Article Topics
Introduction:
Preparing for a statutory audit interview can be challenging, especially when faced with statutory audit interview questions that test your knowledge and skills. To help you navigate this process, we've compiled a list of frequently asked technical interview questions specific to the statutory audit domain.
What is a Statutory Audit?
On the other hand, a statutory audit is legally mandated for certain types of businesses and is conducted by independent external auditors. Its main objective is to provide an unbiased opinion on the accuracy and fairness of a company's financial statements. Statutory audit interview questions often focus on this aspect, as they help candidates demonstrate their understanding of the audit's role. Statutory audits help stakeholders, including shareholders, regulators, and the public, gain confidence in the financial health and transparency of the organization. Both audits serve distinct purposes, but together they play a vital role in maintaining the integrity and accountability of a company's financial reporting.
Also Read: Essential Resume Keywords for Statutory Audit Roles
Average CTC Provided in Statutory Audit:
Statutory audit roles offer promising career prospects, with an average CTC ranging from 8 to 12 LPA (approx.). Preparing for these roles requires a solid understanding of key technical concepts, and this guide will help you tackle the most frequently asked interview questions.
Technical Questions Asked in Statutory Audit:
1. Audit Basics and Processes
- Can you please explain what you understand from the audit cycle/process in brief?
- What is materiality and why is it relevant for audit/What is the use of materiality in Audit?
- How is materiality being calculated? Considerations while calculating materiality?
- What were the key observations you identified during your articleship, and how did you handle them? What was the final outcome of those?
2. Audit Standards and Regulations
- What are key differences between Ind AS 116 and erstwhile IND AS 17?
- What is CARO (Companies Auditor's Report Order)? How many clauses are in CARO 2020? What are the new additional clauses in CARO?
- CARO 2020 – key differences between CARO 2020 and 2016? Can you mention 2 or 3 differences or any specific change as well?
- Is CARO applicable for Audit reports on consolidated financial statements?
- What is Schedule III Amendments – key changes?
- What are the Fixed Asset clauses in CARO 20?
- What is Limited Review (LR)? What are some of the basic differences between LR and Statutory Audit?
3. Technical Concepts and Accounting Standards (Ind AS)
- What are the key differences between Ind AS 116 and Ind AS 17, including ROU and lease liabilities concept/calculations?
- What are the two exemptions provided by Ind AS 116 (short-term leases and low-value leases)?
- Does the concept of finance lease and operating lease still exist in Ind AS 116?
- Read Ind AS 115 thoroughly and how it is applicable for the industry/sector you have worked on.
- What is the 5-step revenue recognition model as per Ind AS 115?
- Methods of revenue recognition – Point in time and Over time – when is each method applied?
- What do you mean by Financial Instruments according to Ind AS 109?
- Basic accounting concepts like discounting, amortizing/unwinding of liabilities, and recording interest regularly.
- Basic Journal Entries and the Expected Credit Loss concept.
4. Audit Procedures and Assertions
- Audit procedures for PPE (useful lives – Schedule II), Depreciation calculation.
- Audit procedures for Trade receivables (including ageing and provision for doubtful debts/ ECL model).
- Audit procedures for Payroll and Revenue testing.
- How can you ensure that revenue is not fraudulent or has occurred in real?
- Assertions covered while testing revenue, and what procedures do you perform while testing revenue/those assertions?
- Cut off procedures – basic Journal entries for cut off.
- Procedures performed for testing the cash and bank balances?
- What procedures would you perform to ensure these balances exist and are not fudged?
- Alternate procedures for confirmations not received – receivables, payables, and specifically bank? Also, what do you do after receiving the confirmations?
5. Risk Management and Controls
- What is the impact on your audit if the controls are not operating as expected/intended? Will you qualify your audit report directly?
- Have you done/heard of controls testing/IFC in audit? What is it, and why is it important?
- Is there any reporting requirement for IFC in audit?
- What is IFCR (Internal Financial Control Over Reporting)?
- What is RAP (Risk Assessment Procedure)?
- What is included in Risk Assessment Procedures?
- What is Audit Risk? What are the types of Audit Risk?
- What is the Risk of Material Misstatements? What would you do when you identify any material misstatement?
- What is the first step you take when you start the Audit of a new client?
- What are substantive Audit Procedures?
- What are controls? How are they different from Procedures?
- What are the objectives of the entity behind the imposition of controls?
- Benefits of Understanding of Internal Control? What are the Limitations of Internal Control?
- What are the deficiencies of control (Specifically asking about Design Deficiency and Operating Effectiveness)?
- What are preventive and detective controls? Give an example.
- What is the Nature, Timing, and Extent of Audit?
6. Audit Reporting and Opinions
- What is Audit opinion and the types of Audit Opinion?
- What are Types of audit reports, opinions, and situations when you issue different reports?
- Explain in brief what is Audit opinion and the types of Audit Opinion.
7. Assertions and Financial Statements
- What are Audit Assertions/Financial Statements Assertions/Balance sheet and Profit and Loss statement Assertions? How is it classified?
- Explain Income Statement Assertions.
- Explain Balance Sheet Assertions.
8. Sampling and Testing Techniques
- What is sampling? How do you choose samples? What are the sampling methods?
