MODULE 5

Question 1

What are recent trends in auditing?

Answer 1

Cost audit

Question 2

What is the nature of cost audit?

Answer 2

It is a statutory audit that verifies the cost of production and cost records maintained by a company.

Question 3

What is the significance of cost audit?

Answer 3

Ensures efficiency in resource utilization and adherence to cost accounting standards.

Question 4

What is the main objective of tax audit?

Answer 4

To ensure accuracy of income and deductions declared

Question 5

What is the objective of management audit?

Answer 5

To evaluate the efficiency and effectiveness of management in achieving organizational goals.

Question 6

Define social audit.

Answer 6

It is an examination of how a company impacts society and the environment.

Question 7

What is the objective of social audit?

Answer 7

To assess a company’s social responsibility and ethical practices.

Question 8

What is government audit?

Answer 8

Audit conducted by CAG to ensure proper use of public funds and compliance with laws in government departments.

Question 9

What is the objective of performance audit?

Answer 9

To evaluate the economy

Question 10

What is auditing in EDP environment?

Answer 10

Auditing in systems that rely on computers and electronic data

Question 11

What are Audit Assurance Standards?

Answer 11

Standards issued by ICAI to provide guidance on quality and consistency of audit procedures and reporting.

Question 12

What is the scope of Audit Assurance Standards?

Answer 12

Covers auditor’s responsibilities

Question 13

Management Audit definition

Answer 13

It is a diagnostic appraisal process for analysing goals,plans,policies and activities in every phase of operation to turnover unsuspected weaknesses and to develop ideas for improvement in areas that have missed management attention

Question 14

Objectives of management audit

Answer 14

Ensure sound objectives are set
Ensure objectives are achieved
Discharge duty efficiently
Relation with employees
Reveal any defect and suggest improvement
Relation with outsiders
Efficient internal organisation
Evaluate performance
Efficiency of management
Change in policies and procedures

Question 15

Functions of management auditor

Answer 15

Assist in:
Taking best decision
Top authority in designing authority and delegating responsibility
Preparation of tax plans and budgetary policy
Strengthening communication system outside and inside
Recommend suitable communication system
Best measures and devices for evaluation of performance
Preparation and execution of plans and policies
Pointing weaknesses
Making management more dynamic

Question 16

Advantages of management audit

Answer 16

Preparation of policies plans objectives and it’s efficient achievement
Evaluation of performance
Vital decision for maximization of profits
Communication system
Preparation of budgets and resource management

Question 17

Disadvantages of management audit

Answer 17

Management will lose initiative - always pinpoint shortcomings
Try up to date not to improve efficiency or reduce cost
Vague concept no material purpose: management opinion

Question 18

Social audit

Answer 18

Evaluation or assessment of company’s performance against planned goals in the area of social responsibility
Measures the social performance

Question 19

Objectives of social audit

Answer 19

To see resources are put in optimum utilisation
Assess the extent of responsibility towards society against use of resources
See how much accountable to society
How far it functions for the society welfare
How much is it’s impact on society development
Evaluation or assessment of company’s performance against planned goals in the area of social responsibility

Question 20

Government audit

Answer 20

Audit of gov department (CAG) , statutory corporate ( CAG and professional CA) and govt companies ( company law board - CAG)

Question 21

Objectives of government audit

Answer 21

Expenditure out of the fund sanctioned
Expenditure has been sanctioned
Expenditure is not more than the occasion demands
Payment to right person and duly entered
Classification of payment capital and revenue
Existence and valuation of stores and stock
Proper system of stock taking
Allowance is permissible

Question 22

Provision of duties of C& AG

Answer 22

The controller and Auditor General’s ( Duties,powers and conditions of service) Act 1971

Question 23

Features of CIS environment

Answer 23

Uniform processing of transactions
Inadequacy of documentation
Potential for errors and irregularities
Potential for increased management supervision
Potential for use of computer assisted audit technique
Lack of segregation of functions

Question 24

Auditing and Auditing Standards

Answer 24

Procedures/practices issued by the ICAI for the proper conduct of auditing
Benchmarks by which the quality of audit performance can be measured and the achievement can be documented
Auditing standards

Question 25

Procedure for issuing Standards on Auditing

Answer 25

AASB study groups Exposure draft Finalisation of draft Issue of SA- council of ICAI

Question 26

Performance Audit

Answer 26

Examination and evaluation of plans procedures and policies from the pov of efficiency economy and effectiveness to find out that they are result oriented

Question 27

Objectives of performance Audit

Answer 27

Optimum return Optimum result Sound strategies Remove areas of inefficiencies and waste Identity areas of. Uncertainties and improve Efficient and economical use of men machine and materials

Question 28

Duties of CAG

Answer 28

Compile and submit accounts of Union and state Audit and report : on all receipts which are payable into CF of India state UT All transactions relating to contingency fund and public accounts Accounts of stores and stocks Trading manufacturing p & L ac BS R& E financed by CF Accounts of govt companies and corporation Other bodies at request of president or governor ar administrator of UT

Question 29

Procedures of govt audit

Answer 29

Expenditure audit Audit of receipts Audit of stores and stocks

Question 30

Audit of receipts

Answer 30

Whether the department has proper rules and procedures to effectively check how assessments and collections are done. Whether these rules and procedures are actually being followed in practice. Whether there are good checks in place to quickly find and investigate issues like irregularities, double refunds, or loss of revenue. Whether the systems and processes ensure that all demands, collections, and refunds are correctly and regularly recorded. Suggestions for improving the existing systems and procedures, if needed.