IMPORTANT QUESTIONS FOR AUDITING

Q1] (a) What is internal audit? Explain its advantages.

(b) Verify the following as an auditor. (i) interest on investment (ii) Outstanding salary Q2] (a) What do you understand by the term fraud & how would you classify the term fraud (b) How would you vouch the following (i) Cash purchases (ii) Travelling expenses Q3] (a) What is window dressing? What are the objections against it? (b) Discuss audit technique in brief Q4] (a) Explain the provision of companies act 1956 regarding appointment of auditor (b) What are the duties of a company auditor Q5] (a)What are the Qualification & Disqualification of a company auditor (b) Distinguish between Auditing & Investigation

Q6] (a) What is internal control? What are its objectives? (b) What are the Advantages & Limitations of check in auditing Q7] (a) Define and explain the term Auditing? Explain the basic principles of auditing
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(b) What are the Advantages & Limitations of Auditing? Q8] (a) What is test checking? What are the features and advantages of Test checking (b) Distinguish between Vouching & Verification in detail Q9] (a) What is Audit programme? What are the Advantages & Disadvantages of Audit Programme? (b) Explain the term True & Fair View Q10] (a) Explain the Current File. Give examples of its contains (b) Elaborate the factor to be considered by auditor while preparing Audit Plan Q11] Write a short notes on (a) Secret Reserve (b) Types of Audit Report (c) Errors of Principles (d) Removal of Auditor other them first auditor (e) Contingent Liability (f) Audit indept (h) Vouching of Preliminary Expenses

ACCOUNTS III RATIO FORMULAS

[A] BALANCESHEET RATIOS:1. CURRENT RATIO = Current Asset

Current Liabilities
2. Quick Ratio/ liquid assets=

Quick Assets Quick Liabilities Quick assets=current assets stock- prepaid expenses Quick liabilities= current liabilities bank overheads income received in advance
3. Proprietory ratio =Proprietors Fund *100

Total assets Proprietory ratio= equity share capital+ preference share capital+ capital reserves+ reserves and surpluses-accumulated profits Total assets = all fixed assets+ current assets
4. Stock working capital ratio = closing stock *100

Working capital Working caital = current assets current liabilities 5. Capital gearing ratio/ Capital structure ratio/leverage ratio = Preference share capital + Debentures + Loan Equity share capital + Reserves & surpluses factitious assets
6. Debt Equity ratio= Long term debt

Share holders funds

[B] Revenue Statement Ratio:

7. Gross profit ratio= Gross Profit *100

Net sales
8. Operating Ratio= Operating cost * 100

Net sales operating cost= cost of goods sold + operating expense

9. Expenses ratio=

Administrative exp / Selling Exp / Material consumed * 100 Net sales

10. Net profit ratio = Net profit * 100

Net sale s
11. Net operating profit ratio= Net operating profit *100

Net sales Net operating profit= gross profit administrative exp- selling exp
12. Stock Turn Over ratio= Cost of goods sold

Average stock Average stock = Opening stock + Closing stock 2 [C] Combine Ratio
13. Return on capital employed =

Net profit before tax, interest & preference dividend *100 Capital employed OR Net operating profit *100
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Capital employed
14. Return on proprietors fund=

Net profit after tax & interest but before preference dividend * 100 Proprietors fund 15.Return on equity shareholders fund Net profit after tax preference dividend * 100 Equity shareholders fund
16. Return on equity share capital =

Net profit after tax preference dividend *100 Equity shareholders capita;
17. Earning per share= Net profit after tax- preference dividend *100

No. of equity shares

18. Dividend payout ratio= Dividend per equity share

Earning per share

19. Price earning ratio = Market price per equity share

Earning per share

20. Debt service ratio = Net profit before interest & tax

Fixed interest charge 21.Debt service coverage ratio/ Interest coverage ratio = Net profit before interest & tax Interest + Preference dividend + Annual debt + Installments due
22. Creditors turnover ratio = Net credit purchases

Average account payable Net credit purchase = gross credit purchase purchase return Average account payable= [op.creditors + cl. creditors] + [op. bills payable + cl. Bills payable] 2 2 No. of days = days in a year Creditors turnover
23. Debtors turn over ratio[ Debtors velocity]= 5

credit sale

Average account Receivable Average account receivable = [op. debtors + cl. Debtors] + [op. bill receivable + cl. Bills receivable] 2 2 Debt collection period = months or days in a year Debtors turn over
24. Return on total resource = Net profit before interest and tax

Total assets