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M. V. Kali Prasad

State whether the following statements are true or false, giving reasons:

1(i) First auditor can be appointed by the board of directors within 30 days from the days of incorporation.

ii) At least one year should have elapsed from the date of incorporation for a company to issue shares at a discount.

iii) Audit evidence in support of audit estimates is less conclusive than other evidence.

iv) Accounting entry need not be made for events occurring after the balance-sheet date.

v) Copy of sale bill is an internal evidence.

vi) Amount payable to a hire vendor is to be disclosed as a secured loan.

vii) Proposed dividend is a current liability.

viii) A foreigner cannot be appointed as auditor of Indian company.

ix) Propriety audit is audit of proprietary concerns.

x) A person who has advanced money to a company cannot be appointed as its auditor. (2x10 = 20 marks)

2) Give your views on the following:

a) A chartered accountant sends in his acceptance by post to a company.

Later on, he changes his mind and sends a telegram to the company indicating his inability to accept the appointment. What should the company do? (6)

b) The management of a company says it need not provide for depreciation on its assets since the necessary clearances have not yet been received from the Pollution Control Board. (6)

c) A company held its annual general meeting on September 20, 2009, and declared dividends.

During severe floods in the first week of October, there was a severe loss suffered by the company. Consequently, the shareholders hold another meeting on October 20, 2009, and pass a resolution not to pay dividends. (8)

3) An auditor should be thorough in his efforts to gather the audit evidence and be objective in its evaluation. Discuss. (10)

4(a) An NGO carries out a sponsored programme to raise funds for the flood relief.

How do you audit the receipts and payments of the programme? (5)

b) What precautions do you take while auditing the accounts made from incomplete records? (5)

5) How do you vouch/verify the following: a) investments; b) secured loans. (5x2 = 10)

6(a) What are the requirements of Section 227(1A)? (6)

b) What are the different classifications of audit reports? (4)

7) What are the different internal controls in case of a computerised accounting system? (5)

8) Write short notes on any two of the following: a) materiality; b) audit trail; c) casual vacancy. (2x5 = 10)

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