🪤 CA Final Trap · Audit · Who can sign?

A CA firm in Bhopal lets its audit assistant sign these on the firm's behalf:
(i) audit queries raised during the audit
(ii) a letter forwarding the draft financial statements to the client
(iii) a turnover certificate for the client's bank
(iv) the memorandum of physical cash verification

Answer: A

Why it's a trap:
The Council lets a firm delegate routine documents that carry no professional opinion or authentication. That covers audit queries, letters forwarding drafts and cash verification memos. A turnover certificate IS authentication, so only a member can sign it. B is the trap: (ii) sounds like signing financial statements, but it's only a covering letter.

📌 ICAI set this exact trap in the Jan 2026 CA Final exam, Paper 3 (Audit), MCQ 9.

🪤 CA Final Trap · DT · Gift to daughter-in-law

On 1 June 2024, a year after his son's wedding, Mr. Raghavan of Madurai gifts ₹15 lakh by cheque to his son's wife, Divya. She puts it in a fixed deposit that earns ₹1,05,000 interest in FY 2025-26.

Answer: D

Why it's a trap: Two rules, one after the other. A father-in-law is a "relative" (lineal ascendant of the spouse), so the gift is exempt under section 56(2)(x). But section 64(1)(vi) clubs income from an asset transferred to a son's wife without adequate consideration into the transferor's income. B is the trap: the FD is in Divya's name, but the interest is taxed in Mr. Raghavan's hands.

📌 ICAI set this exact trap in the Jan 2026 CA Final exam, Paper 4 (DT), MCQ 5.

🪤 CA Final Trap · IDT · Place of supply

Kanchan Tea Exports, registered under GST in Siliguri (West Bengal), hires a training firm registered in Bengaluru to train its Guwahati sales team. The training is held at a resort in Goa.

Answer: West Bengal, where Kanchan Tea is registered

🪤 CA Final Trap · FR · Inventory write-down

Narmada Furniture Ltd., Vadodara, holds teak costing ₹40 lakh. At year-end, its replacement cost has fallen to ₹32 lakh. The furniture made from this teak needs ₹25 lakh more to finish and will sell for ₹75 lakh, with ₹5 lakh of selling costs.

Answer: 45 lakh

Why it's a trap: Ind AS 2 doesn't write down materials just because their price fell. It asks whether the FINISHED product will sell at or above cost. Finished cost = ₹40 + ₹25 = ₹65 lakh; NRV = ₹75 − ₹5 = ₹70 lakh. ₹70 ≥ ₹65, so the teak stays at cost: ₹40 lakh. A uses replacement cost, which matters only when the finished goods would sell below cost. C is above cost, and inventory is never carried above cost.

📌 CA Final level · Rule: Ind AS 2, para 32 (materials held for production)

🪤 CA Final Trap · AFM · Forward premium

Spot rate: ₹80.00/$. 3-month forward: ₹82.00/$.

A student says, "The dollar is at a 10% premium, so the rupee is at a 10% discount."

📌 CA Final · Rule: forward premium/discount (Study Material, AFM Ch. 10)

🪤 CA Final Trap · Audit · Auditor's eligibility

CA Nidhi is proposed as statutory auditor of Kaveri Cements Ltd. Her brother holds Kaveri Cements shares with a face value of ₹80,000 and a market value of ₹6,40,000.

📌 CA Final level · Rule: Section 141(3) read with Rule 10 (Study Material, Audit)

A quick reckoner on TDS thresholds:
https://youtube.com/shorts/BXHEt9hpwzc?feature=share

🪤 CA Final Trap · IDT · ITC vs depreciation

Brahmani Steels, Rourkela, buys a machine for ₹50 lakh plus GST of ₹9 lakh. In its income-tax depreciation schedule, it capitalises the full ₹59 lakh and claims depreciation on it. It now wants to take the ₹9 lakh as ITC.