Solved question paper for AP May-2019 (BCOM 4th)

Question paper 1

1. Section A

   1.What do you meant by auditing? Discuss its objectives.

   Answer:

   ” An audit is an examination of accounting record Undertaker with a view of establishing with their correctly and completely refer the transaction to which the purpose to relate.”

   The term audit is delivered from a latin word "audits" which means to hear orthocity of accounts and insured with the help of the independent review.

   Audit is performed to do as the validity and reliability of information. Examination of book and account with the Sporting voucher and documents to who detect and prevent error fraud is the primary function of auditing

   Objective of Auditing:-Basic object of auditing is to prove true and fairness of a result presented by profit and loss account and financial position presented by balance sheet. It objective are classified into two groups which are given below

   1. Primary Objective of Audit:- They are as follow

   1. Examine the system of internal check

   2. Check automatically accuracy of books of accounts, very fine position, costing, balancing etc.

   3. Verifying the arithmetical and validity of transactions.

   4. Check the purpose destruction of capital and revenue nature of transaction.

   5. Confirming the proper destruction of capital and revenue nature of transaction.

   6. Verifying whether all the status requirements are fulfilled or not.

   7. Proving true and fairness of operating result presented by income statement and financial position presented by balance sheet.

   2. Subsidiary Objectives of Audit:-

   1. Detecting and prevention of Frauds :- Frauds Madhosh mistake which are committed knowingly with some vested interest on direction of top level management. Direction of bond is the main job of auditor. Sach fraud are as follow

   • Misappropriation of cash

   • Misappropriation of goods

   • Manipulation of account for without any misappropriation full cup

   2. Detecting and prevention of errors:- Errors are those mistake which are committed due to carelessness aur lack of knowledge with or without having vested interest errors are various type of some of the them are

   • Error of principle

   • Errors of admission

   • Errors of commission

   • Compensating errors

   3. Under the over valuation of stock:-Normally Sach fraud committed by the top level executives of the business, so the explanation given to the auditor remain Falls. Show and auditor should detecting such a fraud using skill knowledge and facts.

   4. Other objective

   • To provide information to Income Tax authorities.

   • To secure by the provision of company act

   • To have moral effect.

2. 2. Define the government auditor. How it distinguish from commercial audit?

   Answer:

   Government audit is applicable to government department and department undertaking. Government of India maintain a separate Department known as account and Audit department Comptroller and Auditor General of India heads the department.

   Government audit is a divided into server branches like a difference railway form of Post and Telegraph audit it works only for government officer and department. This department cannot undertake audit of non government concerns. It work is strictly according to Government rule and regulations for stock

   
    

   Different between government and commercial:-

   	Basis	Government Audit	Commercial Audit
   1	Incharge for conduct of audit	Audit and account department conducted the audit of government department	External auditor appointed by employee shall conduct their audit here.
   2	Type of audit	Government audit alway a type of continuous audit because of involvement of Huge expanded and large number of transactions.	In commercial concern mostly periodically audit is a conductor.
   3	Nature of appointment of auditors	Auditor and Government employees	They are not the employee of concerned whose account they audit.
   4	Need for parliamentary examination of bills.	Treasury officer alway make a primary examination of Bill before making a payment on government account.	It is not so in the case of commercial audit
   5	Rule and regulations.	Government audit is subjected to the rule and regulation of the concerned department.	Casual has nothing to do with audit or parliamentary examination while making a payment of expander.

3. 3. What is internal check? How does it differ from the internal audit?

   Answer:

   Signal check it is a system which all transaction of an organisation is related accounting work is a divided among the employees in such a manner that the work done by one employee is examined independently by another employee.

   According to this system the work is divided among the following according to the capability and in such a manner that no single employee does a any task or transaction from the start to end in this man is the complete accountancy work in respect of transaction not allotted to any single person from the start to finish

   
    

   Different between internal check and internal audit:-

   	internal check	internal Audit
   1	It is an agreement of Duty allocated in such a way that the work of one person is automatically checker by another.	It is independent of operation and records the company.
   2	The purpose of is to prevent and minimise possibilities of error and fraud.	The purpose of to detect error and fraud that are already committed.
   3	IC does not require a separate staff will stop it represent only the arrangement of duties.	It requires a staff employed only for the purpose.
   4	IC Is a continuous process.	The internal auditor has to reporter periodically about various in effectiveness and chest improvement.
   5	IC belong along with the recording of transactions.	It being when the accounting processor and.
   6	It is a device from doing the work.	It is a device for monitoring the work.

4. 4. Vouching is backbone of auditing. Explain various points that should be taken into consideration while adopting technique of vouching.

   Answer:

   Vouching is said to be the backbone of the the auditing because it eliminate fraud from the system. There are cases where from try to avoid taxes and cheat the government by over starting the experiences to minimise the amount of income that text. Watching enable the auditor to identify the real and fake cost and discover the actual income earned. It also protect the auditor from being for financial fraud full stop when the auditor watches for a certain financial statement. It show that he or she followed 2 lines in accepting his or her duties and is therefore not responsible for any issues that may arise after improving the books.

   Important points to be considered by Auditor in vouching.

   1. Check whether the voucher and printed number and arrange in the order of date of occurrence of transactions.

   2. The entire in the book of account should also be numbered and the number and date should correlate with the concerned voucher.

   3. The name of the person with whom the transaction is carried out, the detail of the transaction and amount involved should be clearly start in the voucher.

   4. All payment of rupees 500 and above should be supported by a stamped voucher.

   5. Transaction should be clearly classified into revenue or capital transaction and accordingly entered in the books of accounts.

   6. The voucher should wear the signature of authoring officer.

   7. The transaction shoulder later only to the business aspects of organisation and transaction of personal natural should not be recorded.

   8. Some transaction may be entered twice or somewhere out there may be used as an evidence for two different transaction entered in books of accounts.

   9. Whenever necessary the supporting documents are to be attached with the voucher show that the transaction can be verified in.

   10. The auditor should verify the prepared and outstanding amount are duly accounted for the period to which Sach transaction relates.

   11. After completing the voucher the auditor main make a separate note explanation in sport of transaction he shall also make out a list of missing vouchers.

   12. An auditor should ensure that the alternation made in the vouchers are duly authorised.

   13. While watching the auditor shed use different type of risk marker whitch Mein helpful for them for their future references for each mark made by them convert different meaning which would be useful to them for future references.

   14. Watching should be continuous at watching for a specified period and for a specified nature of transaction should be done at a sketch and completed at one go which may reduce the chance of errors and frauds.

6. Section-B

   5.State the provision regarding appointment and removal of auditor.

   Answer:

   Appointment of auditor:-

   1. With in 30 days:- Every company must. Its first auditor or the auditing from within 30 days of registration of the company during the Annual General Meeting or within 19 days, in an emergency General Body Meeting by the broad of directors. The first auditor appointed will hold office from the conclusion of the meeting to the time when vi Annual General Meeting is held. There in the auditor appointment are reviewed every six year.

   2. Written Consent:- A return concert from the auditor, with sufficient prove to suggest that the person qualifies the creator are provided in section 14 of the actor, need to be submitted before the appointment.

   3. Appointment Notice:-.The company should Ishu an appointment notice to the auditor and a form A1 is required to be submitted with the within 15 day of the meeting in which the auditor is appointed.

   4. Section 139:-The Companies listed in Section 139 belong to the class or classes of companies as mentioned in the section and rule 5 of the companies Audit and auditor rule 2014 will not

   1. Appoint an individual as auditor for more than one consecutive 5 year turner.

   2. A point and auditing frame for more than it to turn of 5 consecutive year.

   Removal of Auditor

   1. The Companies Act 2013 Les the prevention for the removal or change of auditor before the the complete edition of the the tenure. This happens in those cases where the organisation is not satisfied with the service of the auditor. The procedure of the removal of auditor has been given in subsection 1 of the section 140 of the act.

   2. Before being removed by the frame the auditor is given a fair and responsible chance of laying down reason of his inappropriate conduct.

   3. It is the auditor in being removed before the compilation of hazard term and approval from the central government is necessary before passing a special free solution by the company.

   4. The application to the central government has to be done in the mom EDT to as prescribe in rule 7 of companies rules 2014. Scribed free provided under section 12 of the companies rules 2014 need to be submitted along with this form.

   5. The application has to be made with 30 days of resolution passed by the broad.

   6. The company can hold a journal meeting a within 60 day of receipt of the approval of the central government for passing the auditor appointment resolution.

   If you want to hire and auditor for your company then you need to have a clear overview of the role and responsibility of an auditor. The rule related to appointment appointment and removal of auditor are certain factor that you need to consider before announcing recruitment.

7. 6. Define the auditing in computerised environment.

   Answer:

   Auditing in a Computer Based environment information technology is integral to modern accounting and management information system. It is there for exponential that auditors should be aware of impact of it on the audit of the clients financial statement Information Technology auditing being as electronic data processing auditing and developer largely as a result of rising in a technology in accounting system. The last few years have been an exciting time in the world of it auditing as a result of accounting standards and increase regulation. Regardless of the computer system used the audit objective and approach will remain largely exchange from the if the auditor was being carried out in a non computer environment.

   Audit approach in computerised environment

   1. Auditing around the Computer:-It is the type of auditing done in traditional method this auditor summarised the input data and ignore the computers processing but ensure the correctness of the output data generated by the computer this approach is generally referred to as auditing around the computer. This methodology was the primary focus on ensuring that source documentation was correctly process add this was verified by checking the output documentation to the source documentation.

   2. Auditing Though the Computer:-Due to the real time computer and environment there may only be a limited amount of source of documentation for paperwork hence the auditor Mein employee and approach known as auditing through the computer. In this approach the reliability and accuracy of the result and analysis through the computer this involve the order to perform test on the information technology control to evaluate their effectiveness like a compellence tester, test pack reprocessing.

   3. Auditing With the Computer:-The utilisation of Computer by the auditor for some audit work and use some general software for the purpose of calculating distraction printing letter and duplicate checking and file comparison.

   The computer is not used for all audit work and it is done manually.

8. 7. What are the content and format of an auditor's report?

   Answer:

   Contents for an audit report

   The basis structure of an auditor report as follow

   Title:- Title show the mention that it is an independent auditor's report

   Address:- Should mention clearly as 2 to whom the report is being given for example members mention that it is the management responsibility to prepare the financial statement of the company broad the directions.

   Management responsibilities for financial statement

   Auditor’s Responsibility:-Mention that responsibility of auditor is to expressive UN I'm based on pinion on financial statement at Ishu an audit report.

   Opinion:-Should mention overall impression obtained from the audit of financial statement for example modified opinion unmodified opinion for stock

   Basis of Opinion:-State that basis on which opinion as reported has been achieved. Fact of the basis should be mentioned.

   Other reporting Responsibility:-If any other reporting responsibility access to the same should be mentioned. For example report on legal or regulatory requirements.

   Signature of the auditor:-the engagement partner shall sign on audit report.

   Place of Signature the city name in which audit report is a signed

   Audit report format

   Organisation name

   Date.......................................

   Prepared by ..................................................

   Final audit report of .......................................................

   Report of finding and recommendations of business development of an organisation

   Department of Internal Audit To................................................................. From...........................................

9. 8. Explain the duty and liabilities of an auditor.

   Answer:

   Duties of company auditor

   1. To make the report to the members of the company on the accounts examined by him which should contain all the matter as the Companies Act.

   2. Auditor should perform his duty as per article of Association of the company.

   3. He should certify the statement include in prospect whenever the same is issued.

   4. He should certified the contents of the statutory report.

   5. To comment on all Sach material volitation of the law sound accounting practical which can reasonable affected directly or indirectly the fortune of the accounts of the company.

   6. An auditor must no the provisions office memorandum and articles of association of the company.

   7. He is not only should verify the thematic accuracy of accounts but should check the fairness of account as well.

   Liability of An auditors

   1. If an auditor is reality of negligence in the execution of his duty. He may be held liable to make a good any damage resulting from the negligence.

   2. An auditor is appropriate to deflect a fraud etc. He is a responsible on account of negligence in performance of his duties

   3. Any clause in the agreement between the company and the auditor where by the auditor is freed from liability has been declared void.

   4. If in the causes of the winding up of a company it appear that the auditor has been guilty of any missed periods on branch of trust in relational of the company he may be held liable as an officer of the company. The court Mein Aaj meine into his conduct and compare him to contribute Sach some to the assist of company by way to compensation in respect of the breach.

   5. If the divine dance has been improperly declared and paid of the account audited by him and which did not show our true and fair picture and where incorrect and misleading he will be liable to refund such an amount.

   6. Where are prospects is Ishu inviting person to subscribe for shares or debentures of a company and auditor is liable in respect of the nature statement which is made by him as an expect to pay compensation every person who described for any share or or on the fate of the prospect of any loss or damage he may have substance by Reason by reason of uncertain statement included therein.

   7. If an auditor make a false statement particularly knowing it to be false or unit any material fact knowing it to be material he may be punishable with imprisonment or a fine.

   8. If an auditor is a party to a country statement in prospect he shall be punishable with imprisonment or fine or both.

   9. Under India Panel code for soever Ishu on a sign any certificate required by law to be given or fined or relating to any fact with Sach certificate by law admissible by evidence. Going for believing that Sach certificate is false in any material. Search be punishable in the same manner as if he give a false evidence.

11. Section C

    9. Write a short note on any 10 of the following:-

    (i)Functions of auditing

    Answer:

    Following are the function of auditing

    1. Study of accounting system

    2. Internal control system

    3. Vouchering

    4. Verification of assets

    5. Legal requirements

    6. Liabilities verifications

    7. Capital and revenue

    8. Valuation of liabilities

    9. Valuation of assets

    10. Reporting.

12. (ii) Auditing vs investigation

    Answer:

    Difference between auditing and investigation

    1. Auditing is the process of examining an individual financial statement and passing exclamation on it whereas investigation is a comparison and careful study of the accounts book to find out the truth.

    2. The factor gained from audit process are influential. On the other hand the evidence plane from investigation process is critical in nature.

    3. The nature of auditing carry a journal examination off while the investigation has critical nature.

    4. Auditing is conducted on yearly basis but investigation is controlled according to the need of the organisation.

13. (iii) terim audit

    Answer:

    Interim Audit:- It is an auditor which is a conduct in a between two annual audit to find out interm profit to enable the company to to declare the the divided. It involve complete and detailed examination of transaction and review of record and count up to the date of audit. It is an audit which the conducted between two balance sheet audit se. It is conducted for a specific period with an object of declaring dividend or to determine of value of share at a certain date.

14. (iv) Qualified report

    Answer:

    A qualified report means an audit report which is not clear. In case auditor has any reservation in respect of certain method mentioned in the financial statement hi main qualified his report. Are qualified option shall be expressed as a being subject of or except for the effect of the matter to which the qualification matters of. If the accounting standards issued by Institute of account of India is not followed by the company of auditor main qualified his report.

16. (v) Element of internal audit

    Answer:

    Elements of Internal auditing

    1. Planning and scheduling

    2. Develop audit checklist

    3. Entry meeting

    4. Auditing

    5. Assessing compliance

    6. Corrective action request

    7. Audit report

    8. Exit meeting

    9. Follow up

    (vi)

17. (vi) Internal check

    Answer:

    Internal check it is a system in which all the transactions of organisation and the related accounting work is divided among the employees in such a manner that the work done by one employee is examined independently by another employee.

    According to this is system the work is divided among the employees according to their capability is and in a such a manner that is no single employees does any task for transaction from the start to end a full stop in this manner the complete accounting work in respect of any transaction is not allotted to any single person from the start to finish.

18. (vii) Post and vouch audit

    Answer:

    Post and vouch audit refer to verification of all transaction from back of original entry and its pasting in the ledger. The auditor use different tracks for each aspect of examination like fasting, totalling, balancing etc. In conduct of the audit, the auditor verify the effectiveness of internal control system, if satisfied will Resort the test checking of various type of transactions.

19. (viii) Objectives of internal control

    Answer:

    Objective of internal control.

    1. Efficiency and effectiveness of activities

    2. Probability, complaint timeless of financial management

    3. Information

    4. Compliance with applicable law of regulations

    5. Accountability to the broader.

21. (ix) Routine check and vouching

    Answer:

    Routine checking cover the checking of every carry forward for posting to ledger account and balancing of account. Watching include routine checkup which is mechanical checking of. Whereas vouchering is made on the basis of documentary evidence for stop voucher may be sale bill purchase bill payment recipt, pay in slip etc. All such type of documentary evidence are known as vouchers.

22. (x) Vouching of petty cash book

    Answer:

    Petty cash book:-It is usually kept on the important rest system for storm the auditor should as a certain that the system of petty cash is maintained on the important River system and notice the amount of important that should be consistent and in line with the requirements of company although it should not necessarily be right. After examine the editor see or otherwise of the system of internal check of the following should be performed for vouching the petty cash book.

    1. Checking of amount draw

    2. Cost and carry forward

    3. Check of vouchers

    4. Signature

    5. Pasting

    6. Surprised/ physically counting

    7. Allocation

    8. Authorisation payment

23. (xi) Auditor's lien

    Answer:

    Auditor’s lien:-If the auditor has a world as an accountant he get special right on book of accounts but if he has worked just as an auditor he does not get a special write on books for accounts of. Sometime a problem arise of auditors lines because there is no clarification in companies law.

24. (xii) Disqualification of auditor.

    Answer:

    Disqualification of an auditor.

    1. A person who is a a or any time during the the preceding three year was a director other officer and employee of the company.

    2. A person who is a partner of, or in the employment of the company.

    3. The spouse of director of the company.

    4. A person who is in debited to the company and

    5. A corporate body.