Title SUGGESTED ANSWERS- AUDIT PAPER 1.pdf ✅

AUDITING AND ETHICS– CA INTER SUGGESTED ANSWERS TEST – 1 [1] Part – A – MCQ’s Q1. Appointment as Auditor – Shares Held by Relative Correct Answer: B – He should first renounce or dispose of the shares before accepting the appointment. Explanation: As per Section 141(3)(d)(i) of the Companies Act, 2013: Disqualification due to Financial Interest: • If an auditor holds securities in his own name → He is disqualified. • If relative holds securities: o If the face value is up to ₹1 lakh → It is allowed. o If the face value exceeds ₹1 lakh → The auditor is disqualified, unless the excess is disposed of within 60 days. In this case, CA Arjun Mehra received substantial shares from his relative. Since they are now in his name, he must dispose of them before accepting the audit assignment. Q2. Standards – Inappropriate Combination Correct Answer: B – SA 550, SA 510, SA 220, SA 610 Explanation: • SA 550 – Related Parties → Relevant • SA 510 – Opening Balances → Relevant • SA 220 – Quality Control → Relevant • SA 610 – Using Work of Internal Auditor → Not relevant, since the company has not appointed an internal auditor and is not required to as per the Companies Act.