CA INTER- AUDITING AND ASSURANCE

Test # 1: Chapter 10- Company Audit

Date: June 12, 2021 Marks: 50 Time: 1.5 Hrs

Section A: Multiple Choice Questions (5 Marks)

1. PQR Associates, a firm of Chartered Accountants, has three partners, P, Q & R. The
firm is already having audit of 60 public companies. Now the firm gets an offer for
three company audits, out of which one is a dormant company, second is a one-person
company and third is a private company having paid up share capital of Rs. 90 crores.
In this situation:
a. Auditor cannot accept any of the company audit being offered
b. Auditor can accept the audit of one person company only
c. Auditor can accept the audit of one person company and dormant company,
but not that of private company
d. Auditor can accept all three company audits being offered.

2. Any casual vacancy in the office of cost auditor, whether due to resignation, death or
removal, shall be filled by the Board of Directors within ______ days of occurrence of
such vacancy and the company shall inform the central government in form CRA-2
within 30 days of such appointment of cost auditor:
a. 30 days
b. 45 days
c. 60 days
d. 90 days

3. The first auditor of Anand Ltd. was appointed by Board of Directors of Anand Ltd. One
of the employees of Anand Ltd. named Mr. X was of the opinion that remuneration of
first auditor of Anand Ltd. would be decided only by the members of Anand Ltd. in
First AGM of Anand Ltd. The opinion of Mr. X is incorrect because remuneration of
first auditor of Anand Ltd. may be decided by:
a. Only members of Anand Ltd.
b. Only members of Anand Ltd. in Second AGM of Anand Ltd.
c. Only in EGM of Anand Ltd.
d. Board of Directors of Anand Ltd.

4. The information related to four companies is provided as follows:

Turnover as per last
Name of Company Nature of Company Audited Financial
Statements (Rs.)
Z1 Limited Public Limited Company 160 Crore
Y2 Limited Public Limited Company 180 Crore
N3 Private Limited Private Limited Company 56 Crore
M4 Private Limited Private Limited Company 43 Crore

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 CA INTER- AUDITING AND ASSURANCE
Test # 1: Chapter 10- Company Audit
Date: June 12, 2021 Marks: 50 Time: 1.5 Hrs

Which of the above-mentioned company or companies is/are required to constitute

an Audit Committee?
a. Only M4 Private Limited
b. Both M4 Private Limited & N3 Private Limited
c. Both Y2 Limited & N3 Private Limited
d. Both Y2 Limited and Z1 Limited

5. There was a public limited company by the name YW Limited. According to the last
audited financial statements of YW Limited, the paid-up capital was Rs. 20 Crores. A
partnership firm of Chartered Accountants was required to be appointed as auditor of
YW Limited. In this scenario, which appropriate authority would consider
qualifications and experiences of partnership firm of Chartered Accountants for being
appointed as an auditor of YW Limited considering size and requirements of YW
Limited:
a. Members of YW Limited
b. Audit Committee of YW Limited
c. Board of Directors of YW Limited
d. Independent Directors of YW Limited

Section B: State Correct/Incorrect with Reasons (10 Marks-2 Marks Each)

1. K Ltd., a non-government company was incorporated on 01-10-2017. Mr. B, Managing
Director of K Ltd., himself appointed the first auditor of the company on 31-12-2017.

2. Any partner of LLP, who is appointed as auditor of a company can sign the audit report.

3. Bhartiya Gas Ltd. is a Government Company. C&AG shall, in respect of a financial year,
appoint an auditor duly qualified to be appointed as auditor of companies under this
act, within a period of 180 days from the end of financial year, who shall hold office
till the end of the next financial year.

4. Provisions of CARO 2020 are not applicable to ABC Private Limited, a subsidiary of XYL
Limited (a public company) having Fully Paid-up Capital and Reserves & Surplus of Rs.
50 Lakhs, Secured Loan from bank of Rs. 90 Lakhs and Turnover of Rs. 5 Crores for
Financial Year 2020-21.

5. Provisions relating to rotation of auditors are not applicable to ABC Private Limited
having Paid-up Capital of Rs. 15 Crores and public borrowings from nationalized bank
of Rs. 50 Crores.

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 CA INTER- AUDITING AND ASSURANCE
Test # 1: Chapter 10- Company Audit
Date: June 12, 2021 Marks: 50 Time: 1.5 Hrs

Section C: Descriptive Questions (35 Marks-5 Marks Each)

1. State the matters to be included in the auditor’s report as per CARO 2020, regarding
a. Private Placement of Preferential Issues
b. Utilization of IPO and Further Public Offer

2. At the AGM of HDB Pvt. Ltd, Mr. R was appointed as the statutory auditor. He,
however, resigned after 3 months since he wanted to pursue his career in banking
sector. The Board of Directors has appointed Mr. L as the statutory auditor in board
meeting within 30 days. Comment on the matter with reference to the provisions of
Companies Act, 2013.

3. M/s ABC and Co. is an audit firm having partners CA A, CA B and CA C. The firm has
been appointed as auditor of XYZ Ltd. for Financial Year 2021-22. Mr. D, relative of CA
A is holding 25,000 shares (face value of Rs. 10 each) in XYZ Ltd. having market value
of Rs. 90,000. Are M/s ABC and Co. qualified to be appointed as auditors of XYZ Ltd.?

4. Mr. A is offered by ABC Ltd. for appointment as cost auditor and asked to certify
certain requirements before such appointment. Discuss those requirements with
reference to the provisions of Companies Act, 2013.

5. CA Shrinivas, who is rendering management consultancy services to Niranjan Ltd.

wants to accept offer letter for appointment as an auditor of Niranjan Ltd. for next
financial year. Discuss with reference to provisions of Companies Act, 2013.

6. Board of Directors of ABC Ltd. found the auditors of the company acted in a fraudulent
manner and decided to remove the auditors in board meeting. Comment on the action
of the board and describe correct procedure to be followed for removal of auditors
before expiry of their term.

7. Explain reporting requirements the auditor should ensure under CARO 2020 related
to fixed assets.