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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_Series_2_Questions.pdf | Audit | MTP | May_2026 | (b)
“Familiarity threats are a significant concern affecting the independence of
auditors.”
Explain the meaning of familiarity threats and discuss the circumstances in which
such threats may arise. Also, briefly state how the provisions of the Companies
Act, 2013 help in addressing such threats.
(5 Marks) | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_Series_2_Questions.pdf | Audit | MTP | May_2026 | (c)
FRN Ltd. is a technology-driven company where most transactions such as sales,
purchases, and inventory movements are processed through an automated ERP
system. The auditor observed that the company relies heavily on system-based
processing, with minimal manual intervention.
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
WXY Biotech Ltd. is engaged in manufacturing specialised pharmaceutical
products. During the financial year 2024–25, the company:
•
Introduced a new product developed using advanced biotechnology;
•
Entered into complex revenue-sharing agreements with foreign
distributors;
•
Adopted a newly issued Account... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
RKP & Co., Chartered Accountants, were appointed as the statutory auditors of
Orion Engineering Ltd., a company engaged in manufacturing heavy industrial
equipment. During the course of audit, certain shareholders raised concerns
before the auditors regarding the following matters: | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 1.
They asked the auditor to certify whether the sophisticated imported
machinery installed in the factory was in perfect physical condition and to
estimate its remaining useful life.
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 2.
Some shareholders also requested the auditor to confirm the genuineness
of certain supplier invoices and contracts, alleging that some documents
might be forged. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 3.
A group of investors further demanded that the auditor conduct a detailed
investigation into an alleged fraud by a senior employee, including
questioning employees and recording statements under oath.
With reference to the above situation, explain the matters which fall outside the
scope of an audit. Also dis... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
XYZ Limited is engaged in manufacturing activities. As at 31st March 2025, the
Trade Receivables balance amounted to ` 8 crores. The statutory auditor selected
25 customer balances for external confirmation in accordance with the applicable
Standard on Auditing relating to external confirmations.
The result... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
Buildwell Limited, a manufacturing company engaged in production of industrial
components, has reported total purchases of ` 48 crores for the year ended
31st March, 2025. During the audit, the statutory auditor noted that purchases
constitute a significant portion of total expenses and directly impact invent... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
You are the statutory auditor of ABC Bank Ltd., a scheduled commercial bank
having 350 branches across India. During the audit for the year ended
31st March 2025, you observe the following:
•
Operating expenses have increased by 28% compared to the previous
year, whereas total income has increased only by 10... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
RST & Co., Chartered Accountants, have been the statutory auditors of Bright
Vision Ltd., a company engaged in wholesale trading of electronic goods, for the
last 6 years.
During the financial year 2024–25, the company significantly changed its business
model by:
•
Introducing online sales through its own ... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
Verma & Kapoor, Chartered Accountants, were appointed as the statutory
auditors of Mor Components Ltd. for the financial year 2024–25. The company is
engaged in manufacturing automobile spare parts and has a large number of sales
transactions during the year.
While planning the audit of trade receivables amo... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
Mindset Appliances Limited, a listed company engaged in manufacturing electrical
equipment, closed its books of account for the year ended 31st March 2025. The
statutory audit is in progress and the auditor proposes to sign the audit report on
30th June 2025.
During the period between 31st March 2025 and 30... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 1.
A major debtor owing ` 8 crores as on 31st March 2025 was declared
insolvent on 15th April 2025. No specific provision had been made against
this debtor as at year-end. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 2.
A legal case for product liability, for which a provision of ` 3 crores was
created as on 31st March 2025, was settled out of court on 10th May 2025
for ` 1.80 crores. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 3.
On 20th May 2025, the company issued fresh equity shares through a
qualified institutional placement. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 4.
On 25th May 2025, the Board approved a plan to merge with another listed
entity, subject to regulatory approvals. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 5.
On 5th June 2025, a major fire destroyed finished goods inventory worth
` 6 crores stored in a warehouse. The loss is expected to be fully covered
by insurance.
The management has not made any adjustments in the financial statements but
has disclosed all the above events in the Notes to Accounts. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
State the auditor’s considerations and implications on the financial
statements in each case with reasons. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
GreenGrow Multi-State Co-operative Society Ltd. (GMSCSL) is engaged in
procurement and export of agricultural produce and operates across 6 states in
India. The Society has reported continuous expansion in turnover over the past
4 years. However, during the financial year 2024–25, the following issues came
... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 5.
There were persistent cash flow mismatches and short-term loans were
being used for long-term capital projects.
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 6.
Trade associations complained that the Society’s pricing practices were
distorting the agricultural export market.
On the basis of preliminary inquiry, the Central Government is considering to
direct a special audit of the Society. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
Examine whether the Central Government is empowered to order a special
audit in the above case. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
KRT & Co., Chartered Accountants, have been appointed as the statutory auditors
of First Heavy Engineering Ltd., a company engaged in the manufacture of
specialised industrial equipment. The company operates through multiple
manufacturing units and warehouses located across different states. During the
prelim... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
SRT & Co., Chartered Accountants, are the statutory auditors of Dee Infra Projects
Ltd., a listed company engaged in large infrastructure contracts.
During the audit for the year ended 31st March 2025, the Engagement Partner,
Mr. A, came to know of the following matters: | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 1.
The spouse of one of the senior members of the engagement team holds
substantial equity shares in Dee Infra Projects Ltd. | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 2.
The firm has recently provided consultancy services relating to internal
financial controls implementation to the same client.
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 3.
A partner of the firm has been offered a position on the advisory board of
a group company of Dee Infra Projects Ltd.
Mr. A believes that certain situations may create threats to independence.
However, due to the significance of the client, some partners of the firm are
reluctant to consider withdrawal.
As... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
Parmarth Ltd. is engaged in manufacturing and holds significant inventory. The
management conducts physical verification of inventory at periodic intervals, but
certain discrepancies were noticed during the year. The company has also been
sanctioned working capital limits in excess of ₹5 crore from banks based ... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
While forming an opinion on the financial statements, the auditor is required to
evaluate various aspects relating to the presentation and disclosures in the
financial statements.
Explain the specific evaluations that the auditor is required to perform while
evaluating the financial statements. Further, sta... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
TSR & Associates, Chartered Accountants, are the statutory auditors of Gama
Manufacturing Limited, a company engaged in manufacturing industrial
equipment. The company has 650 employees working across factory and
corporate office locations.
During the audit for the year ended 31st March 2025, the auditor no... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
ABC Ltd. is engaged in manufacturing consumer appliances. During the year
ended 31st March 2025, the company has recognized the following:
•
Provision for warranty amounting to ` 2.80 crores in respect of products
sold during the year, based on past failure trends and actuarial valuation.
•
Provision of ` 1.... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (a)
OPQ Infrastructure Ltd. is engaged in the construction of large industrial projects.
The company has significant estimates in its financial statements such as actuarial
valuation of employee benefits, environmental restoration liabilities, and
provisions relating to ongoing legal disputes.
CA R has been appo... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (b)
Meet Electronics Ltd., a manufacturing company, is planning to appoint statutory
auditor for the financial year 2024–25. The Board has approached CA S for
accepting the audit engagement. During the preliminary discussions, the
management informed CA S that the financial statements will be prepared using
an in... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | (c)
Auditor of Sunshine Ltd. is of the view that due to greater management
intervention to specify accounting treatment, the risk of material misstatement is
greater for non-routine transactions. Is the view of the auditor correct? Specify
the other matters due to which the risk of material misstatement is great... | [
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Inter_P5_Audit_Auditing_and_Ethics_May_2026_MTP_series_1_Questions.pdf | Audit | MTP | May_2026 | 2025. During the course of audit, CA P and his audit team performed various audit
procedures relating to revenue recognition, inventory valuation and verification of
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fixed assets. However, while reviewing the audit files, it was observ... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) Subodh has recently joined an audit firm as an articled clerk. He was in
process of assembling audit working papers in audit file of Cop Limited,
as per the instructions of his senior. While assembling, he noticed
following working paper in audit file: -
Timing of Audit Activities
Activitiy
Expected Timing ... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
CA Tina, while inspecting financial statements of a company, notices that
gross profit ratio of company has increased from 14% in year 2022-23 to
24% in year 2023-24. Considering the above, she has assessed the risk
of material misstatement to be high with respect to assertions relating to
revenue and various ... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (i)
List out a few possible reasons which could have led to abnormal
jump in gross profit ratio.
(ii)
Do you agree with viewpoint of Tisha? Provide reasons for your
answer.
(5 Marks) | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
Expert Industries Limited is engaged in petrochemical business. Due to
nature of its business, the company has hired PQR Associates, a
reputed firm of chartered engineers, to determine the quantity and
valuation of inventories for preparation of financial statements. The
auditor of Expert Industries Limited wa... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) Stay fit Private Limited is a start-up that has been in business for about
two years. It runs an application which provides valuable information
pertaining to nutrition and helps its clients to access customized healthy
food. The company’s revenues are expected to grow in the coming
period. Although company... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
PQR & Associates and MNO & Co., both firms of Chartered Accountants,
have been appointed as joint auditors of Gama and Beta Limited. Before
the commencement of the audit, the joint auditors should discuss and
develop a joint audit plan. In developing the joint audit plan, the joint
auditors should identify div... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
The management of Cool Drinks Limited suspects that some employees
of the company may be involved in making fraudulent payments to
dummy workers at its various plants in the country. Therefore, they are
considering appointment of a firm of auditors to conduct audit involving
detailed examination of accounts. H... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) Mr. Chetan is appointed as an auditor of Spot Limited, a small company.
Mr. Chetan is aware that CARO 2020 is not applicable to small company.
List out the classes of companies that are specifically exempt from the
applicability of CARO 2020.
(5 Marks) | [
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0.035974979400634766,
... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
Zed Limited is engaged in the manufacturing and export of shoes. The
statutory auditor of the company wants to reasonably ensure that only
the inventories recorded in the financial statements are exclusively
owned by the company and do not include any inventories that belong
to third parties but includes inven... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
SQC 1 requires assumption of leadership responsibilities for quality
within firm. Are such leadership responsibilities required for audit
engagements only? Who assumes such leadership responsibilities
within firm? How it is important for audit quality?
(4 Marks) | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) CA X is contemplating the use of negative confirmation requests as the
sole substantive audit procedure to verify certain accounts payable
balances reflected in financial statements of a
company.
Which
conditions need to be met to use negative confirmation requests as
stated above? Additionally, CA X is of ... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
CA H has been offered audit of financial statements of a society engaged
in promoting social causes, such as setting up of drug de-addiction
centres for misguided youth and rehabilitating such young people by
helping them find avenues of gainful employment. However, CA H failed
to send audit engagement letter ... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
While verifying cash and cash equivalents of a company, CA D
engagement partner, is very particular that Bank reconciliation statement
(BRS) prepared by the management in respect of bank account
maintained by the company is proper to rule out misstatements in cash
and cash equivalents reflected in the financia... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) CA Sumit has been appointed as statutory auditor of Core Limited. List
out some matters that he may consider in determining whether a
deficiency or combination of deficiencies in internal control constitutes a
“significant deficiency”.
(5 Marks) | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
While conducting the audit of Zeena Limited, CA E is trying to obtain
understanding of different components of internal controls of
the
company. Such an understanding is necessary and is required to be
documented in accordance with Standards on Auditing. In this context,
how he shall obtain understanding of t... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
Section 72(1) of the Multi-State Co-operative Societies Act, 2002 states
that only a person who is a Chartered Accountant within the meaning of
the Chartered Accountants Act, 1949 can be appointed as an auditor of
a multi-state co-operative society. Who, according to Section 72(2), is
disqualified from being a... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (a) National Bank has advanced cash credit facility of ` 25 Lakh to Sun
Industries. Following is the extract of account of Sun Industries reflecting
in CBS of Bank from December 1, 2023 to March 31, 2024: -
Date
Particulars
Dr.
Cr.
Balance
(Dr.)
01/12/2023 To Transfer
45,000
24,75,000
31/12/2023 By Cleari... | [
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-0... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (b)
While performing audit of financial statements of a listed company,
statutory auditor needs to maintain an attitude of professional skepticism
for related party information. State examples of the records or the
documents
that
may
provide information
about
related
party
relationships and transactions.
(5... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2024_MTP_1_Questions.pdf | Audit | MTP | September_2024 | (c)
Sanjana is of the view that there exist some disadvantages in the use of
audit programmes but most of these can be removed by following some
concrete steps. Do you agree with her perspective? Comment. (4 Marks)
OR
BOTS is a manufacturing entity having material Property, Plant and
Equipment (PPE) items in its ... | [
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-... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
CA Sakshi, the statutory auditor of ZMC Ltd., a medium-sized trading company,
was reviewing the company’s internal control system as part of her audit
procedures. She noticed following instances where errors and lapses occurred:
•
An employee failed to take action on an important report due to lack of
unders... | [
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-... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
CA Veer is conducting the statutory audit of Lamex Industries Ltd., a company
engaged in manufacturing and export of textile goods. The audit firm has been
auditing the company for the last three years using the same detailed audit
programme prepared during the initial year of engagement. During the audit, one ... | [
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0.015264644287526608,... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
M/s Dheeraj & Associates, Chartered Accountants, have been appointed as
statutory auditors of SPICE Limited for the year 2024-25. CA Dheeraj relied solely
on the prior year’s audited financial statements and did not apply any audit
procedures regarding opening balances. He is of the view that since financial
... | [
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-0... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
Identify and explain the assertions that the auditor will check by performing the
following audit procedures: | [
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-0.0... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (i)
Any inventory held by the entity on behalf of another entity has not been
recognised as part of inventory of the entity.
(ii)
Employee benefit expense has been incurred during the period in respect
of the personnel employed by the entity.
(iii)
Inventory has been recognised at the lower of cost and net realis... | [
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0... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (v)
Any inventory held by a third party on behalf of the entity has been included
as part of the inventory balance.
(5 Marks) | [
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0.... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
Advances generally constitute the major part of the assets of the bank. There are
large number of borrowers to whom variety of advances are granted. The audit of
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advances requires the major attention from the auditors. In carrying... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
ABS & Co., Chartered Accountants, have been appointed as statutory auditors of
Aerotech Systems Pvt. Ltd., a company that makes advanced equipment used in
airplanes. Considering technical and complex nature of operations, the auditors
recognise that involvement of experts in the audit is required. Does consider... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
The auditor should maintain alertness for related party information while reviewing
records and documents. He may inspect the records or documents that may
provide information about related party relationships and transactions. List any
ten documents or records that an auditor may inspect to identify related pa... | [
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0.0... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
CA Ritu is conducting the statutory audit of KLM Ltd. During the audit, she
encountered significant difficulties in obtaining certain information from the
company’s finance team. She also noted that one of the accounting practices,
although acceptable under the applicable financial reporting framework, may not... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
Fair Ltd. has been sanctioned a Cash Credit facility of ` 1.50 crores by Worthy
Bank. Based on the monthly stock statements submitted for the last quarter, the
drawing power is calculated at ` 1.45 crores. The outstanding balance in the cash
credit account at the end of the quarter is ` 1.40 crores. Interest ... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
Delightful Limited is required to present comparative financial statements for the
year 2023-24 and 2024-25. CA Mohit has been appointed as the statutory auditor
for the year 2024-25. While reviewing the financial statements of year 2023-24,
he notices that the last year's financial statements contain an adver... | [
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0.01044557336717844... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
CA Sulsa is conducting the statutory audit of SATI Ltd. While reviewing the
purchase records, she noticed a large purchase transaction supported by only one
internal document. The management responded that this is usual practice and
assures her of the document’s authenticity. However, the amount involved is
m... | [
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Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
CA Mahavir is conducting a training session for newly joined audit trainees. He
explains the concept of audit risk and its three components. He mentions that
while two components of audit risk are beyond the auditor’s control, one
component can be influenced by the auditor. Identify the component of audit risk ... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
Shiksha Public School maintains a Fee Register and issues receipts to students
for fee collection. During the audit, the auditor observed that some students were
granted concessions, and some fee payments were pending. As an auditor, what
procedures would you perform to verify the student fee collections in su... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
RST Ltd., a company engaged in manufacturing eco-friendly packaging solutions,
is planning to enter into a new geographical market and launch a new
biodegradable product line. To attract investors and secure bank funding, the
management has prepared prospective financial information based on expected
sales an... | [
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... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
CA Saurabh is conducting the statutory audit of UVW Ltd. for the year 2024-25.
While verifying the purchases made by the company, he decided to perform
analytical procedures for obtaining audit evidence regarding the overall
reasonableness of purchase quantity and price of purchases. Briefly mention the
Downlo... | [
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-0.... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (a)
Money Ltd. is a listed company engaged in the business of manufacturing. During
the financial year 2024–25, the company has given loans to its subsidiary and
provided a corporate guarantee on behalf of a related party.
State the reporting responsibilities of the auditor under Clause (iii) of Paragraph 3
of ... | [
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0.... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (b)
TED Ltd. has taken an office building on rent for its operations. The auditor wants
to verify the rent expense recorded in the books. Describe the audit procedures
that should be performed by you as an auditor to verify the rent expense.
(5 Marks) | [
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-0.... |
Inter_P5_Audit_Auditing_and_Ethics_September_2025_MTP_Series_2_Questions.pdf | Audit | MTP | September_2025 | (c)
CA Sandeep has identified certain misstatements during course of audit of an
entity. Except two misstatements, all were corrected by management. He wants
to obtain written representation from management regarding effects of these
uncorrected misstatements. Describe matter contained in such written
representat... | [
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-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## After studying this chapter, you would be able to understand-
- ♦ Meaning, nature and scope of audit
- ♦ Objectives of audit
- ♦ Inherent Limitations of audit
- ♦ Benefits of audit
- ♦ Meaning of assurance engagements
- ♦ Difference between reasonable assurance engagement and limited assuranc... | [
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0.014487413689494133,
0.030995428562164307,
0.013429186306893826,
-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## AUDITING AND ETHICS
<!-- image -->
<!-- image -->
Sameer, a young CA aspirant, takes interest in events happening around him. Business and financial dealings of corporate world interest him very much. He regularly reads a newspaper publishing mainly business and economic ne... | [
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0.021326212212443352,
0.0354553014039993... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 1. INTRODUCTION
What do such real-life situations highlight? Such instances underline importance of auditing in today's complex business environment. Be it investors desirous of investing their money in companies, shareholders anxious to know financial position of companies they... | [
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-0.0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## AUDITING AND ETHICS
the basis of such audited financial statements. Herein lies the importance of auditing. You can very well understand how significant is role of auditing profession and auditors in modern world involving multitude of economic activities being carried out in eq... | [
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-0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 2. ORIGIN OF AUDITING
Before we get to understand meaning and nature of auditing, let's travel back in time to know about origin of auditing. Auditing has existed even in ancient times in many societies of world including India. The reference to auditing is found in Kautilya's Arthshastra even in ... | [
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-0.00152745156083256... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 3. MEANING AND NATURE OF AUDITING
'An audit is an independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon'.
An incisive... | [
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-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 4. INTERDISCIPLINARY NATURE OF AUDITINGRELATIONSHIP WITH DIVERSE SUBJECTS
Auditing is interdisciplinary in nature. It draws from diverse subjects including accountancy, law, behavioural science, statistics, economics and financial management and makes use of these subjects. Since audit ... | [
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0.03101804479956627,
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-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## AUDITING AND ETHICS
Auditing and Behavioural Science: Knowledge of human behaviour is essential for an auditor to effectively discharge his duties .
Auditing and Statistics & Mathematics: Auditor is also expected to have the knowledge of statistical sampling for meaningful conclusio... | [
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0.0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 5. OBJECTIVES OF AUDIT
In conducting audit of financial statements, objectives of auditor in accordance with SA-200 'Overall Objectives of the Independent auditor and the conduct of an audit in accordance with Standards on Auditing' are: -
- (a) To obtain reasonable assurance about whether the fi... | [
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0.01980520784854889,
-0.005958251655101776,
-0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## An Overview of Objectives of Audit
| Checkbox | Objectives of audit |
|------------|------------------------------------------... | [
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0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 6. SCOPE OF AUDIT-WHAT IT INCLUDES
Scope refers to range or reach of something. The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. Users of financial statements may be shareholders, employees, customers, government and regulatory authori... | [
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0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (2) Reliability and sufficiency of financial information
The auditor should be reasonably satisfied that information contained in underlying accounting records and other source data (like bills, vouchers, documents etc.) is reliable and sufficient basis for preparation of f... | [
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-0.0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (3) Proper disclosure of financial information
The auditor should also decide whether relevant information is properly disclosed in the financial statements. He should also keep in mind applicable statutory requirements in this regard.
It is done by ensuring that financial statement... | [
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0.0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 6.1 Scope of audit-What it does not include
Auditor is not expected to perform duties which fall outside domain of his competence. For example, physical condition of certain assets like that of sophisticated machinery cannot be determined by him. Similarly, it is not expecte... | [
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0.029408542439341545,
-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## An Overview of Scope of Audit
| Check box | Scope of audit of financial statements |
|-------------|---------------------------------------------------------------------------------------|
| | Coverage of all aspects of entity relevant t... | [
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0.0621136836707592,
0.036844123154878616,
0.02830028347671032,
-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## Test Your Understanding 1
Lalji Bhai has purchased shares of a company listed on NSE. The audited financial statements of the company provide picture of healthy financial performance having robust turnover, low debt and good profits. On above basis, he is absolutely satisfied that mon... | [
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0.05430345982313156,
-0.006824085488915443,
-0.0... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## Test Your Understanding 2
Good deeds Limited is engaged in business of recycling of wastes from dumping grounds of municipal corporation of Indore to usable manure. It is, in this way, also, helping to make the city clean.
During course of audit by Zoha & Zoha, a firm of auditors, it is obse... | [
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-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## Test Your Understanding 3
A huge fire broke out in NOIDA plant of KT Limited. Plant assets comprising building, machinery and inventories were insured from branch of a public sector insurance company. Apart from an insurance surveyor who was deputed for assessing loss, t... | [
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0.015988821163773537,
0.006406916305422783,
-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## 7. INHERENT LIMITATIONS OF AUDIT
The process of audit suffers from certain inbuilt limitations due to which an auditor cannot obtain an absolute assurance that financial statements are free from misstatement due to fraud or error. These fundamental limitations arise due to the followin... | [
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0.03595348075032234,
0.015094824135303497,
0.004829905927181244,
-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (1) Nature of financial reporting
Preparation of financial statements involves making many judgments by management. These judgments may involve subjective decisions or a degree of uncertainty. Therefore, auditor may not be able to obtain absolute assurance that financial statemen... | [
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0.05201396346092224,
0.06833242624998093,
0.01114005409181118,
-0.0031884387135505676,
-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (2) Nature of Audit procedures
The auditor carries out his work by obtaining audit evidence through performance of audit procedures. However, there are practical and legal limitations on ability of auditor to obtain audit evidence. For example, an auditor does not test... | [
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0.03610879182815552,
0.018685659393668175,
0.026930997148156166,
-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (4) Timeliness of financial reporting and decrease in relevance of information over time
The relevance of information decreases over time and auditor cannot verify each and every matter. Therefore, a balance has to be struck between reliability of information and cost of obtaining it. | [
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-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## AUDITING AND ETHICS
Consider, for example, an auditor who is conducting audit of a company since last two years. During these two years, he has sought detailed information from management of company regarding various matters. During his thirdyear stint, he chooses to rely upon some information obt... | [
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0.008035525679588318,
-0.... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## (5) Future events
Future events or conditions may affect an entity adversely. Adverse events may seriously affect ability of an entity to continue its business. The business may cease to exist in future due to change in market conditions, emergence of new business models or products or due to onse... | [
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0.011881099082529545,
-... |
Inter_P5_Audit_Mod1_Chapter_1_Nature_Objective_and_Scope_of_Audit.pdf | Audit | Study_Material | N/A | [Concept: Theory]
## Timeliness of financial reporting and decrease in relevance of information
over time : Relevance of information, and thereby its value, tends to diminish over time, and there is a balance to be struck between the reliability of information and its cost.
Future events: Future events ... | [
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0.002... |
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