The Hindu Business Line : Can a CA firm publicise feats of its staff?

A chartered accountants firm releases an insertion in the newspaper congratulating its articled assistant who secured first rank in the CA (Final) examination. The insertion also contains the names of other articled assistants who secured ranks in earlier examinations. Is this a case of professional misconduct? (4 marks)

This is a sample of what a CA Finalist may have to face in the auditing paper. To help prepare for the May 2007 exam, here is a practice paper:

Attempt Questions 1 and 2 which are compulsory, and any four of the rest.

Q1: How do you react in the following circumstances as an auditor?

a) A company says that fringe benefit tax is not applicable on the hospitality and travel costs of the auditors. (5 marks)

b) An NBFC secures the release of its SLR securities based on a certificate issued by a chartered accountant. (5 marks)

c) A partner of a director of the company was appointed to carry out tax audit of the company. (4 marks)

d) A company values its issues to production on LIFO basis. The management of the company says AS 2 is not applicable to issues for production. (4 marks)

Q2: Discuss if there is any professional misconduct in the following cases:

a) A chartered accountant accepts an appointment by the audit committee as statutory auditor of a company in a casual vacancy caused by death of the previous auditor. (5 marks)

b) A chartered accountant secures a job in a multinational company through a placement agency to which he pays 10 per cent of the salary of the first one year. (5 marks)

c) A chartered accountant contests elections to Parliament. He puts out large cut-outs and states that he is a chartered accountant on the election propaganda material. (4 marks)

Q3: a) How do you assess if an asset is impaired? (8 marks)

b) Section 227(1)(A) requires an auditor to see whether loans shown as secured are properly secured. How do you ensure it? (4 marks)

c) Under which circumstances is a company granted exemption from audit of its branches? (4 marks)

Q4: a) A chartered accountant has the following receipts:

Professional receipts — Rs 6 lakh

Academic activities — Rs 5 lakh

Rental income — Rs 4 lakh

Profits on shares — Rs 5 lakh

Examine if he is liable for tax audit. (5 marks)

b) How does audit under Section 142(2)(A) differ from audit under Section 44 AB of the income-tax audit? (5 marks)

c) An individual assessee has a cloth shop having a turnover of Rs 20 lakh, a sweet shop with sales of Rs 15 lakh and he also operates a truck which earns a gross revenue of Rs 9 lakh. Discuss his liability to tax audit. (6 marks)

Q5: a) What is peer review? What are its objectives? By whom is it done? (6 marks)

b) How do you decide if you should rely upon an audit estimate? (5 marks)

c) How do you decide upon whom to be appointed as an expert? (5 marks)

Q6: a) By whom can an investigation be called for? What are the objectives of such investigations? (6 marks)

b) A term lending institution requires you to investigate if an assisted unit was siphoning out funds without repaying the term loan. How do you proceed? (5 marks)

c) Form 3CD (annexure to tax audit report) requires the auditor to state whether undisputed taxes remain unpaid for a period exceeding six months. What points do you consider? (5 marks)

Q7: a) What special points do you consider in the audit of a member of a stock exchange? (6 marks)

(b)(i) How do you audit claims of an insurance company? (6 marks)

(ii) What are the liabilities of a chartered accountant under the Income-Tax Act? (4 marks)

Q8: Write short notes on the following:

a) Investigator's bluff.

b) Borderaux.

c) Practising unit.

d) Flash report. (4 x 4 = 16 marks)