ATTEMPT ANY 5 QUESTIONS FROM EACH SECTION

TIME ALLOWED: 3 HOURS

MAXIMUM MARKS: 100
ALL QUESTIONS CARRY 10 MARKS
SECTION AUDITING
QUESTION NO 1
Outline the importance of the external auditor as a verifier of financial information
and discuss the level of assurance provided by an audit and a review engagement.

QUESTION NO 2
Describe the matters which the external auditor should consider at the planning stage to assess
the effectiveness of a companys internal audit department.

QUESTION NO 3
Describe the matters you should consider and the action you will take to ensure your firm
remains independent as external auditor of the annual financial statements. List down 4
advantages of external audit of financial statements.

QUESTION NO 4
Consider the risks associated with the audit. Describe the ethical matters you should consider in
deciding whether your audit firm should accept the audit. This should include considering
whether your firm has the technical and logistical ability to carry out the audit.

QUESTION NO 5
Describe the reasons why it is important that auditors should plan their audit work. Describe the
matters you will consider in planning the audit.

QUESTION NO 6
Identify and describe five of the procedures for obtaining audit evidence. For each of the procedur
es, describe an audit test using that procedure to obtain evidenceas to the balance of plant and
equipment including the related balances of accumulated depreciation and charges to income.


SECTION TAXATION
QUESTION NO 7
Mr. Ahmed earned an income of Rs.350, 000 from his business carried on as a sole trader. He also
earned an amount of Rs.150, 000 from an AOP in which he is a member. Compute the tax liability
of Mr. Ahmed. Also discuss the rules for taxation of an individual regarding income from AOP.

QUESTION NO 8
Mr. Arif is an employee of a company he has submitted the following information for the tax year
200X
Basic salary per annum Rs.240,000
Bonus Rs.36,000
Cost of living allowance Rs.36,000
Dearness allowance Rs.12,000
Rent free unfurnished accommodation annual value Rs.132,000
Company maintained car for personal and private use Rs.880,000
Utility allowance Rs.48,000
Leave encashment Rs.21,600
LFA provided every year Rs.21,600
Hotel bills paid by employer relating private family trip Rs.26,400
Employer contribution towards provident fund Rs.20,000
Zakat paid under zakat and ushr ordinance Rs.5,000
Tax deducted by the company from salary Rs.25,000
Required: compute the total income, taxable income and tax liability of Mr. Arif.

QUESTION NO 9
Briefly discuss the tax treatments of contribution to an approved provident fund by employee and
employer. List down the criteria for official recognition of a provident fund.



QUESTION NO 10
Mr. Imran has a building, which is rented out at a monthly rent of Rs. 25,000. He incurred the
following annual expenses in respect of the house
Repair charges Rs.10,000
Insurance premium Rs.8,000
Interest on loan from HBFC for the house Rs.12,000
Property tax Rs.5,000
Electricity bills Rs.6,000
Water bills Rs.7,200
Gas bills Rs.4,800

As per agreement the rent includes the payment on account of utility bills.
Required:
Compute the taxable income and the tax liability under each of the following conditions;
1. Rent includes Rs.3,000 P.M on account of utilities provided to tenant.
2. The rent deed does not clearly specify the amount received on account of utilities.

QUESTION NO 11
AA company is a partnership firm. For the tax year ended 30
th
june 200A the firm declared the net
profit of Rs.400,000. The scrutiny of the profit and loss account revealed that the following
deductions were made while preparing the financial statements
Income tax for previous year Rs. 30,000
Tax at source deducted by the customer Rs.15,000
Salary paid to an employee without deduction of tax Rs. 200,000
Salary paid to partner A Rs. 60,000
Salary paid to partner B Rs. 5,000
Salary paid PM to an employee through cash (tax deducted at source) Rs. 20,000
Contribution to unrecognized provident fund Rs. 30,000
Donation to unapproved institutions Rs. 10,000
Donation to approved institutions Rs. 20,000
Manager of the firm was paid the following amounts
Salary
Perquisites and allowances

Rs. 80,000
Rs. 50,000
Accounting depreciation Rs. 55,000
Required:
Compute the taxable income of the firm considering that depreciation under the income tax is
Rs.45,000.

QUESTION NO 12
A leasing company leased out a plant costing Rs.1,000,000 in tax year 200A. the annual lease
rentals were agreed at Rs.240,000 for 5 years. Compute the depreciation to be allowed for years
200A,200B,200C,200D and 200E.