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Audit Mcqs
Audit Mcqs
Audit Mcqs
A. Auditing
B. Vouching
C. Verification
D. Checking
2. The term ‘Audit’ is derived from a Latin word “audire” which means___________?
A. To inspect
B. To examine
C. To hear
D. To investigate
A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.
A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these
A. Auditing
B. Testing
C. Vouching
D. Verification
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
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?
0
Assuming that it is not the first appointment of the auditor, who is responsible for the
appointment of the auditor?
1
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?
0
Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
0
A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent 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
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?
0
According to ISA 500, the strength of audit evidence is determined by which two qualities?
0
Which of the following is normally the most reliable source of audit evidence?
0
A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review
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?
0
A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices
A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties
Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
of____________?
1
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
A. Shareholders
B. Management
C. Government
D. Law
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
When issuing unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the___________?
2
In determining the level of materiality for an audit, what should not be considered?
0
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?
0
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
A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
Which of the following statements is, generally, correct about the reliability of audit evidence?
0
In an audit of financial statements, substantive tests are audit procedures that __________?
0
The nature, timing and extent of substantive procedures is related to assessed level of control risk
0
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
Which of the following factors is most important in determining the appropriations of audit
evidence?
0
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
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?
0
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?
0
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
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___________?
0
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?
0
The auditor’s permanent working paper file should not normally, include__________?
0
For what minimum period should audit working papers be retained by audit firm?
0
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
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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 best describes the understanding with respect to ownership and
custody of working papers prepared by an auditor?
0
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____________?
0
Auditing is what?
0
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above
A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
A. Assets
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above
When issuing unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the_____________?
0
In determining the level of materiality for an audit, what should not be considered?
0
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?
0
What is the primary objective of analytical procedures used in the overall review stage of an
audit?
0
The nature, timing and extent of substantive procedures is _________ related to assessed level of
control risk?
0
A. randomly
B. disproportionately
C. directly
D. inversely
Which of the following statements is, generally, correct about the reliability of auditevidence?
0
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 statements is not true with respect to management representations
obtained as per AAS11?
0
What would most appropriately describe the risk of incorrect rejection in terms of substantive
testing?
0
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?
0
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?
0
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
A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation
If the book value of an asset stands at________per cent of the original cost, a company need not
provide depreciation on it.
0
A. two
B. fifteen
C. five
D. ten
The term of the auditor ship of first auditor would be from the date of appointment till________?
0
In case the directions fail to appoint first auditor (s), the shareholders shall appoint them
at_________by passing a resolution.
0
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_________?
0
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__________?
0
Who out of the following cannot be appointed as a statutory auditor of the company?
0
A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.
Auditor of a___________company does not have right to visit foreign branches of the company?
0
A. Unlimited liability
B. Manufacturing
C. Banking
D. Nonprofit making
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?
0
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___________?
0
A. unqualified opinion
B. unqualified opinion with reference to notes to the accounts
C. qualified opinion
D. disclaimer of opinion
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?
0
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?
0
To test whether sales have been recorded, the auditor should draw a sample from a file
of__________?
0
A. purchase orders
B. sales orders
C. sales invoices
D. bill of loading
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.
A. Positive assurance
B. Negative assurance
C. High level of assurance
D. No assurance
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
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?
0
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___________?
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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
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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?
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You have been proposed as auditor of a company. What is the first step that you should take?
0
A. Auditing
C. To hear
C. Vouching
C. Lapping
D. Attest to the credibility of the company’s accounts
C. Safeguard the company’s assets and manage them on behalf of the shareholders
C. Because the risk to the accounts of their being incorrectly stated is greater
B. Error of commission
D. the shareholders
A. Compliance risk
C. The risk that the sample does not reflect the population
B. Pervasive selection
B. Suppliers’ statements
A. The design of the internal control system and the implementation of the controls
B. Information processing
C. Organizational structure
B. Internal control system reduces the possibility of occurrence of employee fraud and
management fraud
D. Detailed audit
C. 1961
A. Technical errors
D. At the planning state, the auditor considers materiality at the financial statement level
only
C. Directly
A. The reliability of audit evidence and its relevance in meeting the audit objective
B. When it is enough to provide a basis for giving reasonable assurance regarding
truthfulness
D. Worksheet supporting consolidated financial statements
B. The auditor concludes that the balance is materially misstated when in actual fact it not
D. Both A and C
A. The auditor has ascertained that the balance is materially correct when in actual fact it
is not
D. The auditor and his audit assistants
B. They should be considered as the principle support for the auditor’s report
A. The working papers may be obtained by third parties when they appear to be relevant
to issues raised in litigation
C. A copy of financial statements
B. Examination of financial statements
E. All of the above
A. Annual audit
D. Detailed audit
D. At the planning state, the auditor considers materiality at the financial statement level
only
C. directly
B. Effective internal control system provides reliable audit evidence
B. When it is enough to provide a basis for giving reasonable assurance regarding
truthfulness
D. Worksheet supporting consolidated financial statements
D. Both A. and C.