The Hindu Business Line : NPA classification in loan repayment default

A company raised a term loan from National Bank of India and working capital from Wise Bank of India. The working capital limits were properly maintained, but the company defaulted in repaying the term loan instalments, thereby becoming a non-performing asset (NPA). Wise Bank treats the advance as a NPA. How do you respond? (5 marks)

(b)(i) What are the various types of reinsurance? How do they operate? (7 marks)

(b)(ii) What is a contract note? Discuss its importance. (4 marks)

2(a) How do you audit the deposits accepted by a limited company? (8 marks)

(b) What are the provisions regarding statutory liquidity ratio (SLR) to be maintained by a company in respect of deposits accepted by it? (4 marks)

(c) The board of directors proposed a dividend of 30 per cent on the paid-up capital of Rs 100 lakh for the year ended March 31, 2005. At the AGM held in July 2005, the shareholders declared a dividend of 20 per cent only. How do you deal with it in the audit for the year ended March 31, 2006? (4 marks)

3(a) What is a computerised information systems environment? What difficulties do you foresee in such a system? (8 marks)

(b) How do you decide if you should rely on a confirmation of balance received from a debtor? (4 marks)

4(a) Discuss the provisions of law relating to cost audit. (6 marks)

(b) How is a cost auditor appointed? What are his disqualifications? (5 marks)

5(a) How is the auditor of a multi state co-operative society appointed? (6 marks)

(b) What do you understand by "stock audit"? (5 marks)

6) Write short notes on: a) disclaimer of opinion; b) audit materiality; c) skill and competence; and d) corporate governance. (4 x 4 = 16 marks)

CA Final

How do you react as an auditor in the following situations:

1(a) A company appoints joint auditors by passing a single resolution. Is the appointment valid? (4 marks)

(b) A branch auditor dies during the course of an audit. Advise the company. (5 marks)

(c) A company, in which 52 per cent of the paid-up capital is held by a private sector insurance company, appoints the auditor by passing a special resolution at the annual general meeting. Is the appointment valid? (4 marks)

(d) Mr Vijay, a chartered accountant, has a partnership with Mr Vinay, who has another partnership with Mr Ajay. In addition, Mr Ajay practices in his individual name as well. Mr Vijay is director of Sigma (P) Ltd, which is the subsidiary of Sangma (P) Ltd, which has another subsidiary Sarigama (P) Ltd. Mr Ajay, in his individual capacity, is appointed as the statutory auditor of Sarigama (P) Ltd. Is the appointment valid? (5 marks)

2) State your views on the following:

(a) A pharmaceutical company stamps 25 per cent of its output as "Physicians sample, not for sale". During a given period, it produces one lakh tablets at a cost of Rs 2 lakh. At the end of the year, 20,000 tablets and 6,000 tablets marked as samples are held in stock. How do you deal with the situation while valuing closing stocks? (5 marks)

(b) A charitable organisation offers to repay the cost of acquiring an ambulance by a hospital. The hospital acquires the ambulance at Rs 6 lakh, which is reimbursed by the charitable organisation. How do you deal with the ambulance? (5 marks)

(c) A partnership firm says that their auditor need not ensure compliance with accounting standards as there is no such specific provision in the Partnership Act. How do you react? (4 marks)

(d) A company closes its books of accounts on March 31, 2005, by writing off Rs 2 lakh as bad debts since the debtor was not to be traced. In May 2005, the company receives Rs 1.7 lakh out of the said Rs 2 lakh. How do you deal with it as an auditor? (4 marks)

(To be concluded)

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