Process of Budgeting A grant made in advance by the Parliament, in respect of the estimated expenditure for a part of new nancial year, pending the completion of the procedure relating to the voting of the demand for grants and the passing of the Appropriation Act is called Advance from the contingency fund Advance for meeting immediate expenditure Vote on account Charged account Explanation !he most appropriate answer is C" #hen the $overnment does not have enough time to obtain the vote for a full budget before the commencement of the new nancial year, a special provision is made to ma%e sure that there is enough money at the disposal of the government to allow it to run the administration of the country" &" #hich of the following statement is '(! true about )emands for $rants* )emands for grants contain only estimates relating to the contingency fund of +ndia )emands for grants contain only estimates relating to the capital expenditure )emands for grants contain only estimates relating to the expenditure for which vote of the lo% sabha is reuired All of the above Explanation !he most appropriate answer is )" -" #hich of the following statement is '(! !./E about the nance bill* 0inance Bill is a money bill which is presented in the 1ower 2ouse of the Parliament" 0inance bill is a secret bill copies of which are not made available in advance of its introduction in the legislature" +ntroduction of the 0inance bill can be opposed only on the grounds of bringing out economy in the state !he introduction of the nance bill cannot be opposed at all Explanation !he most appropriate answer is C" 3" $ender budgeting essentially means Allocation of more money for the women .e4prioritising the policies and programmes in a way that would tac%le gender imbalances, promote gender euality and development $iving tax concessions to women and educational concessions to girls Empowering the women for facing the atrocities in5icted on them by men Explanation !he most appropriate answer is B" Adopting gender budgeting does not necessarily mean allocating more resources for women or girls
6" #hich of the following statement is !./E about gender budgeting* $ender budgets refers to ma%ing separate budgets for both men and women $ender budget refers to ma%ing budget allocations 67 per cent for men and 67 per cent for women $ender budgeting refers to the process of conceiving, planning, approving, executing, monitoring, analysis and auditing budgets in a gender sensitive way $ender budgeting is done only in the government sector Explanation !he most appropriate answer is C 8" (n the last day of the days allotted for discussion on the )emands for $rants, at the time xed in advance, the 9pea%er puts all the outstanding )emands for $rants to the vote of the 2ouse" !his device for bringing the debate on nancial proposals to an end within a specied time is called Cut motion End motion $uillotine !o%en motion Explanation !he most appropriate answer is C" :" A document prepared and presented annually to the Parliament, re5ecting the purposes and ob;ectives for which funds were provisioned,the cost of various programmes and activities proposed for achieving these ob;ectives and uantitative pro;ection of the wor% performed and services rendered under each programme and activity is generally called as Annual 0inancial 9tatement Appropriation Account (utcome Budget +ncome Budget Explanation !he most appropriate answer is C" An outcome budget measures the development outcomes of all government programmes" 0or instance, it will tell a citi
" .ule of lapse in budget means All appropriations granted by the Parliament expire at the end of nancial year !he estimation in the budget was incorrect and there was a lapse on the part of the estimating o?cer !he budget estimates cannot be prepared accurately as there is a lapse of time between estimates send by the departments and actual expenditure" Budgets should ta%e this lapse of time into account
All of the above Explanation !he most appropriate answer is A" All appropriations granted by the Parliament expire at the end of nancial year and no deduction of unspent budget can be appropriated for meeting the demands in the next nancial year" !hus, all unutili
&" #hich of the following statement is !./E about the public accounts of +ndia referred to in Article &88&D of the Constitution* !he receipts and disbursements such as deposits, reserve funds, remittances etc which do not form part of the Consolidated 0und of +ndia are included in the Public Account of +ndia" )isbursements from the Public Account are not sub;ect to vote by the Parliament, as they are not moneys issued out of the Consolidated 0und of +ndia !he Annual 0inancial 9tatement also exhibits the estimated receipts and expenditure under the Public Accounts and net transactions under the Contingency 0und All of the above Explanation !he most appropriate answer is )" -" !he $eneral )iscussions on Budget is held in parliament After the presentation of the economic survey and before the presentation of the budget Before the presentation of the economic survey Before the presentation of the budget on any day the spea%er may decide in consultation with the ministry of parliamentary a=airs 9ubseuent to the day of presentation of the Budget and for such period of time as the 9pea%er may decide Explanation !he most appropriate answer is )" 3" Preparation of budget separating the two 5ows of the revenue and expenditure without allowing them to be netted out is referred to as Budget on gross basis Budget on actual basis Budget on net basis Budget on consolidated basis Explanation !he most appropriate answer is A" Budget is prepared both on the gross basis and net basis" !he gross gures of receipts and expenditure of the $overnment are re5ected separately for voting by Parliament and the )epartmentsFinistries are normally not permitted to utili
Appropriation of $rants Explanation !he most appropriate answer is B" 8" Expenditure arising out of a new policy decision, not brought to the notice of Parliament earlier, including a new activity or a new form of investment is generally termed as A 'ew instrument of service A new service A proposal A demand for grant Explanation !he most appropriate answer is B" 'ew 9ervice means expenditure arising out of a new policy decision, not brought to the notice of Parliament earlier, including a new activity or a new form of investment" @'ew +nstrument of 9ervice@ means relatively large expenditure arising out of important expansion of an existing activity :" +n the context of gender budgeting, the distinguishing biological ma%e up of men and women, boys and girls, the physical attributes with which human being are born is referred to as
$ender 9ex Physiu e Body Explanation !he most appropriate answer is B" !he biological ma%e of men and women, boys and girls, the physical attributes with which human beings are born is referred to as 9ex" $ender and sex have di=erent connotations" $ender refers to the culturally and socially constructed roles, responsibilities, privileges, relations and expectation of women, men, boys and girls" $ender is not another word for women" $ender is also not another word for sexual di=erence >" #hich the following is '(! a type of cut motion normally available for a member of the legislature during the of discussion of budget* )isapproval of Policy Cut Economy Cut !o%en cut Voted Cut Explanation !he most appropriate answer is )" " An approach to planning that treats women, men, boys and girls as if they were part of one homogenous group is referred to as $ender neutral
planning $ender euitable planning $ender blind planning $ender biased planning Explanation !he most appropriate answer is A" $ender bias refers to an approach which impacts more positively on male than female or on female than male" $ender euitable approach refers to an approach that results in ;ust and fair treatment of women and men and recognition and appreciation of the potential of both men and women" $ender blind is an approach that does not recogni
&-" #hich of the following is '(! a cut motion* )isapproval of policy cut Economy Cut $uillotine Cut !o%en Cut Explanation !he most appropriate answer is C" &3" /nder Article & of the +ndian Constitution, the President shall in respect of every nancial year cause to be laid before both the 2ouses of Parliament, the 2ouse of People 1o% 9abhaD and the Council of 9tates .a;ya 9abhaD, a statement of the estimated receipts and expenditure of the $overnment for that year" !his statement is called Annual Accounts Balance 9heet Annual 0inancial 9tatement Budgetary Control Explanation !he most appropriate answer is C" &6" #hich of the following committees appointed by the $overnment of +ndia recommended commencement of nancial year from Ganuary every year* .angara;an Committee Bimal Galan Committee 1"H Gha Committee Hel%ar Committee Explanation !he most appropriate answer is C" &8" #hich of the following best describes the term @Estimate Committee@* bD to suggest alternative policies in order to bring about e?ciency and economy in administration cD to examine whether the money is well laid out within the limits of the policy implied in the estimates and dD to suggest the form in which the estimates shall be presented to Parliament Estimates committee is a committee appointed by head of each department for supervising the preparation of budgetary estimates" Estimates committee is a committee headed by the 0inance Finister which estimates the receipts and expenditure for the year which will be used for the preparation of the annual budget Estimates committee is a committee appointed by the 0inance Commission to determine the plan expenditure Estimates committee is a parliamentary committee consisting of members of parliament elected every year by the lo%h sabha and whose chairman is appointed by the 9pea%er"
Explanation !he most appropriate answer is )" !he functions of the Estimates Committee include aD to report what economies, improvements in organisation, e?ciency or administrative reform, consistent with the policy underlying the estimates may be e=ected &:" #hich one of the following is a document that gives a detailed analysis of the economic situation of the country and is presented to Parliament a few days before presentation of the Annual Budget for the ensuing year" +t includes a 9tatement about the position of budgetary transactions of the Central and 9tate $overnments, and their overall surplusdecit positions in the current year and the past trends )emand for $rants Appropriation Accounts Annual 0inancial 9tatement Economic 9urvey Explanation !he most appropriate answer is )
+f you were to examine the e?ciency aspects in a hospital, what would you address* costs of resource procurement" average cost per patient admitted" achievement of goals in number of surgeries" none of the above Explanation &" #hich of the following is '(! li%ely to be ma;or consideration for selecting individual performance audit topics* 9ignicance of the topic Fateriality of the topic Visibility of the topic Available manpower in4 house Explanation -" (ne of the considerations while underta%ing ris% assessment for prioriti
Ies" According to performance audit guidelines, while selecting people centric topics, the criteria to be applied for selection is not ;ust nancial materiality" 'o" According to the performance audit guidelines, 9A+ should not be sentimental in dealing with selection of topics" 9A+@s audit resources should be deployed without being sensitive to the issue of the people Explanation 6" !he audit team would li%e to verify the uality of the @Patients Fanagement 9ystem@ bought by the 2ospital last year" #hat would be an appropriate method that the team can use to best allow for gathering of audit data in an e?cient and e=ective manner* Physical observation of patients and interview with doctors Physical observation and documentary review of payments to the supplier )ocumentary review, statistical sampling of euipment and interview with patients 9urvey with the system users and review of complaints made to the hospital +! unit Explanation 8" !he strategic plan for performance audits, in pursuance of the strategic goals and ob;ectives, prepared by each Accountant will beshould approved by 9A+ top management" !hefollowing strategicisplan document forwarded to the 9A+$eneral 2eaduarters be self4contained" #hich of the 1EA9! li%ely to be part of the strategic plan document* 9trategic goals and strategic ob;ectives set for the o?ce 9A+ to be attained through performance audits over the perspective plan period .is% assessment of all programmes or activities of the entity@s operations that are within the audit ;urisdiction of the Accountant $eneral Executive summary containing a gist of the strategic plan including categorisation of the types of sub;ects selected for performance audit vi<nancial, non4nancial, public interest and governance related sub;ects, recent policy shift issues, concurrent and prescience sub;ects A tentative programme of entity eld o?ces to be visited including the details of the personnel who were proposed to be deployed for the performance audit" Explanation :" #hich of the following feature measures the extent to which ob;ectives are achieved and the relationship between the intended impact and the actual impact of an activity* E?ciency E=ectivene ss Economy Euity Explanation >" !he audit techniues applied to performance audit of sub;ects relating to sustainable development and environment management are generally similar to those applied to other sectors though the audit
ob;ectives and approach may vary" #hich of the following statement are correct in respect of audit of sub;ects relating to sustainable development* !he performance audit on sustainable development would deal with programmes and activities in the context of explicit commitments conseuent upon international treaties on environment sustainable development" !he performance audit on sustainable development should ta%e into consideration national environmental management programmes" !he performance audits of all development pro;ects should also address the environmental impact and its management All of these Explanation " #hich of the following statement is !./E with reference to Performance Auditing and Programme Evaluation* Performance auditing shares similar approaches and methodologies with programme evaluation but does not generally extend to assessing policy e=ectiveness or policy alternatives Auditors cannot employ tools of programme evaluation in performance auditing as programme evaluation techniues are mainly statistical based Programme Evaluation techniues cannot be employed in performance auditing as it reuires special s%ills and %nowledge Performance auditing and programme evaluation have the same scope and both uses the same tools and techniues Explanation 7" Based on strategic planning and further ris% assessment, Accountant $eneral identies a performance audit sub;ect with high priority and whose postponement may be associated with ris%" But available manpower put a constraint on underta%ing such tas%s" #hich of the following could be the best alternative in such a situation* Accountant $eneral may postpone the other performance audits selected for the year and divert the resources Accountant $enearal may reuest the +nternal Audit wing of the entity to underta%e a performance Audit" Accountant $eneral may document in details the reasons for not being able to underta%e the high priority tas% after analy
Programme e=ectiveness review time Programme e?ciency review time Explanation &" +n instances where an audit body disagrees with the audit criteria then the 9A+ should convene a meeting with the head of the audited body and get himher to agree on the audit criteria amend the criteria to suit the reuirements of the audited body" weigh the facts and arguments presented by the audited body against other relevant facts and arguments" none of the above Explanation -" !he audit perception of ris% to value for money is one of the criteria in selecting an entity or programme for audit and subseuently, for focusing attention on specic areas within the entity or programme" #hich of the following uestions are important in assessing the ris%* a" #hat can go wrong* b" #hat is the probability of going wrong* c" #hat are the conseuences of things going wrong* a, b, c a, b a only b only Explanation 3" #hich of the following documents can act as source documents for strategic planning for performance auditing* )ocuments of the entity including their administrative policies Parliamentary interest in the form of legislation, parliamentary uestions, reports of PAC etc Academic research on entity activities All of these Explanation 6" +n considering the steps of the performance audit process, which of the following is more li%ely to provide information on the implementation of audit recommendations*
g
.eportin follow4up
main study Planning Explanation 8" Accountants $eneral should be alive to people 4centric cutting edge issues while selecting performance audit topics" #hich of the following statements are true with reference to selection of people centric topics for performance auditing* 9A+ may select topics for performance audit, for which there are either no budgets or these are insignicant, or whose materiality cannot be determined with reference to expenditure, receipts or assets and liabilities only if the sub;ect or the decient performance could a=ect a large or vulnerable section in a signicant manner" !he materiality of such topics could be determined with reference to the si" +f new informationproblems have come to the notice of audit team during the conduct of audit, then changes should not be made to increase the scope of the audit wor% plan even if the new audit procedure could have a signicant impact on the overall audit uestion as such increase in scope will cost more time and money" changes should not be made to increase the scope of the audit wor% plan even if the new audit procedure could have a signicant impact on the overall audit uestion, but the informationissue could be recorded for subseuent audits or for coverage during follow4up audit" changes should always be made to the audit wor% plan on collection of new information as performance audit plans are reuired to be 5exible" none of the above is correct Explanation " !he audit ndings in the report are put into perspective and congruence is ensured when D Audit Audit lin% ob;ectives lin% with uestions &D conclusions withaudit ndings -D .ecommendations lin% with overall ob;ectives
only is correct only & is correct only - is correct All of the above are correct Explanation &7" !he rst stage in performance auditing is +mplementation of performance audit for individual sub;ects 9trategic planning for performance audits 0ollow up process and impact assessment )rafting guidelines for performance auditing Explanation &" #hich of the following is '(! an advantage of setting audit ob;ectives in the performance audit* +t ensures good uality performance audits and therefore, is one of the most important uality assurance measures +t fosters discipline and precision +t helps focused data gathering activities +t helps in underta%ing the ris% analysis Explanation &&" #hich of the following is part of the performance audit impact analysis* !he analysis should provide a comparison of the actual impact against the expected outcome anticipated in the strategic plan and in the audit plan for the individual sub;ects" !he evaluation will have plan to necessarily strategic ob;ectives set in the performance audit strategic and wouldrefer needtotothe address the goals extentand of contribution of out each performance audit to fullling the strategic goals and ob;ectives !he impact should be assessed in both ualitative and uantitative terms and be classied in ualitative and uantitative terms" All of the above Explanation &-" +t is important to identify and analyse the ris%s associated with the entities under audit ;urisdiction" +n the context of performance audit which of the following statement about ris% would be appropriate* !he ris% to delivery of an activityschemeprogramme of the entity with economy, e?ciency and e=ectiveness !he ris% to material misstatements in the nancial statements of the entity
!he ris% to programme implementation due to natural calamities such as 5ood, earthua%e etc !he ris% to programme implementation due to fraudulent activities Explanation &3" !he most important measure of uality of a performance audit would be !he extent of positive impact on the policies and programmes of the government through performance audit !he number of pages of the report turned down by the performance audit team !he number of recommendations made in the report based on the audit evidence !he extent of audit analysis and auditing techniues used in the conduct of performance auditing Explanation &6" #hich of the following is F(9! li%ely to be the time frame covered by a strategic plan document* (ne year 9ix months (ne uarter 0ive years Explanation &8" A diagrammatic representation of the analysis of utilisation of the resources made available for a programme which facilitates a comparison of the budgeted resources with the actual utili
b (nly a (nly b 'one of these Explanation &>" !he performance auditor might see% to assess or measure e=ectiveness by comparing outcomes K or impacts K with the goals set in the policy or programme ob;ectives" 9uch an assessment is also called +mprovement Analysis $oal4Achievement Analysis 0inancial +nverse !ree .egression Analysis Explanation &" #hat does the word @reasonable assurance@ signify with reference to performance auditing* a".easonable assurance relates to the accumulation of audit evidence necessary for the auditor to conclude whether there are any material misstatements in the information relating to performance b"#hat is could LreasonableJ is dependent on the facts of that and situation and is to be could determined by what evidence reasonably be expected to be gathered what conclusions reasonably be expected to be drawn in the particular situation" c"A performance audit conducted in accordance with applicable auditing standards provides reasonable assurance as to whether the information relating to performance is free from material misstatement d"Performance Audit does not embrace the concept of providing any reasonable assurance because the concept of reasonable assurance is with reference to the Ltrue and fairJ view of the nancial statements" a, b, c, d a, b, c b,c,a only d Explanation -7" #hich of the following method is suggested in the performance auditing guidelines for obtaining a -87 degree feedbac% for the performance audit endeavour* 9etting up a system for internal evaluation of impact of performance audits at the close of each year on governance in general and on the entityJs policies and programme management, in particular" maintain an inventory of recommendations, which are included in the performance audits and follow them up to their implementation, both from the point of nominal count as well as from the point of the uality of implementation Both A and B 'one of the Above Explanation
-" MPerformance audit is concerned with the audit of economy, e?ciency and e=ectiveness" #hich of the following statement is '(! !./E with reference to performance auditing* +t embraces audit of the economy of administrative activities in accordance with sound administrative principles and practices and management policies B" +t embraces audit of the e?ciency of utilisation of human, nancial and other resources, including examination of information systems, performance measures and monitoring arrangements and procedures followed by audited entities for remedying identied deciencies +t embraces audit of the e=ectiveness of performance in relation to the achievement of the ob;ectives of the audited entity and audit of the actual impact of activities compared with the intended impact +t embraces verication of the account balances with reference to the boo%s of accounts to ensure whether statement of accounts presents a true and fair view of the state of a=airs of the organi
+t is always necessary to conduct performance audits of the entity or the programme as a whole by engaging su?cient manpower" !he scope and audit ob;ectives of a performance auditing can be conned only to signicant aspects of the programmes or activities" #here desirable, the sub;ects of performance audit may be selected cutting across various departments or entities !he selection of the components or parts of the programme may be guided by the materiality and ris% proles of each part or component Explanation -6" #hich of the following should the auditor rst consider when planning the audit the audit ob;ectives and criteria" the audit ob;ectives and ndings" the audit ob;ectives and methodology" the audit ob;ectives and scope" Explanation -8" 9election of audit topics for performance audits should be determined on which of the following stages of the audit pre4study research and evaluation main study none of the above Explanation -:" Economy, e?ciency, e=ectiveness, euity and ethics are, in e=ect, three plus two issues rather than ve issues" #hich of the following is correct with reference to this statement* Euity and ethics issues in performance audits add value only if the audit ndings against these two standards a=ect one or more of the three i"e" economy, e?ciency and e=ectiveness Ethics and euity are related to the policy issues and an Auditor has no role in ensuring the ethical and euitable behavior of the management Ethics and euity are di?cult to ensure if economy, e=ectiveness and e?ciency has to be ensured Ethics and euity are automatically ensured if economy, e=ectiveness and e?ciency issues are addressed Explanation ->" 9pending less, spending well, and spending wisely refers to
Economy, E?ciency and E=ectiveness respectively E?ciency, Economy and E=ectiveness respectively E=ectiveness, economy and e?ciency respectively E=ectiveness, e?ciency and economy respectively Explanation -" !he 9A+ must use its power of access to information tactfully" !his implies that the audited entity must be informed of the intention to audit and audit scope at least three months in advance reuests sought by the audited entity for changes in the dates of audit must be considered it is desirable that the audited entity is informed of the methods to gather evidence li%e survey of beneciaries, interview with employees giving advance information about the audit to the audited entity ta%es away the surprise element from audit and hence could be avoided Explanation 37" +t will demonstrate the cerebral competence of the 9A+ if it is able to display an ability for prescience of the policy shifts and more importantly anticipation of the ris%s to programmes, performance and public interest" #hich of the following statement is relevant in this regard* Accountants $eneral and the 9A+ should be alive to ma;or shifts in the policies and programmes of the entity and the conseuential new public sector programmes and select critical cutting4edge sub;ects for performance audits in the context of policy changes" Performance audits of sunrise issues are li%ely to contribute value to the implementation of the policy shifts Both A and B 'one of these Explanation 3" #hich of the following is 1east li%ely to be part of a performance auditing* Examination and reporting on the uality of information and advice available to government for the formulation of policy Examination and reporting on the existence and e=ectiveness of administrative to inform the government whether programme ob;ectives and targets have been determined with a view to fullling policy ob;ectives Examination and reporting on compliance to applicable laws and regulations in the context of the performance audit ob;ectives Examination and reporting on policies formulated by the government per se Explanation
3&" #hich of the following are considered uality assurance activities* " .eport to management on progress against budget &" .eport to management on progress against schedule -" 9upervision 3" Allocation of responsibilities only , - and 3 only and 3 only - and 3 All of the above Explanation 3-" #hich of the following is generally considered as the last stage in a performance audit life cycle* 0inali
Explanation 38" #hich of the following is '(! correct regarding the strategic plan document in the context of performance auditing* 9trategic planning is the process of determining the long4term goals of performance auditing and the best approach for attaining them" !he strategic planning document dene the long4term mission statement consisting of goals to be achieved through the performance audits, statements of detailed ob;ectives expected to be accomplished through performance audits and the sub;ects of performance audits to be carried out in pursuance of the strategic goals and ob;ectives 9trategic planning for performance auditing and overall strategic planning of 9A+ are one and the same All of the above Explanation 3:" An independent assessment or examination of the extent to which an entity, programme or organisation operates e?ciently and e=ectively, with due regard to economy is called +ndependent Auditing Entity auditing Performance Auditing 0inancial Auditing Explanation 3>" #hich of the following statement is +'C(..EC! with respect to strategic planning of 9A+* All 9A+ eld o?ces may carry out in4depth exercise for performance audit strategic planning" After setting the strategic goals and ob;ectives, the data on entity contained in budget papers, programme papers, plan documents, annual reports, parliamentary debates and reports, media concerns, research and reports of international agencies, follow4up and leads from the past audits, etc" should be analysed on the parameters of ris%, materiality, signicance, visibility, coverage, etc" to select sub;ects for performance audits to be carried out over the strategic plan period" 9A+ top management may conduct brain storming meetings with Accountants $eneral from time to time in respect of audit strategic and annual operational plan and ris% assessment to select the sub;ect which addresses the 9A+@s concerns for high ris% programmes and activities" !he strategic planning is normally done for a period of ve years and after approval by the 9A+ top management, it becomes a static document" 'o deviations from the plan are permissible until a review is ta%en up after ve years as a rollover exercise" Explanation 3" #hich of the following is C(..EC! with reference to the Performance Audit Annual Plan* " Performance Audit Annual operational Plan prepared for a nancial year &" !he time schedule for completion of all stages of a selected performance Audit sub;ect can spread over more than one nancial year (nly
(nly & 'one of these Both and & Explanation
9election of audit topics for performance audits should be determined on which of the following stages of the audit pre4study research and evaluation main study none of the above Explanation &" !he $overnor of a 9tate or the Administrator of a /nion !erritory having a 1egislative Assembly can entrust, in public interest, the audit of the accounts of a corporation established by law made by the 9tate/nion !erritory 1egislature to the Comptroller and Auditor $eneral after prior consultation with him and after giving reasonable opportunity to the corporation to ma%e representation with regard to the proposal for such audit" #hich of the following section of the CA$@s )PC Act provides for this* 9ection & 9ection > 9ection -D 9ection &7&D Explanation /nder 9ub4section -D of 9ection of the Act, the $overnor of a 9tate or the Administrator of a /nion !erritory having a 1egislative Assembly can entrust, in public interest, the audit of the accounts of a corporation established by law made by the 9tate/nion !erritory 1egislature to the Comptroller and Auditor $eneral after prior consultation with him and after giving reasonable opportunity to the corporation to ma%e representation with regard to the proposal for such audit -" Analytical review in audit involves analysis of signicant ratios and trends that deviate from expectations" @Expectations@ in this context refer to Expectations of the Executive Expectations of the .eader of the Audit .eport Expectations of the Auditor Expectations of the 1egislature Explanation Analytical review is a procedure that involves analysis of signicant ratios and trends including the 5uctuations that are inconsistent with other relevant data or which deviate from expectations" @Expectations@ in this context refer to the auditor@s expectations of what a gure in the accounts being audited should approximately be as wor%ed out from other relevant nancial and non4 nancial information 3" Comptroller and Auditor $eneral of +ndia@s Fanual of 9tanding (rders is issued under
9ection &- of the CA$@s )PC Act 9ection &3 of the CA$@s )PC Act Chapter 3 of the Fanual of (?ce Procedure Chapter - of the Fanual of (?cer Procedure Explanation Article 3 of the Constitution of +ndia and 9ection &- of the Comptroller and Auditor $eneral@s )uties, Powers and Conditions of 9erviceD Act, : empower the CNA$ to frame rules and give directions in all matters pertaining to audit of the accounts for which he is responsible" !he Fanual of 9tanding (rders AuditD &77& is issued in pursuance of the aforesaid provisions 6" +n respect of bodies and corporations where the Comptroller and Auditor $eneral is the sole auditor, the Accountants $eneral concerned are reuired to issue 9eparate Audit .eports 9A.sD 9eparate Annual .eports 9A.sD $eneral Audit .eports $A.sD $eneral Annual .eports$A.sD Explanation !he most appropriate answer is A 8" #hich of the following is the purpose of conducting supplementary or test audit on the accounts of a government company* Verication of the technical accuracy of the accounting records, boo%s of account and nancial results with reference to the Accounting 9tandards" )etection or prevention of misstatements in and window dressing of the nancial statements Examination of the achievement, by the company, of the ob;ectives for which it was established All of the above Explanation !he most appropriate answer is ) :" !he duty of audit of receipts which are payable into the Consolidated 0und of the /nion and of each 9tate and /nion !erritory having a 1egislative Assembly is en;oined upon the Comptroller and Auditor $eneral of +ndia by@@of the CA$@s )PC Act :" 9ection & 9ection 9ection 6 9ection
8 Explanation 9ection 8 of the Comptroller and Auditor $eneral@s )uties, Powers and Conditions of 9erviceD Act, :, en;oins upon the Comptroller and Auditor $eneral the duty of auditing all receipts which are payable into the Consolidated 0und of the /nion and of each 9tate and /nion !erritory having a 1egislative Assembly" >" #hich one of the following would be the best course of action before placing orders for supplies in cases where a formal written contract is not entered into
A written agreement in regard to price should be entered into before placing orders for supply +t should be instructed that all supplies be made on a designated day +t should be mandated that all supplies should conform to the specications An informal agreement through oral conrmation with regard to price and specications Explanation Even in cases where a formal written contract is not entered into, no order for supplies should be placed without at least a written agreement in regard to price" " #hich of the following are considered uality assurance activities* " .eport to management on progress against budget &" .eport to management on progress against schedule -" 9upervision 3" Allocation of responsibilities only , - and 3 only and 3 only - and 3 All of the above Explanation 7" #hich of the following statement is !./E regarding the physical observation by audit personnel for collecting the audit evidence Physical observation for collecting the audit evidence is not permitted Physical observation for collecting the audit is permitted only if audit personnel are accompanied by the departmental personnel physical observation, including ;oint inspection by the auditors and the executive, the resultant observations being signed by both as conrmation of performance or achievements is permitted Physical observation for collecting the audit evidence is not allowed without the permission of the departmental personnel Explanation !he most appropriate answer is C " +n public wor%s .egister of the )ivisional Accountant@s (b;ections 0orm F9( AuditD4&D would contain whichdepartment, of the following
All the observations pointed out by the audit parties of the accountant general AuditD for watching their prompt settlement Finor observations pointed out by the audit parties to be settled departmentally during the course of next audit Fa;or audit observation pointed out by the audit parties which needs highest priority in compliance and settlement with the accountant general 'otes of the )ivisional Accountant providing advice to the )ivisional (?cer in respect of certain transactions and their settlement Explanation +f the )ivisional Accountant considers that any transaction or order a=ecting receipts or expenditure is such as would be challenged by the Accountant $eneral if the latter were to apply the preliminary internal chec%, it is his duty to bring this fact to the notice of the )ivisional (?cer with a statement of his reasons and to obtain the orders of that o?cer" +t will then be his duty to comply with these ordersO if, however, he has been overruled and is not satised with the decision, he should at the same time ma%e a brief note of the case in the .egister of the )ivisional Accountant@s (b;ections 0orm F9( AuditD4&D and submit the register to the )ivisional (?cer so that he may have an opportunity to either accept the )ivisional Accountant@s advice on reconsideration and order action accordingly, or to record, for the information of the Accountant $eneral, his reasons for disregarding that advice" An ob;ection entered in this register should not be considered as nally disposed of until it has been reviewed by the Accountant $eneral AuditD, for whose inspection the register should be available at all times" &" Fatch the following serial number
section of the DPC act
&
9ection9ection
A B
-
9ection 8
C
3
9ection :
)
serial number
the area of audit
Auditofreciepts Auditofexpenditure Audit of stores and stoc% Audit of autonomous bodies
4A, &4B, -4C, 34) 4B, &4), -4A, 34C 4B, &4), -4C, 34) 4A, &4B, -4), 34C Explanation -" +n considering the steps of the performance audit process, which of the following is more li%ely to provide information on the implementation of audit recommendations*
g
.eportin
follow4up main study Planning Explanation 3" !he commonly used analytical review techniues include all of the following ECEP! system analysis random analysis predictive analysis business analysis Explanation @!he commonly used analytical review techniues are aD comparisons involving a single componentO bD comparison across componentsO cD system analysis dD predictive analysisO eD regression analysis and fD business analysis@" 6" +n audit of revenue receipts, Audit has to examine the ;udicial decisions or ;udgements with a view to Chec% whether the ;udgement was sound and in accordance with the provisions of the repective acts Chec% whether the ;udgement was consistent with the previous ;udgement or ;udgement of a higher court Chec% whether the revenue authorities has submitted appeals to ensure that no loss of revenue occurred due to erroneous ;udgements Chec% the e=ectiveness of the assessment procedures and recovery procedures in the light of the ;udgement" Explanation +t is not the duty of Audit to review a ;udicial decision nor does Audit normally review the ;udgment exercised by o?cers in individual cases in areas purely falling in their discretion" But it must be recogni
)ocumentary review, statistical sampling of euipment and interview with patients 9urvey with the system users and review of complaints made to the hospital +! unit Explanation :" +n the audit of assessments of revenue receipts, the assessment les and returns themselves may not always reveal under declaration of sales or income" +n such cases, audit may obtain +nformal Evidence directly from Assesses may obtain additional Evidence through 9urvey of Assessees may underta%e a Cross Verication of information with data available with other departments may complete its examination with the evidence available in the assessment les duly recording the constraints Explanation 0" +n the audit of assessments, the assessment les and returns themselves may not always reveal under declaration of sales or income" +n such cases, a unit4based approach may not su?ce and an inter4disciplinary approach may be called for" 0or example, in the case of chec% of 9ales !ax assessment of dealers who are also manufacturers, the data furnished in their returns could be veried with the corresponding data furnished by them in their Central Excise returns to see whether there are any variations or discrepancies" 9imilar cross verication may also be possible with the income tax returns >" !he Comptroller and Auditor $eneral of +ndia derives his authority and functions mainly from the provisions of 4444444444444 Articles 3> to 6 of the Constitution of +ndia Articles 3: to 67 of the Constitution of +ndia Articles 67 to 63 of the Constitution of +ndia Articles 67 to 66 of the Constitution of +ndia Explanation !he Comptroller and Auditor $eneral of +ndia derives his authority and functions mainly from the provisions of Articles 3> to 6 of the Constitution of +ndia" Article 3> of the Constitution of +ndia states as follows D !here shall be a Comptroller and Auditor $eneral of +ndia who shall be appointed by the President by warrant under his hand and seal and shall only be removed from o?ce in li%e manner and on the li%e grounds as a Gudge of the 9upreme Court &D Every person appointed to be the Comptroller and Auditor $eneral of +ndia shall, before he enters upon his o?ce, ma%e and subscribe before the President, or some person appointed in that behalf by him, an oath or a?rmation according to the form set out for the purpose in the !hird 9chedule -D !he salary and other conditions of service of the Comptroller and Auditor $eneral shall be such as may be determined by Parliament by law and, until they are so determined, shall be as specied in the 9econd 9chedule Provided that neither the salary of a Comptroller and Auditor $eneral nor his rights in respect of leave of absence, pension or age of retirement shall be varied to his disadvantage after his appointment
3D !he Comptroller and Auditor $eneral shall not be eligible for further o?ce either under the $overnment of +ndia or under the $overnment of any 9tate after he has ceased to hold his o?ce 6D 9ub;ect to the provisions of this Constitution and of any law made by Parliament, the conditions of service of persons serving in the +ndian Audit and Accounts )epartment and the administrative powers of the Comptroller and Auditor $eneral shall be such as may be prescribed by rules made by the President after consultation with the Comptroller and Auditor $eneral 8D !he Administrative expenses of the o?ce of the Comptroller and Auditor $eneral, including all salaries, allowances and pensions payable to or in respect of pensions serving in that o?ce, shall be charged upon the Consolidated 0und of +ndia Article 3 of the Constitution provides that the Comptroller and Auditor $eneral of +ndia shall exercise such powers and perform such duties in relation to the accounts of the /nion and of the 9tates and of any other authority or body as may be prescribed by or under any law made by Parliament" Article 67 of the Constitution states that form of accounts of the /nion and of the 9tates shall be %ept in such form as the President may, on the advice of the Comptroller and Auditor $eneral of +ndia, prescribe" Article 6 discusses about Audit reports" Article 6 states that the reports of the Comptroller and Auditor $eneral of +ndia relating to the accounts of the /nion shall be submitted to the President, who shall cause them to be laid before each 2ouse of Parliament" !he reports of the Comptroller and Auditor $eneral of +ndia relating to the accounts of a 9tate shall be submitted to the $overnor of the 9tate, who shall cause them to be laid before the 1egislature of the 9tate " +f you were to examine the e?ciency aspects in a hospital, what would you address* costs of resource procurement" average cost per patient admitted" achievement of goals in number of surgeries" none of the above Explanation &7" !he duties entrusted to the Comptroller and Auditor $eneral of +ndia under the provisions of the Act fall broadly under two categories, namely those relating to 44444444444 and 44444444444 compilation and %eeping of accounts, audit audit, consultation and recommendations audit, reporting and follow up audit, reporting Explanation !he duties entrusted to the Comptroller and Auditor $eneral of +ndia under the provisions of the Act fall broadly under two categories, namely those relating to iD compilation and %eeping of accounts, and iiD audit" &" #hich of the following statement is '(! Correct with regard to the submission of utili
Finistries and departments of the Central $overnment are not reuired to furnish utili
of /nion !erritories Act, 8- &7 of 8-D for the appropriation of moneys out of the Consolidated 0und of +ndia or of a 9tate, or of a /nion !erritory having a 1egislative Assembly, as the case may be is called Appropriation accounts 0inance Accounts Balance 9heetQ Annual 0inancial 9tatement Explanation !he most appropriate answer is A &8" #hich of the following should the auditor rst consider when planning the audit the audit ob;ectives and criteria" the audit ob;ectives and ndings" the audit ob;ectives and methodology" the audit ob;ectives and scope" Explanation &:" +n instances where an audit body disagrees with the audit criteria then the 9A+ should convene a meeting with the head of the audited body and get himher to agree on the audit criteria amend the criteria to suit the reuirements of the audited body" weigh the facts and arguments presented by the audited body against other relevant facts and arguments" none of the above Explanation &>" +f new informationproblems have come to the notice of audit team during the conduct of audit, then changes should not be made to increase the scope of the audit wor% plan even if the new audit procedure could have a signicant impact on the overall audit uestion as such increase in scope will cost more time and money" changes should not be made to increase the scope of the audit wor% plan even if the new audit procedure could have a signicant impact on the overall audit uestion, but the informationissue could be recorded for subseuent audits or for coverage during follow4up audit" changes should always be made to the audit wor% plan on collection of new information as performance audit plans are reuired to be 5exible" none of the above is correct Explanation
&" #hich of the following is part of the functions of the ob;ectives of Central Audit* Chec% whether vouchers are in the prescribed form and have been prepared according to extant rules" 9crutini
!he scope, extent and content of the audit can be mutually agreed upon by the comptroller and auditor general and the auditee institution !he scope and extent of the audit alone can be decided by the audit institution and the CA$ has full powers to get access to the records which are reuired for the audit" Explanation !he most appropriate answer is A --" V1C means in Accounts and Entitlement (?ces refers to Voucher 1evel Compilation Voucher 1evel Computeri
(nly i (nly ii (nly ii and iii All i, ii, and iii Explanation !he most appropriate answer is ) -8" +n the eventuality of non4 production of vital records by the person in charge of an o?ce or department under audit, which of the following course of action has to be ta%en +ssue a disclaimer stating that audit could not ensure the correctness of the transactions owing to non4production of the vital records .eport the non4production of the vital records in the +nspection .eport so that the Audit can verify the records during the next audit .eport the non4production of the vital records in the inspection report stating clearly the money value that could not be veried in audit Call o= the audit and report the matter to the Chief 9ecretary in the 9tate or to the 9ecretary to the $overnment of +ndia in the Centre Explanation 9ub4section &D of 9ection > of the Act, itare is the statutory obligation ofby the charge of the /nder o?ce or the department, the accounts of which to be inspectedaudited theperson in4 functionaries of the Comptroller and Auditor $eneral, to a=ord all facilities for the inspectionaudit and comply with reuests for information in as complete a form as possible and with all reasonable expedition" +n the eventuality of non4 production of vital records, the audit should be called o= and the matter should be reported by the Accountant $eneral to the Chief 9ecretary in the 9tate or to the 9ecretary to the $overnment of +ndia in the Centre, as the case may be" -:" !his is a statistical techniue that creates an euation to reveal how one variable is related to one or more other variables" 9uch method of analysis with the use of mathematical tools is called .egression Analysis Predictive Analysis 9ystem Analysis Casual Analysis Explanation !he most appropriate answer is A" ->" 4444444 enables the Central $overnment to ma%e rules after consultation with the Comptroller and Auditor $eneral for carrying out the provisions of the )PC Act in so far as they relate to maintenance of accounts" 9ection &- of the CA$@s )PC Act 9ection && of the CA$@s )PC Act 9ection &3 of the Fanual of
9tanding (rders 9ection &8 of the Fanual of 9tanding (rders Explanation 9ection && enables the Central $overnment to ma%e rules after consultation with the Comptroller and Auditor $eneral for carrying out the provisions of the Act in so far as they relate to maintenance of accounts
#hich of the following international document re4emphasises the independence of supreme audit institutions* 9upreme Audit )eclaration :: 0rench )eclaration >: Fexico )eclaration &77: Audit )eclaration >: Explanation &" +f, during the course of an annual audit of a publicly held manufacturing company, an independent auditor becomes aware of a reportable condition in the companyRs internal control, the auditor is reuired to communicate the reportable condition to !he senior management and the board of directors of the company !he senior management of the company !he board of directors of the company !he audit committee of the board of directors Explanation !he most appropriate answer is )" -" @!one at the top@ forms part of which of the component of the internal control* .is% Assessment Control Activities Fonitoring Control Environment Explanation !he most appropriate answer is ) 3" #hich of the following statement is !./E regarding the process of ris% assessment .is% Assessment and +nternal Control are two independent processes .is% Assessment is a one4time process which shall be ta%en up at the time of setting organi
)etermine the signicance and sensitivity of the ris% Assessing the susceptibility to misuse of resources, failure to attain ob;ectives regarding ethics, euity, economy, e?ciency, e=ectiveness +dentifying and understanding the relevant controls All of the above Explanation !he most appropriate answer is ) 8" #hich of the following is an example of control ob;ective* i" !o ensure that invoices are paid only for goods or services which have been received ii" !o ma%e sure that ma%e sure that only accredited sta= and visitors are permitted to enter the building iii" !o ensure that payments are made only to the valid employees of the organi" #hich statement is correct concerning the denition of internal control developed by the Committee of 9ponsoring (rgani
+ntercontinental 9ociety of 9upreme Audit +nstitutions +ntercontinental (rganisation of 9upreme Audit +nfrastructure Explanation 7" !he use of delity bonds may indemnify a company from embe<
3" #hich of the following will '(! reduce the e=ectiveness of internal control in an organi" An entityRs ongoing monitoring activities often include Periodic audits by the audit committee
.eviewing the purchasing function !he audit of the annual nancial statements Control ris% assessment in con;unction with uarterly reviews Explanation !he most appropriate answer is C" " #hich of the following is '(! a general ob;ective of +nternal Control 9ystem* Accountability and .eporting Compliance with laws and regulations (rderly ethical economical e?cient and e=ective operations Absolute assurance on the achievement of the ob;ectives of an organi
!he understanding of the internal audit function is an important substantive test to be performed by the independent auditor Explanation !he most appropriate answer is C &-" #hich of the following statement is '(! Correct* +nternal control is not one event, action or circumstance but a series of actions +nternal control is should be separate from the basic management functions of planning organi
A component of internal control An element of the control environment !he primary asset safeguarding techniue A portion of information and communication Explanation !he most appropriate answer is A &>" A consideration of the +nternal Control 9ystem made in connection with an annual audit is usually not su?cient to express an opinion on an entityRs internal control because #ea%nesses in the +nternal Control 9ystem may go unnoticed during the audit period A consideration of the +nternal Control 9ystem is not necessarily made during an audit engagement (nly those controls on which an auditor intends to rely are reviewed, tested and evaluated +nternal controls can change each year Explanation !he most appropriate answer is C &" #hen an auditor considers an entityRs internal control, which of the following is ordinarily a type of control activity that is considered* .is% assessment over cash disbursements 9egregation of duties +nclusion of the president as a member of the audit committee FanagementRs monitoring policies over cash receipts Explanation !he most appropriate answer is B -7" +f the independent auditors decide that the wor% performed by the internal auditor may have bearing on their own procedures, they should consider the internal auditorRs Competence and ob;ectivity E?ciency and experience +ndependence and review s%ills !raining and supervisory s%ills Explanation !he most appropriate answer is A
-" +n general, a reportable condition may be dened as a condition in which material errors or irregularities ordinarily would not be detected within a timely period by An auditor during the normal consideration of the internal controls A controller when reconciling accounts in the general ledger Employees in the normal course of performing their assigned duties !he chief nancial o?cer when reviewing interim 0inancial 9tatement Explanation !he most appropriate answer is C" -&" #hich of the following is not a factor included in the control environment* +ntegrity and ethical values .is% assessment Commitment to competence (rgani
-6" #hen an independent auditor decides that the wor% performed by internal auditors may have a bearing on the nature, extent and timing of the independent auditorRs procedures, the independent auditor should evaluate the competence and ob;ectivity of the internal auditors" .elative to ob;ectivity, the independent auditor should Consider the organi" #hen considering the entity@s +nternal Control 9ystem to determine whether the necessary procedures are prescribed and are followed satisfactorily, an auditor must )evelop uestionnaires and chec%lists .eview the +nternal Control 9ystem and perform tests of controls Perform tests of controls and analytical procedures Evaluate administrative policies Explanation !he most appropriate answer is B
-" #hich of the following component of internal control is treated as the foundation for all other components* Control Activities .is% Assessment Control Environment +nformation and Communication Explanation 37" #hich of the following is the 1EA9! important class of control activity normally adopted in an organi
Consider the reportable condition a scope limitation and therefore disclaim an opinion )ocument the matter in the wor%ing papers and consider the e=ects of the condition on the audit 9uspend all audit activities pending directions from the clientRs audit committee #ithdraw from the engagement Explanation !he most appropriate answer is B 33" #hich of the following is '(! a method of responding to a perceived ris% !ransfer the .is% !olerate the .is% !reat the .is% 9upplement the ris% Explanation 36" Proper segregation of functional responsibilities calls for separation of the Authori
9ystem Controls and software Controls 2ardware controls and 9oftware Controls 9oftware Controls and 2uman .esource Controls Explanation 3>" #hich of the following is !./E with reference to +nformation in an organi
Pro;ecting a deviation rate by comparing the results of a statistical sample with the actual population characteristics Estimating the current yearRs expected expenses based on the prior yearRs expenses and the current yearRs budget Explanation !he most appropriate answer is C" &" Fanagement has reuested the internal auditor to perform an operational audit of the mar%eting operations of a ma;or division and recommend policies and procedures for improving management control over the operation" !he internal auditor should Accept the engagement, but indicate to management that recommending controls would impair audit independence so that management %nows that future audits of that area would be impaired" Accept the audit engagement because independence would not be impaired" 'ot accept the engagement because audit departments are presumed to have expertise on accounting controls, not mar%eting controls 'ot accept the engagement because recommending controls would impair future ob;ectivity of the department regarding this auditee" Explanation !he most appropriate answer is B -" #hich of the following have to be ensured while preparing an Audit report* " Audit ndings should be arranged in a logical 5ow and the ndings should set the stage for Audit recommendation &" Audit report should include ;ust enough information for the reader to understand the message that is being conveyed -" Audit report should not be long4winded as the report would end up being too long and di?cult to read, but they should not be so scanty as to provide insu?cient information to ;ustify the conclusion reached 3" Audit report should not o=er any recommendations to the organi
ii" !o ma%e sure that only accredited sta= and visitors are permitted to enter the building iii" !o ensure that payments are made only to the valid employees of the organi" An Audit rm would best provide itself reasonable assurance of meeting its responsibility to o=er professional services that conform with professional standards by Establishing an understanding with each client concerning individual responsibilities in a signed engagement letter Assessing the ris% that errors and fraud may cause the nancial statements to contain material misstatements" )eveloping specic audit ob;ectives to support managementRs assertions that are embodied in the nancial statements" Faintaining a comprehensive system of uality control that is suitably designed in relation to its
organi
(=er the candidate a position if other sta= members possess su?cient %nowledge in economics and +nformation technology Explanation !he most appropriate answer is ) -" #hich of the following is the best way to compensate for the lac% of adeuate segregation of duties in a small organi
!estsCompliance 9ubstantive
!ests 9tatistical sampling .is% based tests Explanation !he most appropriate answer is A" :" Audit 0iles are generally classied as Permanent Audit 0ile and Current Audit 0ile 9ystem Audit 0ile and 9ubstantive Audit 0ile .is% Audit 0ile and Control Audit 0ile Fanual Audit le and Electronic Audit le Explanation !he most appropriate answer is A" >" 9ampling techniue need not be adopted in which of the following situations in an Audit*
9ampling techniue need not be applied when the number of transactions are very high and it is impossible to chec% all the individual transactions 9ampling techniue need not be applied when the population is very small 9ampling is not always reuired and it may be possible to apply audit procedures to the entire population if all the data is held on computer systems and data analysis software li%e +)EA is available Both B and C Explanation !he most appropriate answer is )" " #hich of the following is the best means of aiding an internal audit activity in determining whether its goals are being met* 2aving the board periodically review the uality of the internal audit activityRs wor%" )eveloping measurement criteria to accompany its goals" 9cheduling an external assessment every - years 2aving external auditors review and evaluate the wor% of the internal audit activity Explanation !he most appropriate answer is B" &7" !he sample si
!he population si
A rotating subcommittee of the board of directors or its euivalent" (nly members from the relevant outside regulatory agencies" Fembers from all important constituencies, specically including representatives from ban%ing, labor, regulatory agencies, shareholders, and o?cers" (nly external members of the board of directors or its euivalent Explanation !he most appropriate answer is ) &6" #hich of the following activity is '(! li%ely to be a part of the Preparation and planning part of the Audit process* Preliminary 9urvey Entry Conference or Hic%4o= meeting Preparation of an Audit Plan 9ubstantive !esting Explanation !he most appropriate answer is )" &8" Prior to releasing results of an internal audit to users outside the organisation the chief audit executive must Assess the potential ris% to the organisation @ Consult with senior management and or legal counsel as appropriate @ Control dissemination by restricting the use of the results All of the above Explanation !he most appropriate answer is )" &:" #hich of the following is a disadvantage in using 5ow charts in Audit*
charting techniues and conventions have to be learned and practiced and the Auditors may!he not 5ow be 5uent or experienced in preparing them 0lowcharts highlight the relationship between di=erent parts of the system Auditor can see and visualise the whole 5ow of documents +nformation can be easily communicated and assimilated and cross referencing between systems is easier Explanation !he most appropriate answer is A &>" #hich of the following tas%s need not be underta%en before an auditor arrives at audit conclusions on a process* 0rame .ecommendations .is% Assessment
!est of Controls /nderstand the process ob;ectives Explanation !he most appropriate answer is A" &" !he purpose, authority, and responsibility of the internal audit activity should be formally dened and the document is normally called +nternal Audit )ocument +nternal Control )ocument +nternal Audit Charter +nternal Audit #or%ing Paper Explanation !he most appropriate answer is C" -7" #hich of the following steps are normally ta%en by an Auditor for evaluating the system design and to determine the adeuacy of control* " +dentify the controls starting at higher level controls and wor%ing down to lower level controls over individual transactions" &" Consider the that something will go wring and the signicance materialityD to the organi
any future losses and thereafter drop the opinion from the audit report Explanation !he most appropriate answer is B -&" +n which of the following situations does an internal auditor potentially lac% ob;ectivity* An internal auditor reviews the procedures for a new electronic data interchange E)+D connection to a ma;or customer before it is implemented A former purchasing assistant performs a review of internal controls over purchasing 3 months after being transferred to the internal auditing department" An internal auditor recommends standards of control and performance measures for a contract with a service organi
-8" An auditor has determined that controls in a process are wea% or inadeuate" 2e decides to test the controls further with the purpose of determining if any signicant losses have occurred due to such wea% controls" 9uch testing of controls are generally called Compliance testing 9ubstantive testing 1oss assessment testing .is% based testing Explanation !he most appropriate answer is B" -:" #hen an engagement was assigned, management as%ed the internal auditor to evaluate the appropriateness of using self4insurance to minimi" #hich of the following statements is generally correct about the sample si
37" #ho among the following is primarily responsible for communicating the audit ndings in respect of internal audit of an organisation* !he Chief Audit Executive !he External Auditor of that organisation !he Chief Executive (?cer !he +nformation (?cer Explanation !he most appropriate answer is A" 3" #hich of the following statement is !./E about Audit les* !he wor%ing papers and any other documentation related to each audit assignment should be held on dedicated audit les !he Audit les should be structured in a clear and logical way in order to ma%e it easy for anyone to nd what they need and to understand what has been done, and why" !he les can be held in electronic or paper form Appropriate use of indexes and of cross4referencing between documents and sections of the les is vital if documentation is to be accessible and assist the auditor to carry out the audit e?ciently All of the Above Explanation !he most appropriate answer is )" 3&" #hich of the following controls should prevent an invoice for the purchase of materials from being paid twice* !he chec% signer accounts for the numerical seuence of receiving reports used in support of each payment An individual independent of cash operations prepares a ban% reconciliation !he person who signs the cheues reviews and cancels all the vouchers !wo chec% signers are reuired for all chec%s over a specied amount Explanation !he most appropriate answer is C" 3-" An Auditor may decide not to sample if " he feels that sampling is too tedious a process &" the population is very small -" he is unwilling to accept the sampling ris% 3" he is searching for rare but important occurances All the above ,&,&,-,3 ,&,3 Explanation !he most appropriate answer is C"
33" )ocumenting the system under Audit is an important part of the Audit process" #hich of the following is normally employed to document the system under Audit 'arrative )escriptions of the 9ystem 0low Charting A Combination of A and B A or B or C Explanation !he most appropriate answer is )" 36" #hich of the following courses of action is the most appropriate if an auditor concludes that there is a high ris% of material misstatement* /se smaller, rather than larger, sample si" #hich of the following is an attribute of a uality audit report* " !he ndings in the audit report should be free from errors and distortions and are faithful to the
underlying facts &" !he audit report should be presented in a fair, impartial and unbiased and should present a balanced assessment of all relevant facts and circumstances -" !he audit report should be helpful to the client and the organisation and lead to improvements where needed 3" !he Audit report should be opportune and expedient depending on the signicance of the issue, allowing management to ta%e appropriate corrective action and & -
& and - and
3 ,&,-, 3 Explanation !he most appropriate answer is )" 3" #hich of the following statements best describes why an auditor would use substantive procedures alone to evaluate specic relevant assertions and ris%s* !he relevant internal control components are not well documented !he internal auditor already has tested the relevant controls and found them e=ective !esting the operating e=ectiveness of the relevant controls would not be e?cient !he cost of substantive procedures will exceed the cost of testing the relevant controls Explanation !he most appropriate answer is C" 67" Each of the following is a type of %nown misstatement, except An inaccuracy in processing data" !he misapplication of accounting principles" )i=erences between management and the auditorRs ;udgment regarding estimates" A di=erence between the classication of a reported nancial statement element and the classication according to generally accepted accounting principles Explanation !he most appropriate answer is C" 6" #hich of the following is an activity an Auditor is 1EA9! li%ely to underta%e while carrying out an Audit* Preparing for and Planning the Audit Assignment Ascertaining and recording the system +dentifying and understanding 9ystem (b;ectives
9etting organi
68" #hich of the following procedures would an Auditor most li%ely perform in the planning phase of a nancial statement audit* Fa%e inuiries of the clientRs lawyer concerning pending litigation Perform cuto= tests of cash receipts and disbursements Compare nancial information with nonnancial operating data .ecalculate the prior yearRs accruals and deferrals Explanation !he most appropriate answer is C" 6:" #hich of the following procedures would an auditor most li%ely perform in the planning stage of an audit* Fa%e a preliminary ;udgment about materiality Conrm a sample of the entityRs accounts payable with %nown creditors (btain written representations from management that there are no unrecorded transactions Communicate managementRs initial selection of accounting policies to the audit committee Explanation !he most appropriate answer is A" 6>" !he results of testing a sample using which of the following sampling approach should not be extrapolated over the population as the sample is unli%ely to be representative of the population* 'on4statistical sampling 9tatistical 9ampling Both A and B 'one of the Above Explanation !he most appropriate answer is A" 6" #hich of the following is '(! the ob;ective of carrying out a preliminary survey* !o determine the broad ob;ectives of the Audit !o determine the extent of sampling to be employed while carrying out the Audit !o determine the scope of Audit and any specic areas that are to be given importance during Audit !o determine the target dates for completion of each stage of Audit Explanation !he most appropriate answer is B 87" An internal auditor fails to discover an employee fraud during an assurance engagement" !he non4 discovery most li%ely suggests a violation of the 9tandards if it was the result of a
0ailure to perform a detailed review of all transactions in the area" )etermination that any possible fraud in the area would not involve a material amount" )etermination that the cost of extending procedures in the area would exceed the potential benets" Presumption that the internal controls in the area were adeuate and e=ective Explanation !he most appropriate answer is )"
!wo determinants of the persuasiveness of evidence are competence and su?ciency" relevance and reliability" appropriateness and su?ciency" independence and e=ectiveness Explanation !he most appropriate answer is C &" #hich of the following is not a characteristic of the reliability of evidence* E=ectiveness of client internal controls" Education of auditor" +ndependence of information provider" .eliability of the source of information Explanation !he most appropriate answer is B" -" (bservation consists of loo%ing at a process or procedure being performed by others" #hich of the following statement is !./E with regard to the use of observation in Audit (bservation is not an acceptable method for collection of audit evidence as it is limited to the point in time at which the observation ta%es place (bservation cannot be used for examination of tangible assets to verify its existence and assess its state of maintenance (bservation is not an acceptable method for collection of audit evidence as observation would upset the normal 5ow of wor% in the organi
procedure is actually a conrmation of the uality of evidence Explanation !he most appropriate answer is B 6" #hich of the following is '(! a purpose of analytical procedures* /nderstand the client@s industry Assess the client@s ability to continue as a going concern" Evaluate internal controls .educe detailed audit tests Explanation !he most appropriate answer is C" 8" #hich of the following is an evidence gathering techniue used in Audit for gathering specic information from a group of people or an organi" #hich of the following is a method of collecting audit evidence* +nterviews Uuestionnaires .eviewing other studies and previous audit reports All of the Above Explanation !he most appropriate answer is )"
" +f an audit evidence is said to be persuasive audit evidence, it means which of the following +t means the evidence collected o=ers condence to the auditors in reaching conclusions with respect to audit ob;ectives +t means the evidence collected is su?cient, competent and relevant to the audit ob;ective +t means it conforms to the common sense and professional ;udgment of the auditor with reference to an audit ob;ective All of the above Explanation !he most appropriate answer is ) 7" #hich of the following statements regarding the relevance of evidence is correct* !o be relevant, evidence must pertain to the audit ob;ective of the evidence !o be relevant, evidence must be persuasive !o be relevant, evidence must relate to multiple audit ob;ectives !o be relevant, evidence must be derived from a system including e=ective internal controls Explanation !he most appropriate answer is A " #hich of the following forms of evidence is most reliable* $eneral ledger account balances" Conrmation of accounts receivable balance received from a customer" +nternal memo explaining the issuance of a credit memo" Copy of month4end ad;usting entries Explanation !he most appropriate answer is B &" #hich of the following are considered as the advantages of using benchmar%ing as an audit evidence gathering tool* +t stimulates an ob;ective review of processes, practices, and systems +t supports recommendations for ma%ing changes +t presents a target for improvement in the audited organi
option will be to ualify the report stating the inability of the audit team in evaluating the complex sub;ect area Auditors can remove the sub;ect area from the scope of audit and mention specically in the preamble of the Audit .eport Expert opinion can be sought individually or experts can be consulted interactively and opinion from recogni
reuires the gathering of corroborative evidence"@ is the auditor@s principal method of evaluating the client@s internal control@ does not provide evidence from an independent source"@ Explanation !he most appropriate answer is C >" #hen ma%ing decisions about evidence for a given audit, the auditor@s goal is to obtain a su?cient amount of timely, reliable evidence that is relevant to the information being veried, and to do so 'o matter the cost involved in obtaining such evidence" At any cost because the costs are borne by the auditee" at the lowest possible total cost at the cost suggested in the engagement letter Explanation !he most appropriate answer is C " Auditors will replace tests of details with analytical procedures when possible because the Analytical procedures are more reliable" !ests of details are relatively more expensive" Analytical procedures are more persuasive !ests of details are more di?cult to interpret Explanation !he most appropriate answer is B &7" #hich of the following statements about conrmations is true* Conrmations are expensive and so are often not used" Conrmations may inconvenience those as%ed to supply them, but they are widely used" Conrmations are sometimes not reliable and so auditors use them only as necessary Conrmations are reuired for several balance sheet accounts but no income statement accounts Explanation !he most appropriate answer is B &" #hich of the following is the vision statement of 9A+ india* !o be a global leader and initiator of national and international best practices in public sector auditing and accounting and recognised for independent, credible, balanced and timely reporting on public nance and governance
!o uphold the constitution of +ndia and promote good governance so as to promote e?ciency, e=ectiveness and economy of the public nance !o uphold the constitution of +ndia and perform the duties specied by the constitution and CA$s )PC Act !o uphold the constitution of +ndia and to perfom duties as mandated by the constitution and CA$s )PC act to promote e?ciency, e=ectiveness and economy in public nance Explanation !he most appropriate answer is A &&" #hich one of the following is '(! one of the primary purposes of audit documentation* A basis for planning the audit" A record of the evidence accumulated and the results of the tests" A basis for review by supervisors and partners" A basis for determining wor% deciencies by peer review teams Explanation !he most appropriate answer is ) &-" #hich of the following is important to ensure that the photographs ualify as competent audit evidence* +n respect of photos proposed as evidence, the date, time and place of the event or ob;ect recorded may be noted in the photo itself with proper attestation by the auditor and a representative of the entity to avoid any dispute when the Audit .eports are discussed" +n respect of photos proposed as evidence it should be ensured that the photos are captured by the representative of the entities as the photos ta%en by the audit team are li%ely to be disputed at a later stage +n respect of photos proposed as evidence it should be ensured that photos are captured only in respect of permanent structures li%e buildings so that even at a later stage if anyone wants to verify the spot, the same state of a=airs should be available so that they audited entity cannot dispute the evidence in the photographs Photographs never ualify as a competent audit evidence as the evidence collected in the form of photographs can be easily manipulated and therefore such evidence are not reliable Explanation !he most appropriate answer is A &3" #hich of the following statement is '(! correct with reference to the persuasiveness of an audit evidence* Corroborated evidence is usually more persuasive than uncorroborated evidence !imely evidence is typically more persuasive than evidence produced after a delay Evidence from within the audited entity is more persuasive than the evidence obtained from third parties Evidence obtained from larger samples are generally more persuasive than those obtained from smaller samples Explanation !he most appropriate answer is C"
&6" #hich of the following is '(! a guideline issued by the CA$ of +ndia to guide the wor%ing of the +ndian audit and accounts department* Fanual of standing ordersAuditD Performance Auditing $uidelines Fanual of instructions for Audit of Autonomous bodies +ndian Audit and Assurance 9tandards &77: Explanation !he most appropriate answer is ) &8" #hich of the following is the mission statement of 9A+ +ndia* !o promote accountability, transparency and good governance through high uality auditing and accounting and provide independent assurance to our sta%eholders, the 1egislature, the Executive and the Public, that public funds are being used e?ciently and for the intended purposes" !o uphold the constitution of +ndia and promote good governance so as to promote e?ciency, e=ectiveness and economy of the public nance !o uphold the constitution of +ndia and perform the duties specied by the constitution and CA$s )PC Act !o uphold the constitution of +ndia and to perfom duties as mandated by the constitution and CA$s )PC act to promote e?ciency, e=ectiveness and economy in public nance Explanation !he most appropriate answer is A &:" @Physical examination@ is the inspection or count by the auditor of items such as Cash, inventory, and payroll timecards" Cash, inventory, canceled chec%s, and sales documents Cash, inventory, canceled chec%s, and tangible xed assets" Cash, inventory, securities, notes receivable, and tangible xed assets Explanation !he most appropriate answer is ) &>" #hich of the following statements regarding documentation is not correct* )ocumentation includes examining client records such as general ledgers and supporting ;ournals" +nternal documents are documents that are generated within the company and used to communicate with external parties External documents are documents that are generated outside of the company and are used to communicate the results of a transaction External documents are considered more reliable than internal documents Explanation !he most appropriate answer is B &" !one at the top policy of the 9A+ india is in5uenced mainly by which of the following documents*
Constitution of +ndia and CA$@s )PC Act F9( Administration F9( Audit F9( !raining Fanual Explanation !he most appropriate answer is A" -7" #hich of the following is normally applied to test the validity of the responses in survey uestions* !o introduce counter uestions within the uestionnaire at appropriate stages !o translate the uestions in the local language !o underta%e surveys twice on the same population after a specied interval of time !o introduce leading uestions so that the respondent may give the answer reuired by the survey team Explanation !he most appropriate answer is A -" Calculating the gross margin as a percent of sales and comparing it with previous periods is a type of evidence gathering techniue %nown as Physical examination" Analytical procedures" (bservation" +nuiry Explanation !he most appropriate answer is B -&" #hich of the following is ta%en as an advantage of using focus groups as a method of collecting audit evidence*
0ocus but group an issue to be discussed depth" (pinions and ideas)i=erent that will perspectives not be available otherwise areallows important for the study can bein obtained by the techniue" of the issue are revealed" .espondents in individual interviews may not express opinions freely but in a group situation, the individuals may be more open" !he members of the focus group are not selected statistically" As such their opinion may not be representative and the results of the focus group cannot be pro;ected on the population at large" A focus group is a social situationO there can be pressure on individual participants to conform to group opinions" !his allows to form a single opinion All of the above Explanation !he most appropriate answer is A --" An audit team decides to ta%e a count of inventory instead of relying on the counted gure of a third party" !he audit evidence thus collected would be !reated as incompetent audit evidence as the audit party has no authority to count the inventory
directly" 9uch direct evidence will not be a persuasive audit evidence !reated as irrelevant and the audit ob;ective can be analysed solely with reference to the gures given by the third party A direct count of inventory by auditors is more persuasive than someone else@s counted gure and therefore can be accepted as an audit evidence !hird party evidence is generally more persuasive than the audit evidence collected by the auditors though direct observation" Explanation !he most appropriate answer is C -3" #hich of the following statement with reference to the audit evidence is correct* )ocumentary evidence is more reliable than the oral evidence Evidence obtained through direct observation is more reliable than the indirectly obtained evidence Photocopies being less reliable evidence than the srcinals, the source of photocopies should be identied by noting the source and as far as possible, the photocopies should be certied !he reliability of entity generated information is more reliable if the internal control system within the entity is wea% Explanation !he most appropriate answer is ) -6" #hich of the following best describes the term corroborated evidence* Corroborated evidence refers to the same or similar evidence acuired from two or more independent sources" Corroborate evidence refers to the evidence obtained in a timely manner from the audited entity which are accepted by the audited entity Corroborated evidence is evidence collected by the audit team through direct observation of the process under audit Corroborated evidence is evidence is evidence obtained employing statistical methods such as sampling Explanation !he most appropriate answer is A -8" #hich of the following statement describes the concept of @bench mar%ing@* Bench mar%ing is a process of preparing standard uestions relating to a sub;ect in the order of importance which could be used as a benchmar% at the time of interviewing the audit personnel Benchmar%ing is the process of arranging the audit evidence in the order of their relevance so that the most competent and relevant audit evidence is available readily to support the audit conclusions Benchmar%ing is the process of assessing performance of public utility, service delivery pro;ects, commercial underta%ings etc" by comparing with entities performing similar functions or with the best practices" Benchmar%ing is the process of arranging the audit evidence against the audit criteria and the ndings in the report so as to ensure that audit evidence, audit criteria and audit ndings are lin%ed in an audit report Explanation !he most appropriate answer is C"
-:" #hich of the following is !./E with regard to use of @survey@ as a method of evidence gathering in audit* 9urveys provide a framewor% for gathering evidence when information reuired for addressing the audit ob;ective cannot be gained from les and administrative records 9urvey is not an acceptable form of collecting audit evidence because the responses of the population may be highly sub;ective 9urvey can be easily administered without much planning and their analysis does not reuire any special s%ills All of the above Explanation !he most appropriate answer is A ->" Audit evidence obtained directly by the auditor will not be reliable if the auditor lac%s the ualications to evaluate the evidence" it is provided by the client@s attorney" the client denies its veracity" it is impossible for the auditor to obtain additional corroboratory evidence Explanation !he most appropriate answer is A -" An audit team has completed an audit" !he audit evidence collected was mainly in the form of internal documentation from the entity" #hich of the following would be a factor adding to the persuasiveness of the evidence at the time of evaluating the audit evidence* !he sampling method used was ;udgemental sampling instead of statistical sampling 9maller samples are employed to save time and early completion of the audit assignment )ocumentary evidence could not be collected in respect of several audit issues due to paucity of time !he evaluation of the internal control system showed that the audited entity is having a well developed internal control system and is functioning well" Explanation !he most appropriate answer is ) 37" According to the Audit Uuality Fanagement 0ramewor% approved by the CA$ of +ndia, which are the ve broad parameters for uality management in +ndian Audit and Accounts )epartment* 1eadership and )irection, 2uman .esources Fanagement, Audit Fanagement, Clients and 9ta%e holder relations, Continuous improvement Auditing Planning, 2uman .esources Fanagement, Audit +mplementation, Clients and 9ta%e holder relations, Audit follow4up Continuous improvement, 2uman resources management, Audit management, Clients and sta%eholder relations, Audit planning Auditing Planning, 2uman .esources Fanagement, Audit +mplementation, Public .elations Fanagement, Fedia Fanagement Explanation !he most appropriate answer is A
3" !hree common types of conrmations used by auditors are D negative conrmations &D blan% form positive conrmations, and -D positive conrmations with information included" Arrange the conrmations in order of reliability from highest to lowest" , &, -" -, &, " &, -, " -, , &" Explanation !he most appropriate answer is C" 3&" An example of an external document is employees@ time reports" ban% statements" purchase order for company purchases" carbon copies of chec%s Explanation !he most appropriate answer is B 3-" An interview is a uestion4answer session to elicit specic information" #hich of the following statement is '(! C(..EC! with regard to an interview +nterviews can be held telephonically or more commonly face4to4face +nterviews generally are very strong evidence and need not be corroborated through information from other independent sources as the evidence is directly ta%en from the relevant person familiar with the sub;ect matter +n case of interviews related to complex sub;ect areas, auditor could see% the participation of an expert in the interview 9tructured interviews often form a part of surveys Explanation !he most appropriate answer is B 33" !he auditing standards of CA$ states @competent, relevant and reasonable evidence should be obtained to support the auditor@s ;udgement and conclusions regarding the organi
evidence provided the report does not contain sensitive and substantial money value ob;ections" Explanation !he most appropriate answer is A 36" #hich of the following forms of evidence would be least persuasive in forming the auditor@s opinion* .esponses to auditor@s uestions by the president and controller regarding the investments account" Correspondence with a stoc%bro%er regarding the uantity of client@s investments held in street name by the bro%er" Finutes of the board of directors authori" #hich of the following is the most ob;ective type of evidence* A letter written by the lawyer of the client discussing the li%ely outcome of outstanding lawsuits" !he physical count of securities and cash +nuiries of the credit manager about the collectability of noncurrent accounts receivable" (bservation of cobwebs on some inventory bins Explanation !he most appropriate answer is B
3" Appropriateness of evidence is a measure of the Uuantity of evidence" Uuality of evidence" 9u?ciency of evidence" Feaning of evidence" Explanation !he most appropriate answer is B" 67" !he reason why expert opinion is not treated as an audit evidence is because #hen several experts are consulted, each one may give di=ering opinion and it would be di?cult for audit team to form an opinion Audit being a professional ;ob cannot be delegated to a third party who has no understanding about the professional standards of auditing !here is no bar in using expert obtaining in audits" (pinion from recogni
Case studies Explanation !he most appropriate answer is ) 6-" #hich of the following are parts of the continuous improvement activities of the 9A+ +ndia* +nternal Audit, +nternal Uuality Assurance .eview, Peer .eview, 9elf4Evaluation and lessons learnt documents Peer .eview and +nternal Audit Assurance Femo 9elf Evaluation Explanation !he most appropriate answer is A
#hich of the following agency is entrusted with the responsibility of ensuring a uniform policy of accounting and audit in the government sector as a whole in +ndia* +nstitute of Chartered Accountants of +ndia !he Comptroller and Auditor $eneral of +ndia !he Controller $eneral of Accounts !he Finistry of 0inance, $overnment of +ndia Explanation !he most appropriate answer is B" !he CA$ is responsible for ensuring a uniform policy of accounting and audit in the $overnment sector as a whole" !he Act authorises the CA$ to lay down for the guidance of the $overnment departments, the general principles of $overnment accounting and the broad principles in regard to audit of receipts and expenditure" &" #hich of the following entities can be treated as entities managing public money* "Central $overnment* &" 9tate government -" $overnment companies established under companies act 3" $overnment autonomous bodies and & ,&,-, 3 and ,&,3 Explanation !he most appropriate answer is B" !he entities managing public resources include commercial underta%ing, e"g", entities established by statute or public sector underta%ings established under the Companies Act in which the $overnment has a controlling interest" +rrespective of the manner in which they are constituted, their functions, degree of autonomy or funding arrangements, such entities are ultimately accountable to the 9upreme law ma%ing body -" An auditor and audit institution should maintain independence" !his include independence from " !he 1egislature &" !he Audited Entity -" !he Executive" (nly & Both & and (nly ,& and -
Explanation !he most appropriate answer is )" !he general standards reuire that auditor and the audit institutions should be independent" !hese include independence from the legislature, independence from the executive, and independence from the audited entity 3" !he 9A+ should comply with the +'!(9A+ Auditing 9tandards in all matters that are deemed material" A matter is considered material if +n general terms, a matter may be ;udged material if %nowledge of it would be li%ely to in5uence the user of the audit report" Fateriality often aconsidered in terms but the inherentdisclosure nature of an item or a group of items may also is render matter material as of forvalue example mandatory reuirements of statutes regardless of the amounts involved" A matter may be material because of the context in which it occurs, for example, considering an item relating to aD !he overall view given to the nancial informationO bD !he total of which it forms a partO cD Associated terms dD !he corresponding amount in previous years All of the above Explanation !he most appropriate answer is )" 6" Auditor has a right to inspect any o?ce of accounts of the /nion or of a 9tate, to reuire that any boo%s, papers and other documents which are relevant to the transactions to be sent to him and to put such uestions to the persons in charge of the o?ce or ma%e such observations and call for such information as he may reuire for the preparation of any account or report which it is his duty to prepare" #hich of the following acuired*is a reuirement imposed by the auditing standards on auditor with regard to the information so !he information so acuired should be properly arranged and all such information should be %ept safely under loc% and %ey wherever possible +nformation about an audited entity acuired in the course of e AuditorRs wor% must not be used for purposes outside the scope of audit +nformation obtained during the course of audit should be %ept secret at least till the audit report is presented before the parliament +nformation obtained during the course of audit should not be shared with the audited entity unless with the specic approval of the Accountant $eneral Explanation !he most appropriate answer is B" +nformation about an audited entity acuired in the course of e AuditorRs wor% must not be used for purposes outside the scope of audit and formation of an opinion or in reporting not in accordance with the RAuditorRs responsibility" +t is essential that Audit maintain condentiality regarding audit matters and the information obtained while carrying out audit engagements" 8" #hich of the following assumptions and premises for the auditors and audit institutions do not form part of the basic postulates of auditing standards issued by the CA$ for the auditors and audit institutions to adopt* !he 9A+ should comply with the +'!(9A+ auditing standards in all matters that are deemed material" !he 9A+ should apply its own ;udgement to the diverse situations that arise in the course of $overnment auditing #ith increased public consciousness, the demand for public accountability of persons or entities managing public resources has become increasingly evident so that there is a need for challenging the
policy decisions of the executive government" #ith increased public consciousness, the demand for public accountability of persons or entities managing public resources has become increasingly evident so that there is a need for the accountability process to be in place and operating e=ectively Explanation !he most appropriate answer is C" !he auditing standards does not reuire the auditors and audit institutions to challenge the policies adopted by the executive government :" #hich of the following is '(! considered to be a responsibility of the management of an organi" According to auditing standards audit institution should wor% towards improving techniues for auditing the validity of performance measures" #hich of the following would '(! be an appropriate action in fullling such reuirement* )evelop new techniues and methodologies to assess whether reasonable and valid performance measures are used by the audited entity Acuaint with the techniues and mythologies adopted in development of information technology Acuaint with the concepts of environment science and behavioral science" )evelop methodologies to collect audit evidence from the database of the audit entity without the explicit %nowledge of the audit entity using computer assisted audit techniues Explanation !he most appropriate answer is )" !he expanding audit role of the auditors will reuire them to improve and develop new techniues and methodologies to assess whether reasonable and valid performance measures are used by the audited entity" #herever practicable the auditors should acuaint themselves with techniues and methodologies of other relevant disciplines" 9tealing information without the %nowledge of the audited entity is not an acceptable form of evidence collection" " Essential ualications of the auditor and the auditing institution in carrying out the audit of an institution are covered in which part of the auditing standards* Basic postulates $eneral standards 0ield 9tandards .eporting 9tandards
Explanation !he most appropriate answer is B" !he general auditing standards describe the ualications of the auditor and the auditing institution so that they may carry out the tas%s related to eld and reporting standards in a competent and e=ective manner 7" According to the auditing standards the materiality is '(! decided by !he value of the transaction !he nature of the item of transaction !he context in which the transaction occurs !he year in which the transaction is made" Explanation !he most appropriate answer is )" !he year in which the transaction is made has least signicance in deciding the materiality of the transaction" +n general terms, a matter may be ;udged material if %nowledge of it would be li%ely to in5uence the user of the audit report" Fateriality is often considered in terms of value but the inherent nature of an item or a group of items may also render a matter material as for example mandatory disclosure reuirements of statutes regardless of the amounts involved" A matter may be material because of the context in which it occurs, for example, onsidering an item relating to aD !he overall view given to the nancial informationO bD !he total of which it forms a partO cD Associated terms dD !he corresponding amount in previous years etc" " #hich of the following statement on the Auditing 9tandards is Correct* !he Auditing 9tandards applicable for the +ndian Audit and Accounts )epartment were rst issued by the )epartment in 3" !he Auditing 9tandards applicable for the +ndian Audit and Accounts )epartment were rst issued by the )epartment in &77: !he Auditing 9tandards applicable for the +ndian Audit and Accounts )epartment were rst issued by the )epartment in 67 !he Auditing 9tandards applicable for the +ndian Audit and Accounts )epartment were rst issued by the )epartment in : Explanation !he most appropriate answer is A" !he Auditing 9tandards applicable for the +ndian Audit and Accounts )epartment were rst issued by the )epartment in 3 &" According to the auditing standards issued by the comptroller and auditor general of +ndia which of the following is '(! a reuirement for the audit institutions* Audit institutions should adopt policies and procedures to recruit personnel with suitable ualications Audit institutions should adopt policies and procedures to develop and train employees to enable them to perform their tas%s e=ectively, and to dene the basis for the advancement of auditors and other sta= Audit institutions should adopt policies and procedures to prepare manuals and other written guidance notes and instructions concerning the conduct of audits Audit institutions should adopt policies and procedures to prepare alternative policy and legislative
framewor%s so as to provide recommendations for improving the existing policies of the executive government Explanation !he most appropriate answer is )" All except ) are the responsibility of the audit institutions" -" !he auditing standards reuire that 9A+ should maintain independence from political in5uence" !his would mean !he 9A+ should not wor% closely with the legislature, including with committees empowered by the legislature" !hey should be politely informed about this and audit institution should %eep a distance !he 9A+ should not give members of the legislature factual briengs on audit reports in order to preserve an impartial approach to its audit responsibilities" 9A+ should not be responsive, nor give the appearance of being responsive, to the wishes of particular political interests All of the above Explanation !he most appropriate answer is C" !he 9A+ wor%s closely with the legislature, including with committees empowered by the legislature to consider audit reports" !he 9A+ may give members of the legislature factual briengs on audit reports, but it is important that the 9A+ maintains his independence from political in5uence, in order to preserve an impartial approach to its audit responsibilities" !his implies that the 9A+ not be responsive, nor give the appearance of being responsive, to the wishes of particular political interests" 3" #hich among the following is responsible for enforcing economy and e?ciency in the expenditure of public money* Comptroller and auditor general of india !he executive government Comptroller and auditor gender of +ndia and executive government with primary responsibility with comptroller and auditor general !he president of +ndia Explanation !he most appropriate answer is B" !he executive $overnment and not Audit is responsible for enforcing economy and e?ciency in the expenditure of public money" +t is, however, the duty of Audit to bring to light wastefulness, failures, system wea%nesses, deciencies and the circumstances leading to infructuous expenditure 6" !he Auditing 9tandards are issued by the CA$ of india for the $uidance of Auditors Auditees Auditor and Audit institutions coming under CA$ Auditors, Auditees and Audit institutions coming under CA$ Explanation !he most appropriate answer is C" !he standard is intended for the use of both auditors and audit institutions" Auditing 9tandards prescribe the norms of principles and practices, which the Auditors are expected to follow in the conduct of Audit" !hey provide minimum guidance to the Auditor that helps
determine the extent of auditing steps and procedures that should be applied in the audit and constitute the criteria or yardstic% against which the uality of audit results are evaluated 8" !he auditing standards issued by the Comptroller and Auditor $eneral of +ndia consist of mainly four parts" #hich of the following is not a part of these document* Basic postulates $eneral 9tandards 0ield 9tandards Uuality 9tandards Explanation !he most appropriate answer is )" !he fourth part of the standard is .eporting 9tandards" Answer ) is ;ust a distractor :" According to the auditing standards issued by the CA$ of +ndia the responsibility of correctness and su?ciency of the form and content of the nancial reports and other information is with /ltimately with the auditors who certify the nancial statements #ith the executive authorities and management of the auditees #ith the auditors where CA$ is the sole auditor Both the management and the auditors share the responsibility of development of adeuate information, control, evaluation and reporting systems within the $overnment will facilitate the accountability process so as to ensure the correctness and su?ciency of the nancial reports Explanation !he most appropriate answer is B" >" #hich of the following standards are applicable to both auditors and audit institutions* A" !he auditor and the audit institutions must be independent" !he auditor and the audit institutions must be independent" !he auditor and the audit institutions must possess the reuired competence" !he auditor and the audit institutions must exercise due care and concern in complying with these auditing standards All of the above Explanation !he most appropriate answer is ) " !he Auditing 9tandards issued by the CA$ in &77& brings out mainly which of the following changes* !he basic elements of +'!(9A+ Rcode of ethicsR has been incorporated !he concept of professional scheptisim was brought in !he concept of bringing out relevant reliable audit evidence was introduced !he elements of A9(9A+ fraud guidelines has been
incorporated &7" According to the auditing standards issued by the CA$ of +ndia, the 9A+ should Promote con5ict of interest with the auditee institutions Avoid con5ict of interest between the auditor and the institution under audit" Promote a con5ict of interest so that audit is carried out with professional s%epticism Avoid con5ict of interest as the audited institutions would not relish the unwanted comments in the audit report &" According to auditing standards, information about an audited entity acuired in the course of e AuditorRs wor% must not be used for purposes outside the scope of audit" !his is essential to maintain !he integrity and superiority of the Audit of the Audit Condentiality of the audit matters
!he suspense and sensitivity 'one of the above