IMPORTANT AREAS FOR NOVEMBER 2010 EXAM

(BASED ON MARCH 2010 EDITION OF INSTITUTE STUDY MATL-TWO VOLUMES)

 

PORTIONS COMMON TO BOTH OLD SYLLABUS AND NEW SYLLABUS

 

MOST IMPORTANT:

1)   THE CHARTERED ACCOUNTANTS (AMENDMENT) ACT, 2006 IS VERY IMPORTANT FOR THE EXAM. (REFER LATEST INSTITUTE SUPPLIMENTARY STUDY MATERIAL ON CHAPTER 17 FOR OLD SYLLABUS- CHAPTER-23 IS SUFFICIENT FOR NEW SYLLABUS)

2)      PRACTICAL QUESTIONS ON COMPANY AUDIT AND ACCOUNTING STANDARDS ARE VERY IMPORTANT

3)      RECLASSIFICATION OF AAS IN TO SA, SAE, SRE AND SRS IS VERY IMPORTANT FOR NOVEMBER 2010 EXAM. STUDENTS ARE EXPECTED TO KNOW THE CORRESPONDING NEW NUMBERS FOR EACH AAS NUMBER. THE PRINCIPLES AND PROCEDURES LAID DOWN IN THE RECLASSIFIED STANDARDS SHOULD BE STUDIED. YOU SHOULD DOWNLOAD THE RECLASSIFIED STANDARDS FROM THE INSTITUTE WEBSITE FROM “RESOURCES” SECTION. MANY SAs HAVE BEEN REVISED. ONLY REVISED SAs SHOULD BE STUDIED.

 

1.             REVISED AND NEW STANDARDS ON AUDITING (important)

(SA, SRE, SAE, SRS)

         a.    SA-200 (Revised) - Overall Objectives of the Independent Auditor and Conduct of Audit     in accordance with Standards on Auditing                                                 

b.       SA-210- Revised- Agreeing the Terms of Audit Engagements

c.       SA-230- Revised -Audit Documentation

d.       SA-240- Revised- Auditor’s Responsibilities Relating to Fraud in Audit of FS

e.       SA-250- Revised- Auditor’s Responsibilities Relating to Laws and Regulations

f.         SA-260- Revised- Communication with Those Charged with Governance

g.       SA-315- NEW STANDARD-VERY IMP.-Identifying and Assessing Risks of MM

h.       SA-320- Revised- Materiality in Planning and Performing an Audit

i.         SA-330- NEW STANDARD-VERY IMP-Auditor’s Responses to Assessed Risks

j.         SA-510- Revised -Initial Audit Engagements- Opening Balances

 

 

k.       SA-540-Revised-Auditing Accounting Estimates including Fair Value Accounting Estimates

l.         SA-550- Revised- Related Parties

m.     SA-560- Revised -Subsequent Events

n.       SA-570- Revised -Going Concern

o.       SA-580- Revised- Written Representations

p.       SA-610- Revised- Using the Work of Internal Auditors

q.       SA-620- Revised- Using the Work of an Auditor’s Expert

r.        SA-700- Revised- Auditor’s Report on Financial Statements

s.        SA-705- NEW- Modifications to Auditor’s Opinion

t.         SRS-4410- (AAS-31)- Engagements to compile Financial information

u.       SRS-4400-(AAS-32)- Engagements to perform agreed upon procedures

v.       SRE-2400-(AAS-33)- Engagements to Review financial statements

w.     SAE-3400-(AAS-35)-Examination of prospective financial information

x.       SQC-1- Standards on Quality Control

 

Note: SA-400, SA-310 and SA-401 have been withdrawn due to issue of New SA-315 and SA-330

 

2.             AS-1, 4, 5, 9, 10, 11, 12, 13, 16, 18, 22, 26 (Revise previous years exam questions on AS since some of them may be repeated)- Applicability of these standards, Exceptions, Treatment of special items, Disclosure aspects of these standards are important for auditing

 

3.             Guidance Notes

a.       Section 227(3) (e), (f)

b.       Proposed Dividend

c.       Independence of Auditors

d.       Audit Reports and Certificates for special purposes

e.       Audit of Capital and Reserves

f.         Audit of Payment of Dividends

 

4.             AUDIT IN A CIS ENVIRONMENT

a.              Approach to Audit (Black Box Approach and White Box Approach)

b.             Impact of Computers on Internal Controls (Specific Problems relating to internal control)

c.              Impact of Computers on Auditing

d.             Internal controls in CIS Environment and Evaluation

e.              Special Audit Techniques- Audit Software, Considerations in the use of CAAT

f.               Procedures for Controlling the Application CAAT

 

5.             SPECIAL AUDIT TECHNIQUES

a.                Analytical Procedures

b.               Audit Risk

c.                Materiality and Audit Risk

d.               Risk Based Audit (RBA)

 

6.             Company Audit-

a.       Chapter-6- (Chapters 4 & 5 of old syllabus consolidated in Chapter 6 of New Syllabus)

i)               Appointment by special resolution- DCA clarification

ii)              Ceiling on company audits- Notification under Code of Ethics

iii)            Can the scope of audit be restricted?

iv)            True and Fair-to be read with Significance of True and Fair

v)             Exemption from Branch Audit

 

 

vi)            Statutory Auditor in relation to Branch Accounts & Branch Auditor

vii)          Gist of CLB Circulars

viii)         Auditor’s Duty and Statutory books- Registers under sections 301, 303, 372A

ix)            Personal expenses of Directors

x)             Preparation and Presentation of Final Accounts (Section 211)

xi)            Divisible profits, dividends and reserves- Distribution of capital profits, Capital Reserve (Reserves)- very important

 

b.       Chapter 8 (Chapter 6 of Old Syllabus)- Auditor’s Report

i)               SA-700 Revised & SA-705 New (Basic Elements, Scope, Opinion, Emphasis of Matter Paragraphs)

ii)              Matters under section 227(3)

iii)            Inquiry under section 227(1A)

iv)            Directors Comments u/s 217(3)

 

Note: Statement on Qualifications in Auditor’s Report has been withdrawn due to issue of SA-700

 

v)             CARO Reporting Requirements- Statement on CARO is very important- Exemption of Private Limited company from CARO- Reporting clauses 1, 2, 4, 5, 7, 9, 10, 13, 14, 15, 16, 17, 18, 19, 21- Council’s comments under clauses in Statement on CARO  

vi)            Distinguish between Audit Report and Certificate

vii)          Audit of Prospectus

 

7.             Liabilities of Auditors

Auditor’s Liabilities under Companies Act, 1956 and Liabilities under Income Tax Act, 1961

 

8.             Corporate Governance

Revised clause 49 of the listing agreement– Entire Chapter-9 in New Syllabus Material is very important including Annexure containing SEBI circulars on clause 49- Composition of Board and Definition of Independent Director (important)

 

9.             Audit of Consolidated Financial Statements

Auditor’s Responsibility, Permanent consolidation adjustments, Current consolidation adjustments

 

10.         BANK AUDIT

a.              Appointment of Auditor, Audit Report (LFAR important)

b.             Evaluation of Internal Controls (Bills for Collection, BP/BD, Advances, Credit Card)

c.              CRR, SLR, Money at Call and at Short Notice

d.             Audit of Investments – Prudential Guidelines regarding market portfolio- Master circular (Latest-Revised in 2009) (Held to Maturity, Held for Trading, Available for Sale)- Non-Performing Investments – Investment Fluctuation Reserve

e.              Prudential norms for NPA classification, income recognition, asset classification, Provisioning Norms, Advances under on-lending arrangement, Take-out Finance, Restructuring, CDR, Projects under Implementation, Stock exchange and other securities, Life Insurance Policies, Bank’s Own Certificates, Third Party guarantees- Verification of Bills Purchased and Discounted, Contingent liabilities

f.               Concurrent Audit system-Scope of Concurrent Audit- Coverage of branches and Reporting systems

g.              Capital Adequacy norms- Annexure III

 

 

 

11.         AUDIT OF GENERAL INSURANCE COMPANIES

a.       Definition of Indian Insurance company - Licensing requirements, Obligation to Rural and social sector, Minimum paid-up capital, Deposits

b.       Requirements of Schedule B to the IRDA Regulations, 2000- Part-I Accounting Principles – Part-III-Contents of Management Report - Audit Considerations

c.       Schedule-C-Form of Auditor’s Report

d.       Verification of Commission

e.       Verification of Operating expenses of the Management

f.         Verification of Outstanding Premiums and Agents Balances

g.       Verification of Investments - sections 27B, 27C, 27D and Audit Procedures

h.       Facultative and Treaty Re-insurance (types of treaties not important)

i.         Co-insurance – Incoming and Outgoing

j.         Solvency Margin

 

12.         Audit of Co-operative societies

Special Features of Co-operative Audit, Rights and Duties of Co-operative Auditors, Audit of Multi-State Co-operative Societies.

 

13.         Audit of Non-Banking Financial Companies

a.       Classification of NBFC

b.       Registration with RBI

c.       NBFC Public Deposits Directions

d.       Audit Check List- Investment, Loan, Hire Purchase, Equipment Leasing Companies

e.       Obligation to Report to RBI

 

14.         Tax Audit

Audit of Public Trusts- Audit u/s 44AB- Accounting Standards, Audit Reports, Form 3CD clauses 9,11,12,13,17,21,24,25,26,27,32 - Audit under VAT very important

 

15.         Audit of Members of Stock exchanges- Chapter-17 in New Syllabus

a.       Margin Deposits

b.       Rolling Settlement

c.       Circuit Filter and Circuit Breaker

d.       Books of Accounts to be maintained under Rule 15 by a member

e.       Contract Notes- Verification of contract notes

 

16.         AUDIT OF PSU

C&AG Powers u/s 619(3) & (4) -Comprehensive Audit of PSU, Committees on Public Undertakings- Audit Report of C&AG

 

17.         PROPRIETY AUDIT

Propriety elements in 227(1A), Propriety elements in CARO 2003, Problems in Propriety Audit

 

18.         INVESTIGATION

Special Issues in Investigation –

Non-statutory Investigations

1. Investigation on behalf of an incoming partner
2. Investigation on behalf of a Bank proposing to advance a loan
3. Investigation for proposal to acquire a limited company or proprietory business

 

 

 

Due Diligence-

What is Due Diligence? Types of Due Diligence

Full fledged Financial Due Diligence- Review of Financial statements, Cash flow, Taxation, Financial Projections

Contents of Due Diligence Report

 

19.         Peer Review-

Definition, Objectives, Scope, Reporting, Confidentiality, Technical Standards

 

20.         Internal Audit, Management Audit and Operational Audit  

Internal Audit- Relationship between External and Internal Auditor, General Evaluation and Specific Evaluation

Management Audit and Operational Audit

a.       Scope of Management Audit and Operational Audit

b.       What is Management Audit Questionnaire? (Measuring performance through MAQ)

c.       Behavioral Problems in conducting Management audit & solutions to overcome such problems

d.       Broad objectives of Operational Audit

 

21.         Professional Ethics (INSTITUTE MATERIAL WITH CA AMENDMENT ACT 2006 VERY IMPORTANT)- Chapter-23 in New Syllabus

 

a.       Section 2(2) (Revised Definition of Management Consultancy Services in 2004) and Sections 7, 8, 24, 27 and Other Misconduct (Very important – as per CA Amendment Act, 2006)

b.       First Schedule- Part-I- clauses 2, 3, 4, 6 7, 8, 9, 11 (Regulation 191 and Regulation 190A (Revised in 2004- VERY IMPORTANT),

c.       First Schedule- Part-II- clause 2

d.       First Schedule- Part-III- clauses 2, 3

e.       Second Schedule-Part-I-clause 1- Role of C.A. in relation to Unlawful acts of his clients, clauses 4, 5, 6, 7, 10

f.         Second Schedule-Part-II-clauses 1, 3, 4

g.       Latest Council notifications are important in the Institute study material. (Starting from Notification No. 53/2001 till Notification no. 93/2006) –

Now these notifications have been withdrawn and issued as Council’s General Guidelines, 2008 which should be downloaded from Institute website.

h.       Latest Council guidelines regarding advertisement through write up issued in May 2008

i.         Latest Council Notification No.116 of 2008 issued on 25^th September 2008 which includes new Regulation 53A and Regulation 53B which is relevant for clauses 2,3,4,5 of Part-I of First Schedule

 

22.         Sarbanes Oxley Act, 2002 (Only for New syllabus) –Titles under SOX, Internal Controls (Section 302) and PCAOB Overview and Functions, Purpose of Internal Control over Financial Reporting and Procedures of Internal Control over Financial Reporting

 

20.    PROBABLE SHORT NOTES QUESTIONS

 

(Certain short notes questions, which are already covered in the respective chapters given above, have not been repeated here)

 

a.       Report on Agreed Upon Procedures Engagement (SRS 4400)

 

 

b.       Professional Skepticism (SA-200 & SA-240)

c.       Audit Risk, Inherent Risk, Control Risk, Detection Risk, Audit in a Risk based Environment (Chapter 5 in the New Syllabus Material)

d.       Management Representation letter (SA-580)

e.       Qualified Opinion, Disclaimer of Opinion, Emphasis of Matter (SA-700 & SA-705)

f.         Company Audit- Personal expenses of Directors, Capital Reserves, Interim Dividend, Non-provision for Proposed Dividend, Non-provision for tax liability

g.       Qualified and Independent Audit Committee, Audit Committee u/s 292A (Chapter-9)

h.       Report on Corporate Governance (Chapter-9)

i.         Special Report to the Registrar of Co-operative societies (Point No.8 in Special Features in Co-operative Audit)

j.         Audit and Investigation

k.       Audit of Members of Stock Exchange – refer to points given earlier

l.         SA-570- Financial, Operating and Other Indications

m.     EDP Audit- Black Box and White Box Approach

 

NOTE:

In recent exams there is a trend of asking Drafting of Letters, Audit Programmes, Questionnaires, Qualifications, Opinions etc. In the Institute Study Material, in the Chapters and in SA, CARO etc where drafting of illustrative letters, qualifications, adverse remarks etc are given you should learn the basic requirements of drafting such letters, Letters, Audit Programmes, Questionnaires, Qualifications, Opinions etc

 

General Notes:

 

1.       All the areas given in this attachment are based on LATEST EDITION (March 2010) of Institute Study Material with two volumes.

2.       Do not answer the compulsory questions 1 and 2 at the beginning of the exam. First answer two or three direct and simple questions before attempting questions 1 and 2 which are practical.

3.       Present the answers point-wise and avoid paragraph-wise presentation.

4.       Examples and illustrations given in Chapters are important for practical questions.

 

FOR STUDENTS WHO ARE WRITING CA FINAL NEW SYLLABUS

 

You have to prepare the following topics in the New Syllabus Institute study material Volumes I and II fully for new syllabus alone.

 

1.       Chapter – 9 – Corporate Governance (Partially covered in Chapter-15 in Old Syllabus)

2.       Chapter – 22 – Sarbanes Oxley Act, 2002 (Not covered under Old Syllabus)

3.       Guidance Notes on

a.       Capital and Reserves (Covered in Chapter-5 in Old Syllabus)

b.      Payment of Dividends (Covered in Chapter-5 in Old Syllabus)

Reports in Company Prospectuses (Covered in Chapter-6 in Old Syllabus