Accountancy & Auditing, Paper II

Explain how the concept of true and fair view guides an auditor when management adopts accounting estimates that are technically permissible under IFRS but appear overly optimistic in light of industry conditions. Support your answer with examples and references to International Federation of Accountants (IFAC) guidelines.

"Audit risk is not merely a computation; it is a judgment." Discuss this statement in the context of inherent risk, control risk, and detection risk, with particular reference to computerized (EDP) environments.

Provide a critical distinction between the following audit concepts:

Ms. Sana, an individual taxpayer, has provided the following data for the Tax Year 2024. Analyze her income components and determine her net tax position under the Income Tax Ordinance, 2001. Particulars PKR A. Salary income (gross) 1,800,000 B. House rent allowance (40% of basic salary) 450,000 C. Net Income from property 120,000 D. Capital gain on listed securities (held for 14 months) 90,000 E. Profit on debt (from a bank deposit) 60,000 F. Donation to an approved NPO (eligible for tax credit) 80,000 G. Business loss carried forward from prior year 35,000 H. Advance tax paid 10,000 I. Tax already withheld on profit on debt (a) Analytical Tax Treatment and Regime Justification. Critically analyse the tax regime (NTR, FTR, or SBI) applicable to Capital Gain (D) and Profit on Debt (E). Justify the inclusion of Income from Property (C) in the Normal Tax Regime (NTR) and explain the policy objective behind providing a tax credit for Donation (F). (b) Computation and Final Tax Position Compute Ms. Sana's Total Taxable Income under the NTR. Compute her Final Tax Liability (including tax on FTR/SBI items, if any). Determine the Net Tax Payable/Refundable amount. Show all workings clearly, referencing the applicable tax status for each major component.

"Financial markets are the backbone of a modern economy." Discuss this statement in the context of Pakistan with reference to the money market, capital market, and financial institutions.