Possible Interview Questions: Prepared By: Eylia Safdar
1. Introduce yourself. Hi, I am ________, I’ve
recently got done with my
articles at KPMG and
currently working as a
Supervisory Senior with
MMH. I’m left with
_______ papers to qualify as
a CA. Along with CA, I’ve
done bachelors in commerce
from ____.
I’ve been working in KPMG
since 2014 in section C of
Audit Dept.
My experience at KPMG
mainly comprises of
manufacturing and services
clients and one client from
financial or banking sector.
2. What are your strengths and
weaknesses?
3. How many clients have you I’ve done three clients as
done as Job In Charge? designated job incharge. And
there are two clients where I
was not the in charge but
was next to In charge, i.e. at
KE and OUP 2018.
4. Are you well versed with Yes, currently Eaudit 2017
latest version of eaudit? version is being used in
Karachi office.
I’ve attended Eaudit 2017
training courses conducted
by Audit Dept. by time to
time.
5. What is a tracker? What In tracker, we document all
items are to mandatory to be the issues from Issue log,
entered in tracker? ML and audit findings and
observations.
6. What is SEW and FSA?
Where do we use each of
them?
7. How do you determine Materiality is determined on
materiality? the basis of the following:
- Nature of entity’s
operations (E.g.
entity is profit
oriented or non-profit
organization. If it’s
an NPO, profit cant
be the benchmark, in
that case, users of FS
are more concerned
about the assets of
the entity).
- Volatility of the
factor selected. (E.g.
if the entity is profit
based, but its profits
are too volatile, in
that case, profit is not
a good guide for
benchmark, we’d
have to go for net
assets or total assets
or more appropriate
benchmark).
PM (Performance
Materiality) is 75%
of total Planning
materiality. 5% of P
is AMPT.
For planning Materiality:
- 3-10% of PBT/equity
- 0.5– 3% of revenue/total
assets/total expenses
Materiality is documented in
section 2.2 of Eaudit. (2.0 is
Risk assessment)
8.. Which heads of accounts
are classified as significant
and how do you determine
that the account heads are
significant.
9. What is SAN and CEAC? SAN (Sentinel Approval
Why do we obtain it and Number) and CEAC (Client
where is it documented in and Engagement Acceptance
Eaudit? ) are obtained at the
inception of the client for
opening an engagement in
the local practice
management system.
Its documented in 1.1.1. Pre-
Engagement.
10. WCGW Revenue:
- Revenue - Revenue recognition
not in accordance
- Inventory with IFRS 15 (i.e.
risk and
- PPE reward/control not
transferred)
- Going concern
assumptions - Excess sales recorded
with fake invoice
- Abnormal sales
returns in starting
months of FY
Inventory:
- NRV testing not
done (i.e.
inappropriate
valuation of
inventory)
- Stock as per records
and as per physical
count not matching.
PPE:
- Inappropriate
classification of PPE
items. (i.e.
Capitalizing items
below expense
threshold or vice
versa)
- Depreciation expense
not recorded
appropriately.
Going Concern Assumption:
11. How would you mitigate the Revenue:
above WCGW?
- Establish that when
control is transferred
to the customers of
goods/services by
reading co. policy
and comparing it
with the revenue
recognition criteria.
- Perform Analytical
procedures to assess
any abnormal
sales/sales returns at
a specific point in
time.
Inventory:
- Perform NRV testing
- Perform physical
stock count.
PPE:
- Identify the
capitalization limit
and assess if all the
items in FAR have
been classified
appropriately.
- Perform recalculation
of depreciation
taking into account
dates of
capitalization and
disposals.
12 How would you verify V of - Testing if correct
inventory? recording of
provisioning of slow
moving stock has
been done.
- Perform NRV testing
13. How would you verify C of - Cut off procedures
inventory?
- Physical stock count.
14. How would you verify E of - Test of Details
revenue? (vouching on
sampling basis)
- Confirmations
15. Why revenue is always - Risk of fraud is
considered as significant inherently high.
account head?
16.. What is exposure analysis? - Analyzing all the
data of the client
mainly focusing on
the exceptions to
assess that how
effective the
processes are, not
only form the
financial perspective
but form the
operational
perspective.
17. What is 13 period testing? - Subsequent testing.
It’s done to check
that whether the
payments which are
being made in the
current year
pertaining to prior
year had their accrual
booked in the prior
period in respect of
the expense. It
confirms that
matching concept is
being applied
appropriately.
18. How would you verify C of - Checking subsequent
revenue? receipts form debtors
to confirm whether
corresponding
revenue was included
in FS.
- Checking contracts
with customers to
assess any possible
sales predicted
during the period and
check if those sales
are included in
revenue.
19. How would you verify C of - Checking subsequent
debtors? receipts form debtors
to check if these had
been included in year
end balances.
- Sending
confirmations to
debtors.
- Directional Testing.
(i.e. tracing from
sales revenue by
excluding all the cash
sales)
20. At one of your client, you If I become aware of any
heard that the company is such instance, I would
being penalized for non- perform the following audit
compliance by a regulatory procedures to obatin:
authority, what audit a) An understanding of
procedures will you apply the nature of the act
and what would the impact and the circumstances
on financial statements? in which it has
incurred; and
b) Further information to
evaluate the possible
effect on the FS
I would also evaluate the
implications of non-
compliance in relation to
other aspects of the audit,
including the risk assessment
and the reliability of written
representations. (ISA 250
para 18 and 21 and for
further impact on auditor’s
report paras 25-27)
21. Co. in loss for past three - Going concern.
years, but equity is positive.
Whats the risk and - Risk of
procedures you’d apply? overstatement of
revenue and
understatement of
expenses
(understatement of
losses).
22. How would you assure that I would perform the
transactions with RP is at following procedures to
arm length? ensure whether the
transactions were conducted
at arm’s length:
a) Comparing the terms of
RP transactions with
those of an identical or
similar transaction with
one or more unrelated
parties.
b) Engaging an external
expert to determine a
MV and to confirm
market terms and
conditions for the
transaction
c) Comparing the terms of
the transaction to
known market terms
for broadly similar
transactions on an open
market.
Evaluating management’s
support for this assertion
may involve one or more of
the following:
a) Considering the
appropriateness of
management’s process
for supporting the
assertion
b) Verifying the source of
the internal or external
data supporting the
assertion and testing
the data to determine
their A,C and
Relevance
c) Evaluating the
reasonableness of any
significant assumptions
on which the assertion
is based (ISA 550 paras
A43-44)
25. What are AP any AP means evaluations of
substantive AP? Is there any Financial information
diff between them? through analysis of plausible
relationships among both
financial and non-financial
data. AP also encompass
such investigation as is
necessary of identified
fluctuations or relationships
and that are inconsistent with
other relevant information or
that differ from expected
values by a significant
amount (ISA 520 para 4)
Fundamentally, analytical
procedures and substantive
analytical procedures, don’t
differ at all. The difference
between the terms actually
refers to the timing of these
procedures i.e. when they are
performed.
Analytical procedures are
used at various stage be it at
planning stage, sample
identification stage
(identifying odd ones out
from the population), during
substantive testing or
finalization stage. When
analytical procedures are
used at substantive testing
stage, they are referred to as
Substantive Analytical
Procedures
AP involved at planning
stage such as with ISA 315--
-not Sub Procedure
25. What is cut-off procedure Cut-off: transactions and
and what assertion is events have been recorded in
verified with it? the correct accounting
period. Cutoff procedures
restrict accounting
information from being
included in the company’s
general ledger after a
specific date. Completeness
is verified through cut-off
testing
26. How would you ensure that -
V of inventory is correct?
And what procedures will
be applied?
27. What is an audit program? An audit program, also
called an audit plan, is
an action plan that
documents what procedures
an auditor will follow to
validate that an organization
is in conformance
with compliance regulations.
The goal of an audit program
is to create a framework that
is detailed enough for any
outside auditor to understand
what official examinations
have been completed, what
conclusions have been
reached and what the
reasoning is behind each
conclusion. The framework
should explain
the audit's objectives, its
scope and its timeline. The
audit program should also
describe how working
papers -- the documented
evidence of the audit -- will
be collected, reviewed and
reported. Audit program
objectives help direct
planning of the audit report
and are based on the
policies, procedures and
guidelines unique to the
company. These objectives
may relate to and outline
how the auditors will
maintain efficiency,
professionalism and a
specific code of conduct
during audit procedure
28. What is inherent, control Inherent risk:
and detection risk? Inherent risk is
the risk posed by an error or
omission in a financial
statement due to a factor
other than a failure of
control. In a financial
audit, inherent risk is most
likely to occur when
transactions are complex, or
in situations that require a
high degree of judgment in
regards to financial
estimates.
Control risk:
Control risk, which is the
risk that a misstatement due
to error or fraud that could
occur in an assertion and that
could be material,
individually or in
combination with other
misstatements, will not be
prevented or detected on
a timely basis by the
company's internal control.
Detection risk:
Detection risk is the chance
that an auditor will not find
material misstatements
relating to an assertion in an
entity's financial statements
through substantive tests and
analysis. Detection risk is
the risk that the auditor will
conclude that no material
errors are present when in
fact there are.
29. What is general and specific General Provision
provision as per IAS 37? A company that records
transactions and works with
customers through AR may
show a general provision on
the balance sheet for bad
debts or for doubtful
accounts. The amount is
uncertain, since the default
has not yet occurred, but is
estimated with reasonable
accuracy based on company
history. For example, the
company may analyze write-
offs from the prior
accounting year when
establishing general
provisions for doubtful
accounts in the current year.
When a write-off is used for
clearing a specific account,
the amount is transferred to
bad debt expenses
Specific Provisions.
A specific provision is
created for receivables
facing serious financial
problems or for a trade
dispute with the entity. For
example, if there is a 50%
chance of recovering a
doubtful debt for a certain
receivable, a specific
provision of 50% may be
required.
30. What is borrowing cost and Borrowing costs refer to the
what is the treatment as per expense of taking out loan
IAS? expenses like interest
payments incurred from a
loan or any other kind of
borrowing. Borrowing costs
that are directly attributable
to the acquisition,
construction or production of
a qualifying asset form part
of the cost of that asset.
Other borrowing costs are
recognized as an expense.
Borrowing costs are interest
and other costs that an entity
incurs in connection with the
borrowing of funds. A
qualifying asset is defined as
'an asset that necessarily
takes a substantial period of
time to get ready for its
intended use or sale'. The
core principle of IAS 23 is
simple: borrowing costs that
are directly attributable to
the acquisition or
construction of a qualifying
asset must be capitalized. All
other borrowing costs should
be expensed
31. Have you performed Indications of impairment
impairment testing at your [IAS 36.12]
client? Indications of
impairment testing? External sources:
market value declines
negative changes in
technology, markets,
economy, or laws
increases in market interest
rates
net assets of the company
higher than market
capitalization
Internal sources:
obsolescence or physical
damage
asset is idle, part of a
restructuring or held for
disposal
worse economic
performance than expected
for investments in
subsidiaries, joint ventures
or associates, the carrying
amount is higher than the
carrying amount of the
investee's assets, or a
dividend exceeds the total
comprehensive income of
the investee
32. Going Concern issue
identified on any client?
Why the entity was not a
GC? And how it was
responded?
33. What procedures will you I will perform the following
apply to verify that procedures:
expenses have occurred and a) Expenses must be
are completely recorded in being received in a
the period of our audit? timely manner.
Expense GL
showing invoice
dates, whether it’s
week’s end or
month’s end.
Tracing invoice
dates from GL
would help in
identifying whether
expenses incurred
fall under the
correct period
b) To verify the
occurrence I will
randomly select
invoices and ask to
see all the original
paperwork,
including contracts
if they exist,
invoices and
signatures. I will
compare all the
original
documentation
against the
amounts paid to
find mistakes
c) Vendor
verification: to
identify the
occurrence of
expenses
