Group 18: Audit of Items of Financial Statements

Correct answer B: Reconcile original issue approvals, register, receipts and capital movements instead of relying solely on the representation.

Written representation is not a substitute for contradictory transaction evidence; actual allotment legality is supplied.

Correct answer B: Reclassification within equity can correct the captions without changing total equity or profit.

Verify face value, issue price and amount; classifications can be wrong despite correct total.

Correct answer A: Rs 6 lakh, with the underlying movements separately verified.

5+2-1=6. Name and arithmetic do not themselves prove that use is lawful; inspect actual criteria.

Correct answer B: Actual discharge/release and relevant lender/charge evidence, not repayment alone as proof of every release formality.

Debt settlement and security discharge require their own evidence; loan/deposit disclosures should reflect actual position.

Correct answer C: Rs 36000.

1200000 x 9% x 4/12=36000. Verify actual period/rate in real work.

Correct answer C: That collection of 70% proves existence and recoverability of the remaining disputed 30%.

Partial receipts must be allocated to specific balances; they do not universally validate the remainder.

Correct answer D: Separate the employee advance from trade receivables and verify its recovery and appropriate caption.

Classification and valuation are distinct; non-sales balances should not be silently included in the trade population.

Correct answer B: Rs 8000 classification to advance rather than physical cash; no cash loss is established solely by that reconciliation.

IOU is not currency;cash 42 plusadvance 8 reconciles 50. Approval and recovery still require evidence.

Correct answer D: Completeness of bank accounts, ownership and restriction/security presentation, not just arithmetic on listed accounts.

Independent bank evidence can reveal missing accounts and restrictions; pledge does not erase ownership.

Correct answer B: Verify custody/ownership and include supported third-party inventory rather than exclude it solely by location.

Confirmation authenticity, ownership terms, movements and value need evidence; physical location alone does not decide recognition.

Correct answer A: Exclude Rs 12000 from inventory cost and recognise it appropriately in expense.

Cost composition matters beyond cash expenditure; the valuation criterion is explicitly supplied.

Correct answer D: Rs 12000.

Total reduction 70000-52000=18000;less 6000 recorded=12000 additional.

Correct answer A: Investigate location, custody, ownership, disposal and impairment evidence before supported correction.

Absence at the inspected site is a discrepancy, not complete evidence of disposition or value.

Correct answer A: Repairs and higher fair value do not negate depreciation under the stated AS 10 conditions.

AS 10 paragraph 54 recognises depreciation despite higher fair value when residual does not exceed carrying; repairs do not negate it.

Correct answer A: Whether costs are directly attributable to bringing the asset to intended location/condition, rather than merely incurred during the project.

Nature and attribution require invoices/work records and criteria; timing/department labels alone are insufficient.

Correct answer A: Treating the existence of one certificate as proof of every rights and valuation assertion.

Intangible rights, recognition and value need separate support; a certificate alone is not all evidence.

Correct answer D: Rs 60000.

240000/4=60000. The finite-life/method/period are supplied, not universally inferred for all intangibles.

Correct answer A: Investigate reasons, perform appropriate further/alternative work and assess evidence implications.

Refusal changes evidence/risk assessment; sufficient work and actual materiality/reporting determine outcome.

Correct answer D: Recognise Rs 50000 missing obligation/related account consistently, rather than indefinite unexplained reconciliation.

240000-190000=50000. Inspect cut-off, nature and existing inventory/expense to avoid duplicate effects.

Correct answer C: Appropriate authorisation, terms, recovery and disclosure despite balance acknowledgment.

Loans/advances need authority and recovery/terms work; related-party status adds disclosure/approval issues under actual law.

Correct answer B: Input completeness and relevance as well as expert competence/capability/objectivity and calculation.

Expert work does not cure incomplete underlying data; reconcile population and assumptions.

Correct answer C: Rs 4 lakh provision/expense is omitted; disclosure alone does not replace required recognition.

Use actual recognition criteria and legal evidence; present/probable is not merely possible under this exercise.

Correct answer C: Rs 100000 when reversing both premature revenue and cost.

250000-150000=100000. Restore ownedstock/correct related balances; actual payment facts are separate.

Correct answer D: Recognise the advance liability rather than earned current sales.

Cash receipt and performance differ; contract and cut-off evidence drive this exercise.

Correct answer B: Booking dividend receivable merely from management's expectation.

The module other-income criteria require a supported right and relevant recognition evidence, not expectation alone.

Correct answer D: Matching documents alone may be insufficient occurrence evidence when authenticity/delivery are unresolved.

Consistency among possibly unreliable documents is not automatic genuineness; investigate risk rather than assert proven fraud.

Correct answer D: Increase Rs 60000, while recording distinct bonus liability and employee receivable.

Add 80000 bonus less 20000 wage overstatement=60000 expense increase. Do not net unrelated assets/liabilities.

Correct answer C: Rs 90000.

(500000-50000)/5=90000; availability and actual framework/policy matter.

Correct answer C: Investigate authorisation, business/personal substance, recovery and correct classification rather than accept the label.

Expense tests include entity purpose and authority, plus supported accounting; label and payment alone are insufficient.

Correct answer C: That correct total proves aging disclosures or recoverability are correct.

Aging, amount and recovery are separate; an aging error does not automatically equal a full debt write-off.