Auditing and 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: 12
(a) Disclaimer of opinion
(b) Adverse opinion
(c) Basic elements of the auditors’ report
(d) Performance audit
(e) Fraud & Error
(f) Prudence

2. (a) What are the responsibilities of an auditor, if there has been a limitation on the scope of
the audit? 4
(b) Draft an audit report for a private limited company, containing at least two findings on
scope limitation. 6

3. (a) Discuss the general principles in connection with the verification of fixed assets. 4
(b) What do you understand by Cut-off Procedure in respect of verification of Stocks? 3

4. (a) List the books of account, which should be kept as per Companies Act, 1994. 3
(b) One of the ethical principles for the auditor is “independence”. Keeping in view with
the independence of auditors, the Companies Act, 1994 has conferred certain rights and
powers on the auditors. What are those rights and powers? 4
(c) Discuss the relevant provisions of remuneration of auditor under the Companies Act,
1994? 3

5. (a) What is divisible profit? Explain the guiding principles regarding payment of dividend. 5
(b) Discuss the following situations with reference to the decided court cases: 6

(i) Whether a company can distribute capital profits;

(ii) Whether depreciation on fixed assets must be made good before distribution of
current profits;

Section II
Marks – 50
1. (a) What is a proposal? How a proposal may be revoked? 4
(b) What do you understand by Quasi-contract? Give some examples of quasi-contract. 3
(c) What do you understand by “Supervening impossibility”? How “Supervening
impossibility” may occur? 3

2. (a) Explain with illustration a contract of ‘Sale’ and agreement to ‘sale’ 3

(b) What is a warranty? Distinguish it from a condition. 3
(c) Is there any implied condition as to quality of fitness for goods supplied for any
particular purpose under ‘the Sale of Goods Act’ 1930? 4

3. (a) What is an arbitration agreement and what are its effects? 2

(b) What matters can not be referred to arbitration? 2
[Please turn over]
 2

(c) Name the properties of a bankrupt debtor that are exempt from attachment and sale
under section 32 of the Bankruptcy Act, 1997? 2
(d) Who are Official Receivers? 2
(e) Can an infant be insolvent? 2

4. (a) Distinguish between a cheque and a promissory note. 3

(b) Who can accept a Bill of Exchange? 3
(c) Spell out the grounds on which a court may dissolve a partnership firm on a suit filed
by a partner. 4

5. (a) What are the acts of insolvency? 3

(b) What is the acceptance for honour? 2
(c) What do you understand by partnership-at-will? 2
(d) Can an outgoing partner carry on business competing with the firm? 3

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