Q. 2
Define professional skepticism and explain its key characteristics. Why should auditors act as though there is always a potential conflict of interest between the auditor and the management of the enterprise under audit?
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FPSC · CSS 2023
Accountancy & Auditing, Paper II
This paper
Accountancy & Auditing · all yearsQ. 2 · Define professional skepticism and explain…Q. 3 · What are CAATs? What are…Q. 4 · Define and explain the differences…Q. 5 · Zia inherited certain assets from…Q. 7 · Fitch Industries is in the…Q. 8 · How have globalization and information…With this paperOfficial PDF2 pp← 20232024 →3 hours · questions hide until you reveal them
SECTION–I
Q. 3
What are CAATs? What are some audit procedures that can be performed using CAATs? What advantages are derived from using CAATs in the financial statement audit?
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Q. 4
Define and explain the differences among several kinds of employee frauds that might occur at an audit client.
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SECTION–II
Q. 5
Zia inherited certain assets from his father in the year 20x1. The fair market values of the assets on the date of inheritance were as follows: 25,000 shares of a private limited company Rs. 25,00,000 21,000 shares of public listed company Rs. 4,62,000 Membership card of Pakistan Stock Exchange Rs. 20,000,000 Jewelry Rs. 15,00,000 During the tax year 20x5, Zia undertook the following transactions: 1) He gifted some of the assets to his 20-year old son Ishaq. The detail and fair market values of the assets are as follows: -----10,000 shares of a private limited company Rs. 2,000,000 -----10,000 shares of a public limited company Rs. 1,700,000 -----Membership card of Pakistan Stock Exchange Rs. 40,000,000 2) The remaining shares were sold as follows: shares of a private limited company Rs. 3,000,000 shares of a public limited company Rs. 1,500,000 Ishaq sold all the assets transferred through gift in the same year. The assets fetched the following amounts: -----10,000 shares of a private limited company Rs. 2,500,000 -----10,000 shares of a public limited company Rs. 1,500,000 -----Membership card of Pakistan Stock Exchange Rs. 55,000,000 Required:
- (a)Based upon the above information, compute the taxable income of Zia and Ishaq for the tax year 20x5
- (b)(Give a brief explanation for the items not included in the taxable income.
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SECTION–III
Q. 7
Fitch Industries is in the process of choosing the better of two equal-risk, mutually exclusive capital expenditure projects, M and N. The relevant cash flows for each project are shown in the following table. The firm’s cost of capital is 9%.
| Project M | Project N | |
| Initial investment-Cash Outflow | -$40,000 | -$40,000 |
| Year (t) | Cash inflows | Cash inflows |
| 1 | $14,000 | $23,000 |
| 2 | 14,000 | 12,000 |
| 3 | 14,000 | 10,000 |
| 4 | 14,000 | 9,000 |
(i) Calculate each project’s payback period.
(ii) Calculate the net present value (NPV) for each project.
(iii) Calculate the internal rate of return (IRR) for each project.
(iv) Summarize the preferences dictated by each measure you calculated, and indicate which project you would recommend. Explain why?
Checked against official paper
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Q. 8
How have globalization and information technology created new opportunities for entrepreneurs? How does an aging population create opportunities for entrepreneurs? Describe current demographic trends that suggest new goods and services for entrepreneurial businesses.
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About this paper
The 2023 CSS Accountancy & Auditing paper set by the Federal Public Service Commission. Question wording only; questions marked “Not yet checked” have not been compared with the official paper yet. Open the official paper beside the questions to check any of them.
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