Poser 1. Earnest Youngest & co. of which Ernest and Youngest are partners both practicing out side India, has been appointed as auditor of Weaker Oldest Ltd. a company registered under companies act, 1956 .
(Hint: can not be appointed as auditors as per s.226(2))
Poser-2. MR. Rivaldo Ronaldo a chartered accountant from BRAZIL who has established his practice in India as a management consultant has been appointed as auditor by FIFA Ltd. a company registered under companies act, 1956 (Hint: Can not be appointed as auditor as per s. 226(1))
Poser-3. 420 Software’s Pvt. Ltd. has appointed shrewd and cunning ltd. of which all directors are chartered accountants practicing in India as its auditors. (Hint: A body corporate cannot be appointed as auditor)
Poser-4. M/s IA & Co. internal auditors were also appointed as statutory auditors of under s. 224(1) in AGM of SLY Ltd.
(Hint: According to clarification by DCA internal auditors of a company can not be appointed as its auditors under s.224)
Poser 5. M/s Accountant & Reconciler a firm of chartered accountant has been assigned prepare the accounts and all the reconciliation of Mistakes (India)Ltd. In its AGM Mistakes (India) Ltd. appointed the same firm as its auditor. (Hint: Hint according to clarification by ICAI person or firm carrying on accounting activities of a company can not be appointed as its auditors under s.224)
Poser-6. MR. X the partner of Mr. Y one of the directors of Z ltd. Has been appointed as auditor of Z ltd.
(Hint: According to s. 226(3) partner of officer is not competent to become auditor of the company)
Poser -7. Mr. X and Y are partner in X Y & Co. a firm of chartered accountants. Mr. X is also employee of Mr. Z a practicing chartered accountant and director of D Ltd. XY & Co. received a letter of appointment as auditor from D Ltd. whether it is possible for XY & Co. to accept the appointment.
(Hint: No, as Mr. .x is employee of officer of the company)
Poser-8. M r. Beans a practicing chartered accountant, is saughtto appointed in as auditor of Touchtel Ltd. It the practice of Touchtel Ltd. to issue telephone bills every two months. At any time during the year Mr. Beans account in Touchtel Ltd. is averagely shows debit balance of 2500 Rs.
(Hint: Not qualified to be appointed as an auditor as the indebtness is more than Rs. 1000/-)
Poser -9. In Purshotaam Textiles Ltd. the details of the account of APD & Co. The auditors of the company shows that throughout the year this account was having debit balance of 10000/- on account of fees received in advance and advance for expenses pending for submission of details of expenses.
(Hint: It will not be treated as indebtness)
Poser-10. Mr. SS the practicing chartered accountant given guarantee to the Indusind Bank Ltd. in relation to housing loan of Rs. 60 Lacs financed by the bank to his son . Now Indusind Bank Ltd. wishes to appoint Mr. SS as their auditor.
(Hint: Can not appoint the auditor as guarantee given for more than Rs. 1000)
Poser -11. APD &C0, a firm of chartered accountants took a loan of Rs. 50 lacs from Ruined Finance Pvt. Ltd. as now APD & Co, can not become auditor of Ruined Finance Ltd. it has been decided to appoint Mr. M a partner of APD & Co. as an auditor in his individual capacity.
(Hint: When the firm is indebted each partner of the firm is indebted)
Poser- 12. APD & CO. a firm of chartered accountants has been appointed as auditors of Rich finance Ltd. from which Son of Mr. AT a partner of the firm took a loan of Rs. 50 lacs.
(Hint: can be appointed as auditor)
Poser-13. APD & Co. Appointed as internal auditors in RPL Pvt. Ltd. at the time of appointment there is a debit balance of APD& Co. in the books of the company regarding Calls in arrears of Rs. 25000/-
(Hint: 226(3) is not applicable to internal auditors)
Poser-14. APD & Co. appointed as auditor in Municipal Corporation Indore as auditor. At the time of appointment property tax of Rs. 12000 related to ST one of the partners of APD & Co. was outstanding.
(HINT: S. 226(3) is applicable to companies registered under companies act but notification issued by ICAI regarding indebtness entities other than company accepting the appointment will be a professional misconduct.)
Poser-15. APD & Co. appointed as auditors of TSL Ltd. At the date of appointment APD & Co.'s investment in equity shares of TSL Ltd. was 10000/-.
(Hint: APD & Co. cannot be appointed as auditors as holding the security containing voting rights)
Poser -16. APD & Co. appointed as auditor of A ltd in which wife of Mr. AS one of the partners is director at a monthly , remuneration of Rs. 30000/-.
(Hint: Provisions of S. 314 are required to be complied with and disclosure of interest in auditor’s report is required) but recently issued council general guidelines 2008 imposes indirect disqualification as "if relative is substantially interested ' member can't issue an opinion on financial statement of the entity.
Poser-17. AS & Co. was appointed as auditor of XY Ltd. later on proprietor of the firm adjudged un discharged insolvent. Whether his office will be deemed as vacated.
(Hint; Yes, because after becoming insolvent he is not a member of ICAI hence it will be a casual vacancy)
Poser-18. BDS & Co. appointed as auditors of T Ltd. Mr. B a partner took loan from T Ltd. for house construction after appointment.
(Hint: Office of the auditor will be treated as deemed to be vacated at the date of taking such loan.)
Poser-19. X a foreign company appointed Mr. A of A &co. chartered accountants as their auditor, at the date of appointment Mr. A is finance director of the foreign Company in India. Y Ltd. an Indian Company holds 60% shares in X. Mr.A is proposed to appoint as auditor of Y Ltd.
(Hint: According to S. 226(4) Mr. A can not be appointed as auditor of holding company if the auditor is disqualified in the subsidiary body corporate)
Poser-20. Mr. X has 20 public company audits and following are the proposals before him. Suggest him which one of the following he may accept
1. Tax audit of Z ltd. having paid share capital more than Rs.25 lacs
2. Internal audit of Z ltd. having paid share capital more than Rs.25 lacs
3. Branch audit of 10 branches of the above Z ltd.
4. Environment audit of Above Z Ltd.
5. Audit of above Z ltd on behalf of lending institution
6. Audit of z Pvt. Ltd. having paid p share capital of 25 lacs
7. Audit of F international a foreign company
8. Audit of Credit co operative society of Indore 9. Audit of Indore branch of CIRC of ICAI 10. Audit of x Ltd a company not having share capital
(Hint: Mr. X can accept all the above)
Poser -21. Mr. X has been appointed as auditor of Z public ltd. having paid up share capital of Rs. 20 Lacs at the time of appointment MR. x was already appointed as auditor of 10 public companies each of which were having paid up share capital more than Rs. 25 lacs.. After acceptance of the above appointment Z public Limited has issued bonus shares to its existing shareholders and now the share capital of the company is Rs. 27Lacs. BODs of Z public limited are of opinion that the auditor's office is deemed to be vacated on the day on which company issued bonus shares.
(Hint: 224(1B) considers only the date of appointment.)
Poser-22. Mr.X a practicing chartered accountant is of opinion that, now after amendment by companies amendment act 2000 he can conduct as many no of company audits of Private companies as he can. Comment
(Hint: although S. 224(1B) is not applicable to Pvt. Companies but Notification issued by The ICAI is limiting the total company audits up to 30)
Poser-23. KNPH & Co. has four Partners K, N,P, and H. Mr. H is in full time employment elsewhere. KNPH is currently having 60 audit assignments of various public limited companies including one special audit assignment ordered by central government under s. 233A. DDLJ Public Ltd with its 20 branches offered appointment to KNPH & Co as their auditors of HO and Branches. Whether it is possible for KNPH & Co. to accept the audit?
(Hint: Yes, S.233A audit is exempt from ceiling limits.)
Poser-24. Mr. X is already holding audit of 30 companies having following offers. Suggest which one of the following is acceptable
1. Joint audit of P Ltd. with Z & Co. Chartered accountants
2. Audit of A ltd a S. 25 Company
3. Audit of BHEL Government Company
4. Z ltd A company limited by guarantee and having share capital
(Hint: Mr. X can not accept any one of the above)
Poser-25. Mr. K a partner of KKKG & Co. has signed all the 120 company audit reports on behalf of the firm .Comment.
(Hint: a partner can sign as much audit reports as his firm is entitled to audit)
Poser-26. BOD of Z Pvt. Ltd. have not complied with the requirement to obtain a written certificate from the proposed auditor regarding the ceiling limits of s. 224(1B).
(Hint: Due to amendment in 224(1B) now it is not required.)
Poser-27. Mr. X a practicing chartered accountant having 30 company audits. Reliance woolen Ltd. offered 3 branch audits to Mr. X. Mr. X saught your advise whether to accept the appointment or not as Mr. X is not the auditor of H.0. of the above company.
(Hint: According to ICAI notification issued on limits prescribed in 224(1B) an auditor is not allowed to conduct audit of 30 companies whether public or private and branches of the same company without H.0. office will be counted as one assignment hence Mr. X can not accept the appointment)
Poser-28. DTPH & Co. of which D,T,P and H are partners. Mr. P is also practicing in a proprietorship firm. Mr. P is of opinion that His limits of audit in Partnership firm is independent of number of audits in proprietorship firm. Comment
(Hint : In computing the numbers of the company audits, total audits related to Mr. P will remain 30 and it is on his discretion to how he divides his 30 audits in individual firm and partnership firm)
Poser-29. Symcox international is a foreign co. did not hold AGM to appoint its subsequent auditor instead. Board of Directors of the company appointed Mr. X as auditor of the company in their meeting.
(Hint: Provisions of 224(1) are not applicable to a foreign company)
Poser-30. Mr. X has been reappointed as auditor of Z ltd. by Board of Directors. In the opinion of board of directors s. 224(1) is applicable only in case of fresh appointment.
(Hint: Incorrect. Under s. 224(1) Appointment includes reappointments)
Poser-31. Whether Auditors appointment made in AGM is for a financial year.
(Hint: No, Auditors appointment is for a period commencing from conclusion of the appointing AGM till conclusion of the next AGM)
Poser-32. X Ltd. has adjourned its AGM, Mr. Y the auditor of the company is of opinion that his tenure is over as the AGM is held on the scheduled date.
(Hint: Unless there is a factual conclusion to the meeting the auditors tenure is not over)
Poser-33. The entire body of shareholders delegated the authority of appointment of auditor to BOD by passing a resolution in AGM.
(Hint: Incorrect, as it is ultravires act).
Poser-34. A the auditor appointed by the members denied to accept the appointment. The board of directors appointed Mr. B as auditors as in the opinion of the board refusal by Mr. A was a casual vacancy.
(Hint: No appointment or reappointment is complete and effective if the auditor declines the same, hence there is no casual vacancy. It will be deemed that company is failed to appoint the auditor)
Poser-35. BOD of ZCB Ltd. are of opinion that Mr. X who was appointed by central government wide powers given by s.224(3) is not subject to compulsory appointment under s. 224(2)
(Hint: S.224(2) is applicable to every retiring auditor irrespective of by which authority it is appointed.)
Poser-36. The notice of 17th AGM of XYZ ltd. has not been sent to Mr. Z the auditor of the company as Mr. Z often shown his unwillingness to offer his candidature for reappointment as auditor. In this AGM Mr. P has been appointed as Auditor. Comment.
(Hint: Company should obtain notice in writing from Mr. Z related to unwillingness.)
Poser-37. According to BOD of Z Ltd it is not necessary to pass a resolution for reappointment of Mr. P the auditor of the company, as he is reappointed by the provision if compulsory reappointment under S.224(2). Comment
(Hint: Appointment is compulsory not automatic. Being a general business of each AGM shareholders should pass a general resolution for reappointment of auditor.)
Poser-38. Mr. X is existing auditor of Z Ltd. Some of the Share holders given company a notice to remove Mr. X and appoint Mr. Y. At the AGM the resolution could not be proceeded with due to death of Mr. Y. According to BOD of Z Ltd. Mr. X is automatically reappointed.
(Hint: S. 224(2) (d) X could not be reappointed compulsorily. Here as the AGM is over it’s a matter of S. 224(2)(d) X could not be reappointed compulsorily. Here as the AGM is over it’s a matter of S. 224(3))
Poser-39. BOD of Z Ltd. Appointed Mr. Y as their new auditor in place of Mr. X as Mr. X in his telephonic talk with Mr. Q a director of the company expressed possible difficulties to conduct the audit of Z Ltd. efficiently.
(Hint: According to S. 224(2)(b) BOD should obtain a notice in writing from the existing auditor regarding his unwillingness towards reappointment.)
Poser-40. Shyam Industries Ltd. reappointed Mr. X the retiring auditor of the company in AGM by ordinary resolution. At the date of appointment Central and State Governments were holding 26% of the subscribed share capital of the company. The BOD are of opinion that there is no need to pass a special resolution as this is a compulsory reappointment under S. 224(2)
(Hint: S. 224(2) starts with the sentence " save as otherwise provided in S. 224(1B) and 224A hence auditor should be appointed by special resolution in AGM)
Poser-41. KGGK Ltd. appointed Mr. X as their auditor in AGM and sent the intimation to Mr. X about his appointment as auditor. Mr. X refuse to accept the appointment due to some personal problems, The company hold another general meeting and appointed Mr. P as their auditor.
(Hint: Refusal of Mr. X is the event indicates companies failure to appoint auditors in AGM, hence now powers to appoint the auditor is with the central government as per s. 244(3))
Poser-42. Mr. X the auditor of Z Ltd. died of heart attack. BOD were failed to fill the casual vacancy, subsequently BOD hold an EGM to fill the casual vacancy. The appointed auditor in EGM refused to accept the appointment later on. Now whether central government can appoint the auditor?
(Hint: Central government can appoint the auditor only when the AGM fails to appoint the auditor)
Poser-43. Mr. X Who was appointed as auditor in AGM refused to except the appointment later on. BOD have not sent the intimation of such to central government as they are of opinion that auditor has already sent intimation of refusal to ROC under s.224(1A).
(Hint: Intimation under s.224(1A) is duty of auditor and is not an alternate to the duties of company and every officer of it under s. 224(4))
Poser-44. Mr. X accepted the appointment as auditor of Z public Ltd. when it was offered by central government in exercising its powers under s. 224(3). Mr.X is of opinion that this audit will not be counted as a unit under s. 224(1B) as he is appointed by central government)
(Hint: Mr. X is wrong, appointment by central government only under s. 233A is not considered as unit for computing the ceiling limits of s. 224(1B).
Poser-45. Mr. X has been appointed by Central government under s. 224(3) has not sent intimation of accepting the appointment on the grounds that it required for an auditor appointed in an AGM.
(Hint: S. 224(1A) is applicable only to appointment under s. 224(1) and not to any other mode of appointment)
Poser-46. The first auditors of the company are named in articles of the association.
(Hint: This mode of appointment has got no recognition in companies act the first auditors can only be appointed by a resolution passed either at the board meeting or general meeting.)
Poser-47. A Ltd. Incorporated on 1.02.2002 board of directors appointed Mr Y as auditor of the company on 03.03.2002.
(Hint: Appointment is defective, Board can appoint the first auditor within one month of date of registration not 30 days)
Poser-48. The first auditor of the company has been appointed by the BOD by a resolution by circulation.
(Hint: it is an acceptable mode of passing resolution hence appointment is valid)
Poser-49. Whether central government can appoint the first auditor.
(Hint: It is not expressed anywhere in the act but literal interpretation of the statute it seems that central government can not appoint the first auditor of the company)
Poser-50. On failure of BOD to appoint the auditor shareholders in their general meeting appointed the first auditor of the company.
(Hint: it is in conformity with the proviso to s.224(5))
Poser-51. AnantRaj Industries Ltd. appointed M/s Deepak Mulci as auditor in the 17th AGM. Mr.Deepak Mulci refused to accept the appointment. BOD of Anant Raj Industries appointed Mr.Sunil K. Jain as their auditor to fill the casual vacancy.
(Hint: This is not a casual vacancy hence appointment of Mr. Sunil K. Jain is defective. Powers to appoint the auditor is with central government.)
Poser-52. Manmeet Exports Ltd. appointed Mr. Manish as their auditor due to some behavioral problems Mr. Manish resigned from the company BOD appointed Mr. Sumeet as auditor of the company.
(Hint: BOD can not fill the vacancy if the casual vacancy is due to resignation)
Poser-53. Entire body of shareholders unanimously passed a resolution and authorized the BOD to fill the casual vacancy created by any reason.
(Hint: This resolution is ultravires act. Share holders can not delegate the power to fill the casual vacancy of auditor arose due to resignation)
Poser-54. If shareholders and BOD are unable to fill the casual vacancy is it possible for the central government to exercise its power to appoint the auditors.
(Hint: See sec. 224(3))
Poser-55. IFCI hold more than 25% shares of subscribed share capital of Z ltd. in its name as security for loan advanced by it. Z Ltd. in its AGM appointed auditor by general resolution.
(Hint: Special resolution as per s. 224A is necessary)
Poser-56. X ltd. whose 28% of subscribed share capital is hold by Life Insurance Corporation Of India reappointed Mr. Y as its auditors in AGM by general resolution. In the opinion of the board it is not necessary to pass special resolution for reappointing the previous auditor.
(Hint: for the purpose of S.224A appointment includes re appointment)
Poser-57. The special resolution has not been passed in the AGM as it was omitted to mention in the notice of the meeting that the appointment of auditor will need a special resolution. The company holds another general meeting and appointed Mr. Z as its auditor for which due notice mentioning the requirement of passing the special resolution sent to share holder.
(Hint: If company fails to pass special resolution in an AGM the powers to appoint the auditors are transferred to Central Government as per s.224(3))
Poser-58. A Ltd. whose 52% paid up share capital is held by central government held 26% of subscribed share capital of Z ltd. Whether it is necessary to pass a special resolution in the AGM to appoint the auditor?
(Hint: Yes, as A ltd. is a government company)
Poser-59 Shareholders have passed a special resolution in their EGM to remove the auditor appointed under S. 224(1) before expiry of his term.
(Hint: Removal is defective. Prior approval from central government is necessary to remove the auditor appointed other than S. 224(5)
Poser-60 Share holders in EGM passed a resolution to removed an auditor appointed under s. 224(5). Company has not obtain any prior approval from central government.
(Hint: No prior approval is required to remove the first auditor of the company appointed by the BOD)
Poser-61 Shareholders in their EGM removed Mr. X an auditor appointed under s.224(3) by central government and send a copy of resolution to central government of such removal to approve the action.
(Hint: Removal is defective, prior approval needed)
Poser-62 Shareholders in AGM resolved that the detail sauda sheets and price lists should not be given to the auditor at any time during the audit as these are the information termed as "trade secrets". Auditor is of opinion that without these he can not make any opinion on financial statement. Comment on the situation
(Hint: This resolution is invalid, shareholders can not restrict the right of auditor to access the records of the auditee Company)
Poser-63 BOD of Z ltd are of opinion that Mr. X has not complied with the provisions of S. 227(1) as he has not access the brokerage and commission party register for his verification.
(Hint: Access to books of account is a right of and auditor not duty under sec 227(1))
Poser-64 BOD restricted the auditor to conduct an enquiry with some of the key managerial persons of the company as in the opinion of BOD they are in technical field and not acquaint much about the financial aspects of the business.
(Hint: It is auditors professional judgment to deliberate or not to deliberate the persons directors can not restrict the auditor to inquire information from any officer of the company)
Poser-65 BOD is of opinion that although branch auditor is conducting the audit of branch but it is auditors duty to visit the branch at least once.
(Hint: Under s. 228(2) it is right of the auditor to visit the branch but it is nevertheless a duty)
Poser-66 In the opinion of the BOD it is sufficient to just forward an intimation to the auditor about the Date Time & Venue of the general meeting. As he is not a member of the company there is no need to send notice etc.
(Hint: S. 231 provides that all notices of and other communications relating to any general meeting of a company shall also be forwarded to the auditor.)
Poser-67 Auditor Mr. Y is of opinion that the company is failed to motivate its employees, to coordinate with workers union, to implement its strategic marketing hence he decided to discuss these topics with shareholders in AGM.
(Hint: As the abovementioned matters are not directly related with the accounts and financial statement auditor has no right to put-up these matters before AGM)
Poser- 68. Auditor Mr. Y is of opinion that he has to enquire only matters prescribed in s. 227 (1A) and (4A) hence these subsections of s. 227 are the final scope of his audit under companies act, 1956.
(Hint: General scope of audit is governed by SAP-2, S.227(1A) and 4A are the special inquiries)
Poser- 69. Mr. X the auditor is of opinion that it is mandatory make a detailed explanation for his satisfaction or dissatisfaction about the each matter prescribed in s. 227(1A).
(Hint: Auditor should comment upon matters over which he is dissatisfied)
Poser- 70. Mr. Y the auditor is of opinion that there is no need to enquire and comment upon a temporary secured loan account which was appeared in the books of accounts for about months and squared up before the closure of the financial year.
(Hint: Auditor contention is incorrect)
Poser-71. Mr A the auditor found that the X Manufacturers Pvt. Ltd. sold some of its investments in subsidiary at a price below the acquisition cost because circumstances lead company to sell them off because this may be the only chance to optimize the loss on such investment. Mr. A of opinion that although he is satisfied nevertheless it his duty to comment upon the reasonableness.
(Hint: It is not obligatory on auditor to comment upon if he is satisfied with the findings)
Poser-72. Director expenses in the revenue account having following items
Rent Free accommodation
Conveyance for personal use
Reimbursement of medical expenses
Reimbursement of school fees of kids
It is explained to the auditor that these expenses are the contractual obligation of the company to fulfill the terms of appointment of directors. Whether auditor should comment on this as personal expenditure debited in revenue account.
(Hint: No, according to ICAI contractual obligation can not be treated as personal expenditure)
Poser-73. Shares have been issued in satisfaction of a debt repayable in cash. Mr. X is confused about the reporting of these shares whether they are issued other than cash.
(No, according to clarification issued by Department of companies affairs)
Poser-74. At 20th Annual General Meeting, Amey Ltd. appointed X as its auditor and asked to give his report on accounts of two previous financial years also as the accounts for all three years to be considered in the next AGM. Mr. X is of opinion that he is only appointed for the current financial report hence he can not report on the previous year financial statements.
(Hint: Mr.-X is appointed as an auditor not for the current financial year but for the period up to conclusion of the next AGM hence Mr. X should report on all the accounts which are laid before the company in general meeting also see 227(2))
Poser-75. Mr. A was appointed as auditor at the seventh annual general meeting of Nikhil Syntax Ltd. However, due to certain reasons he could not complete the audit. Later the company convened its 8th AGM the agenda for which did not include adoption of audited accounts since they were not ready. Mr. B appointed in place of Mr. A in this meeting .Whether Mr.B is entitled or required to audit of the accounts earlier years also in 9th AGM.
(Hint: B should report on the earlier years account also.)
Poser-76 CASHY Ltd. has maintained its books of accounts on cash basis. As books were updated and complete the auditor's comment in his report regarding the same were "in our opinion, proper books of account as required by law have been kept by the company so far as appears from our examination of those books.
(Hint : Proper books of accounts have not been maintained as s.209 requires that books of accounts shall be maintained on accrual basis)
Poser -77 Whether requirement to report the compliance with Accounting Standards is related to AS issued by ICAI ?
(Hint:- No, Issued by NACAS as per sec 211)
Poser-78. BOD of SHOWBIZ India Ltd. are of opinion that it is auditors duty to give an audit report on their performance report of last five year presented in a diagrammatic manner on the first page of the annual report of the company which will be attached with the balance sheet and profit and loss account accompanying the annual report.
(Hint: Auditor is responsible to give report to the not to the attachments of the balance sheet as per s. 227(2).
Poser 79. MR. X the auditor of Jugglery India Ltd. issued a separate report to the board of directors containing some suggestions for better internal control functions although there was a reasonable internal control in operation. He has neither forwarded the same to the shareholders and nor mentioned in his main audit report.
(Hint: it is not at all necessary to mention the same)
Poser-80. Mr. X is about to forward his qualified audit report to the shareholders of Z ltd. Mr. Y the senior article of the company is of opinion that all the qualifications should be set out in BOLD and Italics. Comment.
(Hint: all the qualifications need not be set out in bold and italics only those comments reflecting the adverse functioning of the company should be set out in bold and italics.)
Poser-81. Mr. Y the auditor has set out a qualification about the accounting policy of the company in his report. BODs are requesting him not to qualify the report as the notes on accounts are already contains the clear disclosure of the accounting policy followed.
(Hint: Notes on accounts are views of management not of auditor source: Guidance Note by ICAI)
Poser-82. BODs of Z ltd. requesting the auditor Mr. R to revise the audit report (Before adoption of the accounts in AGM) on some revision in accounts made on account of some latest information came to the notice of BOD, non adjustment of which may affect the true and fair view of the financial statements.
(Hint: Auditor can revise the report after taking back all the original copies of earlier report and mentioning of the revision in his revised audit report Source:- Guidance note by ICAI)
Poser-83. Mr. A the auditor of Z Ltd. (a manufacturing company in the construction stage) is of opinion that as Z Ltd. is a Government company CARO is not applicable
(Hint: CARO is equally applicable to audit of Government company)
Poser-84 Auditor of X international (a foreign company established the place of business in India) is of opinion that this company is not covered by CARO. Hint: CARO covers the Indian as well as foreign company)
Poser-85. Mr Z the auditor of P Ltd. is of opinion that as P Ltd. never earned profits in its history hence CARO is not applicable since it is a company not making profits.
(Hint: No, CARO is not applicable to those companies who are registered as NOT FOR PROFIT MAKING companies not for; a company not making profits)
Poser-86 A Pvt. Ltd has borrowing from other private parties but exceeding 25Jacs. If other conditions are taken care of whether CARO is Applicable it.
(Hint: No, the limit of loans is prescribed for loan from Bank and Financial Institutions and not for others)
Poser-87 A Pvt. Ltd. has recorded a turnover of Rs. 5.2 crores inclusive of sales tax and excise duty. The auditor concluded that CARO is applicable to this private company.
(Hint: Turnover for the purpose of CARO shall be net of Indirect taxes)
Poser-88. Reserve for the purpose of applicability of CARO to PVT company means only Free Reserves.
(No, it includes all reserve like capital reserve and revaluation reserves)
Poser-89 Closing balance of reserves and borrowing from Bank and FI shall be refer when deciding about the applicability of CARO
(No, it should be referred as Maximum Outstanding During the year crosses the threshold limits)
Poser-90. A company has defaulted in depositing the PF contribution of employees in the month of APRIL, JULY and November. As at the year end there is no arrears to pay auditor is of opinion that there will be ho comment on this in the CARO.
(Hint: As the company is irregular in depositing the PF auditor should put a comment for the same in CARO)
Poser- 91. Auditor put a qualification of Rs. 10 crores in relation to non recognition of losses in the profit and loss account. Had this recognition been made in profit and loss account the accumulated losses would have crossed the threshold of 50% of net worth as required in CARO. Whether the auditors should comment about this in CARO after considering his qualification or his comments should be based on the basis of losses reflected in financial statements.
(Hint: Auditor should comment after including his qualification)
