Chapter wise test series for 15 Days Hard Challnge

Ch 3 Risk Assessment and Internal control

(24 Marks)

1. So far as the auditor is concerned, the examination and evaluation of (4)

the internal control system is an indispensable part of the overall

audit programme. The auditor needs reasonable assurance that the
accounting system is adequate and that all the accounting
information which should be recorded has in fact been recorded.
Internal control normally contributes to such assurance. Explain
stating clearly the benefits of evaluation of internal control to the
auditor.

2. XYZ & Associates, Chartered Accountants, while evaluating the (4)

operating effectiveness of internal controls, detects deviation from
controls. In such a situation, state the specific inquiries to be made
by an auditor to understand these matters and their potential
consequences.

3. Determining materiality involves the exercise of professional (4)

judgment. A percentage is often applied to a chosen benchmark as a

starting point in determining materiality for the financial statements
as a whole. Discuss stating the factors that may affect the
identification of an appropriate benchmark

4. Much of the information obtained by the auditor's inquiries is (4)

obtained from management and those responsible for financial

reporting. However, the auditor may also obtain information, or a
different perspective in identifying risks of material misstatement,
through inquiries of others within the entity and other employees
with different levels of authority.
Explain with the help of examples

5. List out some matters that the auditor may consider in determining (4)

whether a deficiency or combination of deficiencies in internal

control constitutes a “significant deficiency”

6. In what ways an effective two-way communication between auditor (4)

and those charged with governance is important?