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Strategy for advanced auditing
April, 20th 2009

The CA (Final) advanced auditing paper is relatively easier than the PCC or PE-II papers for the following reasons:

At the earlier levels, the candidates do not have basic knowledge of the subject.

In most of the cases, they would be studying the subject for the first time. At the Final level, they have already gone through the grind and know how to tackle the paper.

By the time they write the CA Final examination, they should have been not less than two years into the articled training, which is quite helpful.

In these two years, the candidates should have had exposure to auditing in general as well as bank/ tax audits.

The candidates attain the maturity levels to understand the implications of the pronouncements of the ICAI, legal provisions, general framework of accounting, so to say.

The CA Final syllabus is specific.

Since the candidates would have studied each of the accounting standards minutely for the advanced accounting paper, the knowledge so gained would stand them in good stead for the auditing paper as well.


Strategically, the candidate has to draw from whatever he/she has studied in other subjects be it company law, accounting standards, income-tax (profits and gains of business and profession to be specific).

Three topics in advanced auditing merit attention:

Company audit: This topic covers 30 marks normally. This would involve an in-depth study of whatever they have studied at the earlier levels.

The candidate should put in efforts to counter the questions. They would have studied company law in any case. Particular attention to directors, borrowing powers, compliance procedures and CARO would help cover the topic extensively.

Code of conduct: One full-length question (normally four parts of four marks each) on professional ethics is normally asked.

This is a small topic with wide application not only in the examinations but also later after the candidate qualifies to be a member.

Questions on clauses, where the auditor gives an opinion or a certificate without actually verifying the records or where the auditor has information to negate the opinion expressed by him, are also likely.

Another probability is a question on the auditor not expressing an opinion where such an opinion would materially influence the decision making of the reader of the financial statements.

Accounting and auditing standards: Put together, these standards account for 30 marks.

Questions on frauds and errors, relying on management certificates and external communications are highly probable.

On the same footing will be audit risk evaluation, relying on internal controls (especially in computerised information systems environment).

Emphasis on standards

If a candidate meticulously studies one standard a day (averaging an hour a day) he should be thorough with most of them by end-April, which gives him one more month for a quick second visit.

In the three papers advanced accounting, advanced auditing and management accounting about 100 marks are covered from these standards alone.

Thus, if a candidate is thorough with these topics, the first hurdle of 40 marks can be crossed without much hassle.

An in-depth study of topics such as audit of stock brokers, audit of insurance companies, audit of banks, and management and operations audit are required for the advanced auditing paper.

One 16-mark question, combining bank audits and insurance companies, is normally asked. Candidates would do well to give special emphasis on LFAR, concurrent audits, NPA norms, and reporting requirements. Candidates should grab the opportunity to attend bank audits this time.

Normally, for a candidate taking the examination in May, attending bank audits is a doubtful proposition.

Since the examinations are now in June, the candidates can afford the luxury of attending bank audits for a few days.

Similarly, audit of investments of an insurance company and specific terms, such as catastrophe reserve, reserve for unexpired risks, reporting requirements and terrestrial reinsurance, are important.

The dark horse

Focussing on smaller topics such as cost audit, special audit, audit of PSUs and audit of bank borrowers would help save time.

Going by the present trends, questions on corporate governance, audit committees, due diligence, and peer review are highly probable.

Out of the miscellaneous audits, social audit may supersede the other topics. The dark horse could be audit of non-banking financial institutions.

By the process of elimination and probability, questions on tax audit did not get much attention in recent examinations. A full-length question on this may find a place this time around.


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