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4. In the given case, is there any requirement for separate disclosure of the PPE revaluation?
(a) Yes, separate disclosure is required due to the 5% increase in carrying value.
(b) No, separate disclosure is not required as the change in carrying value is less than 10%.
(c) Yes, separate disclosure is required regardless of the percentage change.
(d) No, separate disclosure is not required unless the revaluation results in a material change in the carrying value.
(a) Yes, separate disclosure is required due to the 5% increase in carrying value.
(b) No, separate disclosure is not required as the change in carrying value is less than 10%.
(c) Yes, separate disclosure is required regardless of the percentage change.
(d) No, separate disclosure is not required unless the revaluation results in a material change in the carrying value.
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5. What is your perspective on the management's view regarding the audit requirements for an LLP?
(a) An LLP is always required to conduct an audit, regardless of its turnover or capital contribution.
(b) An LLP is always required to conduct an audit if either the turnover exceeds Rs 40 lakhs or the capital contribution exceeds Rs 25 lakhs.
(c) An LLP is always required to conduct an audit if either the turnover exceeds Rs 25 lakhs or the capital contribution exceeds Rs 40 lakhs.
(d) An LLP is always required to conduct an audit if the capital contribution exceeds Rs 25 lakhs and the turnover exceeds Rs 40 lakhs.
(a) An LLP is always required to conduct an audit, regardless of its turnover or capital contribution.
(b) An LLP is always required to conduct an audit if either the turnover exceeds Rs 40 lakhs or the capital contribution exceeds Rs 25 lakhs.
(c) An LLP is always required to conduct an audit if either the turnover exceeds Rs 25 lakhs or the capital contribution exceeds Rs 40 lakhs.
(d) An LLP is always required to conduct an audit if the capital contribution exceeds Rs 25 lakhs and the turnover exceeds Rs 40 lakhs.
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CASE SCENARIO 6 Part (2)
CA Dilip has clarified that the NPA classification has been verified and is in accordance with RBI guidelines. He instructed Shreyansh to focus on evaluating the adequacy of the provisions, considering RBI Guidelines mandate specific percentages for provisioning based on the NPA classification and the nature of the security.
Based on the above facts, answer the following MCQs:
CA Dilip has clarified that the NPA classification has been verified and is in accordance with RBI guidelines. He instructed Shreyansh to focus on evaluating the adequacy of the provisions, considering RBI Guidelines mandate specific percentages for provisioning based on the NPA classification and the nature of the security.
Based on the above facts, answer the following MCQs:
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1. Is the provision made for AB Industries (Doubtful—D1) appropriate?
(a) Yes, as it exceeds the required 25% provisioning for secured assets.
(b) No, as it should be 40% of the outstanding amount.
(c) No, as the required provision is ₹ 2.50 lakhs (25% of ₹ 10.00 lakhs).
(d) Yes, as provisions for Doubtful assets can exceed the minimum requirement.
(a) Yes, as it exceeds the required 25% provisioning for secured assets.
(b) No, as it should be 40% of the outstanding amount.
(c) No, as the required provision is ₹ 2.50 lakhs (25% of ₹ 10.00 lakhs).
(d) Yes, as provisions for Doubtful assets can exceed the minimum requirement.
2. Considering the Housing Loan and Car Loan availed by the borrower Shyam, which of the following statements is appropriate?
(a) Both Housing Loan and Car Loan should be classified as “Non- Performing Assets” in accordance with RBI norms on asset classification.
(b) Housing Loan should be classified as “Non-Performing Asset” in accordance with RBI norms. However, Car Loan should be classified as Standard Asset.
(c) Car Loan should be classified as “Non-Performing Asset.” However, Housing Loan should be classified as Standard Asset.
(d) Both Housing Loan and Car Loan should be classified as Standard Assets.
(a) Both Housing Loan and Car Loan should be classified as “Non- Performing Assets” in accordance with RBI norms on asset classification.
(b) Housing Loan should be classified as “Non-Performing Asset” in accordance with RBI norms. However, Car Loan should be classified as Standard Asset.
(c) Car Loan should be classified as “Non-Performing Asset.” However, Housing Loan should be classified as Standard Asset.
(d) Both Housing Loan and Car Loan should be classified as Standard Assets.
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3. What is the minimum provision required for RS Enterprises (Doubtful— D2), considering the account is fully secured?
(a) ₹ 30.00 lakhs.
(b) ₹ 12.00 lakhs.
(c) ₹ 15.00 lakhs.
(d) ₹ 25.00 lakhs.
(a) ₹ 30.00 lakhs.
(b) ₹ 12.00 lakhs.
(c) ₹ 15.00 lakhs.
(d) ₹ 25.00 lakhs.
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CASE SCENARIO 7
M/s MCP Associates are having 3 partners namely CA Mahavir, CA Chandana and CA Prabha. CA Mahavir is about to conclude audit of a company. During the audit, he noticed that there is a shortage of important raw material supplies being imported from China due to prevailing geopolitical situation. The company has shared with him its plan to deal with the situation. He is satisfied with assessment of the company for dealing with the matter. The issue is disclosed in financial statements and considering management’s assessment, it is felt that use of going concern assumption by company in preparation of financial statements is appropriate. He also verified that all subsequent events have been accounted for and requested written representations from management, although the representations include qualifying language. Significant findings were communicated both orally and in writing to those charged with governance, with relevant communications documented.
CA Chandana is conducting an audit of a manufacturing company dealing in towels and bedspreads. The company’s inventory is spread across its own locations and third-party premises. As part of audit procedures, she is performing many audit procedures required under different Standards on Auditing. She attends the physical inventory count, sends confirmation requests for trade receivables, and assesses controls. She relies on sampling extensively while auditing transactions, balances, and controls.
CA Prabha is auditing a firm’s financial statements and performs detailed procedures to verify assertions. The firm is engaged in export of goods to Europe. The sales invoices raised in Euros are converted into Indian rupees as per applicable norms. She checks classification of expenses, ensures trade payables are genuine, compares current and past wages, examines title deeds for land, and check the accuracy of calculation of the conversion of foreign currency into Indian rupees for export invoices.
Based on the above facts, answer the following MCQs:
M/s MCP Associates are having 3 partners namely CA Mahavir, CA Chandana and CA Prabha. CA Mahavir is about to conclude audit of a company. During the audit, he noticed that there is a shortage of important raw material supplies being imported from China due to prevailing geopolitical situation. The company has shared with him its plan to deal with the situation. He is satisfied with assessment of the company for dealing with the matter. The issue is disclosed in financial statements and considering management’s assessment, it is felt that use of going concern assumption by company in preparation of financial statements is appropriate. He also verified that all subsequent events have been accounted for and requested written representations from management, although the representations include qualifying language. Significant findings were communicated both orally and in writing to those charged with governance, with relevant communications documented.
CA Chandana is conducting an audit of a manufacturing company dealing in towels and bedspreads. The company’s inventory is spread across its own locations and third-party premises. As part of audit procedures, she is performing many audit procedures required under different Standards on Auditing. She attends the physical inventory count, sends confirmation requests for trade receivables, and assesses controls. She relies on sampling extensively while auditing transactions, balances, and controls.
CA Prabha is auditing a firm’s financial statements and performs detailed procedures to verify assertions. The firm is engaged in export of goods to Europe. The sales invoices raised in Euros are converted into Indian rupees as per applicable norms. She checks classification of expenses, ensures trade payables are genuine, compares current and past wages, examines title deeds for land, and check the accuracy of calculation of the conversion of foreign currency into Indian rupees for export invoices.
Based on the above facts, answer the following MCQs:
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1. Which of the following best describes CA Mahavir’s responsibility for subsequent events as per SA 560?
(a) He has no obligation to perform audit procedures for events occurring between date of financial statements and date of auditor’s report.
(b) He should perform necessary audit procedures to know about events occurring between the date of financial statements and date of auditor’s report.
(c) He has no obligation to perform audit procedures after signing of auditor’s report, even if he comes to know of an event, which if known to him earlier would have caused him to amend the audit report.
(d) He has to only rely upon written representation of management regarding subsequent events. He has no other means to know about such events.
(a) He has no obligation to perform audit procedures for events occurring between date of financial statements and date of auditor’s report.
(b) He should perform necessary audit procedures to know about events occurring between the date of financial statements and date of auditor’s report.
(c) He has no obligation to perform audit procedures after signing of auditor’s report, even if he comes to know of an event, which if known to him earlier would have caused him to amend the audit report.
(d) He has to only rely upon written representation of management regarding subsequent events. He has no other means to know about such events.
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2. Which is the most appropriate action CA Chandana should take for verifying inventories held at third-party premises?
(a) Request confirmation of the inventory’s quantity and condition from third parties or inspect the inventory at their premises.
(b) Inspect all inventories at third-party premises without requesting confirmation.
(c) Rely on management’s written representation regarding inventories at third-party locations.
(d) Confirm the inventory’s value along with its quantity and condition from third parties.
(a) Request confirmation of the inventory’s quantity and condition from third parties or inspect the inventory at their premises.
(b) Inspect all inventories at third-party premises without requesting confirmation.
(c) Rely on management’s written representation regarding inventories at third-party locations.
(d) Confirm the inventory’s value along with its quantity and condition from third parties.
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3. Which audit procedure CA Prabha performed to verify whether conversion of foreign currency into Indian rupees is proper or not?
(a) Inspection.
(b) Recalculation.
(c) Observation.
(d) Reperformance.
(a) Inspection.
(b) Recalculation.
(c) Observation.
(d) Reperformance.
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