ICP Academy
CA Inter Grp 2
Audit Evidence
50 Marks
1. Bold Ltd. supplies navy uniforms across the country. The company has 5 warehouses at different locations
throughout the India and 4 warehouses at the borders. The major stocks are generally supplied from the borders.
Bold Ltd. appointed M/s KPM & Co. to conduct its audit for the financial year 2024-25. Mr. P, partner of M/s KPM
& Co., attended all the physical inventory counting conducted throughout the India but could not attend the same
at borders due to some unavoidable reason.
You are required to advise M/s KPM & Co.,
(a) How sufficient appropriate audit evidence regarding the existence and condition of inventory may be
obtained?
(b) How is an auditor supposed to deal when attendance at physical inventory counting is impracticable?
2. CA Rimi is appointed as an auditor of ASI Pvt. Ltd. During the audit, she decided to use various audit procedures
to gather sufficient and appropriate audit evidence such as:
i. While verifying the fixed asset, she examined factory equipment and verified the presence of each item.
ii. To verify the company’s accounts receivable, she directly sends balance confirmations to some of the
customers.
iii. CA Rimi examined purchase invoices, contracts, and authorisation records to assess the validity of payments
and the approval process.
iv. She independently performs the bank reconciliation that was originally carried out by the accounts
department.
v. She also checked the accuracy of depreciation calculations made by the client.
Identify and explain the type of abovementioned audit procedure performed by CA Rimi in accordance with
relevant SA.
3. Grape Limited presented its financial statements for the F.Y. 2023-24 to its auditor for expressing an opinion
thereon. The auditor while carrying out the audit started comparing various items of profit and loss account of
the year under audit with previous financial years. What is auditor trying to achieve by carrying out those
comparisons?
4. Quality Products Limited is engaged in manufacturing of bicycles. As part of manufacturing activities, it sends
raw material to some business entities and procures finished components from them. As on 31st March 2024
inventories lying with such business entities are material. Being statutory auditor of Quality Products Limited,
how you will obtain sufficient appropriate audit evidence regarding existence and condition of inventories lying
with such business entities?
5. CA Kanika audited books of accounts of Engineering Ltd. for the financial year 2022-2023. The auditor used an
audit procedure according to which all the documents and records maintained by the company were checked in
detail to obtain audit evidence. Explain the audit procedure used by the auditor. Comment on reliability of audit
evidence obtained by performing such an audit procedure in some situations.
6. CA J is conducting statutory audit of Gemini Ltd engaged in manufacturing of pharma products. The company is
fairly large one and has a well-functioning internal audit department. While considering sending out external
confirmation requests to trade receivables outstanding as on date of financial statements, CA J has delegated the
process of choosing trade receivables, designing requests and receiving responses from customers to internal
audit department. The responses are also received on the mail id of internal audit department. Is the approach of
CA J proper?
7. The newly appointed auditor of BTN Limited wants to obtain sufficient appropriate audit evidence about
whether the opening balances contain misstatements that materially affect the current period's financial
statements. What audit procedures should he perform for this purpose?
8. SPR Ltd has been into the media business since 2001. During the F.Y 2022-2023, many notices were received by
the company for hurting public sentiments and financial claims were filed against the company. As an auditor of
the company, you requested the management for arranging the meeting with company's external legal counsel.
Management is of the view that such meetings are necessary in certain circumstances only. Can you list down
such circumstances?
9. CA Mukul is the external auditor of Beige Ltd., a large company, engaged in the manufacturing of fast-moving
consumer (FMCG) goods. After assessing the internal audit function of the company, CA Mukul decided to use the
internal auditor of the company to provide direct assistance. In this context, what is meant by direct assistance
under relevant Standard on Auditing? Also comment whether prior to using internal auditor for direct assistance
for the purpose of audit, CA Mukul is required to obtain any written agreements or not. Give examples of
procedures in which CA Mukul shall not use an internal auditor to provide direct assistance
10. Discuss some of circumstances when work of the internal auditor cannot be used by external auditor.
