Auditing Mcqs for Senior Auditor Junior Auditor

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Auditing Mcqs for Senior Auditor Junior Auditor
Auditing Mcqs for Senior Auditor Junior Auditor

Auditing Mcqs for Senior Auditor Junior Auditor

All Type Test Preparation Website 1: Skilling.pk
All Type Test Preparation Website 2: Stamflay.com

Auditing Mcqs:
____________ is a systematic examination of the books and records or a business?
A. Auditing
B. Vouching
C. Verification
D. Checking
The term ‘Audit’ is derived from a Latin word “audire” which means___________?
A. To inspect
B. To examine
C. To hear
D. To investigate
The main object of an audit is _____________?
A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.
An auditor is like a_______________?
A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these
Process of verifying the documentary evidences of transactions are known as___________?
A. Auditing
B. Testing
C. Vouching
D. Verification
Auditing is compulsory for____________?
A. Small scale business
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns
Concealment of shortage by delaying the recording of cash receipts is known as_____________?
A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these
The fundamental objective of the audit of a company is to_____________?
A. Protect the interests of the minority shareholders
B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts
The concept of stewardship means that a company’s directors________________?
A. Are responsible for ensuring that the company complies with the law
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the shareholders
D. Report suspected fraud and money laundering to the authorities
Why do auditors concentrate their efforts on material items in accounts?
A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it
Which of the following is NOT the responsibility of a company’s directors?
A. Reporting to the shareholders on the accuracy of the accounts
B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor
International auditing standards are issued by the______________?
A. International Accounting Standards Board
B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board
Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial statements
D. He should examine whether recognised accounting principle have been consistently
A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
When an auditor is proposed for removal from office, which one of the following is he NOT permitted to do?
A. Circulate representations to members
B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed
Which one of the following is NOT a duty of the auditor?
A. Duty to report to the company’s bankers
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law
Assuming that it is not the first appointment of the auditor, who is responsible for the appointment of the auditor?
A. The shareholders in a general meeting
B. The managing director
C. The board of directors in a board meeting
D. The audit committee
The independent auditor’s primary responsibility is to______________?
A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders
How long is the auditor’s term of office?
A. Until the audit is complete
B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them
Which of the following is correct in relation to materiality?
A. A matter is material only if it changes the audit report
B. A matter is material if the auditor and the directors both decide that further work needs to be done in the area under question
C. A matter is material only if it affects directors’ emoluments
D. A matter is material if its omission or misstatement would reasonably influence the decisions of an addressee of the auditors’ report
Which one of the following is NOT considered to be part of planning?
A. Background i.e. industry
B. Previous year’s audit i.e. any qualifications in the report
C. Considering the work to be done by the client staff e.g. internal audit
D. Considering whether the financial statements show a true and fair view
Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk
Which of the following should NOT be considered at the planning stage?
A. The timing of the audit
B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations
At the planning stage you would NOT consider____________?
A. the timing of the audit
B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit
Which of the following describes sampling risk?
A. The risk of the auditor carrying out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing
Which of the following is NOT an accepted method of selection in sampling?
A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection
Which of the following are you unlikely to see in the current file of auditors’ working papers?
A. Memorandum & articles of association
B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count
According to ISA 500, the strength of audit evidence is determined by which two qualities?
A. Appropriateness & competence
B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence
Which of the following is normally the most reliable source of audit evidence?
A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review
The degree of effectiveness of an internal control system depends on:
A. The design of the internal control system and the implementation of the controls
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting records
According to ISA 315, which of the following is NOT an element of the control environment?
A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices
According to ISA 315, which of the following is NOT a control activity?
A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties
Lapping is also known as___________?
A. Teeming and lading
B. Looping
C. Embezzlement
D. Hacking
Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example of____________?
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
Which of the following statements is not true?
A. Management fraud is more difficult to detect than employee fraud
B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.
Internal audit is undertaken:
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
The scope of internal audit is decided by the___________?
A. Shareholders
B. Management
C. Government
D. Law
Audit of banks is an example of_____________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above
Concurrent audit is a part of____________?
A. Internal check system
B. Continuous audit
C. Internal audit system
D. None of these
Audit in depth is synonymous for____________?
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
Institute of Chartered Accountants of Pakistan was established in____________?
A. 1949
B. 1956
C. 1961
D. 1972
Which of the following statements is not true about continuous audit?
A. It is conducted at regular interval
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
Internal check is carried on by___________?
A. Staff specially appointed for the purpose
B. Internal auditor
C. Supervisor of the staff
D. Members of the staff
Errors of Omission are_____________?
A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above
Window dressing implies_______________?
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
Test Checking refers to___________?
A. Testing of accounts and records
B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded
Which of the following statements is not correct about materiality?
A. Materiality is a relative concept
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial statement level only
______the audit risks_______the materiality and_________the audit effort.
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the___________?
A. Amount of known misstatement is documented in working papers
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
In determining the level of materiality for an audit, what should not be considered?
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
Analytical procedures issued in the planning stage of an audit, generally
A. Helps to determine the nature, timing and extent of other audit procedures
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above
Which of the following statements 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
Verification refers to_________?
A. Examining the physical existence and valuation of assets.
B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.
Stock should be valued at_________?
A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
Floating assets are valued at____________?
A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
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
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
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.
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
The nature, timing and extent of substantive procedures is related to assessed level of control risk
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
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
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
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
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
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
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
Audit programme is prepared by____________?
A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants
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
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
Which of the following best describes the primary purpose of audit programme preparation?
A. To detect errors or fraud
B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk
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
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
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.
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
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
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.
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
Auditing is what?
A. Reporting the financial information
B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records
Audit of banks is an example of__________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above
In Pakistan, balance sheet audit is synonymous to___________?
A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
Audit in depth is synonymous for­_____________?
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
Balance sheet audit includes verification of____________?
A. Assets
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above
Which of the following statements is not true about continuous audit?
A. It is conducted at regular interval
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
Balance sheet does not include­:_____________?
A. Verification of assets and liabilities
B. Vouching of income and expense accounts related to assets and liabilities
C. Examination of adjusting and closing entries
D. Routine checks
Which of the following statements is not correct about materiality?
A. Materiality is a relative concept
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial statement level
only
_______the audit risk,_______the materiality and _______the audit effort?
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied that the_____________?
A. Amount of known misstatement is documented in working papers
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
In determining the level of materiality for an audit, what should not be considered?
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
Analytical procedures issued in the planning stage of an audit, generally?
A. helps to determine the nature, timing and extent of other audit procedures
B. directs attention to potential risk areas
C. indicates important aspects of business
D. All of the above
Which of the following statements 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
The basic assumption underlying the use of analytical procedures is:____________?
A. It helps the auditor to study relationship among elements of financial information
B. Relationship among data exist and continue in the absence of known condition to the contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.
What are analytical procedures?
A. Substantive tests designed to assess control risk
B. Substantive tests designed to evaluate the validity of management’s representation letter
C. Substantive tests designed to study relationships between financial and non­financial
D. All of the above
Which of the following is not an analytical procedure?
A. Tracing of purchases recurred in the purchase book to purchase invoices.
B. Comparing aggregate wages paid to number of employees
C. Comparing the actual costs with standard costs
D. All of them are analytical procedure
When applying analytical procedures, an auditor could develop independent estimate of an account balance to compare it to­___________?
A. client’s unedited account balance
B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry
What is the primary objective of analytical procedures used in the overall review stage of an audit?
A. To help to corroborate the conclusions drawn from individual components of financial statements
B. To reduce specific detection risk
C. To direct attention to potential risk areas
D. To satisfy doubts when questions arise about a client’s ability to continue
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
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
The nature, timing and extent of substantive procedures is _________ related to assessed level of control risk?
A. randomly
B. disproportionately
C. directly
D. inversely
Which of the following statements is, generally, correct about the reliability of auditevidence?
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.
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
Which of the following is not a corroborative evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
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.
Which of the following statements is not true with respect to management representations 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
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
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
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
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
Depreciation does not arise form _______
A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation
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
Which of the following is a revenue reserve?
A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
If the book value of an asset stands at________per cent of the original cost, a company need not provide depreciation on it.
A. two
B. fifteen
C. five
D. ten
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.
D. The fees paid to engineer who constructed the plant.
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
The board of directors shall appoint first auditor of a company
A. With in one month of completion of capital subscription state of the company
B. With in one month of the promotion of the company
C. With in one month of the commencement of the business of the company
D. With in one month of incorporation of the company
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
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
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
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
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.
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
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.
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
Auditor of a___________company does not have right to visit foreign branches of the company?
A. Unlimited liability
B. Manufacturing
C. Banking
D. Non­profit making
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.
When restrictions that significantly affect the scope of the audit are imposed by the 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;
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. The 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
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
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
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
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
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. recompute accrued income on the data of balance sheet
D. Any of these
What is meant by negative assurance?
A. The auditor cannot give an opinion due to lack of evidence.
B. The client’s financial statements were found to be materially misstated.
C. The auditor could not conduct any tests due to lack of controls.
D. The auditor did not find anything to indicate that a material misstatement exists.
For companies required to produce interim financial statements (IFI):
A. one audit firm should audit the IFI and a different firm should audit the financial statements for the year as a whole.
B. one accountancy firm should review the IFI and a different firm should audit the financial statements for the year as a whole.
C. the same firm should audit the IFI and the financial statements for the year as a whole.
D. the same firm should review the IFI and the financial statements for the year as a whole.
Which of the following statements is correct?
A. When a company negotiates a ‘friendly’ takeover, it usually appoints a firm of accountants to carry out due diligence on the takeover target.
B. In an attestation engagement, the accountant is required to report on the quality of work performed.
C. In a review engagement, evidence is gathered mainly by means of computation and inspection.
D. In an engagement to review financial statements, the amount of work required is the same as for an audit
What sort of assurance is provided in a review engagement?
A. Positive assurance
B. Negative assurance
C. High level of assurance
D. No assurance
Which one of the following is part of the auditor’s function?
A. Conducting the inventory count
B. Obtaining and evaluating audit evidence on the financial statements
C. Calculating the year-end accruals figure for inclusion in the accounts
D. Providing representations to management
Which of the following does NOT belong in the auditors’ report?
A. Introductory paragraph specifying the pages to which the report relates and the accounting convention adopted
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of directors and auditors
What is meant by the expression ‘expectation gap’?
A. The gap between how the directors of a company perform their duties and how the shareholders expect them to perform
B. The gap between how the directors of a company perform their duties and how the general public expects them to perform
C. The gap between the public perception of the role of company auditors and their statutory role and responsibilities
D. The gap between the auditors’ own perception of their duties and how they are set out in the Companies Act
Which of the following would you not use as a benchmark for comparison when undertaking analytical procedures?
A. Other audit clients
B. Previous years
C. Other companies in the same industry
D. Budget
Which of the following is true about written representations?
A. They are the best source of audit evidence
B. They should be used only when there is a lack of other substantive audit evidence
C. They should be used only when there is other substantive audit evidence to complement it
D. Shareholders receive a copy of all material written representations
Which of the following statements is INCORRECT?
A. An auditor may serve on the board of directors of an audit client.
B. An auditor who is an immediate family member of the director of an audit client must not be assigned to the audit team.
C. Purchasing goods from an audit client on normal commercial terms does not create a threat to the auditor’s independence.
D. An auditor who was recently a director of an audit client must not be assigned to the audit team for that client.
An auditor should not accept a loan on favourable commercial terms from an audit client because of the threat to his or her independence. The threat would be a___________?
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
Which of the following are fundamental ethical principles for professional accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity
A. 1, 2 and 3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only
Which one of the following may auditors NOT perform for their client?
A. Taking management decisions
B. Preparation of accounting records
C. Preparing tax computations
D. Advising on weaknesses in the internal control systems
You have been proposed as auditor of a company. What is the first step that you should take?
A. Obtain the client’s permission to communicate with the existing auditor
B. Obtain the existing auditor’s working papers
C. Obtain a copy of the company’s most recent board minutes
D. Obtain a copy of the existing auditor’s letter of engagement
Which of these are types of Audit Report?
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion.
All of above 
Pick the odd one:
A. Checking the vouchers
B. Preparation of vouchers
C. Evaluation of internal control
D. None of the above
Which of the following is not type of engagement standard?
A. Standards on Auditing
B. Standard on Quality Control
C. Standards on Review Engagement
D. Standards on Assurance Engagement
How many Standards on Auditing have been issued?
A. 32
B. 34
C. 36
D. 38
Auditing engagement can be performed w.r.t.
A. Profit making entity
B. Non-profit making entity
C. Corporate entity only
D. Any entity
Scope of financial audit is__________?
A. Financial information
B. Non-financial information
C. Both (a) and (b)
D. None of these
IFRS 9 explains about?
A. Inventory
B. Accounts Payable
C. Accounts Receivable
D. Expenses
Audit fess is a part of__________.
A. works on cost.
B. selling overhead.
C. distribution overhead.
D. administration overhead

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