CA Study Notes (Inter, Final & Foundation)

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Audit Case Study Based MCQ - RIM Private Ltd is engaged in the business of manufacturing of steel having annual turnover of INR 10,000 crores. The company is very capital intensive and has its plants at two locations – Mohali and Hosur. During the year ended 31 March, 2019, the company carried out a detailed physical verification of its property, plant and equipment and also reassessed their useful lives by engaging a consultant. The consultant submitted its report to the management on 21 April, 2019. The statutory auditors of the company started their audit work from May 2019 and when this information was given to them regarding the physical verification and the reassessment of the useful lives of property, plant and equipment, the auditors told the management that the consultant should have submitted its report to the auditors also independently. Further, in the absence of this direct communication of the report of the consultant to the auditors, the audit team would have to review the work of the consultant which is not efficient but it cannot be avoided now. Management did not agree with both the points of the auditors that the consultant should have shared report with the auditors directly and that the auditors need to review the work of the consultant. The management would like to have your views on this matter. Option (a) The view of the management seems to be correct because there is no such requirement that any consultant of the company should share his report directly with the auditor. Also when the consultant has already submitted a detailed report, no further review is required on that. Option (b) Both the management and auditors are not correct. The auditor is not supposed to receive the report directly. Further, the auditor needs to review the work of the consultant irrespective of the fact whether he received the report directly or not. Option (c) The auditor’s requirements are reasonable because he carries duty in respect of audit of financial statements and by not getting report directly from the consultant he would not know whether it belongs to that consultant or not. And now only because of this lack of proper communication the auditor would have to review the work of the consultant. Option (d) Both management and auditors should find a solution to this problem. The management may request the consultant to send the report to the auditor directly now. On the basis of the same, the auditor can avoid unnecessary procedure related to review of report of the consultant. ═════ ♢.✰.♢ ═════ ✪ 𝕵𝖔𝖎𝖓 ➨ @Mission_CA_Inter ĦΔPP¥ ŞŦỮĐ¥ Ҝ€€P ŞĦΔŘIŇG❤️

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