8. CA F performed which of the following analytical procedure to obtain the audit evidence with respect to the overall reasonableness of purchase quantity and price of raw material?

All Options:

• AConsumption Analysis ✓
• BStock Composition Analysis
• CTrend Analysis
• DRatio Analysis (2 Marks) Case Scenario 3 GNH & Co., Chartered Accountants, has been appointed as the statutory branch auditors of Chandigarh branch of HFC Bank, a nationalized bank. While carrying out the audit, the following key issues were identified: Issue 1: Consortium Cash Credit Facility granted to X Ltd.: HFC Bank is a consortium member providing cash credit facilities of ` 50 crores to X Ltd., with HFC's share being ` 10 crores. Over the past two quarters, interest amounting to ` 1.75 crores have been debited in cash credit account of X Ltd., while credits in the account amounts to only ` 1.25 crores. Despite this shortfall, the account has been classified as performing asset, based on a certificate from the lead bank (UNC Bank Limited). Issue 2: Asset Classification of SJ Ltd.: SJ Ltd.'s account has seen no recovery for the past 18 months. However, the bank has not applied NPA norms or income recognition norms to this account. The management justifies this by stating that the account is guaranteed by the Central Government and that NPA and income recognition norms are not applicable. Government has not invoked the guarantee. Issue 3: Loan Application from ABC Traders: ABC Traders has applied for a cash credit limit from HFC Bank for supporting working capital requirements on account of business expansion. In discussions with ABC Traders, HFC Bank has requested different forms of security, depending on the nature of the assets offered, which includes immovable property (warehouse), goods in stock, accounts receivable, and insurance policies. Borrower provided the security and was sanctioned cash credit limit of ` 4.50 Crores. 6 SUGGESTED ANSWER Issue 4: Precision Engineering (one of the borrowers of the branch) has utilized the entire sanctioned cash credit limit of ` 300.00 Lacs. Outstanding balance as on 31 March, 2024 is ` 308.00 Lacs. Bank classified the account as Substandard Asset. One fine day DGM (Inspection) of Bank was passing through the area in which borrower is located and observed that building occupied by the borrower is damaged and there is no machinery, stock and other assets available in the premises. Borrower was not available telephonically and no contact could be made with him. He ordered independent verification of assets and report was submitted that no security mortgaged with bank is available. Report has been accepted by the bank authorities. Only a piece of land with realizable value ` 25 Lacs is available as of now. Bank made a provision in its books of accounts considering the account as Substandard Asset. Based on the above facts, answer the following Q. Nos. 9 to 12.