![MCQs [2024]](https://engineeringinterviewquestions.com/wp-content/uploads/2021/02/Interview-Questions-2.png)
AUDITING Online Test and Answers Pdf Download :-
These are very useful & Most Asked Questions in your certification Exam. Read all Online Mock Test Exam Question Bank for Beginners Freshers & Experienced.
1. Various types of quality audits are:
A) product
B) process
C) management (system)
D) registration (certification)
E) All of above
Answer: E
2. When the auditor is an employee of the organization being audited (auditee), the audit is classified as an …….. quality audit.
A) internal
B) external
C) compliance
D) Both A & B
Answer: A
3. The most comprehensive type of audit is the ……… system audit, which examines suitability and effectiveness of the system as a whole.
A) quantity
B) quality
C) Preliminary
D) sequential
Answer: B
4. Each of the three parties involved in an audit ……………………. plays a role that contributes to its success.
A) the client, the auditor, and the auditeer
B) the client, the auditor, and the audite
C) the client, the moderator, and the auditee
D) the client, the auditor, and the auditee
Answer: D
5. An audit is usually conducted in three steps:
(1) A pre-examination or opening meeting with the auditee marks the beginning of the process.
(2) involves a suitability audit of the documented procedures against the selected reference standard.
(3) the auditor examines in depth the implementation of the quality system.
A) True
B) False
Answer: A
6. The audit final report should include, at a minimum, the following:
(choose the one NOT required)
1. Type of audit conducted
2. Characteristics of audit
3. Identification of involved parties: auditor, auditee, and third party
4. Audit team members
5. Critical nonconformities and other observations
6. Audit standards and reference documents used
7. Determination of proper corrective action(s)
8. Duration of audit
A) 1
B) 2
C) 4
D) 8
Answer: B
7. The time required and costs involved in an external audit are much higher as compared to internal audits.
A) True
B) False
Answer: A
8. Audit is a fact-finding process that compares actual results with ………………….
A) specified standards and plans
B) expected results
C) premature results
D) preliminary results
Answer: A
9. The ……… is also expected to provide the resources needed and select staff members to accompany the auditors.
A) auditor
B) client
C) internal auditor
D) auditee
Answer: D
10. For the benefit of the organisation, quality auditing should only report non-conformances and corrective actions, but should not highlight areas of good practice.
A) True
B) False
Answer: B
11. Who among the following can be appointed as auditor of a company?
A) A partner or a director of the company.
B) A person of unsound mind.
C) Mr. Y who owes Rs. 500 to the company.
D) Mr. Z the holder of C.A certificate.
Answer: D
12. Confirmation of the court is necessary for __________.
A) increasing the share capital.
B) reduction of share capital.
C) conversion of shares into stock.
D) issue of new shares.
Answer: B
13. Audit means ___________.
A) recording business transactions.
B) preparing the final accounts.
C) examination of books, accounts, vouchers etc.
D) preparing final accounts.
Answer: C
14. Auditor shall report on the accounts examined by him __________.
A) to the shareholders.
B) to the court.
C) to the bank.
D) to the general public.
Answer: A
15. Sale of land is a __________.
A) revenue receipt.
B) capital receipt.
C) capital expenditure.
D) revenue expenditure
Answer: B
16. Secret reserve can be created by _______________.
A) public limited company only
B) banking and financial companies only.
C) private limited company only.
D) co-operative societies
Answer: B
17. When a transaction has not been recorded in the books of account either wholly or partially such errors are called as _________.
A) Error of commission
B) Error of omission.
C) Compensating error.
D) Error of principle.
Answer: B
18. Verification of the value of assets, liabilities, the balance of reserves, provision and the amount of profit earned or loss suffered a firm is called _________.
A) Continuous audit.
B) Balance sheet audit.
C) Interim audit.
D) Partial audit.
Answer: B
19. Vouching of the balances of all incomes and expenses account is known as vouching of ______.
A) Personal ledger.
B) Impersonal ledger.
C) Cash
D) Sales
Answer: B
20. Preliminary expenses are the best example for _________.
A) fictitious asset.
B) intangible asset.
C) wasting asset.
D) floating asset.
Answer: A
21. Periodical audit is also called as _________.
A) Final audit.
B) Interim audit.
C) Balance sheet audit.
D) Income statement audit.
Answer: C
22. The auditor of a government company shall be appointed by ________.
A) the government company itself.
B) the central government.
C) the share holders.
D) the debenture holders.
Answer: B
23. The main object of the audit of the cash book may be ________.
A) to verify the assets and liabilities.
B) to know that all receipts and payments have been properly recorded.
C) to check the internal control system in business.
D) to check the bank balance.
Answer: B
24. One of the audit procedures to check the issue of share capital of the newly formed company is __________.
A) the memorandum of association and articles of association.
B) the share transfer register.
C) the issue of debenture.
D) none of the above.
Answer: A
25. The work of one clerk is automatically check by another clerk is called _________.
A) Internal control.
B) Internal check.
C) Internal audit.
D) None of the above.
Answer: B
26. The owners of the company are called __________.
A) Debenture holders.
B) Debtors
C) Shareholders
D) None of the above.
Answer: C
27. The main objects of investigation is _________.
A) to discover errors and frauds.
B) to prevent errors and frauds.
C) to verify statements.
D) all the above
Answer: D
28. Share may be issued _____________.
A) at par.
B) at premium.
C) at discount.
D) all the above.
Answer: D
29. The liabilities of an auditor can be _________.
A) Civil
B) Criminal
C) Civil and Criminal.
D) Official
Answer: C
30. Internal auditor of a company must be _______________.
A) Cost accountant.
B) Chartered accountant.
C) ICWA
D) need not possess any professional qualification.
Answer: B
31. A vacancy caused by resignation of an auditor is filled by _________.
A) board of directors.
B) managing director.
C) general meeting.
D) central government.
Answer: C
32. Cost audit under section 233(b) of the companies act is ___________.
A) voluntary
B) compulsory
C) advisable
D) avoidable
Answer: C
33. When at an annual general meeting of a company no auditor is appointed or reappointed. In that case ________
A) the central government appoints a person to fill the vacancy
B) the board of directors appoints a person to fill the vacancy.
C) the managing director of the company appoints a person to fill the vacancy.
D) none of these can appoint a person to fill the vacancy.
Answer: A
34. The most difficult type of misstatement to detect fraud is based on __________.
A) related party purchases.
B) related party sales.
C) the restatement of sales.
D) omission of a sales transaction from being recorded.
Answer: D
35. Professional skepticism requires that the auditor assume that management is _________.
A) reasonably honest.
B) neither honest nor dishonest.
C) not necessarily honest.
D) dishonest unless proved otherwise.
Answer: B
36. The use of an audit engagement letter is the best method of assuring the auditor will have which of the following?
A) Auditor will obtain sufficient appropriate audit evidence.
B) Management representation letter.
C) Access to all books, accounts and vouchers required for audit purpose.
D) Co-operation from other auditors
Answer: C
37. An auditor who accepts an audit but does not posses the industry expertise of the business entity should ______________.
A) engage experts.
B) obtain knowledge of matters that relate to the nature of entity business.
C) inform management about it.
D) take help of other auditors.
Answer: B
38. Audit of banks is an example of __________.
A) Statutory audit.
B) Balance sheet audit.
C) Concurrent audit.
D) All of the above.
Answer: D
39. In India balance sheet audit is synonymous to _______________.
A) Annual audit.
B) Continuous audit.
C) Detailed audit.
D) Statutory audit.
Answer: A
40. Balance sheet audit included verification of ________.
A) assets
B) liabilities
C) income and expenditure accounts where appropriate.
D) all of the above.
Answer: D
41. Which of the following is not a fact of EPA?
A) Economic audit.
B) Efficiency audit.
C) Expenditure audit.
D) Effectiveness audit.
Answer: C
42. In determining the level of materiality for an audit what should not be considered?
A) Prior years errors.
B) The auditor remuneration.
C) Adjusted interim financial statement.
D) Prior year financial statements.
Answer: B
43. Which of the following statement is most closely associated with analytical procedure applied at substantive stage?
A) It helps to study relationship among balance sheet accounts.
B) It helps to discover material misstatements in the financial statements.
C) It helps to identify possible oversights.
D) It helps to accumulate evidence supporting the validity of a specific account balance
Answer: D
44. Of the following, which is the least persuasive type of audit evidence?
A) Bank statements obtained from the client
B) Documents obtained by auditor from third parties directly.
C) Carbon copies of sales invoices inspected by the auditor
D) Computations made by the auditor.
Answer: C
45. Which of the following Auditing Assurance Standard deals with Audit planning?
A) AAS-7.
B) AAS-8.
C) AAS-9.
D) AAS-3.
Answer: B
46. Audit Programme is prepared by ___________.
A) the auditor.
B) the client.
C) the audit assistants.
D) the auditor and his audit assistants.
Answer: D
47. The quantity of audit working papers complied on engagement would most be affected by _________________.
A) management integrity.
B) auditor experience and professional judgement.
C) Auditor qualification.
D) control risk.
Answer: A
48. Which of the following is not an advantage of the preparation of working paper?
A) To provide a basis for review of audit work.
B) To provide a basis for subsequent audits
C) To ensure audit work is being carried out as per Programme.
D) To provide a guide for advising another client on similar issues.
Answer: D
49. Which of the following sections deals with qualification of the auditor?
A) Section 226(1) and Section 226(2).
B) Section 224(1) and Section 224(2).
C) Section 226(3) and Section 226(4).
D) Section 224(3) and Section 224(4)
Answer: A
50. The board of directors shall appoint first auditor of a company ___________.
A) within one month of completion of capital subscription state of the company
B) within one month of the promotion of the company.
C) within one month of the commencement of the business of the company.
D) within one month of incorporation of the company.
Answer: D
51. In case the directions fail to appoint first auditors, the shareholders shall appoint them at _______ by passing a resolution.
A) a general meeting.
B) first annual general meeting.
C) statutory meeting.
D) annual general meeting
Answer: A
52. The auditor of a government company is appointed by the C & AG. His remuneration is fixed by _____________.
A) the C & AG.
B) the shareholders.
C) the shareholders at an annual general meeting.
D) the board of directors.
Answer: B
53. Which of the following statement is not correct regarding removal of first auditor before expiry of the term?
A) He is removed at a general meeting.
B) The shareholders are authorized to do so
C) The approval of the central government is required for such removal.
D) The provision for such removal are contained in section 224(7)
Answer: C
54. The retiring auditor does not have a right to _________.
A) make written representations.
B) get his representation circulated.
C) be heard at the meeting.
D) speak as a member of the company.
Answer: D
55. Auditor of a _______ company does not have right to visit foreign branches of the company.
A) unlimited liability.
B) manufacturing
C) banking
D) non-profit making.
Answer: B
56. Special audit is conducted at the order of the central government. Which section givers such powers?
A) Section 233(A).
B) section 233(B)
C) section 242(A)
D) Section 242(B).
Answer: C
57. As per C & AG Act, 1971 the tenure of the comptroller and Auditor General is ______ a. four years.
A) four years.
B) five years.
C) six years.
D) seven years.
Answer: C
58. Audit of transactions does not include __________.
A) propriety audit.
B) efficiency cum performance audit.
C) audit of receipts.
D) audit of expenditure.
Answer: B
59. Audit of rent, deposits and remittances does not cover ____________.
A) audit of borrowings.
B) audit of amortization of debt.
C) audit of sanctions
D) remittance audit.
Answer: C
60. The statutory auditor of a Government Company submits his report to _________
A) the BOD of the company
B) the C & AG.
C) the legislature.
D) the company secretary.
Answer: B
61. THE RISK OF MANAGEMENT FRAUD INCREASES IN THE PRESENCE OF:
A) FREQUENT CHANGES IN SUPPLIES
B) IMPROVED INTERNAL CONTROL SYSTEM
C) SUBSTANTIAL INCREASES IN SALES
D) MANAGEMENT INCENTIVE SYSTEM BASED ON SALES DONE IN A QUARTER
Answer: D
62. AUDITING STANDARDS DIFFER FROM AUDIT PROCEDURES IN THAT PROCEDURES RELATE TO
A) AUDIT ASSUMPTIONS
B) ACTS TO BE PERFORMED
C) QUALITY CRITERION
D) METHODS OF WORK
Answer: B
63. WHICH OF THE FOLLOWING FACTORS LIKELY TO BE IDENTIFIED AS A FRAUD FACTOR BY THE AUDITOR?
A) THE COMPANY IS PLANNING AN INITIAL PUBLIC OFFER OF QUALITY SHARES TO RAISE ADDITIONAL CAPITAL FOR EXPANSION.
B) BANK RECONCILIATION STATEMENT INCLUDES DEPOSITSINTRANSIT.
C) PLANT AND MACHINERY IS SOLD AT A LOSS.
D) THE COMPANY HAS MADE POLITICAL CONTRIBUTIONS.
Answer: A
64. THE MOST DIFFICULT TYPE OF MISSTATEMENT TO DETECT FRAUD IS BASED ON:
A) RELATED PARTY PURCHASES
B) RELATED PARTY SALES
C) THE RESTATEMENT OF SALES
D) OMISSION OF A SALES TRANSACTION FROM BEING RECORDED.
Answer: D
65. WHICH OF THE FOLLOWING STATEMENTS IS CORRECT CONCERNING THE REQUIRED DOCUMENTATION IN?
WORKING PAPERS OF FRAUD RISK ASSESSMENT UNDERTAKEN BY THE AUDITOR.
A) AL RISK FACTORS AS MENTIONED IN AAS4, SHOULD BE CONSIDERED AND DOCUMENTED ALONG WITH RESPONSE TO THEM.
B) DOCUMENT THE IDENTIFICATION OF FRAUD RISK FACTORS ALONG WITH RESPONSE TO THEM.
C) DOCUMENT MATERIAL FRAUD, RISK FACTORS AND RESPONSE TO THEM.
D) NO DOCUMENTATION IN REQUIRED.
Answer: B
AUDITING Objective type Questions with Answers
66. WHICH OF THE FOLLOWING IS THE MOST APPROPRIATE POTENTIAL REACTION OF THE AUDITOR TO HIS?
ASSESSMENT THAT THE RISK OF MATERIAL MISSTATEMENT DUE TO FRAUD IS HIGH IN RELATION TO EXISTENCE OF INVENTORY?
A) VISIT LOCATION ON SURPRISE BASIS TO OBSERVE TEST COUNTS
B) REQUEST INVENTORY COUNT AT A DATE CLOSE TO YEAREND
C) VOUCH GOODS SENT ON APPROVAL VERY CAREFUL Y
D) PERFORM ANALYTICAL PROCEDURES.
67. WHICH OF THE FOLLOWING IS NOT LIKELY TO BE A FRAUD RISK FACTOR RELATING TO MANAGEMENT’S? CHARACTERISTICS
A) TAX EVASION
B) FAILURE TO CORRECT KNOWN WEAKNESS IN INTERNAL CONTROL SYSTEM
C) ADOPTION OF CONSERVATIVE ACCOUNTING PRINCIPLES
D) HIGH MANAGEMENT TURNOVER
68. PROFESSIONAL SKEPTICISM REQUIRES THAT THE AUDITOR ASSUME THAT MANAGEMENT IS
A) REASONABLY HONEST
B) NEITHER HONEST NOR DISHONEST
C) NOT NECESSARILY HONEST
D) DISHONEST UNLESS PROVED OTHERWISE
69. WHICH OF THE FOLLOWING INFORMATION SHOULD A SUCCESSOR AUDITOR OBTAIN DURING THE INQUIRY OF?
THE PREDECESSOR AUDITOR BEFORE ACCEPTING ENGAGEMENT?
I) INFORMATION ABOUT INTEGRITY OF MANAGEMENT
II) DISAGREEMENT WITH MANAGEMENT CONCERNING AUDITING PROCEDURES
II) REVIEW OF INTERNAL CONTROL SYSTEM.
IV) ORGANIZATION STRUCTURE
A) (I) AND (I) B) (I) AND (I I) C) (I), (I) AND (I I) D) I) AND (I I)
70. THE AUDIT ENGAGEMENT LETTER, GENERAL Y, SHOULD INCLUDE A REFERENCE TO EACH OF THE FOLLOWING EXCEPT
A) LIMITATIONS OF AUDITING
B) RESPONSIBILITIES OF MANAGEMENT WITH RESPECT TO AUDIT WORK
C) EXPECTATION OF RECEIVING A WRITTEN MANAGEMENT REPRESENTATION LETTER.
D) A DESCRIPTION OF THE AUDITOR’S METHOD OF SAMPLE SELECTION.
71. THE USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF ASSURING THE AUDITOR WILL HAVE WHICH OF THE FOLLOWING?
A) AUDITOR WILL OBTAIN SUFFICIENT APPROPRIATE AUDIT EVIDENCE.
B) MANAGEMENT REPRESENTATION LETTER
C) ACCESS TO ALL BOOKS, ACCOUNTS AND VOUCHERS REQUIRED FOR AUDIT PURPOSE
D) COOPERATION FROM OTHER AUDITORS
72. THE USE OF AN AUDIT ENGAGEMENT LETTER IS THE BEST METHOD OF DOCUMENTING
I) THE REQUIRED COMMUNICATION OF SIGNIFICANT DEFICIENCIES IN INTERNAL CONTROL
II) SIGNIFICANTLY HIGHER CONTROL RISK THAN THAT ASSESSED IN PRIOR AUDIT.
II) OBJECTIVE AND SCOPE OF AUDITOR’S WORK
IV) NOTIFICATION OF ANY CHANGES IN THE ORIGINAL ARRANGEMENTS OF THE AUDIT.
A) (I) AND (I) B) (I) AND (II) C) I AND (IV) D) (I I AND (IV)
73. AN AUDITOR WHO ACCEPTS AN AUDIT BUT DOES NOT POSSESS THE INDUSTRY EXPERTISE OF THE BUSINESS ENTITY SHOULD
A) ENGAGE EXPERTS
B) OBTAIN KNOWLEDGE OF MATTERS THAT RELATE TO THE NATURE OF ENTITY’S BUSINESS
C) INFORM MANAGEMENT ABOUT IT
D) TAKE HELP OF OTHER AUDITORS
74. THE LEAST IMPORTANT ELEMENT IN THE EVALUATION OF AN AUDIT FIRM’S SYSTEM OF QUALITY CONTROL WOULD RELATE TO
A) ASSIGNMENT OF AUDIT ASSISTANTS
B) SYSTEM OF DETERMINING AUDIT FEES
C) CONSULTATION WITH EXPERTS
D) CONFIDENTIALITY OF CLIENT’S INFORMATION
75. THE PRIMARY PURPOSE OF ESTABLISHING QUALITY CONTROL POLICIES AND PROCEDURES FOR DECIDING ON CLIENT EVALUATION IS TO
A) ENSURE ADHERENCE TO GENERAL Y ACCEPTED AUDITING STANDARDS
B) ACCEPTANCE OR RETENTION OF CLIENTS WHOSE MANAGEMENT DOES NOT LACK INTEGRITY
C) ENSURE AUDIT FEES IS CHARGED ACCORDING TO THE TYPE OF AUDIT WORK ASSIGNED
D) ALL OF THE ABOVE
76. WHICH OF THE FOLLOWING IS NOT A QUALITY CONTROL CONSIDERATION ON ACCEPTING A NEW CLIENT?
A) AVAILABILITY OF AUDIT ASSISTANTS WITH NECESSARY SKILL AND COMPETENCE.
B) PROVISION OF OTHER SERVICES TO THE CLIENT WHICH MAY IMPAIR INDEPENDENCE
C) PREDECESSOR AUDITOR’S ADVICE AS TO WHETHER AUDIT FEES WERE PAID PROMPTLY
D) REVIEW OF AUDIT WORK DONE BY ONE PARTNER BY THE OTHER
77. AN AUDITOR OBTAINS KNOWLEDGE ABOUT A NEW CLIENT’S BUSINESS AND ITS INDUSTRY TO
A) MAKE CONSTRUCTIVE SUGGESTIONS CONCERNING IMPROVEMENTS TO THE CLIENT’S INTERNAL CONTROL SYSTEM
B) EVALUATE THE APPROPRIATENESS OF AUDIT EVIDENCE OBTAINED
C) UNDERSTAND THE EVENTS AND TRANSACTIONS THAT MAY HAVE AN EFFECT ON CLIENT’S FINANCIAL STATEMENTS.
D) ALL OF THE ABOVE