90+ Audit Assistant Interview Questions and Answers

Bank balance in financial statements can be audited by verifying bank statements, reconciling balances, and testing internal controls.

• Verify bank statements to ensure accuracy of reported balance

• Reconcile bank balance with general ledger balance

• Test internal controls related to bank transactions

• Confirm balances with the bank directly

• Review any unusual transactions or discrepancies

• Consider the risk of fraud or error in bank transactions

A provision for doubtful debt is a journal entry made to account for potential losses from customers who may not pay their debts.

• Provision for doubtful debt is recorded as an expense in the income statement.

• It is created by debiting the provision for doubtful debt account and crediting the bad debt expense account.

• The provision is based on an estimate of the amount of debt that is likely to become uncollectible.

• The provision is usually a percentage of the accounts receivable ...read more

Limited review is a review of financial statements, less in scope than a full audit. Statutory audit is a comprehensive audit of financial statements.

• Limited review is a less extensive review of financial statements than a full audit.

• It provides a moderate level of assurance on the financial statements.

• Statutory audit is a comprehensive audit of financial statements that provides a high level of assurance.

• Statutory audit is mandatory for certain companies, while limited revie...read more

The five criteria to recognize revenue as per Ind AS 115 are identification of contract, identification of performance obligations, determination of transaction price, allocation of transaction price, and recognition of revenue when performance obligations are satisfied.

• Identification of contract

• Identification of performance obligations

• Determination of transaction price

• Allocation of transaction price

• Recognition of revenue when performance obligations are satisfied

The three major activities in cash flow statement are operating activities, investing activities, and financing activities. Purchase of fixed assets would fall under investing activities, while repayment of loans would fall under financing activities.

• Operating activities involve cash flows from day-to-day business operations, such as sales and expenses.

• Investing activities include cash flows related to the purchase and sale of long-term assets, like property, plant, and equip...read more

To audit cash flow statement, check accuracy of cash inflows and outflows, reconcile with bank statements, and verify classification.

• Verify accuracy of cash inflows and outflows

• Reconcile cash balance with bank statements

• Check classification of cash flows

• Ensure compliance with accounting standards

• Review supporting documents and transactions

• Perform analytical procedures to identify unusual trends or transactions

• Obtain management representation letter

• Examples: Verify cash receip...read more

Materiality levels for mutual fund audit

• Consider the size and nature of the mutual fund company

• Assess the impact of misstatements on financial statements

• Refer to industry standards and regulatory requirements

• Consult with senior auditors and management

• Use professional judgement to determine materiality levels

Reconciling bank balances involves comparing the bank statement with the company's records to identify and resolve any discrepancies.

• Obtain the bank statement and compare it with the company's records of transactions.

• Identify any discrepancies such as missing deposits or withdrawals, bank errors, or outstanding checks.

• Adjust the company's records to match the bank statement by recording any necessary corrections.

• Ensure that the ending balance on the bank statement matches the...read more

The 5 steps of Revenue recognition are identification of the contract, identification of performance obligations, determination of transaction price, allocation of transaction price, and recognition of revenue as performance obligations are satisfied.

• Identification of the contract: Determine the existence of a contract with a customer.

• Identification of performance obligations: Identify the separate performance obligations in the contract.

• Determination of transaction price: De...read more

To start an audit, plan and prepare the audit, conduct fieldwork, analyze findings, and issue a report.

• Plan and prepare the audit by understanding the client's business and risks, determining the scope and objectives of the audit, and developing an audit plan.

• Conduct fieldwork by gathering and analyzing data, testing controls, and assessing risks.

• Analyze findings by evaluating the significance of the issues identified and determining the root cause of the problems.

• Issue a rep...read more

Fixed assets are long-term tangible assets that are used in the production of goods or services and have a useful life of more than one year.

• Fixed assets include property, plant, and equipment (PP&E), such as buildings, machinery, and vehicles.

• They are recorded on the balance sheet at their original cost, less accumulated depreciation.

• Depreciation is the systematic allocation of the cost of a fixed asset over its useful life.

• Accounting standards require that fixed assets be r...read more

Assertions and procedures for auditing debtors

• The existence assertion: ensuring that the debtors actually exist and are valid

• The completeness assertion: ensuring that all debtors are included in the financial statements

• The valuation assertion: ensuring that the debtors are valued correctly

• The rights and obligations assertion: ensuring that the company has the right to collect the debt and that the debtors have an obligation to pay

• The cutoff assertion: ensuring that all transa...read more

Revenue audit focuses on verifying the accuracy of revenue transactions, while statutory audit is a legal requirement to ensure financial statements are accurate.

• Revenue audit is conducted to ensure that revenue transactions are accurately recorded and reported.

• Statutory audit is a legal requirement to ensure that financial statements are accurate and comply with accounting standards and regulations.

• Revenue audit focuses on revenue recognition, sales returns, discounts, and a...read more

TDS payable is a liability that needs to be recorded and settled as per tax regulations.

• TDS is deducted at the source of income and is a liability for the deductor.

• It is recorded as a current liability in the balance sheet until paid.

• For example, if a company deducts TDS of $1,000 from a vendor, it records this amount as TDS payable.

• Once the TDS is paid to the government, the liability is cleared from the books.

• TDS payable affects cash flow and needs to be monitored to avoid ...read more

Audit is a systematic examination of financial records, statements, and transactions to ensure accuracy and compliance with laws and regulations.

• Audit is conducted to provide assurance to stakeholders that financial statements are accurate and reliable.

• The objectives of an audit include evaluating internal controls, detecting fraud, and ensuring compliance with laws and regulations.

• Auditors use various techniques such as sampling, testing, and analytical procedures to gather ...read more

Ind AS 115 outlines revenue recognition principles for contracts with customers, focusing on performance obligations and transaction prices.

• Ind AS 115 applies to all contracts with customers, except for leases, insurance contracts, and financial instruments.

• The core principle is to recognize revenue when control of goods or services is transferred to the customer.

• Five-step model: 1) Identify the contract, 2) Identify performance obligations, 3) Determine transaction price, 4)...read more

Fixed assets are audited by verifying physical existence, ownership, valuation, and depreciation methods.

• Verify physical existence by conducting physical inventory counts.

• Confirm ownership by reviewing title deeds and purchase agreements.

• Ensure accurate valuation by comparing book value to market value.

• Review depreciation methods and calculations for accuracy.

• Check for impairment indicators and assess if any assets need to be written down.

• Examine maintenance records to ensure...read more

Deferred revenue refers to income received by a company in advance of earning it, resulting in a liability on the balance sheet.

• Deferred revenue is also known as unearned revenue.

• It is recorded as a liability on the balance sheet until the revenue is recognized.

• Common examples include magazine subscriptions, annual maintenance contracts, and advance payments for services.

• Once the revenue is earned, it is recognized on the income statement.

• Deferred revenue is important for acc...read more

To close treasury, reconcile all transactions and balances, ensure all necessary approvals are obtained, and update records accordingly. To check bank area, review bank statements and compare to internal records.

• Reconcile all transactions and balances

• Ensure all necessary approvals are obtained

• Update records accordingly

• Review bank statements

• Compare to internal records

Reasonable assurance is a level of assurance that is achievable and practical, but not absolute.

• Reasonable assurance is a concept used in auditing to describe the level of assurance provided by an audit.

• It is a level of assurance that is achievable and practical, but not absolute.

• It is based on the auditor's professional judgment and the nature and scope of the audit procedures performed.

• The level of assurance provided by an audit with reasonable assurance is higher than that...read more

The 3 golden principles of accounting are: 1) Debit the receiver, credit the giver 2) Debit what comes in, credit what goes out 3) Debit expenses and losses, credit income and gains.

• Debit the receiver, credit the giver: when an asset is received, it is debited and when a liability is given, it is credited

• Debit what comes in, credit what goes out: when cash is received, it is debited and when cash is paid, it is credited

• Debit expenses and losses, credit income and gains: when ...read more

Subsequent events are events that occur after the balance sheet date but before the financial statements are issued.

• Subsequent events can be classified as either adjusting or non-adjusting events.

• Adjusting events provide evidence of conditions that existed at the balance sheet date and require adjustment to the financial statements.

• Non-adjusting events do not require adjustment to the financial statements but may require disclosure in the notes to the financial statements.

• Exa...read more

A journal entry for dividends credited reflects the distribution of profits to shareholders, impacting both cash and equity accounts.

• Debit: Retained Earnings (or Dividends Declared) - This reduces the equity of the company.

• Credit: Cash (or Dividends Payable) - This reflects the outflow of cash to shareholders.

• Example: If $1,000 in dividends is declared, the entry would be: Debit Retained Earnings $1,000, Credit Cash $1,000.

• This entry shows the company's commitment to returnin...read more

Types of GST include CGST, SGST, IGST, and UTGST.

• Central Goods and Services Tax (CGST) - levied by the central government on intra-state supplies

• State Goods and Services Tax (SGST) - levied by the state government on intra-state supplies

• Integrated Goods and Services Tax (IGST) - levied by the central government on inter-state supplies

• Union Territory Goods and Services Tax (UTGST) - levied by the union territories on intra-UT supplies

The rate of GST varies depending on the type of goods or services being taxed.

• GST rates are categorized into different slabs - 5%, 12%, 18%, and 28%.

• Some items are exempt from GST, while others may have a special rate like 0.25% or 3%.

• For example, essential items like food grains are taxed at 0%, while luxury items like cars may be taxed at 28%.

Various items in balance sheet & PL are treated differently based on their nature. Assets can be classified as current, non-current, tangible, intangible, etc.

• Balance sheet items are classified as assets, liabilities, and equity.

• Assets can be further classified as current assets (e.g. cash, accounts receivable) and non-current assets (e.g. property, plant, equipment).

• Liabilities can be classified as current liabilities (e.g. accounts payable) and non-current liabilities (e.g....read more

The rate of income tax varies depending on the individual's income level and tax laws of the country.

• Income tax rates are typically progressive, meaning higher income levels are taxed at higher rates.

• Tax rates can also vary based on filing status (single, married, etc.) and deductions/credits claimed.

• For example, in the United States, income tax rates range from 10% to 37% for individuals in 2021.