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Tips to score well in auditing
November, 02nd 2009

Realise that there is no discrimination between theory and practical papers in the CA course. A paper such as auditing is not necessarily a pure theory paper, though many consider it to be so. Proper planning has helped candidates secure 70-plus marks in a paper such as auditing, too. Candidates have secured ranks because of auditing. And there are those who have cleared a group because of high marks scored in auditing. Here are a few tips to score well in auditing.

Q1: It requires stating if the statement given is true or false, giving reason. Each question carries 2 marks.

Do not repeat the question. Just say True or False. If the answer is right it will fetch one mark. The reasons, based on Accounting Standards (AS), AAS or company law, may be stated in three or four sentences. Consider this question: An auditor cannot sign more than 20 audit reports. The answer should be: False. The ceiling is on the number audits he can carry out in his name. A partner of a firm can sign the audit report on behalf of the firm. Therefore, the auditor can sign more than 20 audit reports.

Do not waste your time by writing: The given statement is false. The ceiling on the number of audits does not include audit of private limited companies, audit of partnership firms, co-operative societies, etc. Audit of a branch is also not considered to be one audit under the ceiling. Tax audits are not considered for the number of 20 audits. Therefore the auditor can sign more than 20 audit reports.

The second answer, though right lacks the required crispness.

There are 10 questions carrying 20 marks. Aim at scoring 16 of the allocated 20 marks.

Practical situations

Q2: This question come in three parts for 20 marks. These questions are practical situations and are based on AS, AAS or company audit. The moment you see a practical situation, think of AS, AAS, company audit, CAG, or even income-tax in certain cases. You might as well think of a decided case law if you are sure of it. There is way to answer the question, which is better divided into four parts as follows: explain the legal provision; analyse the given situation; correlate the given situation to the legal provision and build up the logic develop the argument; based on the above, give the conclusion.

Usually, a thought runs through the mind the moment the question is read. Once this thought strikes you, candidates try to support it. Keep in mind that the conclusion is the finished product and not the raw material. Learn to reason the thought out.

Consider this question: Internal auditor refuses to send his report to the statutory auditor saying it is confidential Confidentiality is one of the basic principles governing an audit (AAS 1). An auditor is prohibited from divulging any information of a confidential nature to a third party without specific authority unless he is legally or professionally required to do so. In the given question, the internal auditor refuses to send a copy of the internal audit report to the statutory auditor on grounds of confidentiality.

This basic principle of confidentiality applies to all auditors, internal as well as external. Internal audit is a part of the management tool and is addressed to the management. It contains a lot of information of a confidential nature. Therefore, the concept does not permit the internal audit to send the internal audit report to the statutory auditor without specific authority of the management.

Hence, the internal auditor is justified in refusing to send in his report to the statutory auditor

The statutory auditor should evaluate the internal control systems while planning for the audit. Unless he studies the internal audit report, he will not be able to understand the weakness in the internal control systems. AAS 7 also says that the auditor can rely upon the internal auditor. Therefore, the internal auditor cannot refuse to send the report. He has to send it to the statutory auditor. With proper preparation, scoring 15 out of the 20 marks allotted to this question is possible.

Basics and concepts

Q3: This question normally covers a standard or basic concepts of auditing. One should thoroughly study the standards to be able to tackle this question, which carries 10 marks. Scoring at least 6 marks for this question is possible.

Be specific. Use the terminology used in the standard.

Observe that in the answer to the earlier question the terminology used in the standard has been verbatim. Keep in mind that this is a technical paper and the terms used in the technical literature have to be used by the candidates to earn that extra mark.

Q4: This is divided into two parts and is from company audit. Be clear about the provisions of the Companies Act. If you are sure, quote the section. If not, better avoid doing so. Do not quote a wrong section or provision of law.

The broad guidelines as given for Q2 would go well for this question also.

Q5: This is on audit procedures about how to vouch or verify any two of the three items.

Remember, vouching and verification are substantive procedures and all the assurances an auditor expects from substantive procedures should be covered in your answer. This question consists of two parts of 5 marks each.

Write one line each on: rights and obligations; genuineness and bona fides; measurement; completeness; recording; disclosure; and materiality.

The advantage with regard to this question is that no matter how little you write, you get one mark for each part of the question. Write a little more and you get two marks. Write a good answer, you can hope to get three or even four marks.

Q6: This is divided between government audit and EDP audit. Government audit is a small topic but with a high cost-benefit ratio.

Specialised institutions

Q7: This covers audit of specialised institutions, and comes in two parts, carrying six and four marks respectively. One set on cinema, educational institutions, hotels and hospitals, among others, is covered for 6 marks, and 4 marks will be for audit of NGOs, local authorities, incomplete records and small companies, among others.

Remember to answer only the special points, do not write page after page. If the question is on a hostel, or a tournament or special event, write the answer only for that part.

Q8: This covers certain concepts and aspects of audit. A trick could be to write a couple of lines about the concept to explain it. It is useful at the planning stage to decide the nature extent and timing of the audit procedures.

During the course of the audit, it helps the auditor to ensure that the audit was carried in accordance with the generally accepted audit procedures.

At the end of the audit, it helps the auditor to satisfy that there are no material misstatements in the financial statements. This should hold good for materiality, analytical procedures, sampling, and so on.

Thus, with good preparation and, more importantly, by good presentation, scoring around 70 in auditing is quite possible.

 
 
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