APA

FINAL COURSE – FAST (Part) Paper – 3: Advanced Auditing,

Test Series – Paper 1 Assurance and Professional Ethics
Total No. of Questions in Part I – 9 Maximum Marks – 15
Total No. of Questions in Part II – 3 Maximum Marks – 35
Total No. of Pages - 14
GENERAL INSTRUCTIONS TO CANDIDATES
1. The question paper comprises two parts, Part I and Part II.
2. Part I comprises Multiple Choice Questions (MCQs).
3. Part II comprises questions which require descriptive type answers.
4. Ensure that you receive the question paper relating to both the parts. If you have
not received both, bring it to the notice of the Institute.
5. Answers to MCQs in Part I are to be mentioned in the first page of your answer
copy. Students need to only mention their choice of correct option like (a) or (b) or
so. No explanations or reasonings are required for MCQs.
6. Answers to descriptive questions in Part 2 should be given from the next page of
your answer sheet
7. Student should mention their Name, Batch, Course (CA Inter / Final), Subject
Name, Date of Test and Test Code as given on top of this sheet on the first
page before answering the MCQs.
8. Once the test is complete, student need to scan the answer sheet and make single
pdf file for all the pages and email it to [email protected] and
[email protected] with Subject Line – Answers Sheet for Test (Code) and
Your Name.
9. Duration of the examination is 1.5 hours. You will be required to upload the
answer sheets on the same date / time of test as defined in your live class else the
answer sheet will not be evaluated. In such case you should do a self-evaluation
using the suggested answer which will be posted in the same folder after one day
of the date of test.
10. The FAST examiner team will check the copy and give the marks alongwith
feedbacks for your improvements. We take utmost care in checking however being
subjective in nature the checking may differ from examiner to examiner.
11. Candidate are advised not to cheat and have self-discipline as these tests are
preparing you better for your real exams and hence realistic assessment will help
you take corrective actions at the right time.
12. FAST reserves the right to display any answers or answer sheets or share with
other students for your benefits without any prior written or express consent.
13. You suggestions on the test paper or evaluation or else can be shared at
[email protected]
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PART 1
Case Scenario -1
YS & Associates, a firm of Chartered Accountants, having CA. Y and CA. S as
partners, is based at Mumbai. YS & Associates get their website developed as
www.ysassociates.com from KPY Ltd. The colour of their website was very
bright and attractive to run on a “push” technology. Names of the partners of the
firm and the major clients were also displayed on the web-site without any
disclosure obligation from any regulator.
CA. Y, accepted his appointment as tax auditor of a firm under Section 44AB, of
the Income-tax Act, and commenced the tax audit within two days of appointment
since the client was in a hurry to file Return of Income before the due date. After
commencing the audit, CA. Y realised his mistake of accepting this tax audit
without sending any communication to the previous tax auditor. In order to rectify
his mistake, before signing the tax audit report, he sent a registered post to the
previous auditor and obtained the postal acknowledgement.
CA.S, provides management consultancy and other services to his clients. During
2019, looking to the growing needs of his clients to invest in the stock markets, he
also advised them on Portfolio Management Services whereby he managed
portfolios of some of his clients. Looking at his expertise in financial
management, Mr. Tarak, a student of Chartered Accountancy course, is very much
impressed with his knowledge. He approached CA. S to take guidance on some
topics of financial management subject related to his course. CA. S, on request,
decided to spare some time and started providing classes to Mr. Tarak along with
some other aspirants for 3 days in a week and for 1 hours in a day. However, he
has not taken any specific permission for such private tutorship from the Council.
YS & Associates is appointed to conduct statutory audit of XYZ Ltd. XYZ Ltd is
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required to appoint internal auditor as per statutory provisions given in the
Companies Act, 2013 and appointed CA. IA as its internal auditor. YS &
Associates asked Mr. IA to provide direct assistance to him regarding evaluating
significant accounting estimates by the management and assessing the risk of
material misstatements. He also seeks his direct assistance in assembling the
information necessary to resolve exceptions in confirmation responses with
respect to external confirmation requests and evaluation of the results of external
confirmation procedures.
Based on the above facts, answer the following:- (Q.1-3) (3 x 2 = 6)

1. Whether CA S is guilty of professional misconduct in providing private

tutorship to Mr. Tarak along with some other aspirants for 3 days in a week
and for 1 hours in a day in the absence of specific approval.
a) CA. S is not guilty of professional misconduct as he is teaching within
prescribed hours i.e. not exceeding 25 hours a month as per Regulation
192A
b) CA. S is not guilty of professional misconduct as he is teaching within
prescribed hours i.e. not exceeding 25 hours a month as per Regulation
190A
c) CA. S is guilty of professional misconduct as he has not obtained
specific permission for the same.
d) CA. S is not guilty of professional misconduct as he is teaching within
prescribed hours i.e. not exceeding 25 hours a week as per Regulation
190A

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2. Before signing the tax audit report, CA. Y sent a registered post to the
previous auditor and obtained the postal acknowledgement. Will CA. Y be
held guilty of professional misconduct under the Chartered Accountants
Act, 1949?
a) As per Clause (8) of Part I of First Schedule to the Chartered
Accountants Act, 1949 CA. Y will not be held guilty of professional
misconduct as he communicated with the previous tax auditor before
signing the audit report.
b) As per Clause (8) of Part I of First Schedule to the Chartered
Accountants Act, 1949, CA. Y will not be held guilty of professional
misconduct since the requirement for communicating with the previous
auditor being a Chartered Accountant in practice would apply to
statutory audit only.
c) As per Clause (8) of Part I of First Schedule to the Chartered
Accountants Act, 1949, CA. Y will be held guilty of professional
misconduct since he has accepted the tax audit, without first
communicating with the previous auditor in writing.
d) As per Clause (8) of Part I of Second Schedule to the Chartered
Accountants Act, 1949, CA. Y will be held guilty of professional
misconduct since he has accepted the tax audit, without first
communicating with the previous auditor in writing.

3. Whether, website designed for www.ysassociates.com is in compliance

with the guidelines given in Clause (6) of Part I of First Schedule to the
Chartered Accountants Act, 1949:
a) Yes, website can have names of partners and major clients along with
its fess.
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b) Yes, as the websites can be designed on a “push” technology.
c) Yes, as there is no restriction on the colours used in the website.
d) No, as names of the partners of the firm and the major clients were
displayed without any disclosure obligation from any Regulator.

Case Scenario -2
Mr. Abhishek Bachchan has recently qualified his CA Finals and has become the
member of the Institute. He wants to join his father, FCA Mr. Amitabh Bachchan
in his already established CA Practice. Abhishek intimated about his desire to join
his father in his office. He doesn’t want his son to directly join him as a boss over
other employees, but to earn it after working for at least 6-8 months in the office
as an employee.
He asks Abhishek to study a new and emerging field in the Profession, i.e. GST
properly and apply it practically in the office as well, with the help of other Staff
& Trainers. He also tells him that as he is a newly qualified professional, he will
discuss with him the Professional Ethics of CA Profession, though he might have
read about it during his studies, yet he wants to tell him about its practical aspects.
Abhishek happily agrees to abide by his father’s wishes and starts working on it.
Abhishek works for one year as an Individual and after one year, joins his father
in his CA firm as a Partner with full zeal & enthusiasm after having got the
relevant experience under his experienced father for one year. He has also been
approached by one of the ex-clients of the firm, Rekha Ltd. A listed company of
which the firm was the auditor in the previous year, to accept appointment as an
independent director in the company.
Based on the above facts, answer the following:- (Q.4-6) (3 x 2 = 6)

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4. Abhishek wishes to maintain Books of Account for his professional
earnings on the Khata Book App available on Play store unlike his father
Amitabh or his CA firm who maintained it on accounting software name
Ho gaya Tally. What will be the implications of maintaining books of
accounts on such app?
a) CA. Abhishek will be deemed to be guilty of professional misconduct
for not maintaining proper books of accounts,
b) CA. Abhishek and the firm will be guilty of professional misconduct
for improper maintenance of books of accounts.
c) CA. Abhishek or the firm will not be guilty under the CA Act, 1949
provided cash book and ledger is maintained under the App.
d) Maintaining books on App is not permitted under the CA Act, 1949.

5. Can CA. Abhishek accept the offer of directorship in Rekha Ltd.?

a) Yes, as he not an executive director but an independent director, and
such engagement is permitted under Clause 11 of Part I of Schedule I
of the CA Act, 1949
b) Yes, as his firm was past auditor and not current auditor of Rekha Ltd.
and Clause 4 of Part I of Schedule II of the CA Act, 1949 permits such
appointment as director
c) Yes, provided CA. Amitabh agrees to it
d) No, SEBI guidelines prohibit appointment of directors as independent
director in the present case as the firm was the engaged as auditor of
the company in the previous year.

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6. CA. Abhishek has won heart of staff members with his humbleness. One of
the staff member who has completed his doctorate (PHD.) and is also doing
a part time job in a cooperative bank, gets the firm appointed as auditor of
such bank at a fees of 1% of working capital of the bank. What point will
CA. Abhishek have to keep in mind while accepting or conducting such
audit?
a) He cannot accept such audit, as it is securing work through the work of
others which is prohibited under Clause 5 of Part I of First Schedule to
the Chartered Accountants Act, 1949
b) He cannot accept such audit firm’s employee is in a part time job with
such bank
c) He cannot accept such audit as the fees is contingent and hence
prohibited under Clause 10 of Part I of First Schedule to the Chartered
Accountants Act, 1949
d) There is no misconduct in accepting such audit provided the staff
member is not a part of the engagement team of audit of such bank.

7. The superannuation-cum-pension fund for the employees of a company was

under a separate ‘trust’. Both the company and the trust were under the
same management. The auditor, who was auditing the accounts of the
company as well as the trust noted some irregularities in the operation of
the trust and commented upon these irregularities in the confidential report
given to the trustees, but did not mention about these irregularities in his
report on the annual accounts of the trust
a) The auditor will be guilty for grossly negligence under clause (7) of
Part I of the Second Schedule

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b) The auditor will be guilty under clause (5) of Part I of the Second
Schedule as he Fails to disclose a material fact known to him which is
not disclosed in a financial statement, but disclosure of which is
necessary in making such financial statement not misleading where he
is concerned with that financial statement in a professional capacity
c) The auditor will be guilty under clause (8) of Part I of the Second
Schedule as he fails to obtain sufficient information which is necessary
for expression of an opinion or its exceptions are sufficiently material
to negate the expression of an opinion
d) The auditor will be guilty under clause (6) of Part I of the Second
Schedule as Fails to report a material misstatement known to him to
appear in a financial statement with which he is concerned in a
professional capacity. 1

8. Letter head of CA. Rohit , a practicing Chartered Accountant, is reproduced

below:
Rohit de Rahul ACS, LLB, FCA Chartered Accountant & member of
parliament as per Chartered Accountants act, 1949 you are required to
choose the appropriate answer :
a) As per clause 7 of Part I of First Schedule to the Chartered
Accountants Act,1949 he shall not use the designation ‘Member of the
Parliament’ in addition to that of a ‘Chartered Accountant’
b) He shall not use the designation ‘LLB’ in addition to that of a
‘Chartered Accountant’ as he has not enrolled as an Advocate as per
clause 7 of Part I of First Schedule to the Chartered Accountants Act,
1949.

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c) He can use designations such as Member of Parliament, Member of the
Legislative Assembly in addition to that of a ‘Chartered Accountant’ as
these are specifically allowed as per clause 7 of Part I of First Schedule
to the Chartered Accountants Act,1949.
d) As per clause 7 of Part I of First Schedule to the Chartered
Accountants Act, 1949 he can designate himself as ‘Chartered
Accountant and Company Secretary’ as he is a member of the Institute
of Company Secretaries of India also. 1

9. Mr. Kartik a practicing Chartered Accountant was engaged in conducting

statutory audits, data privacy assessments and other trade compliance risk
assessments for his clients. As a result, he had good knowledge of the laws
and regulations applicable to an entity operating digital space. In 2022,
some of his clients approached him and asked him to share his knowledge
and guide them in which Technology Company they should invest in. Mr.
Kartik considered their request and started providing paid advisory
regarding investment in Technology and Fintech Sector stock. By the end
of FY 2022, Mr. Kartik’s clients made a good amount of profit based on the
advice provided by Mr. Kartik. The overall income (gross) earned by Mr.
Kartik is mentioned below:
Client Name Statutory Other Investment
Audit Advisory Advisory
Service Fee Service Fee Service Fee
Fondue Forte Pvt Ltd - 6,57,000 2,36,200
Home Made Pvt Ltd 7,50,000 - 6,75,000
Home Fresh Pvt Ltd 3,45,000 - 12,50,000
(Fully owned subsidiary
of Home Made Pvt Ltd.)
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Whether Mr. Kartik can do so?
a) Mr. Kartik is allowed to provide investment advisory services to its
clients under section 144 of the Companies Act 2013. Hence, Mr.
Kartik is not liable for professional misconduct.
b) Mr. Kartik cannot provide investment advisory services directly or
indirectly to the company or its holding company or subsidiary
company as per section 144 of the Companies Act 2013. Moreover, a
Chartered Accountant in Practice is not permitted to render any service
which is out of the scope of the approved Management Consultancy
Service.
c) Mr. Kartik can provide investment advisory services directly or
indirectly to the company or its holding company or subsidiary
company as per section 144 of the Companies Act 2013 up to `
50,00,000 in each calendar year. Hence, Mr. Kartik is not liable for
professional misconduct.
d) Mr. Kartik can provide investment advisory services directly or
indirectly to the company or its holding company or subsidiary
company as per section 144 of the Companies Act 2013 up to `
5,00,000 in each calendar year. Hence, Mr. Kartik is liable for
professional misconduct. 1

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PART 2
DESCRIPTIVE QUESTIONS
1. Question paper comprises 6 questions. Answer Question No. 1 which is

compulsory and any 4 out of the remaining 5 questions

2. Working notes should form part of the answer.

3. Answers to the questions are to be given only in English except in the case of

candidates who have opted for Hindi Medium. If a candidate has not opted
for Hindi Medium, his/her answers in Hindi will not be evaluated.
4. Maximum Mark 35

1.
(A) CA Kumar who is contesting Central Council Elections of Institute,
engages his Articled Assistant for his election campaigning promising him
that he will come in contact with influential people which will help to
enhance his career after completion of his training period. 5

(B) CA. Z, in practice, is desirous of filling Multi-purpose Empanelment form

(MEF) for inclusion of his name in panel for allotment of statutory audit of
bank branches web hosted by Professional Development Committee (PDC)
of ICAI for financial year 2023-24. The form requires applicants to upload
XML files of their personal income tax returns 16 along with computation
of income. During relevant year for which information is being sought for
by PDC, CA. Z has transacted in futures and options derivatives (equity)
and has reflected income from such transactions in his return of income as
“Business Income”. Analyse the above situation with reference to the
provisions of the Chartered Accountants Act, 1949.
Would it make any difference if CA. Z had earned income from transacting

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in currency derivatives and commodity derivatives? 5
(C) GeM (e-market place) is a public procurement portal which provides
opportunities to start-ups, entrepreneurs etc. to showcase their innovative
products and services to government buyers and engage in public
procurement. The Government e Marketplace Special Purpose Vehicle
(GeM SPV), a 100% government owned and section 8 (Non-Profit)
company under the Ministry of Commerce, Government of India has been
incorporated under the Companies Act, 2013 to develop, manage and
maintain GeM platform. Whether a firm of Chartered Accountants can
register on GeM portal for rendering professional services to government
departments? 4

2.
(A) Mr. S, the auditor of ABC Pvt. Ltd. has delegated following works to his
articles and staff:
i. Issue of audit queries during the course of audit.
ii. Issue of memorandum of cash verification and other physical
verification.
iii. Letter forwarding draft observations/financial statements.
iv. Issuing acknowledgements for records produced.
v. Signing financial statements of the company.
Is this correct as per the Prof. Ethics & ICAI’s guidelines &
pronouncements? 5

(B) A partner of a firm of chartered accountants during a T.V. interview handed

over a bio-data of his firm to the chairperson. Such bio-data detailed the

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standing of the international firm with which the firm was associated. It also
detailed the achievements of the concerned partner and his recognition as an
expert in the field of taxation in the country. The chairperson read out the
said bio-data during the interview. Discuss whether this action by the
Chartered Accountant would amount to misconduct or not. 5

(C-1) OPAQ & Associates, a firm of Chartered Accountants responded to a

tender issued exclusively for Chartered Accountants by an organisation in
the area of tax audit. However no minimum fee was prescribed in the tender
document. 4
OR
(C2) A special notice has been issued for a resolution at 4th annual general
meeting of TRIM Ltd., providing expressly that CA. Lucky shall not be re-
appointed as an auditor of the· company. Consequently, CA. Lucky
submitted a representation in writing to the company with a request to
circulate to the members. In the detailed representation, CA. Lucky included
the contributions made by him in strengthening the control procedures of the
company during his association with the company and also indicated his
willingness to continue as an auditor if reappointed by the shareholders of
the company. Comment with reference to the Chartered Accountants Act,
1949 and schedules thereto. 4

3.
(A) CA Dev started practice in Punjab in the year 2019. CA Dev issued
‘Turnover Certificate’ for M/s. ASAUS Traders to be forwarded to the
Bank for the purpose of availing cash credit facility and machinery term

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loan. Brother of CA Dev was proprietor of M/s. ASAUS Traders.
Comment. 4
OR
CA Natraj, in practice, accepted an assignment as advisor and consultant to
the public issue of shares by his client M/s Super Ltd. Besides helping the
company as an advisor, he also underwrote the public issue of the company
to the extent of 25% at a commission of 1%. Remaining shares were
underwritten by banks and other financial institutions at the same rate of
commission. He contends that above assignments are part of management
consultancy work permitted by the council of the Institute. Do you agree
with the view of CA Natraj? Decide in the light of applicable code of
conduct. 4

(B) Z, a practicing Chartered Accountant issued a certificate of circulation of a

periodical without going into the most elementary details of how the
circulation of a periodical was being maintained i.e. by not looking into the
financial records, bank statements or bank pass books, by not examining
evidence of actual payment of printers bills and by not caring to ascertain
how many copies were sold and paid for. 3

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