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First of all a heartiest Congratulation to all of you for clearing your CA intermediate examination and you're welcome to our website where you can check all your queries regarding your Articleship,Career etc.In this Blog post we are providing some important for technical round question for CA Articleship in Statutory Audit domain here in this post you got to know about all the question that will be asked in technical round of all the big 4s and big 20 firm for your CA articleship
Topics to be covered
CA Articleship statutory audit question
CA Articleship technical round questions with answer for big 4s,big 20
1. What is Statutory Audit ?
Statutory Audit is an independent examination and verification of a company's financial records, transactions, and statements by a qualified external auditor. The primary purpose of a statutory audit is to ensure that the financial information presented by the company is accurate, reliable, and compliant with the relevant laws and regulations. It is a legal requirement in many countries for certain types of entities, such as public companies, government organizations, and large private companies, to undergo an annual statutory audit.
2. Why Do you Choose Statutory Audit Why not Internal Audit ?
Statutory auditors are independent external professionals who are not part of the company's internal operations. This independence helps maintain objectivity and reduces the risk of bias in their assessment.
and I don't want to be bias towards my value and ethics thats why i choose statutory audit over internal audit
3. For Whom Internal Audit is Applicable
(a) Every Listed Companies
(b) Every unlisted public company if satisfy any of the criteria given as under-
- paid-up share capital of fifty crore rupees or more during the preceding financial year
- turnover of two hundred crore rupees or more during the preceding financial year
- outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year
- outstanding deposits of twenty five crore rupees or more at any point of time during the preceding financial year; and
(c) Every private company if satisfy any of the criteria given as under-
- turnover of two hundred crore rupees or more during the preceding financial year; or
- outstanding loans or borrowings from banks or public financial institutions exceeding one hundred crore rupees or more at any point of time during the preceding financial year:
4. What is assertion?
An assertion refers to a claim or statement made by the management of an audited entity regarding the accuracy, completeness, and validity of the financial information presented in the company's financial statements. During the audit process, the external auditor evaluates these assertions to provide an opinion on the reliability of the financial statements.
There are typically five main types of assertions in audit: (mention any two)
Existence or Occurrence: This assertion pertains to whether the assets, liabilities, and transactions reported in the financial statements actually exist and have occurred during the audit period.
Completeness: This assertion ensures that all relevant and material financial information and transactions have been included in the financial statements, and nothing important has been omitted.
Rights and Obligations: This assertion deals with whether the company has the legal right to claim ownership of its reported assets and whether the liabilities disclosed are the company's obligations.
Valuation or Allocation: This assertion involves whether the financial statement items are correctly valued, including recognition of revenues and expenses in accordance with the applicable accounting principles.
Presentation and Disclosure: This assertion deals with the proper presentation and disclosure of financial information in the financial statements, ensuring that the information is understandable, relevant, and in compliance with accounting standards and regulations.What is assertion?
5. What Do you Know About CARO 2020 ?
CARO stands for the Companies (Auditor's Report) Order. It is an order issued by the Ministry of Corporate Affairs (MCA) in India that prescribes the format and content of the auditor's report for certain classes of companies. CARO is applicable to statutory audits conducted under the Companies Act, 2013.
6. Applicability of CARO 2020 ?
CARO 2020 is applicable for all statutory audits commencing on or after 1 April 2021 corresponding to the financial year 2020-21. The order is applicable to all companies which were covered by CARO 2016. Thus, CARO 2020 applies to all the companies currently, except the following companies:
- One person company.
- Small companies (Companies with paid up capital less than/equal to Rs 50 lakh and with a last reported turnover which is less than/equal to Rs 2 crore)
- Banking companies.
- Companies registered for charitable purposes.
- Insurance companies.
The following private companies are also exempt from the requirements of CARO, 2020: –
- Whose gross receipts or revenue (including revenue from discontinuing operations) is less than or equal to Rs 10 crore in the financial year.
- Whose paid up share capital plus reserves is less than or equal to Rs 1 crore as on the balance sheet date (i.e. usually at the end of the FY).
- Not a holding or subsidiary of a Public company.
- Whose borrowings is less than or equal to Rs 1 crore at any time during the FY.
7. What is Reporting Requirement in CARO 2020 ? (can be asked for one or two of them)
- Details of tangible and intangible assets.
- Details of inventory and working capital.
- Details of investments, any guarantee or security or advances or loans given.
- Compliance in respect of a loan to directors.
- Compliance in respect of deposits accepted.
- Maintenance of costing records.
- Deposit of statutory liabilities.
- Unrecorded income.
- Default in repayment of borrowings.
- Funds raised and utilisation.
- Fraud and whistle-blower complaints.
- Compliance by a Nidhi.
- Compliance on transactions with related parties.
- Internal audit system.
- Non-cash dealings with directors.
- Registration under section 45-IA of RBI Act, 1934.
- Cash losses.
- Resignation of statutory auditors.
- Material uncertainty on meeting liabilities.
- Transfer to fund specified under Schedule VII of Companies Act, 2013.
- Qualifications or adverse auditor remarks in other group companies.
8. Asking For SA's (CA INTER ALL SA's)
Major SA's
- SA 210 Agreeing the term of audit engagements
- SA 230 Audit Documentation
- SA 299 Responsibility of Join Auditor
- SA 505 External Confirmation
- SA 530 Audit Sampling
- SA 570 Going Concern
- SA 580 Written Representation
9. What are different type of audit opinion ?
- Unqualified Opinion: This is the most favorable type of audit opinion. It indicates that the auditor has conducted a thorough examination of the financial statements and found them to be free from material misstatements. An unqualified opinion states that the financial statements present a true and fair view of the company's financial position and performance.
- Qualified Opinion: A qualified opinion is issued when the auditor concludes that the financial statements are generally fairly presented, except for certain specific issues or limitations that have come to the auditor's attention. These issues are not significant enough to invalidate the overall fairness of the financial statements, but they need to be disclosed in the auditor's report.
- Adverse Opinion: An adverse opinion is the most unfavorable type of audit opinion. It is issued when the auditor finds that the financial statements are materially misstated and do not present a true and fair view of the company's financial position and performance. An adverse opinion indicates significant problems with the financial statements, which may require restatement or substantial corrections.
- Disclaimer of Opinion: In certain situations, the auditor may be unable to express an opinion on the financial statements. This happens when there are severe limitations on the scope of the audit due to lack of sufficient evidence or when the company's accounting records are inadequate. In such cases, the auditor issues a disclaimer of opinion, expressing that they cannot form a conclusion on the financial statements.
- Disclaimer of Opinion with Emphasis of Matter: This type of opinion is issued when the auditor is unable to express an opinion due to a scope limitation but wants to draw the reader's attention to specific matters disclosed in the financial statements. The auditor includes an "emphasis of matter" paragraph in the audit report, highlighting the limitations encountered during the audit.
10. What do you know about debtor confirmation ?
Debtor confirmation, also known as accounts receivable confirmation or accounts receivable confirmation letter, is a crucial audit procedure used by external auditors to verify the accuracy and existence of a company's accounts receivable balances. The purpose of debtor confirmation is to obtain direct external confirmation from the company's customers (debtors) regarding the outstanding amounts they owe to the company.
Steps :-
- Selection of Debtors
- Preparation of Confirmation Letter
- Sending Confirmation Letter
- Follow-Up
- Evaluation of Responses
11. What is included in Financial Statement
- Balance Sheet
- Profit and Loss Statement
- Cash Flow Statement
- Notes to Accounts
- Statement of Change in Equity
12. What do you know about CSR ?
CSR Applicability in India (Section 135 of CO. Act)
The provisions of CSR applies to:
- Every company
- Its holding company
- Its subsidiary company
- Foreign company
Having in the preceding financial year:
Net worth > 500 crore
Turnover > 1000 crore
Net profit > 5 crore
The Board of Directors shall make sure that the company spends in every financial year, a minimum of 2% of the average net profits made during the 3 immediately preceding financial years as per CSR policy.
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