CA M. Raja has accepted offer of appointment of auditor of an entity. As business carried on by the entity is new to him, he wants to gain an…
CA Intermediate · Auditing and Ethics · RTP · May 2024
CA M. Raja has accepted offer of appointment of auditor of an entity. As business carried on by the entity is new to him, he wants to gain an understanding about the entity and its environment including its internal control. In this regard, he has performed procedures to obtain audit evidence about design and implementation of relevant controls. He has performed various procedures like inquiry, inspection and observation in this regard. He wants reasonable assurance that accounting system is adequate and that all accounting information which should be recorded has, in fact, been recorded. Further, during the course of audit, he has noticed as under: - As required by the management, bank reconciliation is required to be performed monthly. However, the same is not carried out as stipulated due to time constraints faced by accountant.The entity has a system of procuring its raw material supplies on the basis of valid purchase orders issued by the entity. However, purchase orders are not numbered in a sequence properly.Wage sheets are not verified by a responsible official as required by management.Staff of the entity is responsible for bringing cash from centers in nearby areas to entity's premises from where it is deposited into entity's bank account. However, concerned officer has not renewed insurance for cash in transit. Based on above, answer the following questions:
Suggested Answer and Working Notes:
Correct Answer: Option (A)
Observing application of control
Topics: Audit Evidence, Risk Assessment and Internal Control
Related Questions in this Topic
- VW & Co., Chartered Accountants, are auditing GHI Ltd., a company engaged in infrastructure development. The company has...
- TUV & Co., Chartered Accountants, are appointed as statutory auditors of DEF Ltd. for the year ending on 31st March, 202...
- While evaluating the reliability of audit evidence, the audit team identifies the following documents: Delivery challa...
- An auditor wants to ensure that he has complete knowledge of all locations where a company's inventories are stored. Sin...
- CA Arjun, the statutory auditor of XYZ Ltd., was engaged to conduct the audit of the financial statements for the financ...