning and
Performing an audit of financial statements.
5) State your opinion on the following: The audit of financial statements relieves management of its
responsibilities.
6) “An opinion expressed by the auditor is neither an assurance as to the future viability of the
enterprise nor the efficiency or effectiveness with which management has conducted the
affairs”.
SA 240 (Revised) “Auditor’s Responsibilities relating to fraud in an audit of financial statements
7) Explain briefly duties and responsibilities of an auditor in case of material misstatements
resulting from management fraud. 1.24
8) Fraudulent financial reporting often involves management override of controls
9) Defalcation of Cash- page 1.21 In that particularly - Teeming and Lading
10) Fraud risk factors on page 1.25
11) Types of fraud – covered on page 1.18 (FFR and Misappropriation of asset.
OTHER QUESTIONS
12) Basic Principles Governing an Audit
13) Scope of an Audit
14) Advantages of an Independent Audit
15) Relationship of Auditing With Other Disciplines

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Chapter 2-Basic Concepts in Auditing
STANDARD RELADED QUESTIONS
SA 500 (Revised) “Audit Evidence”
1) Write short note on: Sufficient Appropriate Audit Evidence
2) Explain various methods of obtaining audit evidence
Or Audit procedures to obtain audit evidence.
3) Write short note on: Reliability of Audit Evidence
4) Factors affecting sufficiency of audit evidence
5) Types of Audit Evidence
6) Relevance of audit evidence, page 2.22
SA 330 “The Auditor’s Responses to Assessed Risks”
7) Write short note on: Tests of Controls and Substantive Procedures
8) Audit Procedures
Institute module page 2.11 to 2.21 is all about SA 330- its not that Important- read once.

OTHER QUESTIONS
9) Fundamental principles of an audit – page 2.1

10) Concept of True and Fair


11) Disclosure of Accounting Policies
12) Fundamental Accounting Assumptions

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Chapter 3 -Preparation for an Audit
STANDARD RELADED QUESTIONS
SA 210 (Revised) “Agreeing the Terms of Audit Engagement
1) What is an audit engagement letter? What are the principal contents of audit engagement letter.
or
Draft an engagement letter accepting the appointment as auditor.
2) Write short note on: Preconditions for an audit
3) Comment on the following: “It is not mandatory to send a new engagement letter in recurring
audit, but sometimes it become mandatory to send new letter.” Explain those situations where
new engagement letter is to be sent.
SA 220 (Revised) “Quality Control for an audit of Financial Statements”
4) Comment on the following: “The work performed by each assistant needs to be reviewed by
personnel of at least equal competence”
5) Write short note on: Engagement Quality Control review.
SA 230 (Revised) “Audit Documentation”
6) As an auditor how would you deal with the following: The statutory auditor of the holding
company demands for the working paper of the auditors of the subsidiary company, of which
you are the auditor.
Or Ownership and Custody of Working Papers
7) Types of Working Paper Files
8) Audit Note Book:
9) Importance of Working Papers
SA 300 (Revised) “Planning and Audit of Financial Statements
10) Write short note on: Factors to be considered in the development of overall audit plan.
11) Planning is not a discrete phase of an audit, but rather a continual and iterative process
or Planning is continuous process
12) Write short note on: Preliminary Engagement Activities
13) Comment on the following: Auditor shall establish an overall strategy that sets the scope,
timing and direction of the audit, and that guides the development of the audit plan”.
SA 315 “identifying and Assessing the Risk of material Misstatements through understanding
the Entity and its Environment

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
14) What are the points to be remembered while evaluating the knowledge of the business in the
conduct of an audit?
or
Auditor is required to identify and assess Risk of material misstatement through understanding
the entity and its environment. Explain the various matters of which auditor should obtain
understanding.
15) Write short note on: Risk Assessment procedures
16) Explain various components of Internal Control
SA 320 (Revised) “Materiality in Planning and performing an audit”
17) Explain the concept of materiality in planning and performing an audit
18) Write short note on: Performance Materiality
SA 530 “Audit Sampling”
19) While planning the audit of X Ltd, you want to apply sampling techniques. What are the risk
factors you should keep in mind.
Or
“The auditor is faced with sampling risk in both tests of control and substantive procedures”.
Comment on this statement with reference to SA 530 on Audit sampling.
20) Elements of Statistical Sampling
21) Advantages of Statistical Sampling in Auditing
22) Approaches to Sampling on page 3.34

23) Sample Selection Methods

SA 580 (Revised) “Written Representation”


24) Write short note on: Written Representation
25) In the course of audit of X ltd. its management refuses to provide written representation. As an
auditor what is your duty.
OTHER QUESTIONS
26) Audit Process
27) Audit Techniques
28) Developing the Audit Programme
29) Advantages and Disadvantages of the use of an Audit Programme
30) Continuous and Final Audit
31) Audit Risk (Inherent Risk, Control Risk, Detection Risk)
32) Surprise Checks

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS

Chapter -4 Internal Control


STANDARD RELADED QUESTIONS
SA 260 (Revised) “Communication with Those Charged with Governance”
1) Explain the various matters that are required to be communicated by the auditor to TCWG.
2) “As per SA 260, auditor is required to communicate with TCWG various matters significant to
audit” In this reference explain various forms of communication and factors affecting mode of
communication.
SA 265 (Revised) “Communicating Deficiencies in Internal Control to TCWG and Management”
3) What do you mean by deficiencies in Internal Control. Explain various indicators of Significant
deficiencies.
SA 610 (Revised) “Using the work of Internal auditors”
4) You have been appointed auditor of a large Industrial Company which has an established Internal
Audit Department. You are required to state the main aspects that would be
considered to find out effectiveness of the department.
Explain the following: Relationship between Statutory auditor and Internal Auditor.
Or
Can the statutory auditor rely upon the work of an internal auditor?
OTHER QUESTIONS
5) Objectives of Internal Control: page 4.3
6) Limitations of Internal Control: page 4.4
7) Characteristics of Manual and Automated Elements of Internal Control page 4.5
8) Elements of the control environment page 4.9
9) Monitoring of Controls: page 4.10
10) Review of Internal Control by the Auditor - methods
11) Examination in Depth
12) Internal Controls in the CIS Environment:
13) Approaches to Audit in CIS Environment
14) Internal Check
15) Considerations in Framing a System of Internal Check: page 4.32
16) The activities of the internal audit function may include one or more of the following: page
4.35
(also called internal audit function)
17) Applicability of Provisions of Internal Audit: S -138
18) Internal Audit vs. Internal Check:
19) Cut-off Procdures

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Chapter -5 & 6 Vouching and
verification
STANDARD RELADED QUESTIONS
SA 520 “Analytical Procedures”
1) Write short note on: Analytical Procedures
2) What are the considerations to be kept in mind while performing analytical procedures on
data prepared by the client.
SA 501 (Revised) “Audit Evidence – Specific Considerations for selected items”
3) Explain the procedures to be performed by auditor to obtain sufficient and appropriate audit
evidence regarding the existence and condition of inventory.
4) Explain the auditor’s procedures w.r.t. determination of existence and condition of inventory
under the following circumstances:
(a) Inventory count conducted at a date other than balance sheet.
(b) To attend the inventory is impracticable.
SA 505 (Revised) “External Confirmations”
5) What is External Confirmation. Explain the process of obtaining external confirmation.
6) Comment on the following: Negative confirmation provides less persuasive audit evidence
than positive confirmation.
7) Management of X Ltd. request you not to seek confirmation from its debtors. As the auditor of
X Ltd. what can be appropriate response.
SA 510 “Initial Audit Engagements – Opening Balances”
8) What are the audit procedures to be followed by a statutory auditor in the audit of opening
balances if the financial statements for the preceding year were audited by another auditor.
SA 550 (Revised) “Related Parties”
9) As a statutory auditor how do you verify the existence of Related Parties and disclosures of
Related Party Transactions.
SA 560 (Revised) “Subsequent Events”
10) Write short note on: Subsequent Events
SA 570 (Revised) “Going Concern”
11) Explain the procedures to be performed by the auditor in expressing opinion on going concern
assumption.
12) What are the financial indicators to be considered by an auditor for evolution of the going
concern assumption.

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS

HOW WILL YOU VOUCH OR VERIFY FOLLOWING


13) Expenditure for promotion of product
14) Inventory – work in progress
15) Purchase return
16) Bill discounted - dishonored
17) Trademark and copyright or Intellectual property rights
18) Contingent liability
19) Leasehold rights
20) Foreign travel expense
21) Receipt of capital subsidy. or
Receipt of backward area subsidy
22) Royalty received
23) Goods sent on sale or return basis
24) Goods sent on consignment
25) Refund of general insurance paid
26) Sales proceeds of junk materiel or scrap materiel
27) Payment of taxes
28) Provision for taxes
29) Rental receipt
30) Insurance claim
31) Assets acquired on lease
32) Retirement gratuity paid
33) Investment in shares and debentures of subsidiary
34) Patterns, dies , loose tools etc
35) Work in progress.
36) Bed debt written off
37) Recovery of bad debt written off
38) Borrowing from the bank

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Chapter -7 Company Audit -1
1) SECTION 139 – Particularly 139(2) Rotation of auditor.
2) Section 141 – very important, most likely chance.
3) Section 143.
4) Particularly 143(1) Duty to make inquiry.
5) 143(3) Duty to report.
6) 143(12) Duty to report fraud and Right of lien.
7) Section 148.
8) SA 299 – responsibility of joint auditor.
9) CARO –2016. – very important, most likely chance.
10) SA 700, SA 701 and SA 705
11) Communicating Key Audit Matters- not a substitute for
12) disclosure in the Financial Statements. Discuss
13) Discuss the factors affecting the decision of the auditor
14) regarding which type of modified opinion is appropriate.
15) Section 140
16) Section 143 – remaining portion
17) Section 147
18) Section 177 – Audit committee.
19) SA 706 and SA 710.
20) Short note on EOM and OMP
21) Elements of Auditors report as per sa 700
22) Define, Comparative information, Comparative financial stat and
23) corresponding figures.

Best Chapter out of all- focus on practical and situation-


based case study.

Compiled by: UMANG RATANI (FCA, CS, MBA, M.com, LLB)


HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Chapter -8 Company Audit –II
Section 128 – books of account of the company
In that mainly inspection of the books of account
Section 130, 131, and 132 – newly notified – MUST
Section 134(5)(e) Directors responsibility statement
Audit of
share capital
buy- back S67 to S70
redemption prefrance share
share transfer audit
dividend
capital reduction
sweat equity share

Chapter -9 Special Audit


1) The constitution guarantees the independence of the
C&AG of India by prescribing that he shall be appointed by the President of India
and shall not be removed from office except on the ground of proven mis-behaviour
or incapacity. Explain
OR
Independence of CAG
OR
Write short note on CAG
2) Expenditure Audit
3) Propriety audit
4) Performance audit
5) Explain in detail the duties of Comptroller and Auditor General of India.
6) Role of C&AG is prescribed under the Companies Act, 2013.
7) You have been appointed as an auditor of an NGO, briefly state the points on which
you would concentrate while planning the audit of such an organisation?
OR AUDIT OF NON-GOVERNMENTAL ORGANISATIONS
8) Audit of Stores and Inventories
9) AUDIT OF LOCAL BODIES
10) Mention the special points to be examined by the auditor in the audit of a
charitable institution running
11) Hostel for students pursuing the Chartered Accountancy Course and which charges
only ` 500 per month from a student for his lodging/boarding.
12) AUDIT OF HIRE PURCHASE AND LEASING COMPANIES
13) AUDIT OF CLUB

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HOW TO PREPARE FOR AUDIT – IPCC – NOVEMBER 2018
LIST OF IMPORTANT AND GOOD QUESTIONS
Common Points to Be used while Writing
Vouching / Verification Question
How to use the points in your answer ?

a) Following are the common points to be used in any Vouching or Verification Question asked.

b) However you need to use every time the name reference of the item being vouched or
verified.

c) These are just common points , which will help you in increasing the points and fetching
good marks , without much efforts.

d) Students must in addition to the points given below also in every Vouching or
Verification question , write some points relevant to that particular item
for example: Patents – Verify if provisions of patents act are followed properly , Check
when does the Patent expires,
Whether patent if expired is renewed on timely basis etc

Verification:
1) Verify whether the expenditure is of capital or Revenue in nature
2) Ascertain depreciation if required is duly provided
3) Check whether the item is disclosed properly as per schedule VI ,Part I & Part II of
the Companies act
4) Verify that all the General principles , procedure , accounting standard and guidance
notes are duly complied with
5) Check Whether ( the item to be verified ) needs to disclosed under CARO ,2003
6) Verify whether proper valuation of the item is done at balance sheet date
7) Examine Relevant records and the validity and accuracy of the item recorded
8) Apply analytical review procedure , wherever required

Vouching:
1) Ascertain the nature of particular head of item
2) Ensure that all entries are properly recorded in the books of accounts
3) Verify if authorized by Board of Directors or Proper authority
4) Confirm that other applicable provisions are duly complied with
5) Review the expenditure as compared to previous years expenditure and deviation if
found than reasons for the same
6) Ascertain the Internal Control System periodically
7) Check validity of transaction & Observance of accounting principles
8) Check if item properly disclosed in Financial Statements prepared.

Compiled by: UMANG RATANI (FCA, CS, MBA, M.com, LLB)