
Dear Professional Seniors & Friends,
Welcome to this wonderful weekend MCQ self challenge!
This weekend challenge is on Audit Conclusions and Reporting having 5 MCQs to be self answered by participants to take self challenge. The detailed answer of these MCQs shall be posted on Monday for the self assessment of the participants. This post shall be of immense use of the participant.
MCQ 20.1: Wipro Ltd has branches all over the India. Suddenly due to floods in Kerala, all the Records of Wipro Ltd at its kerala branch were destroyed due to Floods. No documents were made available. The turnover of Wipro Ltd (all over India) was Rs 100 Crore. If turnover from Kerala Branch alone was Rs 25 Lakhs and the Company has disclosed the same in Financial Statements as notes to accounts. There are no alternative checks that could be applied except External Party Confirmations. As an auditor of Wipro what would be your opinion on the Financial Statements.
A. Unmodified Opinion with Emphasis on Matter that the books of the Kerala Branch have been destroyed
B. Modified Opinion- Adverse Opinion
C. Modified Opinion- Disclaimer of Opinion
D. Modified Opinion –Qualified Opinion
MCQ 20.2: What if the above the above Question the company doesn’t disclose the fact that the Books of Accounts of Kerala Branch have been destroyed in Financial Statement.
A. Unmodified with Emphasis on Matter that the books of the Kerala Branch have been destroyed.
B. Modified Opinion- Adverse Opinion.
C. Modified Opinion- Disclaimer of Opinion.
D. Modified Opinion –Qualified Opinion.
MCQ 20.3: What if in the Above Question (1) the Turnover of Kerala Branch alone was 51 Crore and the company disclose the fact that the Books of Accounts of Kerala Branch have been destroyed. Would your opinion be the same?
A. Unmodified with Emphasis on Matter that the books of the Kerala Branch have been destroyed
B. Modified Opinion- Adverse Opinion
C. Modified Opinion- Disclaimer of Opinion
D. Modified Opinion –Qualified Opinion
MCQ 20.4: Key Audit Matters are to be communicated in Auditor’s Report (w.e.f 1.4.18)
A. As a substitute for disclosure’s in the Financial Statement
B. As substitute for Auditor Expressing a modified opinion in the Financial Statement
C. As a separate opinion on Individual Matters
D. When auditor is required by law or regulation to communicate key audit matters in the auditor’s Report.
MCQ 20.5: When auditor is unable to obtain sufficient and appropriate audit evidence that financial statement on which to base the opinion and the auditor concludes that possible effects of the financial statement can be both Material and Pervasive. Then the Key Matters to be included in the Auditor’s Report Should
A. Disclose that No Sufficient & Appropriate Evidence is obtained
B. Auditor is prohibited in communicating Key Audit Matters in the Auditor’s Report i.e No disclosure is Required
C. Disclose that Financial Statement don’t Present a True and Fair View
D. Both A & C
Sincere Regards!
CA Sanjay Kumar Agrawal
Mobile: 9810116321
To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal
For All MCQ post please click on:
Webpage: http://www.casanjay.me/
Facebook: https://www.facebook.com/CA.Sanjay.K.Agrawal/
Linkedin: https://www.linkedin.com/in/ca-sanjay-kumar-agrawal/
Dear Professional Seniors & Friends,
Warm Greetings!
Answer MCQ 20.1: A) Unmodified Opinion with Emphasis on Matter that the books of the Kerala Branch have been destroyed
Answer MCQ 20.2: D) Modified Opinion –Qualified Opinion
Answer MCQ 20.3: C) Modified Opinion- Disclaimer of Opinion
Answer MCQ 20.4: D) When auditor is required by law or regulation to communicate key audit matters in the auditor’s Report.
Answer MCQ 20.5: B) Auditor is prohibited in communicating Key Audit Matters in the Auditor’s Report i.e. No disclosure is required.
Practical Analysis for MCQ 20.1 to 20.3:
As per SA 320 ‘’Materiality in Planning and Performing an Audit‘’ When establishing an overall audit strategy, the auditor shall determine materiality for the financial statements as a whole.
Determining Materiality involves the exercise of professional judgment. A percentage is often applied to a chosen benchmark as a starting point in determining materiality for the financial transaction as a whole.
There are certain items on which the attention of users of the particular entity is to be focused i.e financial performance users may tend to focus on Profit & Revenue.
When planning the audit, the auditor based on materiality considers what items would make the financial information materially misstated and items for which sufficient & Appropriate Audit Evidence is required.
For particular balances and Class of Transaction Amounts for determining mis-statement can be set by the Auditor at less than materiality levels i.e levels for a particular Class of Transaction, account balances and disclosures.
As per SA 705 “Modification of opinion in the Independent Auditor’s Report”, the auditor based on the Audit Evidence obtained frames an opinion that the financial statement as a whole is not free from Material Misstatement.
Nature of Matter Giving Rise to Modification | Auditor’s Judgement about the pervasiveness of the Effects or Possible effects on the Financial statements | |
Material but not Pervasive | Material & Pervasive | |
Financial statements are Materially Misstated | Qualified Opinion | Adverse Opinion |
Inability to obtain sufficient & Appropriate Audit Evidence | Qualified Opinion | Disclaimer of Opinion |
As per SA-706 “Emphasis on Matter Paragraph and Other Matter paragraph in the Independent Auditor’s Report”
Emphasis of Matter paragraph is a para Included in Auditor’s Report that refers to a matter appropriately presented/disclosed in Financial statement that is in auditor’s judgment fundamental to the user’s understanding of Financial statements.
MCQ 20.1:
Based on the above analysis, Correct answer to MCQ 20.1: A) Unmodified Opinion with Emphasis on Matter that the books of the Kerala Branch have been destroyed
MCQ 20.2:
Based on the above analysis, Correct answer to MCQ 20.2 : D) Modified Opinion-–Qualified Opinion
MCQ 20.3:
Based on the above analysis, Correct answer to MCQ 20.3 : C) Modified Opinion- Disclaimer of Opinion
Practical Analysis for MCQ 20.4:
New Standard on Auditing have been Issued by ICAI which is effective from 1.04.2018.
Meaning of Key Audit Matters: matters in the auditor’s professional judgment were most significant in audit of financial statement for the current period.
As per SA-701 “Communicating Key Matters” Paragraph in the Auditor’s Report is not:
But, as per SA 701, Key Audit Matters is to be communicated in the Auditor’s Report when The Auditor is required to comply by law and Regulation to communicate in the auditor’s report.
Based on the above analysis, Correct answer to MCQ 20.4: D) When auditor is required by law or regulation to communicate key audit matters in the auditor’s Report .
Practical Analysis for MCQ 20.5:
Based on the above analysis, correct answer to MCQ 20.5: B) Auditor is prohibited in communicating Key Audit Matters in the Auditor’s Report i.e. No disclosure is required.
(Disclaimer: The objective of the MCQ post is just to discuss the concept, it may happen, by change of facts, the answer may be different. Please do not treat this as professional opinion; you can definitely have your own opinion.)
Sincere Regards!
CA Sanjay Kumar Agrawal
Mobile: 9810116321
To access MCQ posts regularly, please Join Telegram Channel:
https://t.me/caSanjayKumarAgrawal
For All MCQ post please click on:
Webpage: http://www.casanjay.me/
Facebook: https://www.facebook.com/CA.Sanjay.K.Agrawal/
Linkedin: https://www.linkedin.com/in/ca-sanjay-kumar-agrawal/
#CASanjay #MrCA #MsCA #MCQ #CharteredAccountants #CharteredAccountant #CA #India #SmartCA #BrandCA
Please Post Your Comments & Reviews