Auditing and Ethics - September 2026

1. Is the CFO right in stating that auditor cannot review matters such as expired contracts and annual fitness certificates ? 2 (A) Yes, audit deals only with the numbers in the financial statements. (B) Yes, the procedures followed by the auditor constitute an investigation. (C)_No, audit also involves an evaluation of internal controls and matters such as these can impact the integrity of the financial statements. (D)_ No, contract verification is an integral element of SA 220.

2. Is the engagement partner correct in his decision of not revising the audit program ? 2 (A) Yes, the audit program was updated before the audit started and are not allowed to be modified thereafter. (B) Yes, the staff can still perform those steps without featuring in an audit Program and they can always send the same by an e-mail to the engagement partner. : (C) No, audit procedures would differ for owned buses and hired buses and should…

5. CA Rajan wants to know from you whether the utilisation of the capital and : Tevenue reserves is correct ? What would you advise CA Rajan in this scenario? 2 (A) No, revenue reserve cannot be utilized to finance an extension of business and capital reserve cannot be utilized for supplementing divisible profits in lean years. (B) No, revenue reserve cannot be utilized for issuing bonus shares and capital reserve cannot be utilized for supplementing divisible profits in lean…

6. CA Rajan considered the implications of management’s refusal to provide the required written representations in the Auditor’s report to be issued to the shareholders of the company. With reference to SA 580, state the correct option that CA Rajan should exercise : 2 (A) Disclaim an opinion on the financial statements because management has refused to provide required written representations. (B) Express an Adverse opinion on the financial statements because management has refused to provide required written representations. (C)…

7. As part of understanding of the entity’s internal control system CA Amit assessed the control risk at a lower level. The decision of CA Amit is — : 2 (A) Correct, because there exists an inverse relationship between the efficiency of internal control of an entity and control risk. (B) Correct, because control risk represents the risk that the auditor’s procedures will fail to detect a material misstatement that exists in the financial statements. (C) Incorrect, because control risk…

8. As regards, the corrected and uncorrected misstatements, choose the most appropriate option as per SA 450. 2 (A) The auditor should obtain management representation on corrected misstatements. (B) The auditor should obtain written representation from the management that they believe that the effect of uncorrected -misstatements are immaterial, individually and in aggregate to the financial statements as a whole. (C) The auditor should obtain written representation from the management that they believe that the effect of corrected misstatements are…