Auditing MCQs and Answers
Auditing Faqs
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. ‘Auditor is not a valuer’, was stated in
A. Kingston Cotton Mills case
B. London Oil Storage Co. Case
C. London and General Bank case
D. None of the above
Answer: A.Kingston Cotton Mills case
62. Floating assets are valued at
A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
Answer: C.Cost or market price whichever is lower
63. Goods sold on the basis of ‘sales or return ‘ should
A. Be included in the stock
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
Answer: A.Be included in the stock
64. 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.Carbon copies of sales invoices inspected by the auditor
65. Which of the following statements is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
Answer: B.Effective internal control system provides reliable audit evidence
66. In an audit of financial statements, substantive tests are audit procedures that __
A. May be eliminated for an account balance under certain conditions
B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures
Answer: D.May be test of transactions, test of balance and analytical procedures
67. The nature, timing and extent of substantive procedures is related to assessed level of control risk
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
Answer: C.Directly
68. Which of the following factors is most important in determining the appropriations of audit evidence?
A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
Answer: A.The reliability of audit evidence and its relevance in meeting the audit objective
69. When is evidential matter, generally, considered sufficient?
A. When it constitutes entire population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
Answer: B.When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
70. Which of the following is not corroborative evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
Answer: D.Worksheet supporting consolidated financial statements
71. Which of the following statements is not true with respect to managementrepresentations obtained as per AAS11?
A. Authenticated copy of relevant minutes of meetings may be regarded as management representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor
Answer: B.It should always be in working
72. What would most appropriately describe the risk of incorrect rejection in terms of substantive testing?
A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
Answer: B.The auditor concludes that the balance is materially misstated when in actual fact it not
73. Which of the following affects audit effectiveness?
A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both (a) and (c)
Answer: D.Both (a) and (c)
74. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?
A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
Answer: A.The auditor has ascertained that the balance is materially correct when in actual fact it is not
75. Which of the following Auditing Assurance Standard deals with Audit Planning?
A. AAS7
B. AAS8
C. AAS9
D. AAS3
Answer: B.AAS8
76. Audit programme is prepared by
A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants
Answer: D.The auditor and his audit assistants
77. The working papers which auditor prepares for financial statements audit are: _
A. Evidence for audit conclusions
B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors
Answer: C.Owned by the auditor
78. The quantity of audit working papers complied on engagement would most be affected by
A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk
Answer: B.Auditor’s experience and professional judgment
79. Which of the following best describes the primary purpose of audit programme preparation?
A. To detect errors or fraud.
B. To comply with GAAP
C. To gather sufficient appropriate evidence
D. To assess audit risk
Answer: C.To gather sufficient appropriate evidence
80. 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.To provide a guide for advising another client on similar issues
81. The auditor’s permanent working paper file should not normally, include
A. Extracts from client’s bank statements
B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements
Answer: A.Extracts from client’s bank statements
82. For what minimum period should audit working papers be retained by audit firm?
A. For the time period the entity remains a client of the audit firm.
B. For a period of ten years
C. For a period auditor opines them to be useful in servicing the client
D. For the period the audit firm is in existence.
Answer: C.For a period auditor opines them to be useful in servicing the client
83. Which of the following factors would least likely affect the quantity and content of an auditor’s working papers
A. The assessed level of control risk
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter
Answer: D.The content of management representation letter
84. Which of the following statement is true regarding an auditor’s working papers?
A. They document the level of independence maintained by the auditor
B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control
Answer: B.They should be considered as the principle support for the auditor’s report
85. Which of the following statement best describes the understanding with respect to ownership and custody of working papers prepared by an auditor?
A. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not required.
Answer: A.The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation
86. The current file of the auditor’s working papers, generally, should include
A. A flowchart of the internal controls
B. Organisation charts
C. A copy of financial statements
D. Copies of bond and debentures
Answer: C.A copy of financial statements
87. Knowledge of the entity’s business does not help the auditor to
A. Reduce inherent risk
B. Identify problem areas
C. Evaluate reasonableness of estimates
D. Evaluate appropriates of GAAP.
Answer: A.Reduce inherent risk
88. Payment for wage should be vouched with the help of
A. Piece Work Statement.
B. Wage sheets
C. Minutes book
D. Bank pass book.
Answer: B.Wage sheets
89. Payment for building purchased should be vouched with the help of
A. Title Deed
B. Correspondence with the brokers
C. Building Account
D. Cash book
Answer: A.Title Deed
90. Purchase returns should be vouched with the help of
A. Bought notes
B. Credit notes
C. Goods inward book
D. Cash book
Answer: B.Credit notes
91. Receipts from sale of investments should be vouched with the help of
A. Brokers bought notes
B. Brokers Sold notes
C. Minutes book
D. Inventory of investment
Answer: B.Brokers Sold notes
92. Which of the following expenses should not be treated as capital expenditure?
A. Expenses paid on installation of a plant.
B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent. The suit has been lost
D. The fees paid to engineer who constructed the plant.
Answer: C.Legal expenses incurred to defend a suit related to title of patent. The suit has been lost
93. Which of the following is not a revenue expense?
A. Cost of raising a loan
B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship
Answer: B.Cost of accessories of motor vehicles spent at the time of purchase
94. Depreciation does not arise form _______
A. Effluxion of time
B. Use
C. Obsolescence through technology be market changes
D. Remarket expectation
Answer: D.Remarket expectation
95. Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
A. Schedule XIV
B. Schedule V
C. Schedule XIII
D. Schedule X
Answer: A.Schedule XIV
96. Schedule XIV has prescribed rates of depreciation for double shift and triple shift working for which one of the following assets?
A. Building
B. Plant and Machinery
C. Furniture and fittings
D. Ships
Answer: B.Plant and Machinery
97. A company has bought patents. Which of the following methods is most suitable for providing depreciation on them?
A. SLM
B. WDV
C. Sum of year digits
D. Any of the above
Answer: A.SLM
98. Which of the following is a revenue reserve?
A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
Answer: C.Debenture redemption reserve
99. Which of the following will not lead to creation of secret reserve?
A. Undervaluation of closing stock
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required
Answer: C.Goods sent on consignment being shown as actual sales
100. Who is responsible for the appointment of statutory auditor of a limited company?
A. Directors of the company
B. Members of the company
C. The Central Government
D. All of the above
Answer: B.Members of the company
101. Which of the following sections deal with qualifications 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) & Sec.224
Answer: A.Section 226 (1) and section 226(2)
102. Which of the following statement is not true?
A. A partnership firm can be appointed as a statutory auditor of limited company
B. Appointment can be made in the name of the firm
C. Majority of the partners should be practicing in India
D. All partners should be chartered accountants
Answer: C.Majority of the partners should be practicing in India
103. As per the requirements of section 226(3) and 226(4) a person is disqualified from being appointed as a statutory auditor if he holds
A. Equity shares or debentures of the company
B. Equity shares carrying voting of the company
C. Shares carrying voting rights of the company
D. Security carrying voting rights of the company
Answer: D.Security carrying voting rights of the company
104. 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.Within one month of incorporation of the company
105. The term of the auditor ship of first auditor would be from the date of appointment till__
A. the conclusion of statutory meeting
B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal
Answer: B.the conclusion of first annual general meeting
106. In case the directions fail to appoint first auditor (s), 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.a general meeting
107. Which of the following statement is not true regarding appointment of statutory auditor by the Central Government?
A. Such powers have been conferred upon it by section 224(3)
B. If a company fails to appoint an auditor at a general meeting
C. If an auditor refuses to accept appointment, the powers of the Central
D. None of the above
Answer: B.If a company fails to appoint an auditor at a general meeting
108. If a casual vacancy in the office of auditor arises by his resignation it should only be filled by the company in a……..
A. Board meeting
B. Extraordinary general meeting
C. General meeting
D. Annual general meeting
Answer: C.General meeting
109. For the purposes of section 224(IB) the number of partners of a firm which shall betaken into account would be as on the date of _
A. Completion of audit
B. Auditor’s report
C. Acceptance of audit
D. Starting of audit work
Answer: C.Acceptance of audit
110. Which of the following is counted for the purposes of section 224(IB) the number of partners of a firm which shall be taken into account would be as on the data of ___
A. Joint audit
B. Audit to non-profit companies
C. Audit of unlimited companies
D. All of the above
Answer: D.All of the above
111. Mr. A, a Charted Accountant, has nineteen audits, Out of following audits which audits should he accept to ensure he doesn’t violate provisions of section 224(IB) __
A. Audit of a private company
B. Audit of branch of a foreign company
C. Audit of two branches of an Indian company
D. All of them
Answer: D.All of them
112. Which audit out of the following would not be regarded as one audit for the purposesof section 224(IB)?
A. Audit of one branch each of two different companies
B. Joint audit
C. Audit head office & branches
D. Audit of one or more branches of a company
Answer: A.Audit of one branch each of two different companies
113. The auditor of a Government company is appointed by the C & AG. His remunerationis fixed by__
A. The C & AG
B. The shareholders
C. The shareholders at an annual general meeting
D. The board of directors
Answer: B.The shareholders
114. The section which contains provisions regarding remuneration of the auditor is_
A. Section 224(9)
B. Section 224(7)
C. Section 224(8)
D. Section 224(6)
Answer: C.Section 224(8)
115. The authority to remove the first auditor before the expiry of term is with_
A. The shareholders in a general meeting
B. The shareholders in the first annual General meeting
C. The board of directors
D. the Central Government
Answer: A.The shareholders in a general meeting
116. Which of the following statements 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 provisions for such removal are contained in section 224(7)
Answer: C.The approval of the Central Government is required for such removal
117. The retiring auditor does not have a right to___
A. make written representations
B. get his representations circulated.
C. be heard at the meeting
D. speak as a member of the company
Answer: D.speak as a member of the company
118. Who out of the following cannot be appointed as a statutory auditor of the company?
A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (b) and (c)
Answer: B.Internal auditor
119. A statutory auditor has a right of access at all times to
A. Books and accounts of a company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company
Answer: C.Books, accounts and vouchers of the company
120. The auditor has a right to
A. Obtain information and explanation
B. Obtain information and explanation from the employees and officers
C. Obtain information and explanation necessary for the purpose of audit
D. Both (b) and (c)
Answer: D.Both (b) and (c)
121. The principal auditor, as per clarification issued by the ICAI, does not have any right to
A. Inspect working papers of the branch auditor
B. Visit branches
C. Seek information necessary for audit purposes
D. Incorporate the branch audit report in his audit report
Answer: A.Inspect working papers of the branch auditor
122. Under which of the following section auditor has a duty to enquire into six specified matters and report by exception?
A. Section 227(4A)
B. Section 227 (IA)
C. Section 227 (2)
D. Section 227(3)
Answer: A.Section 227(4A)
123. The auditor has to enquire, under section 227 (IA) into different aspects, related to shares allotted for cash for the purpose of auditor include
A. Shares against whose allotment cash has actually been received
B. Shares allotted for consideration other than cash
C. Shares allotted against a debt payable
D. All of them
Answer: D.All of them
124. Right to visit branches has been given to the auditor under which section?
A. Section 222(3)
B. Section 228(2)
C. Section 228(4)
D. Section 228(3)
Answer: D.Section 228(3)
125. Which of the following statements with regard to rules regarding exemption from branch audit is not true?
A. A branch office of a company can be granted exemption on the basis of quantum of activity criterion
B. If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a manufacturing company has been made, it can be exempted from branch audit
C. Cost consideration should be considered as an important factor/ground for exemption from branch audit
D. The auditor should state in his audit report that branch office is exempted by virtue of quantum of activity or any other basis
Answer: B.If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a manufacturing company has been made, it can be exempted from branch audit
126. The branch auditor is appointed by –
A. Shareholders in an annual general meeting
B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above
Answer: B.Shareholders in general meeting
127. Special audit is conducted at the order of the Central Government. Which section gives such powers?
A. Section 233(A)
B. Section 233A
C. Section 242(A)
D. Section 242A
Answer: C.Section 242(A)
128. Who among the following can be appointed as special auditor by the Central Government?
A. The statutory auditor
B. chartered accountant in practice
C. Any chartered accounted who is not in practice
D. Both (a) and (b)
Answer: D.Both (a) and (b)
129. The scope of the audit including reference to the pronouncements of the ICAI, which the auditor adheres to, generally is communicated to the client in the ____ i) auditor’s report ii) engagement letter iii) representation letter
A. i) only
B. Both (i) and (ii)
C. Both (i) and (iii)
D. All the above
Answer: B.Both (i) and (ii)
130. If any director is disqualified from being appointed under section 274(1) (g), the auditor should mention this fact in his audit report. For this purpose, how does hedetermine their eligibility :
A. He obtains a representation from each director
B. He obtains a management representation
C. He enquiries from Registrar of Companies
D. Any one of the above
Answer: A.He obtains a representation from each director
131. As per the ‘Statement on Qualification in Auditor’s Report’s issued by theICAI, the auditor, Under section 227(3) has to gave a statement of fact on_
A. Proper books of account
B. Accounting standards
C. Cess payable under section 441A
D. None of the above
Answer: C.Cess payable under section 441A
132. The date on auditor’s report should not be__
A. The data of AGM
B. Later than the date on which the accounts are approved in board’s meeting
C. Earlier than the date on which the accounts are approved by the management
D. Both (a) and (b)
Answer: C.Earlier than the date on which the accounts are approved by the management
133. Section 227(2) of the Companies Act, requires the auditor to give his report to the members of the company on certain matters. Which of the following is not included in the above?
A. Accounts examined by him
B. Every balance sheet and profit and loss account laid before a general meeting during his tenure
C. Every document that is a part of or ‘annexed to’ the balance sheet
D. Every document which is attached to the profit and loss account
Answer: D.Every document which is attached to the profit and loss account
134. When restrictions that significantly affect the scope of the audit are imposed bythe client, the auditor generally should issue which of the following opinion?
A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph;
Answer: A.Qualified opinion
135. Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?
A. Restrictions the client imposed
B. Reliance on the report of other auditor
C. Inability to obtain sufficient appropriate evidential matter
D. Inadequacy of accounting records
Answer: B.Reliance on the report of other auditor
136. The inventory consists of about one per cent of all assets. The client hasimposed restriction on auditor to prohibit observation of stock take. The auditor cannot apply alternate audit procedures.
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
Answer: C.Disclaimer of opinion
137. The auditor has serious concern about the going concern of the company. It is dependent on company’s obtaining a working capital loan from a bank which has been applied for. Then management of the company has made full disclosure of these facts in the notes to the balance sheet. The auditor is satisfied with the level of disclosure. He should issue_
A. Unqualified opinion
B. Unqualified opinion with reference to notes to the accounts
C. Qualified opinion
D. Disclaimer of opinion
Answer: B.Unqualified opinion with reference to notes to the accounts
138. Which of the following is true about explanatory notes?
A. These are given by the directors of the company
B. These are given to adhere to requirements of section 211.
C. These are given by auditors of the company in auditor’s report
D. All of the above
Answer: B.These are given to adhere to requirements of section 211.
139. The client changed method of depreciation from straight line to written down value method. This has been disclosed as a note to the financial statements. It has an immaterial effect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should the auditor express?
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
Answer: A.Unqualified opinion
140. Which of the following is not true regarding requirements under section 227(3) (f) of the Companies Act, 1956?
A. The auditor has to satisfy himself whether any of the directors of the company, whether public or private, are disqualified from being appointed as directors as per section 274(1) (g).
B. Section 274(1) (g) is applicable to appointment of directors both in public and private companies but reporting is limited to only those directors of a company who are also directors of a public company
C. The auditor requires every director to submit a written representation in respect of each Public company, of which the is a director, as to whether such company has defaulted in terms of provisions of sections 274(1) (g)
D. The disqualification should be considered on the date of audit report.
Answer: D.The disqualification should be considered on the date of audit report.
141. The management of a company, to which AS3 is not applicable, does not include statement of cash flows in its annual report. The auditor should express
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Any of these depending upon materiality and pervasiveness and adequacy of disclosure
Answer: A.Unqualified opinion
142. In case the auditor gives a disclaimer of opinion in the audit report which of the following paragraph(s) of a standard unqualified audit report are modified?
A. Scope paragraph
B. Opinion paragraph
C. Scope and opinion paragraphs
D. Introductory, scope and opinion paragraph
Answer: C.Scope and opinion paragraphs
143. A departure from recognized accounting principle is disclosed in a note to the financial statements. The auditor should
A. Issue a standard unqualified audit report
B. Issue a qualified report
C. Issue an unqualified report with ‘emphasis of matter’ paragraph
D. Disclaim opinion
Answer: B.Issue a qualified report
144. The auditor should state the reasons for his reservations in audit report and should try to quantify the effect on them. This should be done in case he has expressed _ i) A qualified opinion ii) an unqualified opinion with emphasis of matter paragraph iii) An adverse opinion IV) a disclaimer of opinion
A. i) only
B. i) and (iv) only
C. i), iii) and (iv) only
D. All of the above
Answer: A.i) only
145. Which of the following documents is not relevant for vouching cash sales?
A. Daily cash sales summary
B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement
Answer: C.Monthly statements sent to customers
146. The auditor should examine subsequent realization of revenue such as dividends, interest, commission, etc to
A. Identify cases of unrecorded revenue
B. Ensure proper disclosure in the balance sheet
C. Recomputed accrued income on the data of balance sheet
D. Any of these
Answer: A.Identify cases of unrecorded revenue
147. To test whether sales have been recorded, the auditor should draw a sample from a file of
A. Purchase orders
B. Sales orders
C. Sales invoices
D. Bill of loading
Answer: C.Sales invoices
148. For vouching of which item, the auditor is most likely to examine cost records?
A. Commission earned
B. Bad debts recorded
C. Credit sales
D. Sale of scrap
Answer: D.Sale of scrap
149. The “Guidance Note on Revenue” issued by the ICAI does not deal with
A. Sales revenue
B. Revenue rendering service
C. Revenue from sale of fixed assets
D. Income from interest, dividend
Answer: C.Revenue from sale of fixed assets
150. An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries are paid. The primary purpose of this audit procedure is
A. To ensure that there are no ghost workers
B. To ensure the casual workers employed are authorized by the supervisor
C. To test procedures for distributing pay cheques
D. To obtain understanding of internal control system
Answer: C.To test procedures for distributing pay cheques
151. Which of the following would prevent double payment of the same voucher?
A. The person signing the cheque should cancel the supporting documents
B. Cheques should be signed by at best two persons
C. The data of payment of vouchers of similar nature should be the same or close to each other
D. All of the above
Answer: A.The person signing the cheque should cancel the supporting documents
152. In case of unclaimed wages, the auditor should examine whether
A. The amount has been deposited in a separate bank account
B. Deposited with the cashier
C. Held in a safe deposit box
D. All of these
Answer: A.The amount has been deposited in a separate bank account
153. While vouching wages, auditor should examine whether there is proper segregation of duties. Which of the following activities should not be done by same department?
A. Maintaining personnel records and approving changing in wages rates
B. Proposing pay roll summary and disbursement of wages
C. Making salary statements and filing tax returns
D. Comparing time clock records with time reports prepared by supervisors and preparing list of workers employed along with the units of production for each one of them
Answer: B.Proposing pay roll summary and disbursement of wages
154. In order to vouch, which of the expenses, the auditor will examine Bill of Entry?
A. Custom
B. Excise duties
C. Sales tax
D. Income tax
Answer: A.Custom
155. While vouching, how will the auditor ensure himself that all credit salestransactions have been recorded by the entity?
A. Examining cut-off points
B. Matching entries in the sales book against renumbered sales invoices and goods outward notes
C. Counting the number of invoices and matching the number with entries on sales book
D. Both (a) and (b)
Answer: D.Both (a) and (b)
156. In case of sales return, the auditor should examine which documents?
A. Credit notes, advice notes and inward return notes
B. Debit notes, advice notes and inward return notes
C. Purchase invoices, advice notes and inward return notes
D. Credit notes, inspection report and inward return notes
Answer: D.Credit notes, inspection report and inward return notes
157. An internal auditor discovered that fictitious purchases have been recorded by the purchase clerk. This indicates absence of which control?
A. Purchase invoices are independently matched with purchase orders and goods received notes
B. Goods received notes requires the signature of individual who authorized the purchase
C. Routine checks are performed by internal auditor fortnightly.
D. Purchase function and production function are clubbed in one department
Answer: A.Purchase invoices are independently matched with purchase orders and goods received notes
158. Which of the following is most crucial to a purchase department?
A. Reducing the cost of acquisition
B. Selecting supplies
C. Authorizing the acquisition of goods
D. Assuring the quality of goods
Answer: C.Authorizing the acquisition of goods
159. The auditor is most likely to examine related party transactions very carefully while vouching
A. Credit sales
B. Sales returns
C. Credit purchases
D. Cash purchases
Answer: C.Credit purchases
160. In order to vouch bought ledger, the auditor obtain confirmations from creditors. The principal reason for the auditor to examine suppliers statements at balance sheet date is to obtain evidence that
A. The supplier exist
B. There are no unrecorded liabilities
C. Recorded purchases actually occurred
D. To link creditors with cash book entries
Answer: B.There are no unrecorded liabilities
161. The creditor’s accounts, generally, have credit balance. Debit balance may be due to
A. Advance paid against an order
B. Goods returned
C. Wrong debit to supplier account
D. Any of these
Answer: D.Any of these
162. In case of vouching, the auditor is least likely to examine authorization by appropriate authority in case of –
A. Bad debts written off
B. Sales return
C. Purchase return
D. Discount allowed to customers as per organizational policy
Answer: D.Discount allowed to customers as per organizational policy
163. Vendors should be approved by Management before purchase department executes an order. If this is not done, then which of the following situations may arise?
A. Purchases could be made from vendors whose product quality may not be good
B. Purchases may be made from related parties without management’s knowledge
C. Purchases could be made from vendors who may have offered price to manager purchases
D. Any of these
Answer: D.Any of these
164. Which of the following is not true with regard to verification of assets?
A. It invoices substantiation of occurrence of transactions
B. Its objective is to establish existence, ownership, possession, valuation and disclosure of assets
C. The auditor has to form an opinion on different aspects
D. All are true
Answer: A.It invoices substantiation of occurrence of transactions
165. Which of the following statements is not true?
A. Valuation of assets is the responsibility of management
B. The auditor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in the balance sheet
C. The auditor should value the asset as per generally accepted accounting principle
D. Valuation is no part of auditor’s duty
Answer: C.The auditor should value the asset as per generally accepted accounting principle
166. An auditor is verifying valuation of building which has been self constructed by the client. Which of the following documents is least relevant to the auditor for verification purposes?
A. Bills of contractor
B. Minutes of meeting of board of directors
C. Certificates of engineer and architect
D. Loan agreement
Answer: B.Minutes of meeting of board of directors
167. Which of the following assets is least likely to be subjected to lien?
A. Freehold land
B. Plant and machinery
C. Leasehold property
D. Motor vehicles
Answer: C.Leasehold property
168. An analysis of fixed assets account has revealed possibility of unrecorded sale of plant and machinery. Which of the following audit procedures may be adopted to discover it?
A. Examination of property tax files
B. Inquiry of plant manager
C. Examination of debits to accumulated depreciation
D. All of the above
Answer: D.All of the above
169. The auditor has noticed existence of recurring losses sale of fixed assets this indicates
A. Depreciation charges are insufficient
B. Policy of sale or disposal of fixed assets needs to be reviewed
C. The sale of assets have not been properly authorized
D. Accounting errors
Answer: A.Depreciation charges are insufficient
170. Which of the following financial statements assertions are addressed by testing the cut off for plant asset addition?
A. Existence and ownership
B. Valuation and disclosure
C. Possession and ownership
D. Completeness and valuation
Answer: D.Completeness and valuation
171. The auditor while verifying prepaid insurance has concluded that there is inadequate insurance of building, He should__
A. Modify his audit report
B. Insist it should be disclosed in the notes to financial statements
C. Write it in letter of weakness
D. Both (b) and (c)
Answer: D.Both (b) and (c)
172. While verifying intangible assets, an auditor would recomputed amortization charges and determines whether amortization period is reasonable. The auditor tries to establish ….by doing it
A. Valuation
B. Existence
C. Disclosure
D. Possession
Answer: A.Valuation
173. When auditing prepaid insurance, an auditor discovers that the insurance policy bond on building is not available for inspection. This may indicate__
A. No insurance has been undertaken for building
B. Lien on building
C. Insurance premium has not been paid
D. Insurance premium paid but not recorded
Answer: B.Lien on building
174. Which of the following controls would ensure that securities are not lost,stolen or diverted?
A. Establish physical barriers over investment securities
B. Maintain files of authorized signatures
C. Segregate investment approval from accounting and from custody of securities
D. All of the above
Answer: D.All of the above
175. Which of the following would give the assurance that debtors mentioned on the date of balance sheet actually exist?
A. Sending debtor’s confirmation letters
B. Reviewing subsequent collection
C. Verify debtors against sales document
D. Both (a) and (b)
Answer: D.Both (a) and (b)
176. Tests of control are not concerned with_
A. Existence of controls
B. Effectiveness of controls
C. Continuity of controls
D. Designing of controls
Answer: D.Designing of controls
177. The sequence of steps in the auditor’s consideration of internal control is as follows –
A. Obtain an understanding, design substantive test, perform tests of control, and make a preliminary assessment of control risk
B. Design substantive tests, obtain an understanding, perform tests of control, and make a preliminary assessment of control risk
C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.
D. Perform tests of control, obtain and understanding, make a preliminary assessment of control risk, design
Answer: C.Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.
178. Which of the following is not an inherent limitation of internal control system?
A. Management override
B. Collusion among employees
C. Inefficiency of internal auditor
D. Abuse of authority
Answer: C.Inefficiency of internal auditor
179. An auditor should study and evaluate internal controls to
A. Determine whether assets are safeguarded
B. Suggest improvements in internal control
C. Plan audit procedures
D. Express and opinion
Answer: C.Plan audit procedures
180. The primary purpose of performing tests of control is to provide reasonable assurance that_
A. There are no material misstatements due to fraud or error in financial statement
B. Accounting system is well documented
C. Written evidence is there to support transactions
D. if internal control is effective
Answer: D.if internal control is effective
181. If the auditor assesses control risk as high….
A. Document the conclusions
B. Documents the reasons along with conclusions
C. Perform tests of control
D. Perform walk through tests
Answer: A.Document the conclusions
182. The overall attitude and awareness of an entity’s board of directors concerning the importance of internal control is reflected in
A. Accounting controls
B. Control environment
C. Control procedures
D. Supervision
Answer: B.Control environment
183. Which of the following are included in test of control?
A. Reperformance and observation
B. Inquiry and analytical procedures
C. Comparison and conformation
D. Inspection and verification
Answer: A. Reperformance and observation
184. Control risk is assessed at
A. Overall financial statements level
B. Fraud risk factor level
C. Financial statement assertion level
D. Control environment level
Answer: C.Financial statement assertion level
185. An auditor assesses control risk because it
A. Affects the audit risk
B. Affects the level of detection risk that auditor may accept
C. Helps him to fix materiality level for each financial assertion
D. Is directly related to inherent risk
Answer: B.Affects the level of detection risk that auditor may accept
186. A flow chart, made by the auditor, of an entity’s internal control system is a graphic representation that depicts the auditor’s.
A. Understanding of the system
B. Understanding of fraud risk factors
C. Documentation of assessment of control risk
D. Both (a) and (c)
Answer: A.Understanding of the system
187. The performance of tests of control is documented in
A. Audit programme
B. Flow charts
C. Working papers
D. Any of the above
Answer: C.Working papers
188. The independence of an internal auditor will most likely be assured if he reports to the
A. President Finance
B. President System
C. Managing Director
D. CEO
Answer: C.Managing Director
189. In comparison to the independent auditor, an internal auditor is more likely to be concerned with
A. Cost accounting system
B. Internal control system
C. Legal compliance
D. Accounting system
Answer: B.Internal control system
190. When an independent auditor relies on the work of an internal auditor, he or she should
A. Examine the scope of internal auditor’s work
B. Examine the system of supervising review and documentation of internal auditor’s work
C. Adequacy of related audit programme
D. all of the above
Answer: D.all of the above
191. Proper segregation of duties reduces the opportunities in which a person would both
A. Establish controls and executes them
B. Records cash receipts and cash payments
C. Perpetuate errors and frauds and conceals them
D. Record the transaction in journal and ledger
Answer: C.Perpetuate errors and frauds and conceals them
192. Analytical procedures are least likely to be use in the audit of –
A. Cash balance
B. Investments
C. Bills receivables
D. Debtors
Answer: A.Cash balance
193. Which of the following statements is not true with regard to teeming and lading ?
A. It results in the deliberate misappropriation of cash receipts
B. It is associated with cash receipts
C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
D. To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a bank reconciliation will not detect the irregularity.
Answer: C.If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
194. The balance of cash in often between one to five percent of total assets. Tickthe most appropriate statement with regard to verification of cash in context of this
A. Cash in always material as materiality is qualitative concept
B. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative concept
C. The cash balance need only be audited if the balance is in overdraft
D. Cash is to be verified if control risk is assessed as high
Answer: A.Cash in always material as materiality is qualitative concept
195. When counting cash on hand the auditor should ___
A. Ensure presence of somebody from management
B. Obtain a receipt from custodian as to its return
C. Ensure postage and revenue stamps are not counted in physical count
D. Temporary advances to employees are counted to calculate balance of cash in hand
Answer: C.Ensure postage and revenue stamps are not counted in physical count
196. Which of the following statement is not true regard to auditor’s attendance at stock taking?
A. Auditor should attend physical stock taking only if inventory is material
B. Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it
C. If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
D. The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain direct knowledge that the stock and has been property counted
Answer: C.If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
197. While observing a client’s annual physical inventory, an auditor conducted tescounts for certain test counts were higher than the recorded quantities in the client’s perpetual records. This situation could be the result of the client’s failure to record –
A. Purchase returns
B. Sales returns
C. Goods with consignor
D. Purchase discounts
Answer: B.Sales returns
198. Inspection report/receiving report supports entries in
A. Sales book and sales return book
B. Purchase book and sales return book
C. Cash book and purchase book
D. Sales book and purchase return book
Answer: B.Purchase book and sales return book
199. ……………….. Starts where …………….. Ends
A. Accounting, auditing
B. Auditing, accounting
C. Vouching, auditing
D. Accounting,vouching
Answer: B.Auditing, accounting
200. ………… means “proving the truth or confirmation”
A. Vouching
B. Verification
C. Inspection
D. Auditing
Answer: B.Verification
201. Civil liability of an auditor implies liability for
A. misappropriation of cash
B. misappropriation of goods
C. fraud
D. misfeasance
Answer: D.misfeasance
202. An auditor is held criminally liable for
A. Loss to his client
B. Neglect of his duty
C. Offence against statutory provisions
D. Frauds
Answer: C.Offence against statutory provisions
203. An auditor is held liable under C.A Act 1949 for
A. negligence
B. misfeasance
C. Professional misconduct
D. breach of contract.
Answer: C.Professional misconduct
204. __________ is a systematic examination of the books and records or a business.
A. Auditing
B. Vouching
C. Verification
D. Checking
Answer: A.Auditing
205. An audit which is compulsory by the law is __________.
A. Government Audit
B. Internal Audit
C. Cost Audit
D. Statutory Audit
Answer: D.Statutory Audit
206. .Instruction of audit issued by controller and auditor general of India ________.
A. Statutory audit
B. Final Audit.
C. Management audit
D. Government audit
Answer: D.Government audit
207. Audit done by the employees of the business undertaking is called _______.
A. Final audit
B. Management Audit
C. Government Audit
D. Internal Audit
Answer: D.Internal Audit
208. This kind of audit is conducted generally between two annual audit ______.
A. Internal Audit
B. Interim audit
C. Final Audit
D. Continuous Audit
Answer: B.Interim audit
209. Management audit otherwise called as _______.
A. Final audit
B. Efficiency Audit
C. Cost Audit
D. Cash audit
Answer: B.Efficiency Audit
210. Before the work of audit is commenced, the auditor plans out the whole of audit work is called _________.
A. Audit Plan
B. Audit Note
C. Audit Programme
D. Audit Control
Answer: C.Audit Programme
211. A number of checks and controls exercised in a business to ensure its efficient working are known as ________.
A. Internal Check
B. Internal Control
C. Internal Audit
D. Interim Check
Answer: B.Internal Control
212. A Voucher is a _______.
A. Document is support of an entry made in books of accounts
B. Invoice received from suppliers
C. Receipt issued to a customer for cash
D. Dispatch Receipt
Answer: A.Document is support of an entry made in books of accounts
213. Voucher relates to _________.
A. Cash receipt & payments, credit transactions
B. Cash payment only
C. Credit transactions only
D. Cash receipt only
Answer: A.Cash receipt & payments, credit transactions
214. Internal check is meant for ___________.
A. Prevention of frauds
B. Detection of frauds
C. Helping audit is depth
D. Detection of errors
Answer: A.Prevention of frauds
215. Purchase of machinery is a ____________.
A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer: C.capital expenditure
216. Sale of land is a __________.
A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer: B.capital receipt
217. When a transaction has not been recorded in the books of account either wholly or partially such errors are called as _________.
A. errors of commission
B. errors of omission
C. compensating error
D. error of principle
Answer: B.errors of omission
218. 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.balance sheet audit.
219. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of what?
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
Answer: B.Error of commission
220. Recording a transaction twice in the books of original entry is an error of __________.
A. principle
B. commission
C. duplication
D. omission
Answer: C.duplication
221. Errors and frauds already committed can be discovered under the system of ________.
A. internal audit, internal check, internal control
B. external check
C. statutory audit
D. interim audit
Answer: A.internal audit, internal check, internal control
222. Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud
B. misappropriation of cash
C. misappropriation of goods
D. manipulation of accounts
Answer: D.manipulation of accounts
223. /. Special audit is necessary for _________.
A. inefficient concern
B. processing concern
C. trading concern
D. manufacturing concern
Answer: A.inefficient concern
224. The first auditors appointed by head office ____________.
A. for a period of one year
B. for a period of two years
C. for a period of three years
D. till the conclusion of the first annual general meeting
Answer: D.till the conclusion of the first annual general meeting
good practical quation. it’s the most important to seinor auditor of for any origanization.
The questions are carefully weighed on the selected student. Thanks be to God.