Nature, Objective, and Scope of Audit in Chartered Accountancy
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Questions and Answers

What caused the shares of the IT company to drop as soon as the markets opened on Monday?

  • Auditors had not reviewed the financial statements
  • Audited profits were below market expectations (correct)
  • Auditors had given positive remarks on the financial statements
  • Audited profits were above market expectations

    • Why did the uncle of the individual approach a bank for funds?

  • To purchase shares in an IT company
  • To expand his business (correct)
  • To retire from business
  • To pay off personal debts

    • What did the credit officer of the bank request from the individual's uncle for considering the loan application?

  • Latest stock market reports
  • Business expansion plans
  • Audited financial statements of past years (correct)
  • Personal identification documents

    • What did the individual think could have been a significant factor contributing to the substantial increase in direct tax collections as highlighted in the Union Budget?

    <p>Higher taxes paid by companies based on audited results</p> Signup and view all the answers

    From the text, what did the individual reflect upon regarding auditors' role in the economy?

    <p>Auditors have a significant role in the economy and nation-building</p> Signup and view all the answers

    Based on the information provided, why do companies pay taxes on profits shown in their audited financial statements?

    <p>To contribute to nation-building through tax payments</p> Signup and view all the answers

    What is one of the reasons why an auditor cannot guarantee that financial statements are free from material misstatements?

    <p>Inherent limitations of an audit</p> Signup and view all the answers

    Why might an auditor not be able to rely on information obtained in the second year of an audit?

    <p>The information may have lost its relevance over time</p> Signup and view all the answers

    What could lead to the cessation of a business according to the text?

    <p>Emergence of new business models or products</p> Signup and view all the answers

    Why is it mentioned that an auditor cannot reduce audit risk to zero?

    <p>Because of inherent limitations of an audit</p> Signup and view all the answers

    Why is it crucial for an auditor to consider future events in their audit procedures?

    <p>To ensure that the financial statements are free from material misstatements</p> Signup and view all the answers

    What impact do future events have on the ability of an entity to continue its business?

    <p>May affect it adversely</p> Signup and view all the answers

    Why do diverse users rely on audited financial statements?

    <p>To gain confidence in the financial statements</p> Signup and view all the answers

    What is the main reason behind the importance of auditing in the modern world?

    <p>To ensure compliance with legal and regulatory requirements</p> Signup and view all the answers

    What is the primary role of auditors in the economy?

    <p>To provide credibility to financial statements</p> Signup and view all the answers

    What does the scope of audit encompass?

    <p>Evaluation of the internal control system</p> Signup and view all the answers

    What are the responsibilities of auditors according to the text?

    <p>To provide assurance on the reliability of financial information</p> Signup and view all the answers

    What is not included in the scope of auditing?

    <p>Manipulating financial data for personal gain</p> Signup and view all the answers

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