Subject: Clarification and Resolution Request for Errors in CA Final Nov 2024 - Paper 3 (Advanced Auditing and Professional Ethics)
Dear Sir/madam,
I would like to bring to your attention that in the Nov'24 Advanced aditing paper, there may be an error in data given for the MCQs & due to which the question itself appears to be incorrect, and based on the relevant provisions, none of the answer options provided are accurate
I kindly request that grace marks be considered for this MCQ.
RELEVANT PARA OF CASE SCENARIO
You are informed that the basic approach of capital adequacy framework is that a bank should have sufficient
capital to provide as table resource to absorb any losses arising from the risks in its business. You have
observed that Capital is divided into tiers according to the characteristics/qualities of each qualifying
instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II, representing
different instruments' quality as capital.
You have calculated Eligible total capital funds comprising -
1. Tier I capital of Share capital ₹ 200 Crore. and disclosed Reserves ₹ 20 Crore.
2. Tier II capital of Other Reserves ₹ 30 Crore. and subordinated debt. ₹ 20 Crore.
The Risk weighted assets constitute ₹ 25 Crore; while Off-balance sheet items are ₹ 5 Crore.
QUESTION ASKED:
Based on facts given in para (i), you are required to arrive at the correct percentage of Capital Risk Adequacy
Ratio for the Maha Bank Limited
(a) 9%
(b) 10.80%
(c) 8.33%
(d) 10%
The formula for CRAR is (Tier 1+Tier 2 capital)/Risk weighted assets. Applying the formula the ratio comes out to (270/30)*100 i.e. 900% which appears to be wrong.
Thank you for your attention to this matter.
Sincerely,
Your Name
Dear Sir/madam,
I would like to bring to your attention that in the Nov'24 Advanced aditing paper, there may be an error in data given for the MCQs & due to which the question itself appears to be incorrect, and based on the relevant provisions, none of the answer options provided are accurate
I kindly request that grace marks be considered for this MCQ.
RELEVANT PARA OF CASE SCENARIO
You are informed that the basic approach of capital adequacy framework is that a bank should have sufficient
capital to provide as table resource to absorb any losses arising from the risks in its business. You have
observed that Capital is divided into tiers according to the characteristics/qualities of each qualifying
instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II, representing
different instruments' quality as capital.
You have calculated Eligible total capital funds comprising -
1. Tier I capital of Share capital ₹ 200 Crore. and disclosed Reserves ₹ 20 Crore.
2. Tier II capital of Other Reserves ₹ 30 Crore. and subordinated debt. ₹ 20 Crore.
The Risk weighted assets constitute ₹ 25 Crore; while Off-balance sheet items are ₹ 5 Crore.
QUESTION ASKED:
Based on facts given in para (i), you are required to arrive at the correct percentage of Capital Risk Adequacy
Ratio for the Maha Bank Limited
(a) 9%
(b) 10.80%
(c) 8.33%
(d) 10%
The formula for CRAR is (Tier 1+Tier 2 capital)/Risk weighted assets. Applying the formula the ratio comes out to (270/30)*100 i.e. 900% which appears to be wrong.
Thank you for your attention to this matter.
Sincerely,
Your Name