KSLU Solved Question Papers
Principles and Practice of Auditing
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 3
2023 Sep Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 3 Principles and Practice of Auditing 2023 Sep Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2023 Sep examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2023 Sep examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2023 Sep examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type question and short note is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written either in English or Kannada completely.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Define Audit. Briefly explain the different types of Audit.[10]
Answer
For full marks, cover: the meaning of audit (an independent examination ending in an opinion), with the standard's objective in SA 200; the different types of audit, classified by law (statutory and voluntary), by the body audited (company, government, co-operative, trust, partnership, sole trader), by time and method (continuous, final or periodical, interim, balance sheet audit), by scope (complete and partial) and by purpose (internal, cost, tax, management, secretarial, performance); a table; a conclusion.
Meaning of audit
An audit is an independent examination of an organisation's books of account, vouchers and other records by a qualified person. It covers the financial statements prepared from them. The auditor collects evidence and then gives an opinion on whether the statements present a true and fair view.
SA 200 states the auditor's overall objective. The auditor obtains reasonable assurance that the financial statements as a whole are free from material misstatement, whether due to fraud or error. The auditor then expresses an opinion on them. For a company, section 143(2) of the Companies Act, 2013 requires the auditor's report to the members on the true and fair view.
Types of audit
A. By legal requirement
- Statutory audit. An audit required by law. Every company must be audited under sections 139 to 148 of the Companies Act, 2013. Banks, insurers and co-operative societies are audited under their own laws, and a tax audit is required by section 63 of the Income-tax Act, 2025.
- Voluntary (private) audit. An audit not required by law but chosen by the owners. Examples are the audit of a sole trader's or a partnership firm's accounts to settle accounts among partners, obtain a loan or plan tax.
B. By time and method
- Continuous audit. The auditor's staff visit the client at regular intervals during the year and check the transactions as they occur. It suits large businesses with many transactions. Errors are found early, but the client's records may be altered after checking.
- Final (periodical) audit. The audit begins after the year end, when the accounts have been closed. It suits small businesses and causes less disturbance, but errors are found late.
- Interim audit. An audit made between two annual audits, for example to declare an interim dividend or to review half-year results.
- Balance sheet audit. The auditor concentrates on the items of the balance sheet, verifying assets and liabilities and examining related income and expense, rather than vouching every transaction.
C. By scope
- Complete audit. All the books and records for the period are examined, by tests where appropriate.
- Partial audit. Only some parts are examined, such as the cash book or the stores, under the terms of the engagement. The auditor's report must state the limited scope.
D. By purpose or subject
- Internal audit. A continuous review of operations and controls by staff or professionals appointed by management. It is compulsory for the classes of companies prescribed under section 138.
- Cost audit. An audit of cost records, ordered under section 148 for prescribed companies and carried out by a cost accountant.
- Tax audit. An audit of accounts for income-tax purposes under section 63 of the Income-tax Act, 2025.
- Management audit. A review of the performance of management and the efficiency of policies, procedures and decisions.
- Secretarial audit. An audit of compliance with company law and related laws by a company secretary in practice. Section 204 requires it for listed companies and other prescribed companies.
- Government audit. The audit of government departments and government companies under the direction of the Comptroller and Auditor-General of India (CAG). Under section 139(5), the CAG appoints the auditors of government companies.
Continuous and final audit compared
| Point | Continuous audit | Final audit |
|---|---|---|
| When done | At intervals through the year | After the year end |
| Suits | Large businesses with many transactions | Small and medium businesses |
| Detection of errors | Early | Late |
| Risk | Figures may be altered after checking | Little, as books are closed |
| Cost | Higher | Lower |
| Disturbance to client | More frequent visits | One visit, but a heavy one |
In practice, large companies often combine the two. Routine vouching is done in interim visits, and the verification of balances is done in a final visit after the year end.
Types at a glance
| Basis | Types |
|---|---|
| Legal requirement | Statutory, voluntary |
| Time and method | Continuous, final, interim, balance sheet |
| Basis | Types |
|---|---|
| Scope | Complete, partial |
| Purpose | Internal, cost, tax, management, secretarial, government |
Conclusion. An audit is an independent examination of an organisation's records and financial statements. It ends in an opinion on whether they show a true and fair view. Audits are classified in several ways. By law they are statutory or voluntary; by timing, continuous, final, interim or balance sheet audits; and by scope, complete or partial. By purpose there are internal, cost, tax, management, secretarial and government audits. The type chosen depends on the law that applies, the size of the business and what the users of the accounts need.
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