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CA Final Audit Concept Capsule 30
Do you know that a charted accountant in practice cannot accept his fees based on percentage of profits or contingent upon Future profits for his professional works?
However, he can accept fee on percentage basis in case of following services that he provides.
1) Liquidator or a receiver
2) Auditor of Cooperative Society
3) Valuer
4) Management Consultancy Services
5) Fundraising services
6) Debt Recovery Services
7) Cost optimization services.
8) Insolvency Professional
9)Non-assurance services to non-audit clients.
Let me know if you have any questions in the comment section.
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CA FINAL AUDIT CONCEPT CAPSULE 29
Whether a Chartered Accountant in practice become Director of a Company? See the answer lies in which type of Director he wants to become.
1) Managing director/Whole time director - A chartered accountant, in practice, cannot become a managing director or a whole-time director of a company because it involves employing with the company.He has to obtain specific permission from ICAI.
2) Director Simplicitor - A Chartered Accountant in practice can become Director Simplicitor in a company. For this, he need not obtain any specific permission from the ICAI.
The term Director Simpliciter means
- he is required to attend only board meetings - he will not be paid any remuneration except sitting fees and
- Apart from attending board meeting he shall not devote any of his time for the purpose of company.
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If you have any questions regarding this, let me know in the comments section.
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CA Final Audit, Concept Capsule, 28
A chartered accountant, in practice, can audit and sign historical financial statements. This we know, right? Now, whether a chartered accountant can also sign forecasted financials?
Generally, a chartered accountant shall not associate his name with an estimate of earnings contingent upon future transactions or any forecasted financial statements. However, subject to the following conditions, he can sign the forecast.
1) His report shall clearly indicate sources of information and basis of major assumptions taken.
2) He should not vouch for the accuracy of the forecasts.
Otherwise, he will be guilty of professional misconduct under Schedule 2, Part 1, Clause 3 of CA Act 1949.
Let me know if you have any questions in the comment section.
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CA Final Audit Concept Capsule 27
It is quite common for chartered accountants in practice to receive certain monies from their client for the purpose of incurring certain expenditures on behalf of client like paying their taxes, duties, gov fees, etc.
Do you know that those monies that are received by the Chartered Accountant from their clients, apart to his professional fees, has to be deposited in a separate bank account, until the amount is spent?
If not, Chartered Accountant in practice shall be deemed to be guilty of professional misconduct under Schedule 2, Part 1, Clause 10 of CA Act.
However, if money is intended to be spent within a reasonably short time period, then it need not be put in a separate bank account. Now, what would be a reasonable short time? That depends on circumstances of each case.
If you have any questions on this, let me know in the comment section.
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CA Final Audit Concept capsule -26
Whether a chartered accountant in practice can do as many number of audits as he wants?
Unfortunately, the answer is no Icai has put certain limitations in case of tax audit. A chartered accountant can do maximum of 60 tax audits per year.
Coming to statutory audits as per companies act a chartered accountant can do maximum of 30 audits as per ICIA restriction. However, as per companies act a chartered accountant can do maximum of 20 statutory audits only. Therefore, since the limit specified by companies act is less, you should follow 20.
In case of firm of chartered accountants, this limit gets multiplied by number of partners. Let’s say if firm is having three partners then it can do 180 tax audits and 60 statutory audits.
Hope this gives you a clarity. If you have any questions, Let me know them in the comment section.
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CA Final Audit Concept Capsule - 25
Do you know that after you qualify CA, In case you set up a practice, you have to disclose to ICAI the amount of Fee that you received from your practice?
However, disclosure of fee is required only in the following situations
1) For Non public interest entities -
Professional fee from an audit client exceeds more than 40% of the total fee of the firm for two consecutive years
2) For Public interest entities - Professional fee from an audit client exceeds more than 20% of the total fee of the firm for two consecutive years
Here is a catch,No disclosure is required. If total fees received by the firm itself, does not exceed 20,00,000.
Now you might get a doubt, what are public interest entities
1) listed entities,
2) Banks and insurance companies, 3) such other entities as defined by any law regulation
If you have any questions, let me know in the comment section
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CA Final Audit Concept capsule - 24
Chartered accountants can practice in the form of networks. Now what are these networks? Two or more firms can come together to form a network here or some of important points with respect to network firms.
1) network can be in the form of a mutual entity, partnership firm(Max 20 partners) , LLP or even a company
2) the name of network should end with the words & affiliates, just like the name of CA firms end with & co or & Associates.
3) a firm is allowed to join only one network
4) It is mandatory for every network to get itself registered with ICAI.
5) Application for name approval has to be made in form-A and application for registration has to be made in form-B
Let me know in the comment section, if you know any other important points about networks
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CA Final Audit Concept capsule - 23
we have learnt about denial of service attack in digital audit chapter, but have you ever thought how this denial of service attack occurs practically?
Let us take example of Flipkart server, which has capacity to handle 10,00,000 requests at the same time, now attackers will continuously send number of fake requests to Flipkart server, such that it cannot handle all those request parallely because those request or more than its capacity.
Because of this fake request, Flipkart server will not be able to handle, even the genuine request that are received from the actual customer, so if you observe here Flipkart pserver is denying the service to the genuine customers. That is the reason why the name of this attack is known as denial of Service attack.
Hope now you are clear with this concept. If you have any questions, let me know them in the comment section.
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CA final audit concept capsule-22
You would have heard the term IT dependency in your digital audit chapter. Did you ever thought is meant by this IT dependency?
See, it is simple, depending on information technology for various purposes is known as IT dependency .The name itself gives its meaning right…
You can depend on information technology for various purposes like report generation, making automatic calculations, for enforcing security, implementing automated controls, etc
Now this IT dependency is treated as a risk to the organisation, do you know why?
Let’s say information technology has failed suddenly, and now you are dependent on information technology for various purposes because of failure of information technology, organisation cannot discharge that function so excessive dependency on information technology is treated as a risk to the organisation
If you have any questions, let me know them in the comment section
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CA Final Audit Concept Capsule - 21
As per Clause 7 of CORO 2020, Auditor has to report whether the company is regular in depositing undisputed statutory dues.
One tricky question that can be asked on these concepts where students might get confused is…
Let's say a company is making a lump sum payment of statutory due every month irrespective of the actual amount due(eg:- pf due for may is 2.05 lac, company made a lump sum payment of 2 lac and for next month due is 1.9 lac again company made lumpsum payment of 2 lac adjusting previous month balance due also… son) In this situation shortfall or excess payments are not significant and infact they being adjusted in the next month.
The question that arises here is whether this should be reported as a regular payment of statutory dues or not.
Since company is making lump sum payments and the differences are also not significant and being adjusted in the next month, this doesn't fall under irregular payments and you can consider that company is regular in depositing its undisputed statutory dues.
If you have any questions on this let me know in the comment section.
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