AUDITING & BUSINESS LAW

Time allowed 3 hours

Maximum Marks 100
[N.B. The figures in the margin indicate full marks. Questions must be answered in English. Examiner will take
account of the quality of language and of the way in which the answers are presented. Separate answer scripts
should be used for each section. Different parts, if any of the same question must be answered in one place in
order of sequence.]

Section-I
Marks-50
Marks
1. Write short notes on the following:
(a) Working Papers
(b) Audit Evidence
(c) Bank Reconciliation
(d) Contingent Liability
(e) Finance Lease.

10

2. (a) What are the purposes of planning an audit? Enumerate the matters which are to be considered
by an auditor in developing his overall audit program.
4
(b) Write down the procedures of audit planning.
4
3. (a) What are the provisions of the Companies Act, 1994 regarding:i. Qualification of auditors and
ii. Powers and duties of auditors
(b) What do you understand by the term Letter of Weakness? Why and to whom such a letter is issued?
4. (a) How do you relate Materiality with Audit Risk?
(b) Write short notes on:
i. Inherent risk;
ii. Credibility of financial statements; and
iii. Substance Over Form.

3
3
4

3
(3x3)= 9

5. (a) What do you mean by audit independence? State the points that influence auditors independence.
(b) Describe the circumstances under which an auditor issues a qualified report.

6
4

Section-II
Marks-50
1. (a)
(b)
(c)
(d)

An agreement enforceable by law is a contract. Explain.

Explain the circumstances under which a valid contract transforms into a void contract?
A stranger to the consideration can sue but a stranger to a contract cannot sue.Explain.
An invitation to offer is not an offer. Explain.

3
3
3
3

2. (a)
(b)
(c)
(d)

What do you understand by limited liability of a shareholder and separate entity of the Corporate body.
Discuss the effects of non-registration of a partnership firm.
Can the Objective Clause of the Memorandum of Association be changed? If yes, how?
What are the differences between the Memorandum of Association and Articles of Association.

3
3
3
3

3. (a) Who is unpaid seller? What are his rights against goods?
(b) Explain the differences between agency by estoppel and by necessity.
(c) No seller can give a better title of goods to be buyer than that he has. Discuss.

4
4
3

4. (a) What is meant by bankruptcy? What are the purposes of the Law of Bankruptcy?
(b) Define Negotiable Instrument. Discuss the effect of crossing a cheque with the words Not
negotiable written across the face.
(c) Distinguish between dishonour by non-performance and dishonour by non-acceptance of a
negotiable instrument.
(d) How would you differentiate between a Promissory Note and a Bill of Exchange?
(e) Who can refer disputes to the arbitrator and what matters can be referred to the arbitrator under
the Arbitration Act?

The End

3
3
3
3