PREFACE

It gives me immense pleasure in presenting our CA Inter MCQ Book.

As per the said announcement of ICAI, CA Inter exam paper on “Auditing and Assurance” will
contain 30 marks of objective based questions.

Considering the same, I have come up with this book.

The book has the following salient features:

 More than 1000+ objective-based questions covering the entire syllabus on Audit Subject.
 More than 200 MCQ’s issued by ICAI have also been included and have been rearranged
chapter wise.
 Book also includes Integrated case study based MCQ’s issued by ICAI as well as case study
based MCQ’s other than ICAI.
 Important MCQs have been highlighted.
 MCQs are designed strictly based on ICAI material, past examination papers, revision test
papers and Mock Test Papers .
 All chapters and standards are covered.
 All MCQs including those issued by ICAI are drafted chapter wise covering each and every
concept.
 MCQs have been properly reviewed.
 Applicable for old and new course.
 Use of simple language for ease of understanding.
 Beneficial for better understanding and retention of the subject.

From inception to consummation, this project requires dedicated work, deep thinking and hours of
continuous desktop work. My immense gratitude to my parents and family for their continuous
support, which encourages me to accomplish my work. I also extend my heartfelt gratitude to the
efforts of my office staff for bringing this project into reality. I am thankful to Akash, Santosh for
their support and sincere efforts in publishing this June 2020 Edition of MCQ Book.

I hope that the students will be immensely benefitted with this book. However, there is always scope
for improvement. I will be grateful to the students for their valuable feedback for improvement of
this book.

Happy Studying!!!!

RAVI TAORI
AKASH HIRANI
Important Note: -
More than 60% chapters in study material are based on Standards on Auditing, Content is copied directly from
standards. After lot of research, observation and analysis, we have concluded that studying these chapters, SA
wise is much better as compared to studying chapter wise, as we are studying directly from source. Hence, we
have covered all chapters and concepts SA wise in this MCQ book also. So, you won’t find some chapter names
in index, don’t worry they are covered in respective SAs. We have covered everything
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Read Success Stories Discussion Points (Ask Doubts)

 Meaning of different terms used in “MCQ Book”

 MCQ Numbers
Numbers are specific to question and will remain as it is in future also. Use these
numbers to ask doubts at auditguru.in/discussion point. Examples of numbers
used in different sections of the book are as follows:
o Chapter Wise MCQ’s – 1, 2, 3
o ICAI MCQ ‘s – 200.1, 210.1, AAE.1, ICS .1

 Source of Question
o Practice Material & Study Material
 P17M- Practice Manual
 S17M- Study Material

o For RTP, Mock and Sample (Few examples)

RTP
 M17R - May 17 RTP
 N17R - Nov 17 RTP

Mock
 M17M - May 17 Mock
 N17M - Nov 17 Mock

Sample Set
 S-1 - Sample Set 1
 S-2 - Sample Set 2
 SEQUENCE TO STUDY

Complete first reading of the subject.

Solve MCQs issued by ICAI.

Mcq’s issued by ICAI arranged by us in order of chapters
&
Memory Based Exam MCQ Questions or Hint topics

Solve the highlighted MCQs.

Mcq’s prepared by us chapters wise on the basis of ICAI material, past examination
papers and revision test papers

For further practice solve other MCQs.

Mcq’s prepared by us chapters wise on the basis of ICAI material, past examination
papers and revision test papers
 INDEX
SR.NO TOPICS PAGE NO
1 SA 200 series* 01-19
2 SA 300 series* 19-29
3 SA 500 series* 30-43
4 SA 600 series* 44-45
5 SA 700 series* 46-55
6 Company Audit I 56-63
7 Company Accounts and Misc. 63-68
8 CARO 68-75
9 Internal Control System 75-78
10 Automated Audit Environment 78-80
(Only for New Course)
11 Bank Audit (Only for New Course) 80-83
12 Government Audit 83-88
13 Co-operative Society (Only for New Course) 88-91
14 Audit of Different types of Entities 91-99
15 Concepts in auditing 99-104
16 Audit of Items of financial statement (Only for New 105-119
Course)
17 Answer Key 120-124
18 MCQs issued by ICAI- RTP, MTP, Sample 125-170
19 ICAI Answer Key 171
Integrated Case Based MCQs
20 Issued by ICAI 172-176
Other than ICAI -For Practice 176-203
21 Case Based MCQs- Answer Key 204

*Note:
The following SAs are applicable for old course only from November 2019 exams-
 SA 260, SA 265, SA 402, SA 450, SA 540, SA 600, SA 620 & SA 720.
 These are not included in this book. However if someone wants, can contact to support team for
PDF

CARO
 ICAI is yet to declare which CARO will be applicable i.e 2016 or 2020. This book has content as per
CARO 2016. If ICAI makes CARO 2020 applicable we will issue changes on www.auditguru.in .

MCQ Sequence Numbers

 You may find that certain sequence numbers are missing. It is because of the additions and deletions
that we have made to previous editions. We do not change the MCQ number with every new edition.
MCQ numbers are unique and can be used for asking doubts at www.auditguru.in/disscussionpoint
CA RAVI TAORI
SA 200
1. Complete the following extract:
As per SA 200 -The overall objective of the
independent auditor includes obtaining a
___________assurance, that whether financial
statement as a whole is free from material
misstatement, whether due to ___________.
a) absolute; fraud
b) reasonable; fraud or error
c) reasonable; error
d) absolute; fraud or error
2. To report on the financial statement is an
objective of the auditor only under SA 700 and
hence SA 200 does not deal with the same.
a) True, SA 200 deals with general objectives
of the auditor and not with reporting on
the financial statements.
b) False, SA 200 deals with overall objectives
of the auditor which also includes
reporting on the financial statements as its
objective.
c) True, SA 200 deals with overall objectives
of the auditor which does not involves
reporting on the financial statements as its
objective.
d) False, as not only SA 200 requires
reporting on financial statements but also
specifies the content of the audit report.
3. To express an opinion on whether the financial
statements are prepared as per applicable
financial reporting framework is an objective of
the auditor only under SA 700 and hence SA 200
does not deal with the same.
a) True, SA 200 deals with general objectives of
the auditor and not with expressing an
opinion on whether the financial statements
are prepared as per applicable financial
reporting framework
b) False, SA 200 deals with overall objectives of
the auditor which also includes expressing an
opinion on whether the financial statements
are prepared as per applicable financial
reporting framework
c) True, SÁ 200 deals with overall objectives of
the auditor which does not involves
expressing an opinion on whether the
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CA INTER AUDIT MCQs
financial statements are prepared as per
applicable financial reporting framework.
d) False, as not only SA 200 specifies to express
an opinion on whether the financial
statements are prepared as per applicable
financial reporting framework but also
specifies the content of the audit report.
4. Identify the correct one:
Following is the principal objective of the
auditor:
a) Whether the financial statement show true &
fair view or not.
b) Whether the financial statement show true &
correct view or not.
c) Detection of error & fraud.
d) Making recommendation to prevent frauds
from occurring.
5. Identify the incorrect one:
Following is not the incidental and secondary
objective to the principal objective of the auditor:
a) Whether the financial statement show true &
fair view or not.
b) Whether the financial statement show full &
fair view or not.
c) Whether material misstatement is due to
error or fraud.
d) Making recommendation to prevent frauds
from occurring
6. Identify the correct one.
1. Auditor was not negligent but was not able
to detect a deep-laid fraud in accounts
during conduct of audit, it will be construed
as a failure of audit.
2. Auditor was not negligent but was not able
to detect a deep-laid fraud in accounts
during conduct of audit, it will not be
construed as a failure of audit.
3. Auditor was negligent and was not able to
detect a deep-laid fraud in accounts during
conduct of audit, it will not be construed as a
failure of audit.
4. Auditor was negligent and was not able to
detect a deep-laid fraud in accounts during
conduct of audit, it will be construed as a
failure of audit.
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CA RAVI TAORI
Options:
Options
a) 1 & 3
b) 2 & 3
c) 2 & 4
d) 1 & 4
7. Since Standards of Audit are mandatory in
nature. In case of conflict between Standards
of Audit & Law –
a) Standards of Audit will override the law
b) Law will override the Standards of
Auditing
c) Specific standards such as SA 805 will
override law
d) General standards such as SA 200 will
override law
8. __________ does not requires the auditor as its
objective in normal course to give opinion on
internal financial controls as its objective,
however _________requires the auditor to
comment on the internal financial controls. Later
overrides the earlier hence the auditor is required
to report on the same.
a) SA 200; Section 143 of the Companies Act
,2013
b) Section 143 of the Companies Act,2013; SA
200
c) SA 700
d) Section 143 of the Companies Act,2013
e) SA 200; Section 144 of the Companies
Act.,2013
9. __________ does not requires the auditor as its
objective in normal course to give opinion on
internal financial controls as its objective,
however _________requires the auditor to
comment on the internal financial controls
over financial reporting / with respect to
financial statements. Later overrides the
earlier hence the auditor is required to report
on the same.
a) SA 200; Section 143 of the Companies Act
,2013
b) Section 143 of the Companies Act,2013;
SA 200
c) SA 700; Section 143 of the Companies
Act,2013
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CA INTER AUDIT MCQs
d) SA 200; Section 144 of the Companies
Act.,2013
10. Identify the incorrect one:
SA 200 deals with overall objectives of the auditor
hence
a) Objectives of other specific SA's will be
irrespective of the overall objectives as
specified by SA 200
b) Objectives of other specific SA's will be in
context of SA 200.
c) Both of the above
d) None of the above
11. During the course of audit, auditor is not able to
obtain _________assurance due to ___________of
audit. Hence the auditor is required to obtain
___________assurance to form an opinion as its
objective as specified under SA 200.
a) absolute; Inherent limitations; reasonable
b) reasonable; Inherent limitations; absolute
c) absolute; external limitations; reasonable
d) absolute; external limitations; reasonable
12. Compliance framework allows ______________.
a) additional disclosure for better financial
presentation
b) amending requirement for better financial
presentation
c) Both the above
d) None of the above
13. Fair Presentation Financial Reporting framework
allows ______________.
a) additional disclosure for better financial
presentation
b) amending requirement for better financial
presentation
c) Any of the above
d) None of the above
14. Wording of opinion para in Fair Presentation
Financial Reporting framework?
a) Whether the financial statement give true &
fair view.
b) Financial statements are as per compliance
framework.
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CA RAVI TAORI CA INTER AUDIT MCQs

c) Whether the financial statement give full & 20. Inherent limitation due to Time & Cost
fair view. constraints does not includes:
d) Whether the financial statement give true & a) Expectations of Users to get information in
correct view. time
b) Sophisticatedly Designed Frauds are difficult
15. Wording of opinion para in Compliance to detect
framework? c) limited audit fees of assignment
a) Whether the financial statement give true & d) none of the above
fair View.
b) Financial statements are as per compliance 21. _________ Risk is a risk that auditor will form an
framework. inappropriate opinion when the financial
c) Whether the financial statement give full & statements are materially misstated.
fair View. a) Audit
d) Whether the financial statement give true & b) Sampling
correct view. c) Inherent
d) Detection
16. Due to inherent limitations of audit, the audit
evidence is ______________in nature rather 22. Identify the Risk:
than____________. Susceptibility of account balance or class of
a) persuasive; conclusive. transactions to material misstatement assuming
b) conclusive; persuasive. no internal control.
c) sufficient; appropriate. a) Audit Risk.
d) appropriate; sufficient. b) Inherent Risk.
c) Detection Risk.
17. Identify the incorrect one: d) Control Risk
Inherent limitation of audit may arise from:
a) Nature of financial reporting. 23. Identify the Risk:
b) Nature of audit procedures. Risk that Internal control system will not be able
c) Time & cost constraints to prevent, detect or correct material
d) None of the above misstatement.
a) Audit Risk.
18. Inherent limitation due to Nature of Financial b) Inherent Risk.
Reporting does not include: c) Detection Risk.
a) Judgement by management. d) Control Risk
b) Subjective decisions or assessments.
c) Auditor not having investigation powers. 24. Identify the Risk:
d) Range of Interpretations Risk that auditor procedures will not be able to
detect material misstatement.
19. Inherent limitation due to nature of audit a) Audit Risk.
procedures does not includes: b) Inherent Risk.
a) Judgement by management c) Detection Risk.
b) Sophisticatedly designed frauds d) Control Risk
c) Incomplete information provided by the
management whether intentionally or 25. The auditor shall exercise professional judgment
unintentionally in_______________ the audit of financial statements.
d) No powers of investigation with the
a) planning.
auditor
b) performing.
c) planning and performing.

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CA RAVI TAORI
d) Tallying Financial statements
26. Professional judgment is required but is not
essential for the proper conduct of an audit.
a) True, audit can be conducted without
professional judgment, it is not essential
for the proper conduct of an audit
b) False, audit cannot be conducted without
professional judgment, as it helps the
auditor in forming an opinion regarding
the evidence obtained, existence of risk
and nature timing and extend of audit
procedures to be applied.
c) True, interpretation of relevant ethical
requirements and the SAs and the
informed decisions required throughout
the audit do not need professional
judgment
d) False, audit cannot be conducted without
professional judgment, as it is one of the
threats to independence.
27. It is______________ that auditor complies with
relevant ethical requirements, relating to financial
statement audit engagements.
a) recommendatory.
b) mandatory.
c) optional
d) supplementary
28. It is______________ that auditor complies with
relevant Independence requirements, relating to
financial statement audit engagements.
a) recommendatory.
b) mandatory.
c) optional.
d) Supplementary
29. Identify the incorrect one:
The Code establishes the following as the
fundamental principles of professional ethics
relevant to the auditor when conducting an audit
of financial statements:
a) Objectivity
b) Confidentiality
c) Professional competence and due care
d) Professional Judgement of Management
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CA INTER AUDIT MCQs
30. The Code describes independence as comprising:
a) Independence of mind.
b) Independence in appearance.
c) Both, independence of mind & appearance.
d) Independence of mind, appearance &
attitude.
31. An attitude that includes a questioning mind,
being alert to conditions which may indicate
possible misstatement due to error or fraud.
a) Professional Judgement.
b) Professional Skepticism.
c) Inherent Skepticism.
d) Integrity
32. For Maintaining professional skepticism, the
auditor is necessarily required to disregard past
experience of the honesty and integrity of the
entity’s management and those charged with
governance.
a) True, as if the auditor takes into consideration
past experience of the honesty and integrity
of management and those charged with
governance, it will become lenient and soft
while applying the audit procedures due to
the confidence over the entity's management
and those charged with governance
b) False, the auditor cannot be expected to
disregard past experience of the honesty and
integrity of management and those charged
with governance. However, it does not relieve
the auditor of the need to maintain
professional skepticism.
c) True, as if the reliance is placed on the entity
on the basis of past experience then it would
be inappropriate and unethical to accept
same fees as work of the auditor has reduced.
d) False, as if the auditor does not take into
consideration past experience of the honesty
and integrity of management and those
charged with governance, it will be against
the principles laid down by SA 200
33. Identify the odd one out:
Maintaining professional skepticism throughout
the audit reduces the risks of:
a) Overlooking the unusual circumstances
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CA RAVI TAORI CA INTER AUDIT MCQs

b) Over generalizing when drawing conclusions d) test of controls

from audit observations.
c) Using inappropriate assumptions in SA 210
determining the nature, timing and extend of
the audit procedures.
38. Before thinking about acceptance & continuance
d) Inherent nature.
of audit, auditor is not required to
check________________.
34. Identify the correct one:
a) pre -conditions of audit
a) The auditor may accept records and
b) post-conditions of audit
documents as genuine unless the auditor has
c) limitation imposed by management
reason to believe the contrary.
prior to acceptance
b) The auditor should consider records and
d) all of the above
documents as incorrect unless the auditor
has reason to believe the contrary.
39. Before thinking about acceptance &
c) The auditor should consider records and continuance of audit, auditor is required to
documents as incorrect unless management check whether any limitations are imposed by
gives a written representation of records and management, which will result in the auditor
documents being correct disclaiming an opinion on the financial
d) None of the above statements. If yes, the auditor shall accept
only if:
35. The auditor shall comply with each a) Written representation is given by
requirement of a SA unless: management.
a) the entire SA is not relevant b) Management agrees that auditor will give
b) application of SA is subject to condition, modified opinion.
and the condition does not exist. c) Required by law
c) either of the above. d) None of the above.
d) none, as compliance with SA is mandatory
without any exceptions. 40. Before thinking about acceptance & continuance
of audit, auditor is required to check whether
36. Failure to achieve an objective represents: Limitation are imposed by management, if not
a) an insignificant matter requiring imposed, the auditor shall accept only if:
documentation in accordance with SA 230
b) a significant matter requiring
a) Written representation is given by
documentation in accordance with SA 230
management.
c) an insignificant matter and does not
b) Pre - condition exists.
requires documentation in accordance
c) Post - conditions exists.
with SA 230
d) a significant matter but does not requires d) None of the above.
documentation in accordance with SA 230
41. As per SA 210 Preconditions does not mean -
37. Identify the most suitable option: a) management should accept their
The auditor may judge it necessary to depart responsibility regarding preparation of the
from a relevant requirement in a SA. In such financial statements.
circumstances, the auditor shall perform b) management should accept their
______________to achieve the aim of that responsibility regarding preparation of the
requirement. Internal Control System.
a) alternative audit procedures c) providing auditor with information required
b) risk assessment procedures during course of audit.
c) substantive procedures

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CA RAVI TAORI CA INTER AUDIT MCQs

d) management should accept their b) Relevance

responsibility regarding written c) Reliability
representation in matters of conflict. d) Understandability

42. Which of the following is not an attribute of 48. Choose the correct one:
acceptable financial reporting framework? a) In case of recurring audits, the auditor is
a) completeness required to send engagement letter every
b) relevance year as a normal procedure.
c) accuracy b) In case of recurring audits, the auditor is not
d) reliability required to send engagement letter every
year as a normal procedure.
43. Which of the following is an attribute of c) Concept of engagement letter is no longer
acceptable financial reporting framework? applicable
a) Reasonableness d) Engagement letter is given by retiring auditor
b) Relevance to newly appointed auditor.
c) Accuracy
d) Redundancy 49. In which of the following cases new engagement
letter is required to be send in recurring audits?
44. Use of cost of goods sold for banking is a a) Revision in terms of engagement.
violation of which of the attributes of acceptable b) Change in nature & size of the business.
financial reporting framework? c) Change in management.
a) Completeness d) All the above.
b) Relevance
c) Reliability 50. Choose the correct one:
d) Neutrality a) If during the course of audit management
request for change in terms of audit, the
45. Practice that, “losses should be postponed till auditor shall record the new terms of the
required to pay and income should be booked engagement in an engagement letter, if no
as we get sale confirmation" is a violation of reasonable justification is provided.
which of the attributes of acceptable financial b) If during the course of audit management
reporting framework? request for change in terms of audit, the
a) Completeness
auditor shall not accept the change in terms
b) Relevance
and shall withdraw from the audit, if no
c) Reliability
reasonable justification is provided.
d) Neutrality
c) If during the course of audit management
request for change in terms of audit, the
46. Practice that " debtors & provision for doubtful
auditor shall accept such revised terms and
debt should be netted & shown at one place" is
shall not withdraw from the audit, even if no
a violation of which of the attributes of
reasonable justification is provided.
acceptable financial reporting framework?
d) None of the above
a) Completeness
b) Relevance
51. Choose the correct one:
c) Reliability
a) If during the course of audit, management
d) Understandability
request for change in terms of audit, the
auditor shall record the new terms of the
47. Practice of “not disclosing contingent liabilities "
engagement in an engagement letter, if no
is a violation of which of the attributes of
reasonable justification is provided.
acceptable financial reporting framework?
a) Completeness
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CA RAVI TAORI
b) If during the course of audit management
request for change in terms of audit, the
auditor shall record the new terms of the
engagement in an engagement letter, if
reasonable justification is provided.
c) If during the course of audit management
request for change in terms of audit, the
auditor shall not record the new terms of the
engagement in an engagement letter, if
reasonable justification is provided.
d) None of the above
52. Choose the correct one:
a) Engagement letter is recommendatory at the
time of acceptance of audit.
b) Engagement letter is mandatory at the time
of acceptance of audit.
c) Concept of engagement letter is no longer
applicable
d) Engagement letter is given by retiring auditor
to newly appointed auditor.
53. Choose the correct one:
a) If law prescribes terms of engagement, then
auditor should not include it again in the
written engagement letter.
b) Terms of engagement should always be
included in the written engagement letter as
it decides the objectives of audit.
c) Terms of engagement may be excluded in the
written engagement letter at the instance of
the mutual agreement.
d) Terms of engagement may be excluded in the
written engagement letter if written
representation for the same is received from
management.
54. Identify the mandatory clause of engagement
letter from below:
a) Restriction of the auditor’s liability.
b) Obligations to provide audit working papers
to other parties.
c) basis on which fees are computed and any
billing arrangements
d) Reference to the expected form and content
of audit reports
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CA INTER AUDIT MCQs
55. Identify the non-mandatory clause of
engagement letter from below:
a) Responsibilities of management.
b) Obligations to provide audit working papers
to other parties.
c) Responsibilities of the auditor
d) Reference to the expected form and content
of audit reports
SA 220
56. SA 220 deals with:
a. Quality control at firm level.
b. Quality control at professional level.
c. Quality control at assignment level.
d. Quality control at branch level.
57. SQC 1 deals with:
a) Quality control at firm level.
b) Quality control at professional level.
c) Quality control at assignment level.
d) Quality control at branch level.
58. Who should take responsibility to maintain
quality in the assignment?
a. Engagement partner
b. Senior Manager
c. Head of the firm
d. In-charge of the firm
59. A partner working on an assignment due to
some reasons left, and a new partner takes off
his work. What should be done by the new
partner?
a) If the assignment was well planned, no
need to do anything.
b) He should replan and reperform the
assignments.
c) He should do proper review of the
documents regarding audit performed
then decide what to do.
d) He should not accept such assignment
60. To whom from the following quality control
review is mandatory.
a. Public Companies
b. Government Companies
c. Listed Companies
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CA RAVI TAORI
d. All of the above
61. What is the work of consultants?
a) Consultants are part of the engagement team
b) They work along with engagement team
members
c) They review work of engagement team
member
d) They advise the engagement team members
62. Senior manager of the firm is a whole and sole
in charge of 15-year-old streamlined audit
assignment, is this approach correct?
a) Yes, policy of the firm to appoint senior
manager is correct.
b) No, engagement partner should be
appointed.
c) Yes, policy of the firm to appoint senior
manager is correct as he has proper
experience to handle such assignment
d) No, even though the senior manager is an
experienced, engagement partner should
be there.
63. In case of difference of opinion between senior
manager and junior manager, whose opinion
shall prevail?
a. Senior manager opinion shall prevail
b. Junior manager opinion shall prevail
c. Logically whose opinion is correct shall
prevail
d. Matter should be resolved as per firm’s policy
64. When the assignment shall be signed?
a) after completing review.
b) after completion of engagement quality
control review
c) before completing review.
d) before completion of engagement quality
control review
65. In an engagement quality control review what
does the reviewer writes in the end?
a) Financial statements give true and fair view
b) Audit records give true and fair view
c) Work was done properly
d) He did not come across any instance that
shows any issue was not resolved
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CA INTER AUDIT MCQs
66. "Responsibility to train junior team members was
given to another junior member of the firm."
a) Not wrong, if the junior team’s member was
smart enough to take such responsibility.
b) Responsibility to train junior team members
shall be always given to senior and
experienced person.
c) Junior teams’ member can take such
responsibility in case of unavailability of
senior team members.
d) None of the above
67. Junior team member was given responsibility to
give directions to another team members in an
audit assignment.
a) Not wrong if the junior team’s member was
smart enough to take such responsibility.
b) Responsibility to direct junior team members
shall be always given to senior and
experienced person
c) Junior teams’ member can take such
responsibility in case of unavailability of
senior team members
d) None of the above
68. Who shall do supervision and review of the audit
assignment?
a) Junior team member
b) Senior team member
c) Team member of same level
d) None of the above
69. SA 220 and SQC 1 are one and the same thing?
a) SA 220 deals with implementation of quality
controls in audit of historic financial
statements whereas SQC 1 deals with
implementation of quality controls in all of
the assignments taken up by the firm
b) SQC 1 deals with implementation of quality
controls in audit of historic financial
statements whereas SA 220 deals with
implementation of quality controls in all of
the assignments taken up by the firm
c) Yes SA 220 and SQC 1 are one and the same
thing. Both deals with quality.
d) None of the above
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CA RAVI TAORI CA INTER AUDIT MCQs

70. Is SA 220 being applicable in compilation of 73. Is SQC 1 is applicable in compilation of financial
financial statements? statements?
1. Yes, SA 220 is applicable in compilation of 1. Yes, SQC 1 is applicable in case of
financial statements compilation financial statements
2. No, SÁ 220 is not applicable in compilation of 2. No SQCL 1 is not applicable in case of
financial statements compilation financial statements
3. Yes, SA 220 is applicable in compilation of 3. Yes, SQC 1 is applicable to all assignments
financial statements with certain restrictions taken by the firm
4. No, SA 220 is applicable only in case of audit 4. No, SQC 1 is applicable only in case of audit
of historic financial statement of historic financial statement
Options: Options:
a) 1 & 3 a) 1 & 3
b) 2 & 4 b) 2 & 4
c) 1 & 4 c) 1 & 4
d) 2 & 3 d) 2 & 3

71. Is SA 220 being applicable in case of prospective SA 230

financial statements?
1. Yes, SA 220 is applicable in case of
74. Identify the incorrect one:
prospective financial statements
Audit Documentation means Record of:
2. No, SÁ 220 is not applicable in case of
a) Audit procedures performed.
prospective financial statements
b) Relevant audit evidence obtained.
3. Yes, SA 220 is applicable in case of
c) Conclusions the auditor reached
prospective financial statements with certain
d) None of the above
restrictions
4. No, SA 220 is applicable only in case of audit
75. Working papers means audit documentation:
of historic financial statement.
a) True, terms such as “working papers” or
Options:
“work papers” are also sometimes used for
a) 1 & 3
audit documentation
b) 2 & 4
b) False, working papers and audit
c) 1 & 4
documentations are completely different
d) 2 & 3
things.
c) False, “only current years working papers” or
72. Is SQC 1 is applicable in case of prospective
“only current years’ work papers” can be
financial statements?
referred as audit documentation
1. Yes, SQC 1 is applicable in case of
d) True, however such statement holds good
prospective financial statements
only in case of permanent working papers.
2. No, SQC 1 is not applicable in case of
prospective financial statements
3. Yes, SQC 1 is applicable to all assignments 76. Audit documentation may be recorded on:
taken by the firm a) only paper
4. No, SQC 1 is applicable only in case of b) electronic or paper media
audit of historic financial statement c) paper or other media.
Options: d) paper, electronic or other media
a) 1 & 3
b) 2 & 4 77. Arrange the audit documentation in sequence:
c) 1 & 4 1. Audit programmes
d) 2 & 3 2. Issus memoranda.
3. Letters of representation
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CA RAVI TAORI CA INTER AUDIT MCQs

4. Checklists d) copies of audited financial statements for

Options: previous years
a) 1/4/2/3
b) 4/2/1/3 83. Temporary Audit File does not include-
c) 3/2/1/4 a) communications with other auditors,
d) 1/2/4/3 experts and other third parties.
b) letters of representation or confirmation
78. Identify the correct one: received from the client
a) Audit documentation is not a substitute for c) conclusions reached by the auditor
d) legal and organizational structure of the
the entity’s accounting records.
entity.
b) Audit documentation can be used as a
substitute for the entity’s accounting records.
84. Following are _________ proportionate to the
c) Audit documentation is another name for the
extent of audit documentation.
entity’s accounting records.
Size/Complexity/Risk/Nature and extent of
d) All of the above
exceptions.
a) directly
79. Identify the correct one:
b) indirectly
a) Audit documentation is auditor’s property.
c) reverse
b) Audit documentation is clients’ property.
d) converse
c) Audit documentation is joint property of
auditor’s & clients.
85. The auditor shall assemble the audit
d) Audit documentation is client’s property in
documentation in an audit file and complete the
custody of auditor
administrative process of assembling the final
audit file on a timely basis __________________.
80. Identify the incorrect one:
a) before the date of the auditor’s report
Audit documentation serves a number of
b) after the date of the auditor’s report
additional purposes, including the following:
c) before the end of 1 year from financial year
a) Enabling the engagement team to be
to which such auditor’s report relate
accountable for its work (but cannot be used
d) before the report of approving authority
as an evidence against charges of negligence)
b) Retaining a record of matters of continuing
86. Identify the correct option:
significance to future audits
1) The auditor can delete or discard audit
c) Enabling the conduct of quality control
documentation after the end of its retention
reviews
period.
d) Enabling the conduct of Inspection.
2) The auditor shall not delete or discard audit
documentation before the end of its
81. What are different types of audit files?
retention period.
a) Fixed & current audit file.
3) The auditor can delete or discard audit
b) Fixed & flexible working file.
documentation before the end of its
c) Permanent & current audit file.
retention period.
d) Permanent & temporary audit file.
4) The auditor cannot delete or discard audit
documentation after the end of its retention
82. Permanent audit file does not include-
period.
a) significant audit observations of earlier years
Options:
b) analysis of significant ratios and trends.
a) 1 & 2
c) evidence that the work performed by
b) 1 only
assistants was supervised and reviewed
c) 3 & 4
d) A & D
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87. SQC -1 requires firms to establish policies and
procedures for the timely completion of the
assembly of audit files. An appropriate time limit
within which to complete the assembly of the
final audit file is ordinarily ______________________.
a) not more than 30 days after the date of the
auditor’s report
b) not more than 60 days after the date of the
auditor’s report
c) not more than 90 days after the date of the
auditor’s report
d) not more than 120 days after the date of the
auditor’s report
88. Changes may, however, be made to the audit
documentation during the final assembly process
if they are __________ in nature.
a) managerial.
b) administrative
c) operational
d) Any of the above
89. SQC 1 requires firms to establish policies and
procedures for the retention of engagement
documentation. The retention period for audit
engagements ordinarily is:
a) no shorter than seven years from the date of
the auditor’s report, or, if later, the date of the
group auditor’s report.
b) no longer than seven years from the date of
the auditor’s report, or, if later, the date of the
group auditor’s report.
c) no shorter than eight years from the date of
the auditor’s report, or, if later, the date of the
group auditor’s report.
d) no shorter than seven years from the date of
the auditor’s report, or the date of the group
auditor’s report whichever is earlier.
90. Identify the incorrect one:
The auditor should not disclose information
acquired in the course of his work to a third party:
a) Without consent of his client.
b) Unless professional duty to disclose.
c) Unless required by any law.
d) Unless for the benefit of the society.
91. Audit documentation is the property of the
___________.
a) Auditor
b) Client
c) Management
d) Shareholders
92. Choose the correct one:
a) The main auditors of an enterprise do not
have right of access to the audit working
papers of the branch auditors.
b) the main auditors of an enterprise do have a
right of access to the audit working papers of
the branch auditors since branch report is
also considered while forming opinion on the
whole enterprise.
c) Both of the above
d) None of the above
93. Choose the correct one:
a) An auditor can rely on the work of another
auditor, only if having right of access to the
audit working papers of the other auditor.
b) An auditor can rely on the work of another
auditor, without having any right of access to
the audit working papers of the other auditor
c) Both of the above
d) None of the above
94. A summary retained as part of the audit
documentation that describes the significant
matters identified during the audit and how they
were addressed or cross- references to other
relevant supporting audit documentation that
provides such information.
a) Audit notebook
b) Completion memorandum
c) Permanent audit file
d) Temporary audit file
95. An _________is usually a bound book in which a
large variety of matters observed during the
course of audit are recorded.
a) audit notebook
b) completion memorandum
c) audit memorandum
d) memorandum notebook

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96. Audit notebook is thus a part of the __________
record.
a) permanent
b) temporary
c) alternate
d) short
(Note: Permanent audit record and permanent
audit file are different terms; all audit files are
permanent records)
97. ____________also provides a valuable help to the
auditor in picking up the links of work when the
concerned assistant is away, or the work is
stopped temporarily
a) Audit notebook
b) Completion memorandum
c) Audit memorandum
d) Memorandum Notebook'
98. ________contains observations, the
various queries, explanations obtained, and
evidence seen.
a) Audit notebook
b) Completion memorandum
c) Audit memorandum
d) Memorandum Notebook
99. Select the correct option:
a) The auditor need not include in audit
documentation superseded drafts of working
papers.
b) The auditor should also include in audit
documentation superseded drafts of working
papers.
c) Both of the above.
d) None of the above.
100. Identify the correct one:
a) As per general principles & ICAEW exercising
lien may seem illogical but as per Sec 128 of
companies act/Supreme Court Judgement/
ESB Announcement it is practical to exercise
lien and it will not lead to misconduct.
b) As per general principles & ICAEW exercising
lien may seem logical but as per Sec 128 of
companies act / Supreme Court Judgement /
ESB Announcement it is impractical to
exercise lien and it will lead to misconduct.
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CA INTER AUDIT MCQs
c) As per Sec 128 of companies act / Supreme
Court Judgement / ESB Announcement
exercising lien may seem logical but as per
general principles & ICAEW it is impractical to
exercise lien and it will lead to misconduct.
d) As per general principles, ICAEW, Supreme
Court Judgement & ESB Announcement
exercising lien may seem logical but as per
Sec 128 of companies act it is impractical to
exercise lien and it will lead to misconduct.
101. Is preparation of Summary of Completion or
Completion Memorandum mandatory in each
audit assignment?
a) Yes, it gives bird's eye view of significant
matters in audit assignment
b) Yes, its mandatory and it should be in
format that experienced auditor should be
able to understand it.
c) No, such requirement doesn’t exist in
India, it is required for European audits
d) No, it is not mandatory. It can be prepared
if audit team finds it useful.
SA 240
102. Fraud means-
a) an intentional act by someone to obtain an
unjust or illegal advantage over other.
b) an unintentional act by someone to obtain an
unjust or illegal advantage over other.
c) an intentional act by someone to obtain just
or legal advantage over other.
d) an unintentional act by someone to obtain
just or legal advantage over other.
103. Identify the incorrect one:
a) Auditor may suspect or identify fraud and
report
b) it but it is not his responsibility to prove it in
court of law.
c) Auditor may suspect or identify fraud and
report
d) it and it is also his responsibility to prove it in
court of law.
104. Fraudulent financial reporting and
misappropriation of assets are examples of
_________________
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CA RAVI TAORI
a) intentional misstatements
b) unintentional misstatements
c) inadvertent misstatements
d) involuntary misstatements"
105. Identify the type of intentional misstatements:
Financial statements are intentionally prepared in
such a manner that they do not show true and
fair view regarding the affairs of the company.
a) Fraudulent financial reporting:
b) Misappropriation of assets
c) Misappropriation in financial reporting
d) None of the above
106. Identify the type of intentional misstatements:
Acts which involves theft of entities assets. Ways
may differ, but ultimate effect will be reduction in
entities assets.
a) Fraudulent financial reporting:
b) Misappropriation of assets
c) Misappropriation in financial reporting
d) None of the above
107. Omission, manipulation, misapplication is used
in
a) fraudulent financial reporting.
b) misappropriation of assets
c) misappropriation in financial reporting
d) none of the above
108. There had been a rise in equity share capital,
but company did not disclose that such
increase is through issue of bonus shares.
Identify to what the above transaction relates
to the most?
a) Omission (Left out)
b) Manipulation (Falsify)
c) Misapplication (Judgement)
d) None of the above
109. MBA fees paid for children of directors was
shown as employee development expenses.
Identify to what the above transaction relates to
the most?
a) Omission (Left out)
b) Manipulation (Falsify)
c) Misapplication (Judgement)
d) None of the above
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110. Suddenly increasing useful life to reduce
depreciation and increase profits, increasing %
completion of WIP to increase profits. Identify to
what the above transaction relates to the most?
a) Omission (Left out)
b) Manipulation (Falsify)
c) Misapplication (Judgement)
d) None of the above
111. Misappropriating collections received of
accounts receivable. Identify to what the above
transaction relates to the most?
a) Embezzling receipts
b) Stealing physical assets or intellectual
property
c) Causing an entity to pay for goods and
services not received
d) Using an entity’s assets for personal use
112. Payments to fictitious employees. Identify to
what the above transaction relates to the
most?
a) Embezzling receipts
b) Stealing physical assets or intellectual
property
c) Causing an entity to pay for goods and
services not received
d) Using an entity’s assets for personal use
113. Stealing inventory or scrap for resale. Identify to
what the above transaction relates to the most?
a) Embezzling receipts
b) Stealing physical assets or intellectual
property
c) Causing an entity to pay for goods and
services not received
d) Using an entity’s assets for personal use
114. Using the entity’s assets as collateral for a
personal loan. Identify to what the above
transaction relates to the most?
a) Embezzling receipts
b) Stealing physical assets or intellectual
property
c) Causing an entity to pay for goods and
services not received
d) Using an entity’s assets for personal use"
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CA RAVI TAORI CA INTER AUDIT MCQs

115. Incentive, pressure, opportunity, attitude are the documentation necessary even if auditor
_______ factors. concludes that such presumption is not
a) Fraud Risk. applicable.
b) Error Risk. c) When identifying and assessing the risks of
c) Risk. material misstatement due to fraud, the
d) Material. auditor shall pre-assume that there are risks
of fraud of capital nature. Documentation
116. Risk of not detecting _______ is higher than necessary if auditor concludes that such
not detecting _______. presumption is not applicable.
a) fraud; error d) When identifying and assessing the risks of
b) error; fraud material misstatement due to fraud, the
c) omission; scam auditor shall pre-assume that there are risks
d) fault; hoax of fraud of capital nature. No documentation
necessary even if auditor concludes that such
117. Risk of not detecting ________ is more than presumption is not applicable.
detecting _________
a) employee fraud; management fraud. 121. If any fraud by the company, or any fraud on the
b) management fraud; employee fraud. company by its officers or employees has been
noticed or reported during the year, under which
118. It is ___________ to perform analytical procedures clause of CARO reporting is required to be done?
on __________ accounts to identify unusual or a) Clause (x).
unexpected relationships. b) Clause (ix).
a) compulsory; revenue c) Clause (xi).
b) recommendatory; revenue d) Clause (xii)
c) compulsory; capital
d) recommendatory; capital SA 250
119. When identifying, and assessing the risks of
122. As per SA 250, following is not the responsibility
material misstatement due to fraud, the auditor
of auditor:
shall pre-assume that there are risks of fraud in
a) To check whether entity is complying with
__________
applicable framework.
a) asset recognition
b) Obtaining understanding of legal and
b) revenue recognition
regulatory framework applicable.
c) liability recognition
c) Ensuring that the entity’s operations are
d) equity recognition.
conducted in accordance with laws and
regulation.
120. Identify the correct one:
d) All of the above
a) When identifying and assessing the risks of
material misstatement due to fraud, the
123. As per SA 250, following is the responsibility of
auditor shall pre-assume that there are risks
management:
of fraud in revenue recognition.
a) To check whether entity is complying with
Documentation necessary if auditor
applicable framework.
concludes that such presumption is not
b) Obtaining understanding of legal and
applicable
regulatory framework applicable.
b) When identifying and assessing the risks of
c) Ensuring that the entity’s operations are
material misstatement due to fraud, the
conducted in accordance with laws and
auditor shall pre-assume that there are risks
regulation.
of fraud in revenue recognition. No
d) All of the above
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124. The auditor shall obtain sufficient appropriate financial statements have been disclosed to the
audit evidence regarding __________ with the auditor.
provisions of those laws and regulations a) False
generally recognized to have a direct effect on b) True
the financial statements.
a) compliance 130. Which from the following are not expected have
b) non-compliance material effect on the financial statements?
c) dissent a) Prevention of Terrorism Act
d) none of the above b) Factory Act
c) Industrial Dispute Act
125. Which from the following may not have direct d) Environment Act
effect on the financial statements?
a) Payment of Gratuity Act 131. Select the incorrect one:
b) Income Tax Act As per SA 250-
c) Industrial Dispute Act a) Non-compliance related to financial aspects
d) Payment of Bonus of an entity affecting the financial statements,
will be easy to detect by the auditor.
126. Which from the following are not expected to b) Non-compliance related to operational
have material effect on the financial statements? aspects of an entity affecting the financial
a) Prevention of Terrorism Act statements, will be easy to detect by the
b) Factory Act auditor.
c) Industrial Dispute Act
d) Environment Act" 132. Which non-compliance from the following will
be difficult for auditor to detect?
127. In case of laws having direct impact on a) Noncompliance related to operational
financial statement, the auditor shall check matters
compliance by performing the following audit b) Concealed non-compliance
procedures: c) Tricky issues with contradictory Case laws
a) Inquiry d) All of the above.
b) Observation
c) Inspection
133. Which from the following is not a non-
d) All the above
compliance indicator?
a) Adverse media comment
128. In case of laws that may have material impact on
b) Unusual legal fees
financial statement, the auditor shall check non-
c) Award by government
compliance by performing the following audit
d) Investigations
procedures except:
a) Inquiry
134. Select the correct one:
b) Observation
a) If the auditor has identified non-
c) Inspection compliance with laws and regulations,
d) All of the above auditor can report it to outside the entity,
if in public interest and would not be
129. State whether true or false: considered as misconduct under CA Act
The auditor shall request management and and non-compliance of SA 250.
TCWG to provide written representations that all b) If the auditor has identified non-
known instances of non-compliance or suspected compliance with laws and regulations,
non-compliance with laws and regulations whose auditor can report it to outside the entity,
effects should be considered when preparing if required by law and would not be

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considered as misconduct under CA Act & 139. If the auditor is unable to determine whether
non-compliance of SA 250. non-compliance has occurred because of
c) If the auditor has identified non- limitations imposed by the circumstances,
compliance with laws and regulations however if there is appropriate disclosure in
auditor can report it to outside the entity notes to accounts of the above fact, the auditor
if required by law but would be considered
shall express:
as misconduct under CA Act & Non-
a) Qualified/Disclaimer of opinion.
Compliance of SA 250.
b) Unmodified opinion + EMP.
d) All of the above.
c) Qualified/ Adverse opinion
d) Any of the above"
135. While reporting for noncompliance in audit
report, if auditor concludes that non-compliance
140. All non-compliance (material + immaterial) shall
has a material impact on the financial statements,
be informed to:
and has not been adequately reflected in the
a) Management
financial statements the auditor shall express:
b) TCWG
a) Qualified/Disclaimer of opinion.
c) Both
b) Unmodified opinion.
d) None of the above.
c) Qualified/ Adverse opinion
d) Any of the above
141. All non-compliance (material) shall be Informed
to:
136. The auditor shall obtain sufficient appropriate
a) Management
audit evidence regarding __________ with the
b) TCWG
provisions of those laws and regulations that may
c) Both
have a material effect on the financial statements.
d) None of the above.
a) compliance
b) non-compliance
c) any of the above

137. If the auditor is precluded by management

or those charged with governance from
obtaining sufficient and appropriate audit
evidence with regards to non-compliances
that may be material to the financial
statements, the auditor shall express:
a) Qualified/Disclaimer of opinion.
b) Unmodified opinion.
c) Qualified/ Adverse opinion
d) Any of the above

138. If the auditor is unable to determine whether

non-compliance has occurred or not, because of
limitations imposed by the circumstances and if
there is no appropriate disclosure in notes to
accounts of the above fact, the auditor shall
express:
a) Qualified/Disclaimer of opinion.
b) Unmodified opinion.
c) Qualified/ Adverse opinion
d) Any of the above

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SA 299
166. For conducting the audit of large entities more
than one auditor may be appointed. Such other
auditors are known as________
a) group auditors.
b) component auditor
c) joint auditor.
d) principal auditor"
167. Identify the incorrect one:
a) SA 299 does not deal with the relationship
between a principal auditor who is appointed
to report on the financial statements of an
entity and another auditor who is appointed
to report on the financial statements of one
or more component.
b) SA 299 does deals with the relationship
between a principal auditor who is appointed
to report on the financial statements of an
entity and another auditor who is appointed
to report on the financial statements of one
or more component.
c) SA 299 does deals with the relationship
between two or more auditors who are
appointed for conduct of an audit of
common entity.
d) None of the above
168. Which from the following are not the
advantages of appointing a joint auditor?
a) Pooling of expertise in different area
b) Lower costs to carry out the audit work.
c) Sharing of fees.
d) If one auditor leaves the audit than other
will continue
169. ____________________ of each joint auditor shall be
involved in planning the audit.
a) Engagement Partner
b) Other Key Member
c) Both the above
d) Any of the above
170. Identify the correct one:
a) Establishing an overall audit strategy guides
in the development of the audit plan.
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CA INTER AUDIT MCQs
b) Establishing an audit plan guides in the
development of the overall audit strategy.
c) Establishing an overall audit strategy is same
as developing of an audit plan.
d) None of the above is correct.
171. Identify the correct one:
a) Prior to the commencement of the audit,
the joint auditors shall discuss an overall
audit strategy and as the audit proceeds
shall develop a joint audit plan.
b) Prior to the commencement of the audit,
the joint auditors shall discuss an overall
audit strategy and develop a joint audit
plan.
c) Prior to the commencement of the audit,
the joint auditors shall discuss a joint audit
plan and as the audit proceeds shall
develop an overall audit strategy
d) None of the above is correct
172. Division of audit areas that are too important
and critical to the entity may be on the basis of:
a) Business units.
b) Specified areas.
c) Assets or liabilities, income or expenses or
other components of financial statement.
d) It will not be divided and covered by all
173. Identify the correct one:
a) Audit areas that are too important and critical
to the entity may be divided by mutual
discussion on the basis of business units,
specified areas, assets or liabilities, income or
expense.
b) Audit areas that are too important and critical
to the entity would not be divided and
covered by all joint auditor.
c) Audit areas that are too important and critical
to the entity may be divided by mutual
discussion may not be divided or may be
divided on the basis of business units,
specified areas, assets or liabilities, income or
expense.
d) None of the above is correct.
174. Identify the correct one:
a) Risks of material misstatement need to be
considered and assessed jointly for common
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CA RAVI TAORI
audit areas and Separately for specific
allotted areas to each of the joint auditors
and shall be communicated to other joint
auditors if it affects work or area of the other
joint auditor.
b) Risks of material misstatement need to be
considered and assessed jointly for specific
allotted areas and Separately for common
audit areas to each of the joint auditors and
shall be communicated to other joint
auditors.
c) Risks of material misstatement need to be
considered and assessed for common audit
areas and for specific allotted areas by each
of the joint auditor and shall be always
communicated to another joint auditor.
d) Risks of material misstatement need to be
considered and assessed jointly for specific
allotted areas and Separately for common
audit areas to each of the joint auditors and
shall be communicated to other joint auditors
if it affects work or area of the other joint
auditor.
175. Identify the correct one:
a) The joint auditors shall always discuss and
document the nature, timing, and the extent
of the audit procedures for common and
specific allotted areas of audit to be
performed by each of the joint auditors and
the same shall be communicated to those
charged with governance
b) The joint auditors shall discuss and document
the nature, timing, and the extent of audit to
be performed by each of the joint auditors
only for common areas of audit and the same
shall be communicated to those charged with
governance
c) The joint auditors shall discuss and document
the nature, timing, and the extent of audit to
be performed only for specific allotted areas
of audit and the same shall be communicated
to those charged with governance
d) The joint auditors shall discuss and document
the nature, timing, and the extent of the audit
procedures for common areas of audit and
specific allotted areas if it affects work or area
of the other joint auditor and the same shall
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CA INTER AUDIT MCQs
be communicated to those charged with
governance and shall be communicated to
other joint auditors
176. Joint Auditors shall not be separately and
individually responsible for:
a) Assessment of risk relating to the areas of
work allocated.
b) Evaluation of internal control relating to
the areas of work allocated
c) Nature, timing and extent of the audit
procedures for work allocated to said joint
auditor.
d) Presentation and disclosure requirement
of financial statement.
177. Joint auditors shall not be jointly responsible for:
a) Work not divided.
b) Decisions taken by all the joint auditor
together w.r.t nature, timing and extend of
the audit procedures for common audit
areas.
c) Ensuring that audit report complies with
statutes, the app. SA’s and the relevant
pronouncements issued by ICAI.
d) Evaluation of internal control relating to the
areas of work allocated.
178. Identify the correct option with respect to
the following statement:
ABC & Co. and DEF & Co, Chartered
Accountant firms were appointed as joint
auditors of Good Health Care Ltd. for 2009-
10. A special audit was conducted during
March 2011 and observed gross
understatement of Revenue.
The revenue aspects were looked after by
DEF & Co, but there was no documentation
for the division of work between the joint
auditors":
a) ABC & Co. has not reviewed the work as they
have put their reliance on the work
performed by DEF & Co, there is a violation
of SA 299 as the division of work has not been
documented. In the normal course DEF & Co.
and ABC & Co. jointly will be held liable for
negligence.
b) there is a violation of SA 299 as the division
of work has not been documented. In the
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CA RAVI TAORI CA INTER AUDIT MCQs

normal course DEF & Co. will be held liable
for negligence. If DEF & Co. refuses to accept
sole responsibility for the fault, ABC & Co.
have to prove by other ways and means of
evidences that the particular area of audit
was exclusively done by DEF & Co. only.
179. Identify the incorrect one:
During the course of the audit, joint auditor shall
communicate to the other joint auditor in writing
prior to the completion of the audit:
a) Matters which are relevant and deserve
attention of the other joint auditor.
b) Matters which are relevant and require
disclosure.
c) Matters which are relevant and require
discussion.
d) Matters which are relevant and does not
require application of judgment by other
joint auditors."
180. Identify the incorrect one:
a) It is necessary to review/tests whether work
has been performed as per relevant SA’s, or
whether the other joint auditor have brought
to the notice of any departure from
applicable financial reporting framework.
b) It is not necessary to review/tests whether
work has been performed as per Relevant
SA’s or whether the other joint auditor have
brought to the notice of any departure from
applicable financial reporting framework.
181. Identify the incorrect one:
a) Before finalizing their audit report joint
auditor shall discuss and communicate with
other joint auditors’ their respective
conclusions that would form the content of
the audit report.
b) Before finalizing their audit report joint
auditors’ may discuss and communicate with
other joint auditors’ their respective
conclusions that would form the content of
the audit report.
c) Joint auditor is not bound by views of the
majority regarding opinion or matters to be
covered in the audit report.
d) In case of disagreement in opinion, joint
auditor shall express their opinion in a
different audit report.
182. Identify the incorrect one:
a) Joint auditor is bound by views of the
majority regarding opinion or matters to
be covered in the audit report.
b) In case of disagreement in opinion, joint
auditor shall express their opinion in a
common audit report.
c) In case of disagreement reference shall be
made under the heading “Emphasis of
Matter Paragraph” as per Revised SA 706”.
d) All are incorrect.
183. Identify the correct one:
A. In case joint auditor expects to modify the
report, circumstances that led to the
expected modification and the proposed
wording of the modification to ensure
compliance with revised SA 705 shall be
communicated to TCWG.
B. In case joint auditor expects to include
emphasis of matter para or another matter
para in the report, expectation and the
proposed wording of this paragraph to
ensure compliance with revised SA 706 shall
be communicated to TCWG.
Options:
a) Only A is correct.
b) Only B is correct
c) Both A & B Are correct.
d) Both A & B Are incorrect.
SA 300
184. Nature and extent of planning is
_____________proportional to size and complexity
of the Auditee
a) directly
b) Inversely
c) not
d) none of the above
185. Nature and extent of planning is
_____________proportional to past experience and
expertise of the auditor.

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CA RAVI TAORI CA INTER AUDIT MCQs

a) directly c) External party of whose confirmation is

b) inversely required.
c) not
d) none of the above 192. The auditor discusses elements of planning
with the management to facilitate the conduct
186. Nature and extent of planning is and management of the audit engagement.
_____________proportional to change in Thus, the overall audit strategy and the audit
circumstances. plan is the responsibility of:
a) directly a) Auditor
b) Both Auditor & Management.
b) inversely
c) Both Auditor & Management (only if
c) not
written consent given)
d) none of the above
d) Any of the above

187. Identify the correct one:

193. Who shall not be involved in discussing the
Planning is not a ________ phase of an audit
nature and timing of detailed audit procedures?
a) continuous
a) The engagement partners
b) discrete
b) other key members of engagement team
c) iterative
c) Audit Staff
d) None of the above
d) Key management personnel of the entity

188. _________ planning activities would be required

194. Discussing the nature and timing of detailed
in entity whose size and complexity are more as
audit procedures with management may
compared to an entity whose size and complexity
compromise the ______________ of the audit by
is less.
making the audit procedures too predictable.
a) More.
a. effectiveness.
b) Less.
b. efficiency.
c. audit fees.
189. Identify the correct option:
d. auditor’s judgement "
a) Audit strategy means overall audit plan.
b) Audit strategy involves overall audit plan.
195. Identify the incorrect one:
c) Overall audit plan and Audit strategy are not
The auditor shall undertake the following
related to each other
activities at the beginning of the current audit
engagement (preliminary engagement activity):
190. Planning does not need to consider:
a) Acceptance and continuance procedures
a) The analytical procedures to be applied as
required by SA 220
risk assessment procedures.
b) Evaluating compliance with ethical
b) Obtaining a general understanding of the
requirements as required by SA 220.
entity.
c) Establishing an understanding of the terms of
c) The determination of materiality
the engagement, as required by SA 210.
d) None of the above
d) Performing procedures required by SA 240"

196. Which from the following is not a synonym to

191. Identify the incorrect one:
another options?
The auditor may decide to discuss elements of
a) Overall Audit Plan
planning to facilitate the conduct and
b) Overall Audit Strategy
management of the audit engagement with:
c) Audit Plan
a) The audit teams
b) Management

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CA RAVI TAORI CA INTER AUDIT MCQs

197. Identify the correct one: a) result of unexpected events.

With respect to audit of historic financial b) changes in conditions.
statement, the auditor shall develop an audit plan c) Evidence obtained from results of audit
that shall include audit procedures as per: procedures.
a) SRE 2400. d) None of the above
b) SA 330
c) SA 701. 203. Determination of Characteristics of Audit falls
d) SAE 3400. under:
a) Overall Audit Strategy
198. Identify the correct one b) Audit Plan
a) The audit plan is more detailed than the c) Both of the above
overall audit strategy. d) None of the above
b) The overall audit strategy is more detailed
than the audit plan. 204. With the proper overall audit
c) The overall audit plan is more detailed than _____________quantity of resources can be
the overall audit strategy. effectively allocated.
d) The overall audit strategy is more detailed a) strategy
than the overall audit plan." b) book
c) masters
199. Audit evidence obtained through the d) blueprint
performance of substantive procedures__________
the audit evidence obtained through tests of 205. Which of the following shall not be considered
controls in establishing the overall audit plan?
a. may contradict a) The entity's timetable for reporting.
b. will contradict. b) Significant industry developments.
c. will never contradict. c) Engagement budgeting.
d) Which person should do physical
200. State whether true or false: verification?
Planning of the auditor's risk assessment
procedures occurs early in the audit process. 206. The documentation of the __________ is a
However, planning the nature, timing and extent record of the key decisions considered
of specific further audit procedures depends on necessary for making a proper _________ for
the outcome of those risk assessment audit.
procedures. a) overall audit strategy; plan.
a) True b) plan; overall audit strategy.
c) blueprint; game plan
b) False.
d) game plan / blueprint

201. State whether true or false:

207. Checklists is a part of audit __________.
The auditor cannot begin the execution of further
a) plan
audit procedures for some classes of
b) strategy
transactions, account balances and disclosures
c) blueprint
before planning all remaining further audit
d) game plan
procedures.
a) True
208. Record of nature, timing and extent of risk
b) False
assessment procedures is a part of audit _________.
a) plan
202. The auditor may not need to modify the overall
b) strategy
audit strategy and audit plan due to:
c) blueprint
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CA RAVI TAORI
d) game plan
209. Choose the incorrect one:
a) The audit strategy is prepared before the
audit plan.
b) The audit plan is prepared before the audit
strategy.
c) Audit strategy is a broader term than audit
plan.
d) None of the above"
210. Choose the correct one:
a) Change in audit strategy would bring about a
change in audit plan but change in audit plan
would not bring a change in audit strategy.
b) Change in audit plan would bring about a
change in audit strategy but change in audit
strategy would not bring a change in audit
plan.
c) Change in audit plan would bring about a
change in audit strategy and change in audit
strategy would bring a change in audit plan.
Both are interrelated.
d) None of the above
211. Increase in nature, timing and extent of audit
procedure is recommended ______________.
a) in case materiality level is high
b) in case materiality level is low
c) at the judgement of management.
d) experienced Audit Staff
212. Decrease in nature, timing and extend of audit
procedure is recommended ______________.
a) in case materiality level is high
b) in case materiality level is low
c) at the judgement of management.
d) Inexperienced Audit Staff
213. An auditor determines lower level of materiality
for a particular area, however the article assistant
instead of being informed about the lower level
of materiality did not perform the procedures
carefully and did only test check on important
areas. What will be its effect on detection risk?
a) Detection risk will decrease
b) Detection risk will increase
c) No impact on detection risk
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CA INTER AUDIT MCQs
d) None of the above
214. An auditor determines higher level of
materiality for a particular area, however the
article assistant instead of being informed
about the higher level of materiality
performed detailed audit procedures. What
will be its effect on detection risk?
a) Detection risk will be decrease
b) Detection risk will be increase
c) No impact on detection risk
d) None of the above
215. Following is not a feature of an audit
programme:
a) Is Prepared to allocate work to team
members
b) Includes the list of audit procedures and
instructions to be followed
c) Estimates the duration for completing an
audit task
d) Tells us about what to do if management
does not co-operate"
216. Identify the correct one:
Audit programme should be developed taking
into consideration the:
a) Technical set-up of the company and
accounting set-up of the company.
b) Financial set-up of the company and
accounting set-up of the company.
c) Accounting set-up of the company, technical
set-up of the company and financial set-up of
the company.
d) Technical set-up of the company and
financial set-up of the company"
217. To ensure a systematic approach to the work
overall plan for the audit programme should be
drawn up. If any divergence from the audit
programme becomes necessary:
a) the audit programme may be modified.
b) First the overall plan should be modified
thereafter the audit programme.
c) First the audit programme should be
modified thereafter audit strategy.
d) None of the above
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CA RAVI TAORI CA INTER AUDIT MCQs

218. State whether true or false: d) Detection Risk

The framework provided by the overall plan
should be strictly adhered to while drawing the 224. Identify the type of risk:
audit programme. Circumstances that account balance and
a) True. transactions are materially misstated, assuming
b) False no internal control.
a) Sampling risk
219. If the auditor finds that there has been an b) Control risk
extraordinary increase in the amount of book c) Inherent risk
debts or that in the value of stocks as d) Detection risk
compared to that in the previous year which
of the following has to be suitably altered and 225. Identify the type of risk:
in which order: Risk that internal control will not be able to
a) Audit programme and overall audit plan.
prevent, detect and correct material
b) Overall audit plan and audit programme.
misstatement
c) Audit plan and audit programme.
a) Sampling risk
d) Audit programme only
b) Control risk
c) Inherent risk
SA 315 d) Detection risk

220. The _____________risk is the risk that the auditor 226. Identify the type of risk:
expresses an inappropriate audit opinion when Chances that conclusion obtained from
the financial statements are materially misstated. auditing the selected part of the population
a) sampling risk will differ from the conclusion obtained from
b) audit risk auditing the entire population due to
c) inherent risk incorrect selections from population.
d) detection risk a) Sampling risk
b) Control risk
c) Inherent risk
221. Audit risk is a function of the _____________
d) Detection risk
and_____________.
a) risk of material misstatement; detection risk.
227. Identify the type of risk:
b) inherent risk; control risk
Chances that conclusion obtained from auditing
c) material misstatement; control Risk
the selected part of the population will be
d) material misstatement; detection Risk"
incorrect due to inappropriate audit procedure.
a) Non-sampling risk
222. Identify the type of risk:
b) Sampling risk
Chances that financial statements presented
c) Inherent risk
before audit to the auditor is misstated.
d) Detection risk
a) Sampling Risk
b) Risk of material misstatement
228. Identify, which from the following risk is the
c) Inherent Risk
component of the Detection Risk:
d) Detection Risk
a. Non-Sampling risk
223. Identify the type of risk:
b. Control risk
Risk that auditor’s procedure will not be able to
c. Inherent risk
identify material misstatement.
d. None of the above.
a) Sampling Risk
b) Risk of material misstatement
229. "Identify, which from the following risk is the
c) Inherent Risk
component of the detection risk:
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CA RAVI TAORI CA INTER AUDIT MCQs

a. Sampling risk c) Inherent and control risks differ from

b. Control risk detection risk in that they are assessed by
c. Inherent risk management.
d. None of the above. d) Detection risk differ from Inherent and
control risks in that it is variable.
230. Identify, which from the following risk is not the
component of risk of material misstatement: 235. Identify the correct one:
a. Sampling Risk a) There is an inverse relationship between
b. Control Risk combined level of detection risk + inherent
c. Inherent Risk risk and the control risk.
d. None of the above b) There is a direct relationship between
combined level of inherent risk + control risk
231. Identify the incorrect one: and the detection Risk.
a) If the internal controls are designed and c) There is an inverse relationship between
operated perfectly, risk can not only be combined level of inherent risk + control risk
reduced, but also can be eliminated. and the detection Risk.
b) If the internal controls are designed and d) There is a direct relationship between
operated perfectly, risk can be reduced, but combined level of detection Risk + Inherent
cannot be eliminated. risk and the control risk.
c) Good internal control can result into
reduction of risk. 236. Inherent risk and control risk are not the
d) None of the above functions of _____________
a. management
232. Identify the correct one: b. auditor
a) Business risk is a kind of risk that arises due c. TCWG
to internal circumstances. d. all of the above
b) Business risk is a kind of risk that may arises
due to external or internal circumstances. 237. Which from the following is not the component
c) Business risk is a kind of risk that arises due of internal control?
to in-house circumstances a. Control environment
d) Business risk is a kind of risk that arises due b. Control activity
to intrinsic circumstances. c. Risk Assessment Process
d. None of the above
233. Inherent limitations of internal control do not
include: 238. Which from the following is not the component
a. Cost effectiveness of internal control?
b. Collusion among employees a) Monitoring
c. Abuse of Authority b) Control Activity
d. Narrative Records c) Information System & Information
Technology.
234. Identify the correct one: d) None of the Above
a) Inherent and control risks differ from
detection risk in that they exist independently 239. Identify the incorrect one:
of an audit of financial information. a) Good Control environment is not a guarantee
b) Inherent, control risks are dependent on each to prevent fraud
other. b) Good Control environment is a guarantee to
prevent fraud

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CA RAVI TAORI CA INTER AUDIT MCQs

c) Good Control environment act as a platform 4 Less; less

for other components of internal control
d) None of the above
240. State whether true or false:
Control environment act as a platform for other
components of internal control and a good
control environment will act as a base to develop
other components of Internal control system.
a) True
b) False
241. Risk of material misstatement at financial
statement level will depend on:
a) Timing of transaction
b) Complexity of Transaction
c) Nature of Entity business
d) Unusual Transaction.
242. Risk of material misstatement at financial
statement level does not depend on:
a) Complexity of Transaction
b) Integrity of management.
c) Nature of Entity business
d) Unusual pressure on management.
243. Risk of material misstatement at transaction
and account balance level does not depend
on:
a) Judgement in valuation.
b) Complexity of Transaction.
c) Nature of Entity business.
d) Unusual Transaction.
Options:
a) 1/3
b) 1/4
c) 2/3
d) 3/4
246. Risk at financial statement level means that
misstatement:
a) may exist pervasively in financial
statement as a whole and may affect many
assertions.
b) may exist for particular class of
transaction, account balance level or at
disclosure level.
c) may not exist pervasively in financial
statement as a whole and may affect many
assertions.
d) may exist for group of transaction,
account balance level or at disclosure
level.
247. Risk at assertion level means that misstatement:
a) may exist pervasively in financial statement as
a whole and may affect many assertions.
b) may exist for particular class of transaction,
account balance level or at disclosure level.
c) may not exist pervasively in financial
statement as a whole and may affect many
assertions.
d) may not exist for particular class of
transaction, account balance level or at
disclosure level.

248. ___________are key features of financial

244. "The acceptable level of detection risk bears an
statements expressed directly or indirectly by the
___________ relationship to the assessed risks of
management.
material misstatement at the assertion level
a) Assertions.
a. direct
b) Estimates
b. inverse
c) Valuation
c. straight
d) Projection
d. absolute

249. Identify the assertion affected in the following

245. Identify the incorrect option:
statements:
The ____________the risks of material misstatement
Auditor is required to check whether the assets or
the auditor believes exists, the__________
liability are at appropriate amounts.
detection risk that can be accepted.
a) Valuation
1 greater; less
b) Existence
2 greater; greater
c) Occurrence
3 less; greater
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CA RAVI TAORI CA INTER AUDIT MCQs

d) Completeness 253. When the identified risk relates to the fraud or

250. Identify the assertion affected in the following
statements:
Auditor is required to check whether the assets or
liability as included in the financial statement
actually exists.
a) Valuation
b) Existence
c) Occurrence
d) Completeness
251. Identify the assertion affected in the following
statements:
Auditor is required to check whether all the assets
or liability that actually exists are included in the
financial statement.
a) Valuation
b) Existence
c) Occurrence
d) Completeness
252. Identify the correct option:
Assessment of risk at assertion level for class of
transactions, account balance and disclosure
need to be considered as:
1 It directly assists in determining the nature
timing and extent of further audit procedures
at assertion level.
2 It indirectly assists in determining the nature
timing and extent of further audit procedures
at assertion level.
3 In determining risk at assertion level auditor
may conclude that identified risk relate more
pervasively to financial statement as a whole
and may affect many assertions.
4 Determining risk at assertion level will not
help auditor in concluding that identified risk
relate more pervasively to financial statement
as a whole and may affect many assertions.
Options:
a) 1 & 4
b) 2 & 3
c) 1 & 3
d) 2 & 4
related party transaction special consideration is
required by the auditor over such risk.
a) True
b) False
254. Risk related to which of the following requires
special consideration:
a) Complex transaction
b) Fraud
c) Significant Unusual transaction
d) All the above
255. Is it mandatory to perform test of controls for all
relevant controls of the company each year?
a) Yes, test of control is fundamental audit
procedure.
b) No, it should be done once in three years.
c) Yes, it is mandatory as per SAs.
d) No, it can be done every alternate year.
256. If Inherent Risk is 40%, Control Risk is 50%
and Acceptable Audit Risk is 5%, What should
be Detection Risk?
a) 20%
b) 25%
c) 2%
d) 10%
SA 320
257. Identify the incorrect one:
a) Misstatement are considered to be material if
they are expected to influence the decision of
the user.
b) Misstatement are not considered to be
immaterial if they are expected to influence
the decision of the user.
c) Misstatement are considered to be
immaterial if they are expected to influence
the decision of the user.
d) Misstatement are considered to be
immaterial if they are not expected to
influence the decision of the user.
258. Materiality is a matter of:
a) Professional judgement
b) Financial reporting framework may specify it

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CA RAVI TAORI
c) Either of the above
d) None of the above
259. Identify the incorrect one:
Judgement of the auditor regarding materiality
depends on:
a) Circumstances prevailing
b) Common financial needs of the user as the
group
c) Individual financial needs of the user.
260. Identify the correct one:
While making judgement regarding materiality
level:
a) Individual needs are not given much
importance as common financial needs of the
user as a group.
b) Common financial needs of the user as a
group are not given much importance as
individual needs.
c) Individual needs are given equal importance
as common financial needs of the user as a
group.
d) None of the above
261. Identify the incorrect statement:
Materiality is used in:
a) Planning and performing the audit.
b) Evaluating effect of identified misstatement
on audit.
c) Evaluating effect of uncorrected
misstatement on financial statement.
d) None of the above is incorrect.
262. A starting point which is chosen as a base and
on which a percentage is applied to determine
materiality for financial statement as a whole
is known as ____________.
a) audit Plan
b) benchmark
c) volatility
d) regression
263. To determine materiality for financial statement
as a whole a benchmark is selected, and
percentage is applied on that benchmark. There
is _____________relationship between such
benchmark and the percentage applied on it.
a) direct
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CA INTER AUDIT MCQs
b) inverse
c) straight
d) absolute
264. Identify the correct one:
a) It is mandatory that only Items of the financial
statement should be considered for deciding
the benchmark.
b) It is recommendatory that only Items of the
financial statement should be considered for
deciding the benchmark.
c) It is not mandatory that only Items of the
financial statement should be considered for
deciding the benchmark.
d) It is not recommendatory that only Items of
the financial statement should be considered
for deciding the benchmark.
265. Identify the correct one:
a) It is important that Items of the financial
statement having low volatility should be
considered for deciding the benchmark.
b) It is important that Items of the financial
statement having high volatility should be
considered for deciding the benchmark.
c) It is not mandatory to consider volatility at
the time of selecting a benchmark
d) None of the above
266. Profit of the company - Rs 10 crore
Net Asset - Rs 50 crore
Turnover - Rs 100 crore
Auditor is considering selecting one of the
options from above as benchmark to decide
the materiality level for financial statement as
a whole.
Percentage that can be applied on benchmark
is 5 %, 10 % and 2 %. Considering the
relationship between benchmark and the
percentage applied on it as per SA 320,
determine the appropriate order of
percentage to be applied for the above
respective sequence of benchmark.
a) 10 %, 2 %, 5 %.
b) 10 %, 5 %, 2 %.
a
c) 5 %, 10 %, 2 %.
d) 5 %, 2 %, 10 %
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CA RAVI TAORI
267. Identify the correct one:
a) For specific area auditor can determine a
lower level of materiality, if those area
influence the user even at small level of
misstatement.
b) For specific area auditor can determine a
higher level of materiality if those area
influence the user even at small level of
misstatement.
c) For specific area auditor can determine a
lower level of materiality if those area
does not influence the user even at small
level of misstatement.
d) For specific area auditor can determine a
higher level of materiality if those area
impact the user even at lower level of
misstatement.
268. Materiality level set by the auditor, which is
less then materiality for financial statement as
a whole or specific area level materiality to
reduce the risk that the aggregate of
uncorrected and undetected misstatements
exceeds materiality for the financial
statements as a whole.
a) Materiality for particular classes of
transactions.
b) Materiality for account balances or
disclosures
c) Performance materiality.
d) None of the above.
269. Identify the incorrect one:
a) SA 320 permits revision of materiality.
b) SA 320 does not permit revision of
materiality.
c) As per SA 320 materiality initially decided can
be revised
d) None of the above
SA 330
270. Identify the correct one:
As per SA 330 - For risk identified as per SA 315
at financial statement level __________________is
required to be done.
a) overall response
b) test of controls
c) test of details.
d) any of the above
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CA INTER AUDIT MCQs
271. Identify the incorrect one:
As per SA 330 - For Risk identified as per SA 315
at assertion level __________________is required to
be done.
a) Overall Response
b) Test of Controls
c) Test of Details.
272. As per SA 330 - For risk identified as per SA
315 at assertion level, test of control is
required to be done. For the purpose of test of
control over assertions being at risk:
a) Only relevant control is required to be
considered.
b) All control is required to be considered.
c) Both of the above
d) None of the above
273. Identify the correct option:
a) Test of control or compliance procedures are
designed to detect deviation in internal
control.
b) Test of control or compliance procedures are
designed to detect misstatement in internal
control.
c) Both of the above
d) None of the above
274. Identify the correct option:
a) Test of detail or substantive procedures
are designed to detect deviation in
internal control.
b) Test of detail or substantive procedures
are designed to detect misstatement in
internal control.
c) Both of the above
d) None of the above
275. Identify the correct one:
a) Substantive procedures are mandatory in
case of material transactions.
b) Substantive procedures are recommendatory
in case of material transactions.
c) Both of the above
d) None of the above
276. Substantive procedures are designed to detect
material misstatement at assertion level.
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CA RAVI TAORI CA INTER AUDIT MCQs

a) True 284. Identify the factors that must be taken into

b) False
277. Design of test of detail depends on _________ and
__________ involved.
a) Nature of risk; Judgement of auditor
b) Nature of risk; Assertions
c) Judgement of auditor; Assertions
d) None of the above
consideration before relying on the test of
controls on the basis audit evidence obtained in
previous year.
a) Personnel Change
b) Process/operations-manual or automated
c) General IT control effectiveness
d) All of the above

278. Design of test of detail is assertion specific.

a) True
b) False

279. How to obtain audit evidence for performing

test of control or test of detail?
a) Inquiry
b) observation
c) Inspection
d) All of the above

280. How to obtain audit evidence for performing

test of control or test of detail?
a) Inquiry
b) Re-performance
c) Computation
d) All of the above

281. Analytical procedures are designed for large

volume of transactions that tend to be
predictable over the period of time.
a) True
b) False

282. Auditor cannot in any case rely on the test of

controls on the basis of audit evidence obtained
in previous year.
a) True
b) False

283. Identify the factors that must be taken into

consideration before relying on the test of
controls on the basis audit evidence obtained
in previous year.
a) Control environment
b) Risk of material misstatement
c) Change in circumstances
d) All of the above

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CA RAVI TAORI CA INTER AUDIT MCQs

SA 500 3. Sufficiency refers to the quality of audit

evidence obtained.
4. Appropriateness refers the reliability &
310. Anything which gives information to form an
relevance of the evidence.
opinion.
Options:
a) Audit report
a) 1 & 4.
b) Management representation
b) 1 & 2.
c) Audit evidence
c) 1 & 3.
d) External confirmation
d) 4 & 3

311. Audit evidence includes-

1. The accounting records-Which are 315. Factors affecting sufficiency and
prepared specifically for accounting appropriateness includes experience gained
process or output of accounting process. during previous audits. We can say that there is
2. Other Information - Which are prepared ________relationship between factors affecting
specifically for accounting process or sufficiency, appropriateness and experience
output of accounting process. gained during previous audits.
3. Other Information - Which are prepared a) direct
for various purposes, but which can be b) inverse
used to verify accounting records. c) reverse
4. The accounting records-Which are d) converse
prepared for various purposes, but which
can be used to verify accounting records. 316. Factors affecting sufficiency and
Identify the correct one:
appropriateness includes risk of material
Options:
misstatement. We can say that there does not
a) 1 & 4
exists ________relationship between factors
b) 1 & 2
affecting sufficiency and appropriateness and risk
c) 1 & 3
d) 2 & 3 of material misstatement
a) direct
312. Following is not an example of accounting b) inverse
records: c) straight
a) Working for depreciation d) immediate
b) Interest
c) Board meeting minutes 317. Factors affecting sufficiency and
d) Cost allocation appropriateness includes materiality. We can say
that there exists ________relationship between
313. Following is not an example of other records: factors affecting sufficiency and appropriateness
a) Production records and materiality.
b) Article of association a) direct
c) Board minutes b) inverse
d) Purchase Invoice c) reverse
d) converse
314. Identify the correct one:
Audit evidence should be sufficient and 318. Identify the incorrect one:
appropriate: Types of audit evidence may differ as per
1. Sufficiency refers to the quantum of audit different categories:
evidence obtained. a) Depending upon NATURE.
2. Appropriateness refers the quantity of audit b) Depending upon SIZE.
evidence obtained. c) Depending upon IMPACT.

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d) Depending upon SOURCE. 326. Just by seeing a purchase invoice we conclude

that there is a purchase, but purchase invoice
319. Identify the odd one out: may be fake:
Depending upon NATURE there can be different a) Audit evidence is persuasive.
type of evidence: b) Audit evidence is conclusive.
a) Visual Evidence c) Audit evidence is corroborated.
b) Oral Evidence d) Audit evidence is substantiated
c) Persuasive Evidence
d) Documentary Evidence 327. Choose the correct one
Physical Verification of Machine-
320. Physical verification is an example of: a) Audit evidence is persuasive.
a) Visual Evidence b) Audit evidence is conclusive.
b) Oral Evidence c) Audit evidence is substandard.
c) Documentary Evidence d) Audit evidence is not adequate
d) None of the above
328. Identify the correct one:
321. Inquiry is an example of: Depending upon SOURCE there can be different
a) Visual Evidence type of evidence:
b) Oral Evidence a) Documentary Evidence.
c) Documentary Evidence b) Conclusive Evidence.
d) None of the above c) Persuasive Evidence.
d) Internal- External
322. Purchase Invoice is an example of:
a) Visual Evidence 329. Identify the correct one:
b) Oral Evidence a) Purchase invoice is made by entity and held
c) Documentary Evidence by third party.
d) None of the above b) Sales invoice, delivery challan is made by
third party and held by entity.
323. Identify the odd one out: c) Goods received note is made by entity and
Depending upon IMPACT there can be different held by Entity
type of evidence: d) None of the above is correct.
a) Documentary Evidence.
b) Conclusive Evidence. 330. Methods of obtaining audit evidence includes:
c) Persuasive Evidence. a) Observation
d) none of the above. b) Inquiry
c) Recalculation
324. Identify the correct one: d) All the above
a) Persuasive means confirm evidence
b) Persuasive means not a confirm evidence 331. Methods of obtaining audit evidence does not
c) Persuasive means corroborate evidence includes:
d) None of the above a) Re-performance
b) Analytical Procedures
325. Identify the correct one: c) Letter of Engagement.
a) Conclusive means not confirm evidence. d) External Confirmation
b) Conclusive means confirm evidence.
c) Conclusive means uncorroborated evidence 332. State whether true or false:
d) None of the above When designing and performing audit
procedures, the auditor shall consider the

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reliability and relevance of the information to be
used as audit evidence.
a. True
b. False
333. Identify the incorrect one:
Factors affecting reliability:
a) Evidence from independent source outside
entity is more reliable
b) Evidence provided from client is more reliable
c) Evidence provided by original documents is
more reliable
d) If internal controls are strong, internal
evidence is more reliable
334. Identify the incorrect one:
a) If internal controls are strong, internal
evidence is more reliable.
b) Even though If internal controls are
strong, internal evidence is less reliable.
c) If internal controls are weak, external
evidence is more reliable than internal
evidence.
d) None of the above
335. Before relying on work done by managements
expert, check following things
a) Competence/ Capability/ Objectivity of the
expert.
b) Understanding of the field & experts work
c) Appropriateness of expert’s work
d) All the above
336. Select the correct one:
a) An auditor can bring about a modifications or
additions to audit procedures if audit
evidence is inconsistent or has doubts over its
reliability.
b) An auditor can bring about a modifications or
additions to audit procedures if audit
evidence is inconsistent or has doubts over
the its reliability however management
approval is required.
c) An auditor cannot bring about a
modifications or additions to audit
procedures once determined even if audit
evidence is inconsistent or has doubts over its
reliability.
d) None of the above are correct.
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CA INTER AUDIT MCQs
337. Identify the incorrect one:
100% examination may be appropriate when:
a) Population constitutes a large number of
small value items.
b) Significant risk and other means do not
provide sufficient appropriate audit evidence
c) Cost Effective
d) All the above
SA 505
338. Audit evidence obtained by the auditor as a
direct written response from a third party is
called_________.
a) Internal Confirmation
b) External Confirmation
c) Interior Confirmation
d) Exterior confirmation
339. External confirmation should always be in paper
form and not in any other medium due to its
importance.
a) True, as per SA 505 external confirmation is
reliable only if it is in paper form.
b) False, as per SA 505 external confirmation can
be in paper, electronic form or any other
medium.
c) True, as per SA 505 external confirmation
other than in paper form is prohibited.
d) False, as per SA 505 external confirmation can
be in paper or electronic form, other than this
no another medium shall be used.
340. External Confirmation can be by paper,
electronic or other medium.
a) True, SA 505 permits that external
confirmation can be in paper, electronic or
other medium.
b) False, as per SA 505 external confirmation
is reliable only if it is in paper form.
c) True, as per SA 505 external confirmation
can be by paper, electronic or other
medium but it depends on the internal
control system of the organisation.
d) False, as per SA 505 external confirmation
can be in paper or electronic form, other
than this no another medium shall be
used.
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CA RAVI TAORI CA INTER AUDIT MCQs

a) More
341. Audit evidence is less reliable when it is b) Less
obtained from independent sources outside the c) equally
entity. d) None of the above
a) True, as per SA 505 audit evidence obtained
internally is more reliable. 346. Negative confirmation is used where risk of
b) False, as per SA 505 audit evidence obtained material misstatement is__________.
from an independent source is more reliable. a) More
c) True, as per SA 510 audit evidence obtained b) less
from dependent sources is more reliable. c) greater
d) False, as per SA 510 audit evidence obtained d) supplementary
from an independent source is more reliable.
347. In case if the internal control system of the
342. State the incorrect one: organisation is good the __________will be a better
a) Audit evidence obtained directly by the option.
auditor is more reliable than audit evidence a) Negative Confirmation
obtained indirectly or by inference. b) Positive Confirmation
b) Audit evidence is more reliable when it exists c) interior Confirmation
in documentary form, whether paper, d) exterior confirmation
electronic or other medium
c) Audit evidence in the form of external 348. A response that indicates a difference between
confirmations received directly by the auditor information requested to be confirmed, or
is less reliable than evidence generated contained in the entity’s records, and information
internally by the entity. provided by the confirming party.
d) External Confirmation can be by paper, a) deviation
electronic or other medium. b) exception
c) misstatement
343. A request that the confirming party respond d) error
directly to the auditor, indicating whether the
confirming party agrees or disagrees with the SA 510
information in the request, or providing the
requested information.
349. Initial audit engagement– An engagement in
a) Negative Confirmation request. which either:
b) Positive Confirmation request 1. The financial statements for the prior
c) Follow up confirmation request period were not audited
d) Affirmative confirmation request 2. The financial statements for the prior
period that were audited by a joint
344. A request that the confirming party respond auditor.
directly to the auditor only if the confirming party 3. The financial statements for the prior
disagrees with the information provided in the period were not audited properly.
request. 4. The financial statements for the prior
a) Negative Confirmation request. period were audited by a predecessor
b) Positive Confirmation request auditor.
c) Follow up confirmation request Options:
a) 1 & 2
d) Affirmative confirmation request
b) 3 & 4
c) 1 & 4
345. Positive confirmation is _____persuasive than
d) 2 & 3
negative confirmation.

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350. If the auditor is unable to obtain sufficient
appropriate audit evidence regarding the
opening balances, the auditor shall express a
____________
a) qualified opinion or adverse opinion
b) disclaimer of opinion or adverse opinion
c) adverse opinion or unmodified opinion
d) qualified opinion or disclaimer of opinion
351. If the auditor concludes that the opening
balances contain a misstatement that materially
affects the current period’s financial statements,
and the effect of the misstatement is not properly
accounted for or not adequately presented or
disclosed, the auditor shall express
a______________.
a) qualified opinion or adverse opinion
b) disclaimer of opinion or adverse opinion
c) adverse opinion or unmodified opinion
d) qualified opinion or disclaimer of opinion
352. If the auditor concludes that there has been
inconsistency in following accounting policy or
required disclosures with respect to the change
in accounting policy is not adequately presented
the auditor shall express a ______________
a) qualified opinion or adverse opinion
b) disclaimer of opinion or adverse opinion
c) adverse opinion or unmodified opinion
d) qualified opinion or disclaimer of opinion
353. If no audit is performed in last year or if audit is
by done someone else in last year than the fact
of the same shall be disclosed in audit report in
___________
a) emphasis of matter para
b) other matter para
c) opinion para
d) none of the above
354. A ltd. last year's audit was conducted by a CA
Firm having A, B, C as three partners. A did the
audit last year. This year audit will be conducted
by B. Will this be considered as initial audit
engagement for A ltd.
a) Yes, as the auditing partner has changed.
b) No, as the auditing firm has not changed.
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CA INTER AUDIT MCQs
c) Yes, as it falls under definition of initial audit
engagement
d) None of the above
355. A ltd. last year's audit was conducted by a CA
Firm having A, B, C as three partners. A did the
audit last year. This year audit will be conducted
by B. Will this be considered as initial audit
engagement for Audit firm.
a) Yes, as the auditing partner has changed.
b) No, as the auditing firm has not changed.
c) Yes, as it falls under definition of initial audit
engagement
d) None of the above
356. Identify the incorrect one:
Factors affecting nature and extent of audit
procedures regarding opening balance?
a) Significance of the opening balances
b) Changes in accounting policies
c) Nature of the account balances, classes of
transactions
d) Qualification of the auditor
SA 520
357. _____________means evaluations of financial
information through analysis of plausible
relationships among both financial and non-
financial data.
a) Risk assessment procedure
b) Comparison
c) Analytical procedure
d) Test checking
358. Analytical procedures do not encompass
investigation within it to identify the fluctuations
identified.
a) True
b) False
359. Analytical procedures are used as a
substantive test:
a) to determine the nature, timing and
extent of other auditing procedures.
b) to obtain evidential matter about
particular assertions related to account
balances or classes of transactions.
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CA RAVI TAORI CA INTER AUDIT MCQs

c) to form opinion checking for depreciation, revaluation, AS

d) None of the above. compliance, physical verification.
a) Inappropriate audit procedure
360. Analytical procedures are used in planning b) Misinterpretation of audit evidence
stage: c) Failure to recognize a misstatement or
a) to determine the nature, timing and extent of deviation
other auditing procedures. d) None of the above
b) to obtain evidential matter about particular
assertions related to account balances or 366. Compared ratios of Cement Industry with
classes of transactions. Textile Industry and termed differences as
c) to form opinion increased Risk of Material Misstatement.
d) None of the above. a) Inappropriate Audit Procedure
b) Misinterpretation of Audit Evidence
361. Factors that do not determine suitability of c) Failure to recognize a misstatement or
particular substantive analytical procedures: deviation
a) Volume of transactions d) None of the above
b) Predictable relationship
367. Company policy changed from 1 director
c) Level of assurance
signature to 2 director signatures for cheques
d) None of the above
above 10,00,000 but bank was not informed, and
many cheques were still signed by 1 director, but
SA 530 auditor could not detect it
a) Inappropriate Audit Procedure
362. The risk that the auditor’s conclusion based on b) Misinterpretation of Audit Evidence
a sample may be different from the conclusion if c) Failure to recognize a misstatement or
the entire population were subjected to the same deviation
audit procedure. d) None of the above
a) Audit Risk
b) Inherent Risk 368. The auditor shall determine a sample size
c) Detection Risk sufficient to-
d) Sampling Risk a) reduce sampling risk to an acceptably low
level
363. The risk that the auditor reaches an erroneous b) increase sampling risk to an acceptably low
conclusion for any reason not related to sampling level
process c) reduce sampling risk to an acceptably high
a) Audit Risk level
b) Inherent Risk d) increase sampling risk to an acceptably high
c) Detection Risk level
d) Non-Sampling Risk
369. The higher the auditor’s assessment of the risk
364. Examples of non-sampling risk include: of material misstatement, the ________sample size
a) Inappropriate audit procedure needs to be.
b) Misinterpretation of audit evidence a) smaller
c) Failure to recognize a misstatement or b) larger
deviation c) compact
d) All of the above d) minor

365. Only cost of fixed assets was checked by tracing

bills and agreements with fixed asset register, no

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CA RAVI TAORI CA INTER AUDIT MCQs

370. The auditor’s assessment of the risk of material a) True

misstatement is affected by__________ b) False
and__________.
a) inherent risk; detection risk. 376. Following is an example of Statistical sampling
b) control risk; detection risk. method:
c) inherent risk; control risk. a) Haphazard sampling
d) None of the above b) Block selection
c) Judgmental sampling
371. The less the auditor is relying on other d) Simple random sampling
substantive procedures to reduce to an
acceptable level the detection risk regarding a 377. Following is a not an example of Non -
particular population, the_________ assurance Statistical Sampling method:
the auditor will require from sampling. Hence a) Haphazard Sampling
sample size will be_________.
b) Block Selection
a) less, less
c) Judgmental Sampling
b) more, less
d) Interval Based Sampling
c) less, more
d) more, large
378. Following is an example of Non-statistical
Sampling method:
372. The greater the amount of misstatement the
a) Random Sampling
auditor expects to find in the population, the
b) Cluster Sampling
_________ sample size needs to be in order to
c) Haphazard Sampling
make a reasonable estimate of the actual amount
d) Interval Sampling
of misstatement in the population.
a) smaller
379. Following is a not an example of- Statistical
b) larger
Sampling method:
c) compact
a) Random Sampling
d) minor
b) Cluster Sampling
c) Block Sampling
373. When a population cannot be appropriately
d) Interval Sampling
stratified, the sample size from the population
generally will be _______.
380. Whatever may be the approach non-statistical
a) lower
or statistical sampling, the sample must be
b) higher
representative of the entire population. This
c) compact
means that it must be:
d) minor
a) closely similar to the whole population
although not necessarily exactly the same.
374. State the incorrect one from the options:
b) entirely similar to the whole population,
a) The lower the tolerable misstatement, the
necessarily exactly the same.
smaller the sample size needs to be.
b) The lower the tolerable misstatement, the
381. In_____________ sampling, sample items are
larger the sample size needs to be.
selected in a way that each sampling unit has a
c) The higher the tolerable misstatement, the
known probability of being selected.
smaller the sample size needs to be.
a) statistical
d) None of the above
b) non - Statistical
c) non steady
375. Sample size is a valid criterion to distinguish
d) non -stative
between statistical and non-statistical
approaches.
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CA RAVI TAORI
382. With_____________ sampling, judgment is used to
select sample items.
a) statistical
b) non - statistical
c) numerical
d) integrated
383. Audit testing done through _________approach is
more scientific than testing based entirely on the
auditor’s own judgment.
a) statistical
b) non - statistical
c) non steady
d) non -stative
384. ___________ sampling has reasonably wide
application where a population to be tested
consists of a large number of similar items.
a) statistical
b) non - statistical
c) non steady
d) non -stative
385. Identify the methods of selecting the sample.
Stratified sampling means -
a) The mechanics of selection of items may
be by choosing numbers from table of
random numbers by computers or picking
up numbers randomly from a drum.
b) This method involves dividing the whole
population to be tested in a few separate
groups called strata and taking a sample
from each of them.
c) It involves selecting items using a constant
interval between selections, the first
interval having a random start.
d) None of the above.
386. Identify the methods of selecting the sample.
Interval sampling means -
a) The mechanics of selection of items may be
by choosing numbers from table of random
numbers by computers or picking up
numbers randomly from a drum.
b) This method involves dividing the whole
population to be tested in a few separate
groups called strata and taking a sample from
each of them.
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CA INTER AUDIT MCQs
c) It involves selecting items using a constant
interval between selections, the first interval
having a random start.
d) None of the above.
387. Identify the methods of selecting the sample.
Simple random sampling means -
a) The mechanics of selection of items may
be by choosing numbers from table of
random numbers by computers or picking
up numbers randomly from a drum.
b) This method involves dividing the whole
population to be tested in a few separate
groups called strata and taking a sample
from each of them.
c) It involves selecting items using a constant
interval between selections, the first
interval having a random start.
d) None of the above.
388. The cluster is ________effective for a given
sample size than unrestricted random and
stratified samples as items are not individually
selected. However, the time saved can be utilized
to have a_______ sample to make the sample
results more reliable.
a) less, smaller
b) more, larger
c) less, larger
d) more, smaller
389. Monetary Unit Sampling is a type of value
weighted selection.
a) True
b) False
390. Under __________the sample size and its
composition are determined on the basis of the
personal experience and knowledge of the
auditor.
a) Statistical
b) Non - Statistical
c) Numerical
d) integrated
391. State whether true or false:
The non-statistical sampling is criticized on the
grounds that it is neither objective nor scientific.
a) True
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CA RAVI TAORI CA INTER AUDIT MCQs

b) False a) Yes, every misstatement should be

considered
392. This method involves the selection of a fixed b) SA is silent about it
number of consecutive items. c) Yes, it is part of sampling
a) Random Sampling d) No, it should not be considered as per SA
530
b) Cluster Sampling
c) Block Sampling
d) Interval Sampling

393. Identify the incorrect one:

a) Haphazard selection is not appropriate when
using statistical sampling.
b) Haphazard selection is appropriate when
using statistical sampling.
c) Haphazard selection is appropriate when
using non-statistical sampling.
d) None of the above

394. State whether true or false:

If the audit procedure is not applicable to the
selected item, the auditor shall perform the
procedure on a replacement item.
a) True,
b) False,

395. If the auditor is unable to apply the designed

audit procedures, or suitable alternative
procedures, to a selected item, the auditor
shall treat that item as a ___________ from the
prescribed control, in the case of tests of
controls, or a____________, in the case of tests of
details.
a) misstatement, deviation
b) fraud, error
c) deviation, misstatement
d) error, fraud
396. If risk increases sample size increases. What will
happen if population size increases?
a) Sample Size Increases
b) Sample Size Decreases
c) Negligible Effect on Sample Size
d) Both are unrelated

397. While sampling auditor detected anomalous

misstatement.
Whether such misstatement should be
included while projecting misstatement of
population?

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CA RAVI TAORI
SA 550
405. As per SA 550, the definition of related party
includes:
a) Any party controlling or having significant
influence
b) Any party who is under significant influence
or control
c) Parties which are under common control
d) All of the above
406. If the term "related party" is defined by the
Financial Reporting Framework,
a) we should use the definition as defined by
the FRF.
b) we should use the definition as per SA 550.
c) we should use the definition as per Income
Tax Act, 1961.
d) any of the above
407. If the term "related party" is not defined by the
Financial Reporting Framework,
a) we should use the definition as defined by
the FRF.
b) we should use the definition as per SA 550.
c) we should use the definition as per Income
Tax Act, 1961.
d) any of the above
408. Choose the correct one:
Entities under common control of Government
are covered in the definition of Related Parties in
accordance with SA 550
a) True, government companies are also
governed by same norms
b) False, to avoid hardship on government
companies, otherwise each government
company will have 1000s of related parties
just because of common control of
government.
409. Entities under control of Government (State or
Central), will be covered in the related party
transactions only when_____________________
a) they do not have significant transactions or
significant resource sharing between them
b) they have significant transactions or
significant resource sharing between them
c) the above statement has no relevance as
entities under the common control of
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CA INTER AUDIT MCQs
government will not be covered under
related parties.
410. Indicators of dominant influence exerted by a
related party include:
a) Vetoed significant business decisions
b) Significant transactions are referred to the
related party for final approval
c) Transactions involving the related party are
rarely independently reviewed and approved
d) All of the above
411. Which from the following options does not
include as an indicator of dominant influence
exerted by a related party?
a) Vetoed significant business decisions
b) Significant transactions are referred to the
related party for final approval
c) Business proposals were initiated by the
related party after rigorous discussion
d) Transactions involving the related party
are rarely independently reviewed and
approved
412. For identified significant related party
transactions outside the entity's normal
course of business, the auditor shall evaluate
whether:
a) the business rationale (or lack thereof) of
the transactions suggests that they may
have been entered into to engage in
fraudulent financial reporting or to
conceal misappropriation of assets
b) the terms of the transactions are
consistent with management's
explanations
c) the transactions have been appropriately
accounted for and disclosed in accordance
with the applicable financial reporting
framework
d) all of the above
413. As an auditor, what shall you do for identified
significant related party transactions that are
outside the entity's normal course of business?
a) Inspect the underlying contracts or
agreements, if any.
b) Obtain audit evidence that the transactions
have been appropriately authorized and
approved.
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CA RAVI TAORI
c) Both of the above
d) None of the above
414. As per the Chartered Accountant Act 1949, and
the Regulations thereunder, which from the
following shall be used as the definition of the
"Related Party"?
a) As per AS 18
b) As per SA 550
c) As per the Companies Act 2013
d) As per the Income Tax Act 1961
SA 560
415. AS-4 covers:
a) Events occurring between the date of the
financial statements and the date of approval
of accounts by the board.
b) Facts which become Known to the auditor
after the date of the auditor’s report but
Before the date the financial statements are
Issued
c) Facts which become Known to the auditor
after the financial statements have been
Issued
d) All of the above
416. SA 560 covers:
a) Events occurring between the date of the
financial statements and the date of the
auditor’s report.
b) Facts which become known to the auditor
after the date of the auditor’s report but
before the date the financial statements are
issued
c) Facts which become known to the auditor
after the financial statements have been
Issued
d) All of the above
417. Identify the incorrect one:
When, after the date of the auditor’s report
but before the date the financial statements
are issued, a fact becomes known to the
auditor that, had it been known to the auditor
at the date of the auditor’s report, may have
caused the auditor to amend the auditor’s
report, the auditor shall:
a) Discuss the matter with management and,
where appropriate, those charged with
governance.
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CA INTER AUDIT MCQs
b) Determine whether the financial
statements need amendment.
c) Inquire how management intends to
address the matter in the financial
statements.
d) Read the entity’s latest subsequent
interim financial statements.
418. When, after the date of the auditor’s report
but before the date the financial statements
are issued, a fact becomes known to the
auditor that, had it been known to the auditor
at the date of the auditor’s report, may have
caused the auditor to amend the auditor’s
report, the auditor shall discuss with
management and ask management to revise
financial statement and shall issue new audit
report , if the management agrees by :
a) Dual Dating
b) Emphasis of matter para
c) Other matter para
d) Any of the above, as appropriate
419. When, after the date of the auditor’s report but
before the date the financial statements are
issued, a fact becomes known to the auditor that,
had it been known to the auditor at the date of
the auditor’s report, may have caused the auditor
to amend the auditor’s report, the auditor shall
discuss with management and ask management
to revise FST and , if the management disagrees :
a) Shall issue new audit report by Dual Dating
b) Shall issue new audit report by using
Emphasis of Matter Para
c) Shall issue new audit report by using Other
Matter Para
d) Shall take appropriate action so that no one
can rely on earlier auditor's report.
420. Identify the incorrect one:
a) Dual dated audit report is restricted to only
the amended matter.
b) Dual dated audit report is not restricted to
only the amended matter, but to the entire
financial statement.
c) Dual dated audit report covers only matters
that were not earlier present in financial
statement.
d) None of the above
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CA RAVI TAORI CA INTER AUDIT MCQs

421. Identify the correct one: 425. As per SA 570, Adverse financial ratio's is a:
a) OMP is restricted to only the amended a) Financial Indicator.
matter. b) Operating Indicator.
b) OMP is not restricted to only the amended c) Other Indicator.
matter, but to the entire financial statement. d) None of the above.
c) OMP also covers matters present in earlier
426. As per SA 570, Non-compliance with loan
financial statement.
Agreement is a:
d) None of the above
a) Financial Indicator.
422. Identify the incorrect one: b) Operating Indicator.
With respect to facts Which Become Known to c) Other Indicator.
the Auditor After the Financial Statements d) None of the above.
have been Issued the auditor shall:
a) Discuss the matter with management and, 427. Loss of major market or loss of key customer is
where appropriate, those charged with a:
governance. a) Financial Indicator.
b) Read the entity’s latest subsequent b) Operating Indicator.
interim financial statements. c) Other Indicator.
c) Inquire how management intends to d) None of the above.
address the matter in the financial
statements. 428. As per SA 570, Loss of licenses or labour
d) Check whether FST issued are called back unrest is a:
and steps are taken to inform those who a) Financial Indicator.
are in receipt of such statement about the b) Operating Indicator.
situation. c) Other Indicator.
d) None of the above.
SA 570 429. As per SA 570, Change in law is a:
423. Choose the correct one: a) Financial Indicator.
As per SA 570: b) Operating Indicator.
a) Assessment of entities going concern is c) Other Indicator.
responsibility of management. d) None of the above.
b) Assessment of entities going concern is 430. As per SA 570, Legal proceeding is an example
responsibility of auditor. of:
c) Assessment of entities going concern is a) Financial Indicator.
responsibility of management and auditor. b) Operating Indicator.
d) None of the above
c) Other Indicator.
424. Choose the correct one: d) None of the above.
As per SA 570:
431. If the assessment of going concern is made
a) Auditor is required to assess going
by management but the period covered for
concern assumption of the entity.
assessment is less than 12 months the auditor
b) Auditor is only required to evaluate
shall:
whether entities assessment of going
a) Cover such period as covered by
concern is correct or not.
management even though its less than 12
c) Auditor is required to assess going
months
concern assumption of the entity and is
b) Request management to extend its period
also required to evaluate whether entities
of assessment to at least 12 months.
assessment of going concern is correct or
c) Not make evaluation of management
not.
assessment of going concern assumption.
d) None of the above
d) None of the above

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SA 580 b) optional (as per requirement of auditor)

431.1 "As per SA 580, Written representations means
a written statement by auditor provided to the
management to
a) confirm certain matters
b) support other audit evidence
c) both of the above
d) none of the above"
431.2 As per SA 580 , Written representations
means a written statement by
management provided to the auditor to
a) confirm certain matters
b) support other audit evidence
c) both of the above
d) none of the above
431.3 As per SA 580 ,Written representations in
this context include –
a) financial statements,
b) the assertions therein
c) supporting books and records
d) none of the above
431.4 For purposes of SA-580 , references to
“management” should be read as
a) management
b) those charged with governance
c) both of the above
d) management and, where appropriate,
those charged with governance.
c) both of the above
d) none of the above
431.7 Identify the incorrect one:
a) As per SA 580, written representations
provide necessary audit evidence, they do
not provide sufficient appropriate audit
evidence on their own about any of the
matters with which they deal.
b) As per SA 580, written representations can
be considered as necessary , sufficient &
appropriate audit evidence on their own
about any of the matters with which they
deal.
431.8 Identify the correct one:
a) The fact that management has
provided reliable written
representations does not affect the
nature or extent of other audit evidence
that the auditor obtains about the
fulfilment of management’s
responsibilities, or about specific
assertions.
b) The fact that management has
provided reliable written
representations affect the nature or
extent of other audit evidence that the
auditor obtains about the fulfilment of
management’s responsibilities, or
about specific assertions.

431.9 Identify the correct one:

431.5 As per SA 580, there are two types of written
a) Written representations cannot be a
representations: -
substitute for other evidence that the
1) Written Representations about
auditor could expect to be reasonably
Management’s Responsibilities
available.
2) Other Written Representations.
b) Written representations can be a
State whether true or false:
substitute for other evidence that the
a)True
auditor could expect to be reasonably
b)False
available.

431.6 As per SA 580, written Representations

431.10 Identify the correct one:
about Management’s Responsibilities is
If the auditor is unable to obtain
__________in nature
sufficient appropriate audit evidence that
a) compulsory
he believes would be available regarding

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a matter which has or may have a
material effect on the financial
information.
a) If representation from management
has not been obtained on the matter in
that case only it will constitute a
limitation on the scope of his
examination.
b) If representation from management
has been obtained on the matter this
will still constitute a limitation on the
scope of his examination
c) Even If representation from
management has not been obtained on
the matter this will not constitute a
limitation on the scope of his
examination.
d) None of the above
431.11 The auditor may also ask management to
reconfirm its acknowledgement and
understanding of those responsibilities in
written representations. This is particularly
appropriate when:
a) The terms of the audit engagement were
prepared in a previous year;
b) There is any indication that management
misunderstands those responsibilities
c) Changes in circumstances make it
appropriate to do so.
d) All of the above
431.12 Identify the correct one:
As per SA 580 ,Written representations
requested from those responsible for :
a) the preparation and presentation of
Audit report
b) the preparation and presentation of
Stakeholders report
c) the preparation and presentation of
financial statements
d) all of the above
431.13 Identify the correct one:
To the effect that representations are made
to the best of its knowledge and belief
,written representations by management :
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CA INTER AUDIT MCQs
a) should always use an unqualified
language
b) may be in qualifying language
c) should always use a qualified language
d) none of the above
431.14 Identify the correct one
The date of the written representations
shall be:
a) as near as practicable to, before or
after, the date of the auditor’s report on
the financial statements
b) as near as practicable to, but not
before, the date of the auditor’s report
on the financial statements
c) as near as practicable to, but not after,
the date of the auditor’s report on the
financial statements
d) all of the above
431.15 Identify the incorrect one:
If management does not provide one or
more of the requested written
representations, the auditor shall:
a) Discuss the matter with management;
b) Re-evaluate the integrity of management
and evaluate the effect that this may have
on the reliability of representations and
audit evidence in general; and
c) Take appropriate actions, including
determining the possible effect on the
opinion in the auditor’s report in
accordance with SA 705.
are d) None of the above
the
the
the
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CA RAVI TAORI CA INTER AUDIT MCQs

SA 610 c) True, as SA 610 mentions to submit the report

to shareholders.
440. Internal auditor means: d) False, internal audit report is not only for the
a) person who reviews operating activities, shareholders but also for management of
evaluates internal control system and the company.
helps TCWG and management in
governance. 445. Identify the incorrect option as per SA 610
b) person who checks that whether financial Statutory auditor shall determine, can he rely on
statements are prepared as per applicable Internal Auditor for using his work. It depends on
financial reporting framework and following:
expresses opinion on them. a) Level of Competence
c) Key management Person b) Objectivity of Internal Auditor
d) Director c) Systematic & Disciplined Approach
d) Prohibition by law
441. One of the differences between internal auditor
and external auditor is that external auditor is 446. Identify the incorrect option as per SA 610
__________of management and internal auditor is Statutory auditor shall determine, can he take
_________of management. direct assistance from Internal Auditor. It
1. independent depends on following:
2. advisor a) Level of Competence
3. under influence b) Objectivity of Internal Auditor
4. Not a part c) Systematic & Disciplined Approach
Options: d) Prohibition by law
a) 1 and 4
b) 1 and 3 447. Statutory auditor can use the work of the
c) 2 and 3 internal auditor which is:
d) 3 and 4 a) Complex in nature
b) Requires significant judgements
442. Internal auditor is appointed: c) Risk of material misstatement is high.
a) by board of directors d) None of the above
b) by shareholders
c) by Managing director 448. Statutory auditor can use direct assistance
from internal auditor with respect to work
d) None of the above
which is:
a) Complex in nature
443. Internal audit is _________, however compulsory
b) Requires significant judgements
to some companies as specified under section
c) Risk of material misstatement is high.
______ of Companies Act, 2013. d) None of the above
a) Voluntary,143
b) Voluntary,138 449. State the incorrect one:
c) Voluntary,141 a) If direct assistance is taken from internal
d) None of the above auditor, it will reduce the liability of statutory
auditor in case of negligence on part of
444. Internal audit report is required to be submitted internal auditor.
to the shareholders of the company. b) Even if direct assistance is taken from internal
a) True, as it tells the shareholders about the auditor, it will not reduce the liability of
working of the company. statutory auditor in case of negligence on
b) False, internal audit report is for the part of internal auditor.
management of the company.

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450. Can statutory auditor Take Direct Assistance in

external confirmation procedure from Internal
Auditor?
a) Yes, its common work for both auditors.
b) No, internal auditor is not concerned with
such audit procedure.
c) Yes, it makes audit efficient and effective.
d) No, we cannot, as external auditor should
have control over external confirmation
process.

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SA 700 470. Identify to which option the following example

relates to the most. TRAI asked for circle wise
466. Identify the correct one profit and loss which is suitable for decision
There are two types of financial reporting making of license fees.
framework: a) General purpose financial reporting
1. General purpose financial reporting framework
framework b) Special purpose financial reporting
2. Specific purpose financial reporting framework
framework c) Government purpose financial reporting
3. Special purpose financial reporting framework
framework d) Specific purpose financial reporting
4. Government purpose financial reporting framework
framework
Options: 471. General purpose report is covered by SA:
a) 3 & 4 a) 700
b) 1 & 3 b) 800
c) 2 & 3 c) 600
d) 2 & 4 d) 810

467. Identify the correct one 472. Which of the standards of auditing are relevant
General purpose financial reporting framework is: when the financial statements are prepared as
a) followed and suitable for few. per special purpose financial reporting
b) followed and suitable for public at large. framework?
c) followed and suitable for government a) 700
entities. b) 800
d) followed and suitable for public sector c) Both of the above
entities. d) None of the above

468. Special purpose financial reporting framework 473. Identify the correct option:
is: __________________ gives permission,
a) followed and suitable for few. 1. For additional Disclosures or
b) followed and suitable for public at large. 2. To amend requirement of Financial
c) followed and suitable for government Reporting Framework, for better financial
presentation
entities.
Options:
d) followed and suitable for public sector
a) Fair presentation Framework
entities.
b) Compliance Framework
c) Equitable presentation Framework
469. Identify to which option the following example
d) Docility Framework
relates to the most AS in India are required to be
followed by almost all. 474. State whether true or false:
a) General purpose financial reporting Compliance Framework gives permission,
framework 1. For additional Disclosures or
b) Special purpose financial reporting 2. To amend requirement of Financial Reporting
framework Framework, for better financial presentation
c) Government purpose financial reporting Options:
framework a) True, as compliance framework does permits
d) Specific purpose financial reporting the same.
framework

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b) False, as only fair presentation framework 480. The term __________is used when auditor verifies
permits the same. and vouches for accuracy of facts stated there in.
c) True, as docility Framework does permits the a) audit Report
same. b) certificate
d) False, as only equitable presentation c) review Report
framework permits the same. d) none of the above.

475. Identify the expected wording of Compliance 481. While giving audit report, auditor is responsible
Framework: for:
a) Whether financial statements give true & fair a) Ensuring that report is based on factual data.
view. b) Factual accuracy of the what is stated
b) Whether financial statements are as per c) All of the above
compliance framework. d) None of the above
c) Auditor did not receive any information
which suggests material misstatement exist. 482. While giving certificate, auditor is responsible
d) None of the above for:
a) Ensuring that report is based on factual data.
476. Identify the expected wording of Fair b) Factual accuracy of the what is stated
presentation Framework: c) All of the above
a) Whether financial statements give true & fair d) None of the above
view.
b) Whether financial statements are as per 483. Identify the correct one:
compliance framework. a) Supplementary Information is the
c) Auditor did not receive any information additional information which is not
which suggests material misstatement exist. required as per financial reporting
d) None of the above framework but is included voluntarily or
as per law.
b) Supplementary Information is the
477. Which from the following is a written
additional information which is required
confirmation of accuracy of facts?
as per financial reporting framework or
a) Audit Report
voluntarily or as per law.
b) Certificate
c) Supplementary Information is the
c) Review Report additional information which is required
d) None of the above. as per financial reporting framework and
not voluntarily or not as per law.
478. Which from the following is a formal Statement d) None of the above
including opinion made after enquiry of matter
specified? 484. Report under section 143 of the Companies Act,
a) Audit Report 2013 is addressed to:
b) Certificate a) Management
c) Review Report b) Those charged with governance
d) None of the above. c) Shareholders
d) None of the above
479. __________involves expression of opinion which
may differ from person to person. 485. Communication under SA 260 is addressed to:
a) Audit Report a) Management
b) Certificate b) Those charged with governance
c) Review Report c) Shareholders
d) None of the above. d) None of the above

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486. Report under section 143 of the Companies Act,

2013 is an internal document.
a) True, it is a report for management of the
company.
b) False, it is a statutory report and is available
in public domain.
c) True, it is a report for TCWG of the company.
d) None of the above

487. Communication under SA 260 is an internal

document.
a) True, it is a report for TCWG of the company.
b) False, it is a statutory report and is available
in public domain.
c) True, it is a statutory report and is internal
document of the company.
d) None of the above

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SA 701
487.1 In which circumstances, auditor should
think/consider about Key Audit Matter
Paragraph?
a) For audits of complete sets of general-
purpose financial statements of listed entities
b) Required by law or regulation
c) Auditor decides to communicate key audit
matters ( significant public interest
d) All of the above
487.2 SA 705 (Revised) prohibits the auditor from
communicating key audit matters when the
auditor disclaims an opinion on the financial
statements, unless:
a) Such reporting is required by law or
regulation.
b) Such reporting is required in public interest
c) Any of the above
d) None of the above
487.3 What do you mean by Key audit matters ?
Key audit matters mean –
a) Those matters that, in the auditor’s
professional judgment, were of most
significance in the audit of the financial
statements of the current and previous
period
b) Those matters that, in the auditor’s
professional judgment, were of most
significance in the audit of the financial
statements of the current period
c) Those matters that, in the management's
judgment, were of most significance in the
audit of the financial statements of the
current and previous period
d) Those matters that, in the management's
judgment, were of most significance in the
audit of the financial statements of the
current period
487.4 Identify the correct one:
a) Key audit matters are selected from matters
which are neither communicated with those
charged with governance nor with
management.
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CA INTER AUDIT MCQs
b) Key audit matters are selected from matters
communicated to management but not to
those charged with governance.
c) Key audit matters are selected from matters
communicated with those charged with
governance.
d) None of the above
487.5 Choose the correct one:
Determining Key Audit Matter involves?
1. Making List of matters communicated to
TCWG
2. Identify matters which need significant
auditor's attention
3. Identification of item of most significance
4. Correct period item
Options:
a) 1 &
b) 3 & 4
c) 1,2 & 4
d) 1,2,3 & 4
487.6 Which from the following shall never be
considered for Identification of matters which
need significant auditor's attention?
a) Significance of Risk
b) Significance of Management Judgement
c) Significance of event or transaction
d) None of the above
487.7 Those matters that, communicated with
those charged with governance and in the
auditor’s professional judgment, were of most
significance in the audit of the financial
statements of the current period ,the auditor shall
mandatorily describe each key audit matter in the
auditor’s report without any exceptions.
a) True, there exist no exceptions to such
disclosure
b) False, there exist exceptions to such
disclosure
487.8 Which from the following are the
circumstances in Which a Matter Determined
to Be a Key Audit Matter Is Not
Communicated in the Auditor’s Report
1. Law or regulation precludes public
disclosure about the matter
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CA RAVI TAORI CA INTER AUDIT MCQs

2. Adverse consequences of doing so would

reasonably be expected to outweigh the
public interest benefits (entity has publicly
disclosed information about the matter)
3. Adverse consequences of doing so would
reasonably be expected to outweigh the
public interest benefits(entity has not
publicly disclosed information about the
matter)
4. Law or regulation does not preclude public
disclosure about the matter
Options:
a) 1 & 3
b) 1 & 4
c) 2 & 4
d) None of the above

487.9 Identify the incorrect one:

1. If matter is Qualified under SA 705 - Don’t
include in KAM just give reference of Basis of
Qualification in KAM para
2. If matter is Adverse under SA 705 - Don’t
include in KAM just give reference Basis of
Qualification in KAM para
3. If Disclaimer is given under SA 705 - Don’t
give KAM para as audit was not conducted
4. If matter is referred in EMP / OMP under SA
706 and Matter of EMP / OMP is also KAM
include it in KAM
Option:
a) 1 , 2, 3
b) 1 , 3 , 4
c) 1,2,3,4
d) None of the above

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SA 705 c) Disclosure which are fundamental to user

understanding.
d) None of the above
488. Pervasive effects on the financial statements are
those that, in the auditor’s judgment:
492. What kind of opinion will be given by auditor in
a) are not confined to specific element
the following circumstances?
b) If confined, represent a substantive portion in
Material misstatement exists in financial
financial statement
statement and it’s pervasive.
c) are disclosure which are fundamental to user
a) Disclaimer of opinion
understanding
b) Qualified opinion
d) All of the above
c) Adverse opinion
d) Unmodified opinion
489. Identify as to which of the following option
will be appropriate to the respective
statement taking into consideration the 493. What kind of opinion will be given by auditor in
concept of pervasiveness. the following circumstances?
A misstatement that affects many items in the Material misstatement exists in financial
financial statement statements but it’s not pervasive.
a) Not confined to specific element a) Disclaimer of opinion
b) If confined to one item represent a b) Qualified opinion
substantive portion in financial statement c) Adverse opinion
c) Disclosure which are fundamental to user d) Unmodified opinion
understanding
d) None of the above 494. What kind of opinion will be given by auditor
in the following circumstances?
490. Identify as to which of the following option will Sufficient and appropriate audit evidence is
be appropriate to the respective statement taking not available but it’s not pervasive.
into consideration the concept of pervasiveness. a) Disclaimer of opinion
A misstatement that affects only a particular item b) Qualified opinion
in financial statement, but that item is of c) Adverse opinion
substantial importance d) Unmodified opinion
a) Not confined to specific element
b) If confined to one item represent a 495. What kind of opinion will be given by auditor in
substantive portion in financial statement the following circumstances?
c) Disclosure which are fundamental to user Sufficient and appropriate audit evidence is not
understanding available and it’s pervasive.
d) None of the above a) Disclaimer of opinion
b) Qualified opinion
491. Identify as to which of the following option will c) Adverse opinion
be appropriate to the respective statement taking d) Unmodified opinion
into consideration the concept of pervasiveness.
“Not disclosing the facts which can have material 496. What kind of opinion will be given by auditor in
impact on user’s understanding of financial the following circumstances?
statement.” Eg: Material Uncertainty over Going Sufficient and appropriate audit evidence is
Concern available, and no material misstatement exist.
a) Not confined to specific element. a) Disclaimer of opinion
b) If confined represent a substantive portion in b) Qualified opinion
financial statement. c) Adverse opinion
d) Unmodified opinion

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497. What kind of opinion will be given by auditor in 503. When auditor expects to modify the opinion in
the given circumstances? the audit report, the auditor shall inform "those
No Material misstatement exists in financial charged with governance" regarding intended
statements and sufficient and appropriate audit wording of the modification and reason for the
evidence is also available same.
a) Disclaimer of opinion a) True, SA 705 specifies the same
b) Qualified opinion b) False, SA 705 does not specify the same
c) Adverse opinion c) True, SA 706 specifies the same
d) Unmodified opinion d) False, SA 706 does not specify the same

498. Relate the statement to the respective opinion: 504. If any limitation are imposed on the auditors
"Not able to express opinion" scope of work after acceptance, which is likely to
a) Disclaimer of opinion result in qualification or disclaimer ,the auditor
b) Qualified opinion shall request management to remove such
c) Adverse opinion limitation .If management refuses, auditor should
d) Unmodified opinion go to those charged with governance and shall
perform alternate audit procedures .If the auditor
499. Relate the statement to the respective is not able to obtain sufficient and appropriate
opinion: audit evidence and its pervasive, the auditor shall
"Subject to / Except effect of:" give a(if its early stage) :
a) Disclaimer of opinion a) Disclaimer of opinion
b) Qualified opinion b) Qualified opinion
c) Adverse opinion
c) Adverse opinion
d) Unmodified opinion
d) resign from engagement

500. Relate the statement to the respective opinion:

505. If any limitation are imposed on the auditors
"Financial statements does not show true and fair
scope of work after acceptance ,which is likely to
view"
result in qualification or disclaimer ,the auditor
a) Disclaimer of opinion
shall request management to remove such
b) Qualified opinion
limitation .If management refuses ,auditor should
c) Adverse opinion
go to those charged with governance and shall
d) Unmodified opinion
perform alternate audit procedures .If the auditor
is not able to obtain sufficient and appropriate
501. Relate the statement to the respective opinion:
audit evidence and its pervasive, the auditor shall
"Financial statements show true and fair view"
give a(if it is an advanced stage) :
a) Disclaimer of opinion
a) Disclaimer of opinion
b) Qualified opinion
b) Qualified opinion
c) Adverse opinion
c) Adverse opinion
d) Unmodified opinion
d) Resign from engagement

502. When auditor expects to modify the opinion

506. If any limitations are imposed on the
in the audit report, the auditor shall
auditors scope of work after acceptance
communicate to "those charged with
,which is likely to result in qualification or
governance".
disclaimer ,the auditor shall request
a) True, SA 705 specifies the same
management to remove such limitation .If
b) False, SA 705 does not specify the same
management refuses, auditor should go to
c) True, SA 706 specifies the same
those charged with governance and shall
d) False, SA 706 does not specify the same
perform alternate audit procedures .If the
auditor is not able to obtain sufficient and
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appropriate audit evidence but it’s not 512. When auditor expects to include emphasis of
pervasive, the auditor shall give a : matter para or other matter para in the audit
a) Disclaimer of opinion report the auditor shall communicate to those
b) Qualified opinion charged with governance, the fact and the
c) Adverse opinion expected wordings of this para.
d) Resign from engagement
a) True
b) False
SA 706
513. Emphasis of matter para is a substitute for:
507. ________is used by the auditor to refer the 1. Qualified, Adverse or Disclaimer of
matter appropriately presented in financial Opinion or,
statement, with the intention to highlight the 2. Disclosure to be made by management in
matter. financial statement.
a) Other Matter Para a) True
b) Emphasis of Matter Para b) False
c) Opinion para
d) None of the above 514. Widespread use of Emphasis of matter para
reduces its effectiveness.
508. ________is used by the auditor to refer the matter a) True
other than those mentioned in financial b) False
statement, which is relevant to user
understanding regarding auditor's responsibility 515. Before using emphasis of matter para or other
or his report. matter para, auditor is required to obtain
a) Other Matter Para sufficient and appropriate audit evidence that
b) Emphasis of Matter Para matter for which such para is used, is not
c) Opinion para materially misstated.
d) None of the above a) True
b) False
509. Examples, where emphasis of matter para
will be used:
a) Prior period item.
SA 710
b) Amalgamation
c) Changes in accounting policy 516. As per SA 710, _________are amounts and
d) All of the above disclosures which are of one or more prior period
and are included in financial statement in
510. Examples, where other matter para will be used: accordance with applicable financial reporting
a) Prior period item. framework.
b) Amalgamation a) prior period items
c) Changes in accounting policy b) comparative Information
d) None of the above c) both of the above
d) none of the above
511. Examples, where other matter para will be used:
a) Last year no audit was conducted. 517. Identify the approach:
b) Last year audit was conducted by someone Detailed information of previous year is given.
else. a) Corresponding Figure Approach.
c) Some branches are audited by other auditors. b) Comparative financial statements Approach.
d) All of the above c) Complementary Figure Approach.
d) Restricted financial statements Approach

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518. Identify the approach:
Previous Year is not given equal importance.
a) Corresponding Figure Approach.
b) Comparative financial statements
Approach.
c) Complementary Figure Approach.
d) Restricted financial statements Approach
519. Identify the approach:
Current year and previous year both are referred
in intro para and opinion para.
a) Corresponding Figure Approach.
b) Comparative financial statements Approach.
c) Complementary Figure Approach.
d) Restricted financial statements Approach
520. Identify the approach:
Current year only is referred in intro para and
opinion para.
a) Corresponding Figure Approach.
b) Comparative financial statements Approach.
c) Complementary Figure Approach.
d) Restricted financial statements Approach
521. Identify the approach:
Previous year financial statement is considered as
separate financial statement.
a) Corresponding Figure Approach.
b) Comparative financial statements Approach.
c) Complementary Figure Approach.
d) Restricted financial statements Approach
522. In case of Comparative financial statement
approach, if last year audit was not done by
the auditor or last year's financial statements
were not audited then, auditor shall refer the
intro para and opinion para of:
a) previous year, current year and shall
mention the fact in other matter
paragraph.
b) current year and shall mention the fact in
other matter paragraph.
c) previous year and shall mention the fact in
other matter paragraph.
d) previous year and current year.
523. As per SA 710, In case of Comparative financial
statement approach written representation are
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CA INTER AUDIT MCQs
required for all periods on which opinion is given
in audit report.
a) True, as management need to reaffirm that
written representation it previously made
with respect to prior period remains
appropriate.
b) False, written representation are only
required for current period as audit report
only refers to the current period.
c) False, there is no such requirement as per SA
710
d) None of the above.
524. Choose the most appropriate option from
below after considering the statement given.
As per SA 710, In case of Corresponding
financial statement approach written
representation are required for only for
current period.
a) False, written representation of prior
period also required as management need
to reaffirm that written representation it
previously with respect to prior period
remains appropriate.
b) True, written representation are only
required for current period as audit report
only refers to the current period.
c) False, there is no such requirement as per
SA 710
d) None of the above
525. As per SA 710, In case of Comparative financial
statement approach if misstatement is stated in
previous year audit report or detected during
current year, the auditor should ask management
to resolve if management agrees, auditor shall
issue a:
a) Clean report and shall mention the fact in
emphasis of matter para
b) Clean report and shall mention the fact in
other matter para
c) Modified report and shall mention the fact in
emphasis of matter para
d) Modified report and shall mention the fact in
other matter para
526. As per SA 710, In case of Corresponding figure
approach if misstatement is stated in previous
year audit report or detected during current year,
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CA RAVI TAORI CA INTER AUDIT MCQs

the auditor should ask management to resolve if b) give a Qualified opinion on previous year
management agrees, auditor shall issue a: figures only
a) Clean report and shall mention the fact in c) no qualification required on current year
emphasis of matter para figures
b) Clean report and shall mention the fact in d) none of the above
other matter para
c) Modified report and shall mention the fact in 530. As per SA 710, if auditor changes his opinion
emphasis of matter para regarding previous year as reported earlier the
d) Modified report and shall mention the fact in auditor shall specify the fact in:
other matter para a) emphasis of matter para
b) other matter para
527. As per SA 710, In case of Corresponding figure c) opinion para
approach if misstatement of previous year is d) none of the above
stated in previous year audit report or detected
during current year, the auditor should ask
management to resolve if management
disagrees, auditor shall issue:
a) Qualified opinion on entire financial
statement as it affects comparability.
b) Qualified opinion on current year figures only
c) No qualification required on current year
figures
d) None of the above

528. As per SA 710, In case of Comparative

financial statement approach if misstatement
of previous year is stated in previous year
audit report or detected during current year,
and it doesn’t have any effect on current year,
the auditor should ask management to resolve
if management disagrees, auditor shall issue
a:
a) Give a Qualified opinion on entire financial
statement
b) Give a Qualified opinion on previous year
figures only
c) No qualification required on current year
figures
d) None of the above

529. As per SA 710, In case of Comparative financial

statement approach if misstatement of previous
year is stated in previous year audit report or
detected during current year and also affects
current year figures, the auditor should ask
management to resolve if management
disagrees, auditor shall issue a:
a) give a Qualified opinion on previous year and
current year figures.

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COMPANY AUDIT-I
542. As per section 139 of the Companies Act 2013,
company can appoint ___________as an auditor.
a) individual
b) firm
c) Either from the above
d) None of the above
543. Identify the correct one:
As per section 139 of the Companies Act 2013,
every company shall, at the first Annual
General Meeting, appoint an individual or a
firm of auditors as an auditor who shall hold
office from: -
a) from the conclusion of that meeting till
the conclusion of its sixth annual general
meeting
b) from the conclusion of that meeting till
the conclusion of its fifth annual general
meeting
c) from the conclusion of that meeting till
the conclusion of its seventh annual
general meeting
d) None of the above
544. Identify the correct one:
a) Before appointment of auditor is made, the
written consent of the auditor to such
appointment, and a certificate from him or it
that the appointment, if made, shall be in
accordance with the conditions as may be
prescribed, shall be obtained from the
auditor.
b) After appointment of auditor is made, the
written consent of the auditor to such
appointment, and a certificate from him or it
that the appointment, if made, shall be in
accordance with the conditions as may be
prescribed, shall be obtained from the
auditor.
c) After appointment of auditor is made, the
written consent of the auditor to such
appointment is required, however a
certificate from him or it that the
appointment, if made, shall be in accordance
with the conditions as may be prescribed, is
not required from the auditor.
d) None of the above
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CA INTER AUDIT MCQs
545. Identify the correct one:
a) Company shall inform the auditor concerned
of his or its appointment, and also file a
notice of such appointment with the
Registrar within thirty days of the meeting in
which the auditor is appointed.
b) Company shall inform the auditor concerned
of his or its appointment, and also file a
notice of such appointment with the
Registrar within fifteen days of the meeting in
which the auditor is appointed.
c) Company shall inform the auditor concerned
of his or its appointment, and also file a
notice of such appointment with the
Registrar within seven days of the meeting in
which the auditor is appointed.
d) None of the above.
546. Auditor is appointed in an Annual General
Meeting by passing a resolution. However, a
single resolution for appointment of auditor
shall not cover a period exceeding ________in
case of individual and _________in case of firm
of auditors.
a) one term of five consecutive years; one
terms of five consecutive years
b) two term of five consecutive years; two
terms of five consecutive years
c) one term of five consecutive years; two
terms of five consecutive years
d) two term of five consecutive years; one
terms of five consecutive years
547. In case of rotation, auditor (firm or individual)
who has completed a term shall not be eligible
for re-appointment as auditor in the same
company for a period of ___________from the
completion of his term.
a) ten years
b) five years
c) three years
d) two years
548. Identify the correct one:
a) in the audit firm appointed, the auditing
partner and his team shall be rotated at
such intervals or the audit shall be
conducted by more than one auditor shall
be resolved by members.
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CA RAVI TAORI CA INTER AUDIT MCQs

b) It is mandatory for members to resolve 553. The first auditor of a company, other than a
that the auditing partner and his team Government company, shall be primarily
shall be rotated at such intervals or the appointed by the Board of Directors
audit shall be conducted by more than one within___________ from the date of registration of
auditor the company.
c) The auditing partner and his team shall be
a) ninety days
rotated at such intervals or the audit shall
b) sixty days
be conducted by more than one auditor
c) thirty days
may be resolved by the board of directors.
d) fifteen days
d) None of the above.

554. In case of, other than a Government company

549. In the case of a Government company,
_____________shall appoint the first auditor of a
_______________ shall, in respect of a financial year,
company at an ____________ in the case of failure
appoint an auditor duly qualified to be appointed
of the Board to appoint such auditor.
as an auditor of companies under Companies
a) Shareholders; extraordinary general meeting
Act,2013.
b) Board of Directors; extraordinary general
a) Central Government.
meeting
b) Comptroller and Auditor-General of India.
c) Shareholders; annual general meeting
c) Board of directors
d) Board of Directors; annual general meeting
d) None of the above

555. In case of, other than a Government company

550. In the case of a Government company
auditor shall be appointed within tenure of the first auditor is till_____________.
_____________from the commencement of the a) the conclusion of the sixth annual general
financial year. meeting.
a) a period of one hundred and twenty days b) the conclusion of the first annual general
b) a period of thirty days meeting.
c) a period of one hundred and eighty days c) the conclusion of the fifth annual general
d) a period of sixty days meeting.
d) None of the above
551. In the case of a Government company auditor,
till what period auditor shall hold the office? 556. In case of, other than a Government
a) till the conclusion of the sixth annual general company _____________shall appoint the first
meeting. auditor of a company, in case of failure of the
b) till the conclusion of the annual general Board to appoint such auditor within ninety
meeting. days of______________:
c) till the conclusion of the third annual general a) shareholder; from the date of registration.
meeting. b) shareholder; after completion of 30 days
d) till the conclusion of the fifth general given to the board.
c) Central Government; from the date of
meeting.
registration.
d) Central Government; after completion of
552. The first auditor of a company, other than a
30 days given to the board.
Government company, shall be primarily
appointed by the _________________.
557. The first auditor of a company, in case of
a) Shareholders
Government company, shall be primarily
b) Board of Directors
appointed by the _________________.
c) Central Government
a) Shareholders
d) None of the above
b) Board of Directors
c) Central Government

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d) Comptroller and Auditor-General of India 562. In case of, a Government company

________shall appoint the first auditor of a
558. The first auditor of a company, in case of company at an ____________ in the case of failure
Government company, shall be primarily of the Board to appoint such auditor.
appointed by the Comptroller and Auditor- a) Shareholders; extraordinary general
meeting
General of India within___________ from the date
b) Board of Directors; extraordinary general
of registration of the company.
meeting
a) ninety days
c) Shareholders; annual general meeting
b) sixty days
d) Board of Directors; annual general
c) thirty days
meeting
d) fifteen days
563. In case of, a Government company tenure of the
559. In case of, a Government company first auditor is till_____________.
_____________shall appoint the first auditor of a a) the conclusion of the sixth annual general
company at an ____________ in the case of failure meeting.
of the Comptroller and Auditor-General of India b) the conclusion of the first annual general
to appoint such auditor. meeting.
a) Shareholders; extraordinary general meeting c) the conclusion of the fifth annual general
b) Board of Directors; board meeting
meeting.
c) Shareholders; annual general meeting d) None of the above
d) Board of Directors; annual general meeting
564. Casual vacancy (other than resignation) in the
560. In case of, a Government company
office of an auditor of a non-government
_____________shall appoint the first auditor of a
company be filled by the Board of Directors
company, in case of failure of the Comptroller
within__________.
and Auditor-General of India to appoint such
a) thirty days
auditor, within _________________:
a) shareholder; 30 days from the date of b) sixty days
registration. c) ninety days
b) Board of directors; next 30 days after d) None of the above
completion of 60 days given to the CAG.
c) Central Government; 60 days from the 565. Casual vacancy (resignation) in the office of
date of registration. an auditor of a non-government company be
d) Board of directors; next 30 days after filled by the Board of Directors, appointment
completion of 30 days given to the CAG. shall also be approved by the company at a
general meeting __________ of the
561. In case of, a Government company ________shall recommendation of the Board.
appoint the first auditor of a company, in case of a) within three months
failure of the board to appoint such auditor, b) within six months
c) within four months
within _________________:
d) None of the above
a) shareholder; 30 days from the date of
registration.
566. Auditor appointed in casual vacancy shall hold
b) shareholder; next 60 days after completion of
the office till_______________.
30 days given to the Board of Directors.
a) conclusion of the sixth annual general
c) Central Government; 60 days from the date
meeting
of registration.
b) conclusion of the next annual general
d) Board of directors; next 30 days after
meeting
completion of 30 days given to the CAG.

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c) conclusion of the fifth annual general d) recommendations of director

meeting
d) None of the above 572. The auditor appointed under section 139 may
be removed from his office before the expiry of
567. Casual vacancy (other than resignation) in the his term only by a __________ of the shareholders
office of an auditor of a government company be of the company.
filled by the Comptroller and Auditor-General of a) Omnibus resolution
India within__________. b) Ordinary resolution
a) thirty days c) Special resolution
b) sixty days d) None of the above
c) ninety days
d) None of the above 573. As per section 140 of the Companies Act,
2013, auditor appointed may be removed
568. Casual vacancy (in case of resignation) in the from his office before the expiry of his term.
office of an auditor of a government company be However prior approval of the ______________ is
filled by the Comptroller and Auditor-General of required.
India within______________ a) State Government
b) Board of Directors
a) thirty days
c) Central Government
b) sixty days
d) Shareholders
c) ninety days
d) None of the above
574. The application to the Central Government
for removal of auditor shall be made in Form
569. If Comptroller and Auditor-General of India _______________.
does not fill the vacancy within the said period, a) ADT-1
the ______________ shall fill the vacancy within next. b) ADT-2
a) Board of Directors; sixty days c) ADT-3
b) Board of Directors; thirty days d) ADT-4
c) Board of Directors; ninety days
d) Shareholders; thirty days 575. The application for approval shall be made to
the Central Government for removal of auditor
570. Where at any annual general meeting, no before expiry of term within ________ of the
auditor is appointed or re-appointed, the resolution passed by the Board.
existing auditor in normal circumstances, a) fifteen days
shall_________________. b) thirty days
a) retire from office of auditor of the c) seven days
company
d) forty days
b) continue to be the auditor of the company
c) recommend the new auditor of the
576. The company shall hold the general meeting
company
within __________ of receipt of approval of the
d) none of the above
Central Government for passing the special
resolution by _____________.
571. Where a company is required to constitute an
a) thirty days; board of directors
Audit Committee under section 177, all
b) sixty days; shareholders
appointments, including the filling of a casual
c) fifteen days; shareholders
vacancy of an auditor under this section shall be
d) sixty days; board of directors
made taking into account after the ______________.
a) recommendations of board
577. Identify the sequence in which the following
b) recommendations of such committee
things take place for the purpose of removal
c) recommendations of shareholders
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CA RAVI TAORI
of auditor appointed under section 139 of the
Companies Act,2013 before the expiry of his
term, as per section 140 of the Companies
Act,2013 to be read with rule 7.
1. Special resolution of shareholders
2. Board resolution
3. Approval of Central Government.
Options:
a) 2; 3; 1
b) 3; 2; 1
c) 1; 2; 3
d) 1; 3; 2
578. As per section 140 of the Companies Act, 2013,
in case of other than government companies ,the
auditor who has resigned from the company shall
file within a period of ______________ from the date
of resignation, with the _____________ a statement
indicating the reasons and other facts as may be
relevant with regard to his resignation.
a) thirty days; company
b) thirty days; company and the Registrar
c) thirty days; the Registrar
d) thirty days; board
579. As per section 140 of the Companies Act,
2013,in case government companies ,the auditor
who has resigned from the company shall file
within a period of ______________ from the date of
resignation, with the _____________ a statement
indicating the reasons and other facts as may be
relevant with regard to his resignation.
a) thirty days; company and CAG
b) thirty days; company, Registrar and CAG
c) thirty days; the Registrar and CAG
d) thirty days; board and CAG
580. As per section 140 of the Companies Act,
2013, a notice shall be required for a
resolution at an Annual General Meeting for
appointing as auditor a person other than a
retiring auditor.
What kind of notice is required to given and
what kind of resolution is required to be
passed?
a) Ordinary Notice; Ordinary resolution
b) Special Notice; Ordinary resolution
c) Special Notice; Special resolution
d) Ordinary Notice; Special resolution
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CA INTER AUDIT MCQs
581. As per section 140 of the Companies Act,
2013, a notice shall be required for a
resolution at an annual general meeting for
appointing as auditor a person other than a
retiring auditor.
What kind of notice is required to given and
what kind of resolution is required to be
passed in case where the retiring auditor has
completed a consecutive tenure of five years
or, as the case may be, ten years (in case of
rotation of auditor)?
a) No Special Notice; Ordinary resolution
b) Special Notice; Ordinary resolution
c) Special Notice; Special resolution
d) No Special Notice; Special resolution
582. As per section 141 of the Companies Act,2013,
a person shall be eligible for appointment as an
auditor of a company only if he is a ______________.
a) Chartered Accountant having certificate of
practice or not
b) Chartered Accountant having certificate of
practice
c) Chartered Accountant having membership
d) none of the above
583. Where a firm including a limited liability,
partnership is appointed as an auditor of a
company, ____________ shall be authorized to act
and sign on behalf of the firm.
a) only the partners who are chartered
accountants in practice
b) only the partners who are chartered
accountants whether in practice or not
c) only the partners who are chartered
accountants and having membership
d) none of the above
584. Who among the following shall not be
disqualified from being appointed as an
auditor of the company as per section 141 of
the Companies Act,2013?
a) Person having business relationship with
the company.
b) Person whose relative is a key
management person or director.
c) Partner or employee of officer or
employee of the company
d) None of the above
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CA RAVI TAORI
585. Who among the following shall not be
disqualified from being appointed as an
auditor of the company as per section 141 of
the Companies Act,2013?
a) a person who is holding security worth Rs
80,000 in the company or its subsidiary, or
of its holding or associate company or a
subsidiary of such holding company
b) a person whose relative is holding security
worth Rs 80,000 in the company or its
subsidiary, or of its holding or associate
company or a subsidiary of such holding
company
c) is indebted to the company, or its
subsidiary, or its holding or associate
company or a subsidiary of such holding
company, in excess of Rs 5,00,000.
d) whose relative is indebted to the
company, or its subsidiary, or its holding
or associate company or a subsidiary of
such holding company, in excess of Rs
5,00,000.
586. Who among the following shall not be
disqualified from being appointed as an auditor
of the company as per section 141 of the
Companies Act,2013?
a) a person who is holding security worth Rs
80,000 in the company or its subsidiary, or of
its holding or associate company or a
subsidiary of such holding company
b) a person whose relative is holding security
worth Rs 1,10,000 in the company or its
subsidiary, or of its holding or associate
company or a subsidiary of such holding
company
c) a person or relative is indebted to the
company, or its subsidiary, or its holding or
associate company or a subsidiary of such
holding company, in excess of Rs 5,00,000.
d) a person or relative has given a guarantee or
provided any security in connection with the
indebtedness of any third person to the
company, or its subsidiary, or its holding or
associate company or a subsidiary of such
holding company, 80,000
587. As per section 141 of the Companies Act,2013,
where a person appointed as an auditor of a
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CA INTER AUDIT MCQs
company incurs any of the disqualifications after
his appointment, he shall vacate his office as such
auditor.
a) Such vacation shall be deemed to be a casual
vacancy in the office of the auditor.
b) Such vacation however shall not be deemed
to be a casual vacancy in the office of the
auditor.
c) Such vacation shall affect by resignation of
the auditor.
d) None of the above
588. Which from the following services cannot be
rendered by the auditor directly or indirectly
to the company or its holding company or
subsidiary company?
a) accounting and book keeping services
b) internal audit
c) design and implementation of any
financial information system
d) all of the above
589. Which from the following services cannot be
rendered by the auditor directly or indirectly to
the company or its holding company or
subsidiary company?
a) investment advisory services
b) investment banking services
c) management services
d) all of the above
590. State whether true or false:
All notices of, and other communications
relating to, any general meeting shall be
forwarded to the auditor of the company, and
the auditor at his discretion may or may not
attend the meeting.
a) True, as per section 146 of the Companies
Act,2013 it is at the discretion of the
auditor whether to attend the meeting of
not.
b) False, as per section 146 of the Companies
Act,2013 it is mandatory for the auditor to
attend the meeting unless exempted by
the company.
c) True, as per section 146 of the Companies
Act,2013 it is recommendatory for the
auditor to attend the meeting.
d) False, as per section 146 of the Companies
Act,2013 it is mandatory for the auditor to
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CA RAVI TAORI
attend the meeting no exemption is
available to the company.
591. As per Rule - 3, Companies (Cost Records and
Audit) Rules, 2014,for the purposes of section
148(1) of the Companies Act, 2013, the class of
companies, including foreign companies
engaged in the production of the goods or
providing services (regulated & unregulated as
specified ) having an overall turnover ___________
during the immediately preceding financial year,
shall include cost records for such products or
services in their books of account .
a) from all its products and services of rupees 35
crore or more.
b) for individual products and services of rupees
35 crore or more.
c) from all its products and services of rupees 25
crore or more.
d) for individual products and services of rupees
25 crore or more.
592. As per Rule - 3, Companies (Cost Records and
Audit) Rules, 2014,for the purposes of section
148 of the Companies Act,2013, every
company specified in regulated sector shall
get its cost records audited in accordance with
these rules if the overall annual turnover of
the company from all its products and services
during the immediately preceding financial
year is rupees _________ and the aggregate
turnover of the individual product or products
or service or services for which cost records
are required to be maintained under rule 3 is
rupees ___________.
a) 50 crore or more; 25 crore or more
b) 25 crore or more; 50 crore or more
c) 100 crore or more; 35 crore or more
d) 35 crore or more; 100 crore or more
593. As per Rule - 3, Companies (Cost Records and
Audit) Rules, 2014,for the purposes of section 148
of the Companies Act,2013, every company
specified in non-regulated sector shall get its cost
records audited in accordance with these rules if
the overall annual turnover of the company from
all its products and services during the
immediately preceding financial year is rupees
_________ and the aggregate turnover of the
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CA INTER AUDIT MCQs
individual product or products or service or
services for which cost records are required to be
maintained under rule 3 is rupees ___________.
a) 50 crore or more; 25 crore or more
b) 25 crore or more; 50 crore or more
c) 100 crore or more; 35 crore or more
d) 35 crore or more; 100 crore or more
594. The requirement for cost audit under these rules
shall not apply to a company which is required to
maintain cost records (covered in rule 3) and—
a) whose revenue from exports, in foreign
exchange, exceeds seventy-five per cent of its
total revenue; or
b) which is operating from a special economic
zone.
c) which is engaged in generation of electricity
for captive consumption through Captive
Generating Plant.
d) All of the above
595. Cost records shall be maintained in form
_________.
a) CRA-2
b) CRA-1
c) CRA-3
d) CRA-4
596. Cost auditor shall be appointed within________ of
the commencement of every financial year.
a) 160 days
b) 180 days
c) 120 days
d) 150 days
597. Identify the sequence in which the following
things take place for the purpose of removal
of auditor appointed under section 139 of the
Companies Act,2013 before the expiry of his
term, as per section 140 of the Companies
Act,2013 to be read with rule 7.
1. Special resolution of shareholders
2. Board resolution
3. Approval of Central Government.
a) 2; 3; 1
b) 3; 2; 1
c) 1; 2; 3
d) 1; 3; 2
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CA RAVI TAORI
598. Auditor detected 5 different frauds of 25 lakhs
each by employees in the company in span of 1
month. Which reporting he should apply under
section 143(12) of Companies Act, 2013, below
Rs1 crore or above Rs 1 crore?
a) Below Rs 1 crore, as span is just 1 month
b) Above Rs 1 crore, as total frauds by
employees is Rs 1.25 crore
c) Below Rs 1 crore, as we have to see amount
of individual fraud and not total amount of
frauds
d) Above Rs 1 crore, as amount is big and truth
should reach government
COMPANY ACCOUNTS AND
MISC.
599. Every company shall prepare and keep books
of account and other relevant books and papers
and financial statement for every financial year
on:
1. on accrual basis
2. double entry system
3. cash basis
4. single entry system
a) 1 & 2
b) 2 & 3
c) 3 & 4
d) 1 & 4
600. Every company shall prepare and keep books of
account and other relevant books and papers and
financial statement for every financial year which
give a ________ view of the state of the affairs of
the company.
a) full and fair
b) true and fair
c) true and correct
d) full and correct
601. As per section 128 of the Companies Act,
2013, every company shall prepare and keep
at its registered office books of account and
other relevant books and papers and financial
statement for every financial year. Can book
of accounts be kept at any other place other
than registered office?
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CA INTER AUDIT MCQs
a) No, books of accounts should be kept only
at the registered office of the company.
b) Yes, books of accounts may be kept at the
registered office or any other place in
India at the discretion of the shareholders.
c) Yes, books of accounts may be kept at the
registered office or at such other place in
India as the Board of Directors may decide.
d) None of the above
602. If the board of directors decide to keep books
of accounts at any other place in India the
company shall, within ____________ thereof, file
with the Registrar a notice in writing giving the
full address of that other place.
a) seven days
b) eighteen days
c) ten days
d) fifteen days
603. The books of account and other books and
papers maintained by the company within
India shall be open for inspection at the
registered office of the company or at such
other place in ________________.
a) India by any shareholder during business
hours
b) India by any director during business
hours
c) India by any director 24 *7
d) India by any shareholder 24 *7
604. If the books of account and other books and
papers are maintained outside the country and
any "other financial information" is required by
the director, the company shall produce such
financial information to the director within
__________ of the date of receipt of the written
request.
a) seven days
b) eighteen days
c) ten days
d) fifteen days
605. The summarized returns of the books of
account of the company kept and maintained
outside India shall be sent to the registered
office at ___________.
a) half yearly intervals
b) quarterly intervals
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CA RAVI TAORI CA INTER AUDIT MCQs

c) yearly intervals c) all financial years since existence

d) monthly intervals d) seven financial years

606. Identify the correct one: 610. Who shall be responsible for maintenance of
a) Power to call "other financial information" books of accounts of the company?
in case books of account of the company a) Managing director, the whole-time director
kept and maintained outside India can be in charge of finance
exercised by the director himself and not b) The Chief Financial Officer
by or through his power of attorney c) Any other person of a company charged by
holder or agent or representative.
the Board
b) Power to call "other financial information"
d) All of the above
in case books of account of the company
kept and maintained outside India can be
611. What are penalties for non-maintenance of
exercised by the director himself and by or
books of accounts of the company?
through his power of attorney holder or
a) imprisonment for a term which may
agent or representative.
extend to one year
c) Power to call "other financial information"
b) fine which shall not be less than fifty
in case books of account of the company
thousand rupees, but which may extend to
kept and maintained outside India cannot
five lakh rupees
be exercised by the director himself and
c) Both of the above, at the discretion of
by or through his power of attorney
authority.
holder or agent or representative.
d) None of the above
d) None of the above

612. Financial statement prepared shall:

607. The inspection of books of accounts in respect
a) Give true and fair view of the state of affairs
of any subsidiary of the company shall be done
of the company
only by____________.
b) Be prepared as per accounting standard
a) the person authorized in this behalf by a
c) Be prepared as per schedule III
resolution of board of directors
d) All of the above
b) any director of the company
c) the person authorized in this behalf by a
613. As per section 129 of the Companies Act ,2013,
resolution of shareholders
financial statement shall be prepared as per
d) All of the above
Schedule III. To which of the following the above
conditions are not applicable?
608. The books of account of every company relating
a) Banking Company
to a period of not less than _____________
b) Insurance Company
immediately preceding a financial year.
c) Electricity Company
a) six financial years
d) All of the above
b) eight financial years
c) all financial years since existence
614. Identify the correct one:
d) seven financial years
a) At every annual general meeting of a
company, the Board of Directors of the
609. Where the company had been in existence
company shall lay before such meeting
for a period less than eight years books of
financial statements for the financial year.
accounts shall be maintained for all the
b) Consolidated financial statement of the
preceding years together with the vouchers
company and of all the subsidiaries and
relevant to any entry in such books of account
associate companies in accordance with
shall be kept in good order.
applicable accounting standards, shall also
a) six financial years
b) eight financial years

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CA RAVI TAORI
be laid before the annual general meeting
of the company.
c) A separate statement containing the
salient features of the financial statement
of its subsidiary or subsidiaries and
associate company or companies shall also
be attached along with its financial
statement
d) All of the above
615. Where the financial statements of a company do
not comply with the accounting standards, the
company shall disclose in its financial statements:
a) deviation from the accounting standards
b) reasons for such deviation
c) effect of such deviation
d) All of the above
616. Who shall be responsible for contravention of
provisions of section 129?
a) Managing director, the whole-time director
in charge of finance
b) The Chief Financial Officer
c) Any other person of a company charged by
the Board
d) All of the above
617. What are penalties for contravention of
provisions of section 129?
a) imprisonment for a term which may
extend to one year
b) fine which shall not be less than fifty
thousand rupees, but which may extend to
five lakh rupees
c) Both of the above, at the discretion of
authority.
d) None of the above
618. A company shall not re-open its books of
account and not recast its financial statements,
unless an application in this regard is made by
_____________and an order is passed by the court.
a) the Central Government,
b) the Income-tax authorities,
c) the Securities and Exchange Board, any other
statutory regulatory body or authority or any
person concerned
d) All of the above
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CA INTER AUDIT MCQs
619. Identify the reason for correct reason for re-
open its books of account and recast of financial
statements as per section 130 of the Companies
Act, 2013.
1. the relevant earlier accounts were prepared in
a fraudulent manner
2. the accounts are being prepared in a
fraudulent manner
3. the affairs of the company were mismanaged
during the relevant period, casting a doubt
on the reliability of financial statements
4. the affairs of the company are being
mismanaged, casting a doubt on the
reliability of financial statements.
Options:
a) 1 & 4
b) 1 & 3
c) 2 & 4
d) 2 & 3
620. No order shall be made in respect of re-
opening of books of account relating to a
period earlier than _________immediately
preceding the current financial year.
a) six financial years
b) eight financial years
c) five financial years
d) seven financial years
621. Section 131 of the Companies Act, 2013 deals
with revision of _________:
a) the financial statement of the company
b) the report of the Board
c) both of the above
d) none of the above
622. If it appears to the directors of a company
that the financial statement of the company
or the report of the Board do not comply with
the provisions of _________ they may prepare
revised financial statement or a revised
report.
a) section 134
b) section 129
c) both of the above
d) none of the above
623. As per section 131 of the Companies Act,2013
financial statement of the company or the report
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CA RAVI TAORI
of the Board can be revised for any of the
______________after obtaining approval of the
Tribunal on an application made by the company.
a) six preceding financial years
b) eight preceding financial years
c) three preceding financial years
d) seven preceding financial years
624. Identify the correct one:
a) As per section 130 of the Companies
Act,2013, revised financial statement or
report shall not be prepared or filed more
than once in a financial year
b) As per section 131 of the Companies
Act,2013, revised financial statement or
report shall not be prepared or filed more
than twice in a financial year
c) As per section 131 of the Companies
Act,2013, revised financial statement or
report shall not be prepared or filed more
than once in a financial year
d) As per section 130 of the Companies
Act,2013, revised financial statement or
report shall not be prepared or filed more
than twice in a financial year
625. As per section 131 of the Companies Act ,2013,
the application to the tribunal for revision of
financial statements or Board's report shall be
made by the__________.
a) the Central Government,
b) the Income-tax authorities,
c) the Securities and Exchange Board, any other
statutory regulatory body or authority or any
person concerned
d) Company
626. As per section 134 of the Companies Act,2013,
the financial statement, including consolidated
financial statement, if any, shall be approved by
the_________ before they are signed on behalf of
the Board.
a) Director
b) Board of Directors
c) shareholders
d) stakeholders
627. The financial statement, including consolidated
financial statement, if any, shall be approved by
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CA INTER AUDIT MCQs
the Board of Directors before they are signed on
behalf of the Board by-
a) chairperson of the company where he is
authorized by the Board
b) by two directors out of which one shall be
managing director
c) Chief Executive Officer, the Chief Financial
Officer and the company secretary of the
company, wherever they are appointed
d) All of the above
628. A signed copy of every financial statement,
including consolidated financial statement, if any,
shall be issued, circulated or published along with
a copy each of—
a) any notes annexed to or forming part of such
financial statement;
b) the auditor's report; and
c) the Board's report
d) All of the above
629. As per section 134 of the Companies Act, 2013
where the chairperson of the company is
authorized by the Board, the Board's report and
any annexures shall be signed by its:
a) chairperson of the company
b) shall be signed by at least two directors, one
of whom shall be a managing director,
c) a director where there is one director.
d) All of the above
630. As per section 134 of the Companies Act,
2013 where the chairperson of the company is
not authorized by the Board, the Board's
report and any annexures shall be signed by
its:
a) chairperson of the company
b) shall be signed by at least two directors,
one of whom shall be a managing director,
c) a director where there is one director.
d) b & c above
631. Every company having:
1. net worth of rupees__________________, or
2. turnover of rupees________________, or
3. a net profit of rupees __________________,
4. during the immediately preceding
financial year shall constitute a Corporate
Social Responsibility Committee.
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CA RAVI TAORI
a) five hundred crore or more; one thousand
crore or more; five crore or more
b) one thousand crore or more; five hundred
crore or more; five crore or more
c) five crore or more; one thousand crore or
more; five hundred crore or more
d) None of the above
632. Corporate Social Responsibility Committee of
the Board shall consist of:
a) three or more directors, out of which at least
one director shall be an independent director.
b) four or more directors, out of which at least
one director shall be an independent director.
c) three or more directors, out of which at least
two directors shall be an independent
director.
d) five or more directors, out of which at least
three directors shall be an independent
director.
633. The Board of every company to whom CSR is
applicable shall ensure that the company spends,
in every financial year, at least ____________of the
company made during the_______________, in
pursuance of its Corporate Social Responsibility
Policy
a) two per cent of the average net profits; three
immediately preceding financial years
b) one per cent of the average net profits; three
immediately preceding financial years
c) two per cent of the average net profits; five
immediately preceding financial years
d) one per cent of the average net profits; five
immediately preceding financial years
634. A copy of the financial statements, including
consolidated financial statement, if any, along
with all the documents which are required to be
or attached to such financial statements under
companies act,2013 duly adopted at the annual
general meeting of the company, shall be filed
with the Registrar within___________ of the date of
annual general meeting.
a) forty days
b) thirty days
c) fifteen days
d) twenty days
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CA INTER AUDIT MCQs
635. Where the financial statements are not
adopted at annual general meeting or
adjourned annual general meeting-
a) such unadopted financial statements shall
be filed with the Registrar provisionally
within thirty days of the date of AGM till
the financial statements are filed with him
after their adoption in the adjourned
annual general meeting for that purpose.
b) the financial statements are not required
to be filed with the Registrar.
c) such unadopted financial statements shall
be filed with the Registrar provisionally
within fifteen days of the date of AGM till
the financial statements are filed with him
after their adoption in the adjourned
annual general meeting for that purpose.
d) None of the above
636. Financial statements adopted in the adjourned
annual general meeting shall be filed with the
Registrar within __________ of the date of such
adjourned annual general meeting
a) fifteen days
b) thirty days
c) ten days
d) sixty days
637. One Person Company shall file a copy of the
financial statements duly adopted by its
member, along with all the documents which
are required to be attached to such financial
statements, within_________________.
a) one hundred eighty days from the date of
AGM.
b) one hundred twenty days from the closure
of the financial year.
c) Thirty days from the closure of the
financial year.
d) one hundred eighty days from the closure
of the financial year
638. As per section 138 of the Companies Act,2013,
internal auditor, who shall either be a:
a) chartered accountant
b) cost accountant
c) such other professional as may be decided by
the Board
d) All of the above
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CA RAVI TAORI
639. As per section 138 of the Companies Act,2013,
the term "Chartered Accountant" or "Cost
Accountant" shall mean a
a) "Chartered Accountant" or a "Cost
Accountant", as the case may be, whether
engaged in practice or not.
b) "Chartered Accountant" or a ""Cost
Accountant", as the case may be, engaged in
practice.
c) "Chartered Accountant" or a ""Cost
Accountant", as the case may be, not
engaged in practice.
d) None of the above
640. Internal Auditor shall be applicable to
a) listed Company,
b) Unlisted Company having:
1. paid up share capital of ____________during
the preceding financial year;
2. turnover of_________ during the preceding
financial year, or
3. outstanding loans or borrowings from
banks or public financial institutions
exceeding____________ at any point of time
during the preceding financial year; or
4. outstanding deposits of_____________ at any
point of time during the preceding
financial year.
Options:
a) two hundred crore rupees or more; fifty
crore rupees or more; one hundred crore
rupees or more, twenty-five crore rupees
or more.
b) fifty crore rupees or more; two hundred
crore rupees or more; one hundred crore
rupees or more, twenty-five crore rupees
or more.
c) one hundred crore rupees or more; fifty
crore rupees or more; two hundred crore
rupees or more; twenty-five crore rupees
or more.
d) twenty-five crore rupees or more; two
hundred crore rupees or more; one
hundred crore rupees or more, fifty crore
rupees or more.
641. Internal Auditor shall be applicable to private
company:
1. turnover of _____________during the preceding
financial year, or
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CA INTER AUDIT MCQs
2. outstanding loans or borrowings from banks
or public financial institutions exceeding
______________ at any point of lime during the
preceding financial year
a) two hundred crore rupees or more; one
hundred crore rupees or more
b) one hundred crore rupees or more; two
hundred crore rupees or more
c) five hundred crore rupees or more; one
hundred crore rupees or more
d) two hundred crore rupees or more; two
hundred crore rupees or more
642. In listed companies, director’s responsibility
statement should have responsibility
statement for Internal Financial Controls over
Financial Reporting (IFCFR)?
a) Yes, it is required by Sec 134
b) No, it should contain statement about
overall Internal Financial Controls not just
IFCFR
c) Yes, it should be specific just controls over
financial reporting
d) Yes, Internal Financial Control is part of
Internal Financial Control Over Financial
Reporting.
643. Can board of directors of company appoint any
person to inspect books of accounts of subsidiary
under section 128 of Companies Act, 2013?
a) Yes, it is their right.
b) No, they can appoint only directors for this.
c) Yes, they cannot perform their functions
without it.
d) No, they cannot impose such things on
subsidiary.
CARO
644. State the correct one:
a) CARO shall apply to every company except a
foreign company.
b) CARO shall apply to every company including
a foreign company.
c) CARO shall apply to every company including
a foreign company who has completed 5
years in India.
d) None of the above.
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CA RAVI TAORI
645. State the correct one:
CARO shall apply to every company including a
foreign company except: -
a) a banking companies
b) an insurance companies
c) a company licensed to operate under section
8 of the Companies Act,2013
d) All of the above
646. State the correct one:
CARO shall apply to every company including
a foreign company except: -
a) a banking companies
b) an insurance companies
c) One Person Company
d) All of the above
647. State the correct one:
CARO shall apply to every private company
except: -
a) in which paid up capital and reserves and
surplus are not more than rupees one crore
as on the balance sheet date.
b) in which paid up capital are not more than
rupees one crore as on the balance sheet
date.
c) in which paid up capital and reserves and
surplus are not more than rupees one crore
as at any point of time during the financial
year
d) in which paid up capital are not more than
rupees one crore as at any point of time
during the financial year
648. State the correct one:
CARO shall apply to every private company;
however, such applicability has certain
exemptions also. One of the exemptions is: -
a) which does not have total borrowings
exceeding rupees one crore from any bank or
financial institution at any point of time
during the financial year
b) which does not have total borrowings
exceeding rupees one crore from any bank or
financial institution as on the balance sheet
date.
c) which does not have total borrowings
exceeding rupees two crore from any bank or
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CA INTER AUDIT MCQs
financial institution at any point of time
during the financial year
d) which does not have total borrowings
exceeding rupees two crore from any bank or
financial institution as on the balance sheet
date.
649. State the correct one:
CARO shall apply to every private company;
however, such applicability has certain
exemptions also. One of the exemptions is: -
a) which does not have a total revenue as
disclosed in Schedule III to the Companies
Act, 2013 (including revenue from
discontinuing operations) exceeding
rupees one crore during the financial year
as per the financial statements.
b) which does not have a total revenue as
disclosed in Schedule III to the Companies
Act, 2013 (including revenue from
discontinuing operations) exceeding
rupees five crore during the financial year
as per the financial statements.
c) which does not have a total revenue as
disclosed in Schedule III to the Companies
Act, 2013 (including revenue from
discontinuing operations) exceeding
rupees ten crore during the financial year
as per the financial statements.
d) which does not have a total revenue as
disclosed in Schedule III to the Companies
Act, 2013 (including revenue from
discontinuing operations) exceeding
rupees fifteen crore during the financial
year as per the financial statements.
650. State the correct one:
CARO shall apply to every company, except small
company however such exemptions has certain
exceptions also. Threshold limit of capital is: -
a) CARO shall be applicable to small company
having paid up share capital exceeding 50
lakhs.
b) CARO shall be applicable to company having
paid up share capital exceeding 25 lakhs.
c) CARO shall be applicable to company having
paid up share capital exceeding 90 lakhs.
d) CARO shall be applicable to company having
paid up share capital exceeding 1 crore.
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CA RAVI TAORI
651. State the correct one:
CARO shall apply to every company, except
small company however such exemptions has
certain exceptions also. Threshold limit of
capital is:
a) CARO shall be applicable to small
company whose turnover exceeds 2 crores
b) CARO shall be applicable to small
company whose turnover does not
exceeds 3 crores
c) CARO shall be applicable to small
company whose turnover does not
exceeds 5 crores
d) CARO shall be applicable to small
company whose turnover exceeds 1 crore
652. State the correct statement
1. Company Audit Report Order shall not
apply to the auditor's report on
consolidated financial statements.
2. Company Audit Report Order shall also
apply to the auditor's report on
consolidated financial statements
3. Company Audit Report Order shall also
apply to the auditor's report of branch
financial statements
4. Company Audit Report Order shall not
apply to the auditor's report of branch
financial statements
Options:
a) 1 & 3
b) 1 & 4
c) 2 & 4
d) 2 & 4
653. State the incorrect statement:
a) Debit balance of statement of profit and loss
shall be shown as a negative figure under the
head "Surplus"
b) Debit balance of statement of profit and loss
shall be shown as a negative figure under the
head "Deficit"
c) Credit balance of statement of profit and loss
shall be shown as a positive figure under the
head "Surplus"
d) None of the above
654. State the correct statement:
a) Balance of "Reserves and Surplus", after
adjusting negative balance of surplus, if any,
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CA INTER AUDIT MCQs
shall be shown under the head ""Reserves
and Surplus"" even if the resulting figure is in
the negative.
b) Balance of "Reserves and Surplus", after
adjusting negative balance of surplus, if any,
shall be shown under the head ""Reserves
and Deficits" even if the resulting figure is in
the negative.
c) Balance of "Reserves and Surplus", after
adjusting positive balance of surplus, if any,
shall be shown under the head ""Reserves
and Deficits".
d) None of the above
655. Reserves and surplus for the purpose of
applicability of CARO shall include:
a) free reserves
b) capital reserve
c) revenue reserve
d) all of the above
656. Identify the correct one:
a) Reserves and surplus figure as per balance
sheet would have to be reckoned for
calculating 'paid up capital and reserves
and surplus' even if the figure is a negative
figure
b) Reserves and surplus figure as per balance
sheet would have to be reckoned for
calculating 'paid up capital and reserves
and surplus' only if the figure is a positive
figure
c) Reserves and surplus figure as per balance
sheet would have to be reckoned for
calculating 'paid up capital and reserves
and surplus' unless if the figure is a
negative figure.
d) None of the above
657. Identify the incorrect one:
1. CARO,2016 is applicable to NBFC (Non-
Banking Financial Company) which converts
itself into a banking company and is a
banking company as at the balance sheet
date.
2. CARO,2016 is not applicable to NBFC (Non-
Banking Financial Company) which converts
itself into a banking company and is a
banking company as at the balance sheet
date.
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CA RAVI TAORI
3. CARO, 2016 would not apply to a private
limited company which converts itself to a
Limited Liability Partnership (LLP) and is an
LLP as at the balance sheet date.
4. CARO, 2016 would apply to a private limited
company which converts itself to a Limited
Liability Partnership (LLP) and is an LLP as at
the balance sheet date.
Options:
a) 1 & 3
b) 1 & 4
c) 2 & 3
d) 2 & 4
658. Identify the correct one:
a) A private limited company is an OPC, CARO
will not be applicable if it satisfies the
conditions specified for exemption.
b) A private limited company is an OPC, CARO
will be applicable if it does not satisfy the
conditions specified for exemption.
c) A private limited company is an OPC, CARO
will not be applicable even if it does not
satisfy the conditions specified for
exemption.
d) None of the above
659. Identify the correct one:
a) A private limited company is a small
company, CARO will not be applicable if it
satisfies the conditions specified for
exemption.
b) A private limited company is a small
company, CARO will be applicable if it does
not satisfy the conditions specified for
exemption.
c) A private limited company is a small
company, CARO will not be applicable even if
it does not satisfy the conditions specified for
exemption.
d) None of the above
660. Identify the correct one:
a) a) A private limited company is a section 8
company, CARO will not be applicable if it
satisfies the conditions specified for
exemption.
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CA INTER AUDIT MCQs
b) A private limited company is a section 8
company, CARO will be applicable if it does
not satisfy the conditions specified for
exemption.
c) A private limited company is a section 8
company, CARO will not be applicable even if
it does not satisfy the conditions specified for
exemption.
d) None of the above
661. Is Caro applicable to Private Unlimited
Companies?
a) Yes, if it does not fulfill the conditions of
exemption applicable to Private Companies.
b) No, even if it does fulfill the conditions of
exemption applicable to Private Companies.
c) Yes, CARO is applicable to Private Unlimited
Companies unconditionally as exemption is
only applicable to Private Companies and not
to Private Unlimited Companies.
d) None of the above
662. Identify the incorrect one:
a) For the purpose of applicability of CARO,
2016 loan even if repaid shall be counted
in borrowing.
b) For the purpose of applicability of CARO,
2016 borrowing shall include not only
from banks and financial institutions but
also from private parties.
c) For the purpose of applicability of CARO,
2016 credit card shall also be counted in
borrowing.
d) For the purpose of applicability of CARO,
2016 only fund-based facilities shall be
counted in borrowing and not the non-
fund-based borrowings.
663. Identify the correct one:
a) For the purpose of applicability of CARO,
2016 the term revenue has been defined
by the order as total revenue disclosed in
Schedule III of the act.
b) Revenue Includes Turnover and Other
Income.
c) Revenue will also include revenue for
Discontinuing Operations.
d) All of the above
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CA RAVI TAORI CA INTER AUDIT MCQs

664. Which of the clause of CARO,16 deals with b) Clause 5

reporting of fixed assets? c) Clause 6
a) Clause 2 d) Clause 7
b) Clause 3
c) Clause 4 671. Which of the clause of CARO,16 deals with
d) Clause 1 reporting on raising of money via IPO/FPO or
term loan:
665. Which of the clause of CARO,16 deals with a) Clause 8
reporting of inventory? b) Clause 9
a) Clause 2 c) Clause 6
d) Clause 7
b) Clause 3
c) Clause 4
672. Which of the clause of CARO,16 deals with
d) Clause 1
reporting on Fraud?
a) Clause 10
666. Which of the clause of CARO,16 deals with
b) Clause 9
reporting of loans and advances to parties
c) Clause 11
covered under section 189 of the Companies Act
d) Clause 12
2013:
a) Clause 2
673. Which of the clause of CARO,16 deals with
b) Clause 3
reporting on Managerial Remuneration?
c) Clause 4
a) Clause 10
d) Clause 1
b) Clause 9
c) Clause 11
667. Which of the clause of CARO,16 deals with
d) Clause 12
reporting of Investment, guarantees and
securities under section 185/186?
674. Which of the clause of CARO,16 deals with
a) Clause 8
reporting on Nidhi Company?
b) Clause 4
a) Clause 10
c) Clause 6
b) Clause 9
d) Clause 7
c) Clause 11
d) Clause 12
668. Which of the clause of CARO,16 deals with
reporting of acceptance of deposits?
a) Clause 8 675. Which of the clause of CARO,16 deals with
b) Clause 5 reporting on Related Party Transaction?
c) Clause 6 a) Clause 10
d) Clause 7 b) Clause 13
c) Clause 11
669. Which of the clause of CARO,16 deals with d) Clause 12
reporting on cost records?
a) Clause 8 676. Which of the clause of CARO,16 deals with
b) Clause 5 reporting on Private Placement?
c) Clause 6 a) Clause 13
d) Clause 7 b) Clause 14
c) Clause 15
670. Which of the clause of CARO,16 deals with d) Clause 16
reporting on Statutory dues?
a) Clause 8 677. Which of the clause of CARO,16 deals with
reporting on Non-Cash Transactions?
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CA RAVI TAORI CA INTER AUDIT MCQs

a) Clause 13 683. As per Clause 7 of CARO, 2016, the auditor is

b) Clause 14 required to report:
c) Clause 15 a. Whether the company is regular in payment
d) Clause 16 of periodic statutory dues.
b) Details of undisputed dues which are
678. Which of the clause of CARO,16 deals with outstanding for more than 6 months at the
reporting on Registration requirement with RBI balance sheet date.
regulation under section 45- IA? c) Details of dues which are disputed and are
a) Clause 13 not paid.
b) Clause 14 d) All of the above
c) Clause 15
d) Clause 16 684. A company took a loan from bank and
financial institution, repaid the principle
679. As per Clause ___ of CARO, 2016, the auditor is amount but failed to pay the interest amount.
required to report whether physical verification of Whether the same will be reported by auditor
fixed asset is conducted at reasonable interval or under clause 8 of CARO, 16?
not. Reasonable interval means _____years. a) Yes, as the company defaulted in
repayment of loan.
a) 1; 3
b) No, as the company only defaulted in
b) 2 ;2
payment of interest and not in repayment
c) 3; 1
of principle, payment of interest does not
d) 4; 4
fall within repayment of loan.
c) Yes, as the company defaulted in payment
680. As per Clause ______of CARO, 2016, the auditor of interest which falls within the definition
is required to report whether physical verification failure in repayment of loan.
of inventory is conducted at reasonable interval d) No, as loan does not includes interest
or not. Reasonable interval means ______years. amount
a) 1; 3
b) 3 ;2 685. A company raised money from debenture
c) 2; 1 holders, repaid the principle amount but failed to
d) 4; 4 pay the interest amount. Whether the same will
be reported by auditor under clause 8 of CARO,
681. As per Clause ________of CARO, 2016, the auditor 16?
is required to report whether the provisions of a) Yes, as the company defaulted in repayment
section __________ has been complied with. of dues.
a) 1; 185 & 186 b) No, as the company only defaulted in
b) 3 ;186 & 187 payment of interest and not in repayment of
c) 2; 186 & 187 principle.
d) 4; 185 & 186 c) Yes, as the company defaulted in payment of
interest which falls within the definition
682. As per Clause ________of CARO, 2016, the failure in repayment of dues.
auditor is required to report whether the d) No, as dues does not includes interest
provisions of section __________ and RBI amount
circulars with respect to acceptance of
deposits has been complied with. 686. A company took a term loan from bank for
a) 1; 73 & 76 the construction of company shed, however
b) 3 ;73 & 76 used it for purchase of vehicles for the
c) 5; 73 & 76 company. Whether the same will be reported
d) 4; 73 & 76 by auditor under clause 9 of CARO, 16?

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a) Yes, as per clause 9 the auditor is required deposits in case of a Nidhi company fall
to report whether the term loan was below should be 1:10.
applied for the purpose it was raised. d) Yes, it will be reported by auditor under
b) No, since the amount is utilized for the Clause 9 of CARO, 16
purpose of the company.
c) Yes, as the directors have mis-utilized the
690. A company at the time of issue of share capital
funds for their personal purpose.
also made a preferential allotment of shares to
d) No, such reporting is required under
some private parties. Whether the same will be
clause 9.
reported by auditor under CARO, 16? If yes, then
under which clause?
687. Directors of the company used the funds of the
a) No, it will not be reported by auditor under
company for their personal purpose. Whether the
CARO, 16.
same will be reported by auditor under CARO,
b) Yes, as Clause 14 of CARO, 16 requires
16? If yes, then under which clause?
reporting if there has been a preferential
a) No, it will not be reported by auditor under
allotment.
CARO, 16
c) No, as Clause 14 of CARO, 16 requires
b) Yes, it will be reported by auditor under
reporting if there has been a preferential
Clause 10 of CARO, 16
allotment at premium.
c) No as Clause 10 of CARO, 16 requires only
d) Yes, it will be reported by auditor under
reporting of fraud done by the company only
Clause13 of CARO, 16
d) Yes, it will be reported by auditor under
Clause 9 of CARO, 16
691. A company entered into a non-cash
transaction with a party. Whether the same
688. Company used the funds of the CSR fund for
will be reported by auditor under CARO, 16? If
its own benefit. Whether the same will be
yes, then under which clause?
reported by auditor under CARO, 16? If yes,
a) No, it will not be reported by auditor
then under which clause?
under CARO, 16.
a) No, it will not be reported by auditor
b) Yes, Clause 15 of CARO, 16 requires
under CARO, 16
reporting of non-cash transactions
b) Yes, it will be reported by auditor under
entered by the company with anyone.
Clause 10 of CARO, 16
c) No, Clause 15 of CARO, 16 requires
c) No as Clause 10 of CARO, 16 requires only
reporting of non-cash transactions
reporting of fraud done on the company
entered by the company with directors or
by its officer and employees.
person concerned with directors only.
d) Yes, it will be reported by auditor under
d) Yes, it will be reported by auditor under
Clause 9 of CARO, 16
Clause 14 of CARO, 16

689. Reeti is a "Nidhi Company". Its net owned funds

692. A company entered into a non-cash
are 5 lakh and deposit accepted are 80 lakhs.
Whether the same will be reported by auditor
under CARO, 16? If yes, then under which clause?
a) No, it will not be reported by auditor under
CARO, 16.
b) Yes, as Clause 12 of CARO, 16 requires
reporting if the ratio of net owned funds to
deposits in case of a Nidhi company fall
below 1:20.
c) No, as Clause 12 of CARO, 16 requires
reporting if the ratio of net owned funds to
transaction with directors. Whether the same
will be reported by auditor under CARO, 16? If
yes, then under which clause?
a) No, it will not be reported by auditor
under CARO, 16.
b) Yes, Clause 15 of CARO, 16 requires
reporting of non-cash transactions
entered by the company with anyone.
c) Yes, Clause 15 of CARO, 16 requires
reporting of non-cash transactions
entered by the company with directors or
person concerned with directors only.

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d) Yes, it will be reported by auditor under
Clause 14 of CARO, 16
693. Some fixed assets owned by company are
installed at homes of employees. What should be
written in location column of Fixed Asset
Register?
a) Registered address of company
b) Actual address of home of employee
c) Name & Designation of employee
d) Simply not applicable
694. Loan 100Cr
Int Accrued & Due 10Cr
Int Accrued but Not Due 20Cr
Principal due within 3 mts 30Cr
What should appear under other current liability
in balance sheet?
a) 160 Cr
b) 60 Cr
c) 30 Cr
d) 40 Cr
INTERNAL CONTROL SYSTEM
695. To facilitate the accumulation of the
information necessary for the proper review
and evaluation of internal controls, the
auditor can use which of the following to help
him to know and assimilate the system and
evaluate the same?
a) Narrative record
b) Flow chart
c) Check List
d) All of the above
696. Identify to which of the following option the
respective statements belong to?
1. Complete and exhaustive description of the
system as found in operation by the auditor
2. Recommended in cases where no formal
control system is in operation and would be
more suited to small business
3. Disadvantage is comprehending the system
in operation is quite difficult
Options-
a) Narrative record
b) Flow chart
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CA INTER AUDIT MCQs
c) Check List
d) Questionnaire
697. Identify to which of the following option the
respective statements belong to?
1. It is a graphic presentation of each part of the
company’s system of internal control
2. It gives bird’s eye view of the system and the
flow of transactions
Options-
a) Narrative record
b) Flow chart
c) Check List
d) Questionnaire
698. Identify to which of the following option the
respective statements belong to?
1. Series of instructions and/or questions
which a member of the auditing staff must
follow and/or answer
2. Answers to the instructions are usually
Yes, No or Not Applicable.
Options-
a) Narrative record
b) Flow chart
c) Check List
d) Questionnaire
699. Identify to which of the following option the
respective statements belong to?
1. Usually issued to the client and the client
is requested to get it filled by the
concerned executives and employees
2. Generally, questions are so framed that a
‘Yes’ answer denotes satisfactory position
and a ‘No’ answer suggests weakness.
3. Comprehensive series of questions.
4. In respect of questions not relevant to the
business, ‘Not Applicable’ reply is given
Options-
a) Narrative record
b) Flow chart
c) Check List
d) Questionnaire
700. Identify the incorrect one:
1. The auditor needs to obtain the same
degree of assurance in order to give an
unqualified opinion on the financial
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statements of both small and large
entities.
2. The auditor needs to obtain the different
degree of assurance in order to give an
unqualified opinion on the financial
statements of both small and large
entities.
3. Controls in small and large are not same,
many controls which would be relevant to
large entities are not practical in the small
business
4. Controls in small and large are same,
controls which are relevant to large
entities are also relevant in the small
business
Options-
a. 2 & 3
b. 2 & 4
c. 1 & 3
d. 1 & 4
701. Identify the correct one:
1. Segregation of Duty is more found in small
business
2. Segregation of Duty is less in small business
3. Segregation of Duty is less in large business
4. Segregation of Duty is more found in large
business
Options-
a. 1 & 3
b. 2 & 4
c. 2 & 3
d. 1 & 4
702. Identify the incorrect one:
a) In circumstances where segregation of duties
is not limited, or evidence of supervisory
controls is lacking, the evidence necessary to
support the auditor’s opinion on the financial
information may have to be obtained largely
through the performance of substantive
procedures.
b) In circumstances where segregation of duties
is limited, or evidence of supervisory controls
is lacking, the evidence necessary to support
the auditor’s opinion on the financial
information may have to be obtained largely
through the performance of substantive
procedures.
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CA INTER AUDIT MCQs
703. Identify the correct one:
a) An entity’s system of internal control
contains manual elements and often
contains automated elements.
b) An entity’s system of internal control
contains only manual elements.
c) An entity’s system of internal control
contains only automated elements.
d) None of the above
704. Identify the incorrect one:
a) The use of manual or automated elements in
internal control affects the manner in which
transactions are initiated, recorded,
processed, and reported
b) The use of manual or automated elements in
internal control does not affects the manner
in which transactions are initiated, recorded,
processed, and reported
705. Identify the incorrect one:
____________elements in internal control may be
more suitable where judgment and discretion are
required
a) Automated
b) Manual
706. Identify the correct one:
______________in internal control may be less
reliable than ____________ because they can be
more easily bypassed, ignored, or overridden
a) Manual elements; automated elements
b) automated elements; Manual elements
707. Identify the correct one:
_______________in internal control are more
consistent in nature
a) Manual elements
b) automated elements
708. In which of the following ways IT benefits an
entity’s internal control?
a) Reduce the risk that controls will be
circumvented
b) Consistently apply predefined business rules
and perform complex calculations
c) Enhance the ability to monitor the
performance of the entity’s activities
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CA RAVI TAORI CA INTER AUDIT MCQs

d) All of the above assurance about achieving the entity’s

financial reporting objectives. This is due to
709. Identify which from the following is a risk to a. limitations of Internal Control
internal control because of IT Systems? b. limitations imposed by management
a) IT personnel gaining access privileges c. limitations of external environment
d. none of the above
beyond those necessary to perform their
assigned duties
715. Identify the correct option as what type of
b) Enhance the ability to achieve effective
inherent Limitations of Internal Control is
segregation of duties by implementing
referred, taking into consideration the
security controls
respective statement
c) Facilitate the additional analysis of "Judgement in decision-making can be faulty
information (engineer’s judgement about useful life can be
d) All of the above faulty) and that breakdowns in internal
control can occur"
710. Identify which from the following is a risk to Options-
internal control because of IT Systems? a) Collusion among Employees
a) Unauthorized changes to data in master files b) Judgement by Management
b) Unauthorized changes to systems or c) Ineffective Operation of Control
programs d) Role of Human Judgement & Error
c) Failure to make necessary changes to systems
or programs 716. Identify the correct option as what type of
d) All of the above inherent Limitations of Internal Control is
referred, taking into consideration the respective
711. _______________of controls is a process to assess statement
the effectiveness of internal control performance “Controls can be circumvented by the collusion of
over time. two or more people or inappropriate
a. Developing management override of internal control”
b. Monitoring Options-
c. Performance a) Collusion among Employees
d. None of the above b) Judgement by Management
c) Ineffective Operation of Control
712. Identify whether true or false: d) Role of Human Judgement & Error
Monitoring of controls also involves assessing
the effectiveness of controls on a timely basis and 717. Identify the correct option as what type of
taking necessary remedial actions. inherent Limitations of Internal Control is
a) True referred, taking into consideration the respective
b) False statement
"In designing and implementing controls,
713. Management accomplishes monitoring of management may make judgments on the nature
controls through and extent of the controls it chooses to
a) ongoing activities implement, and the nature and extent of the risks
b) separate evaluations it chooses to assume"
c) both of the above Options-
d) none of the above a) Collusion among Employees
b) Judgement by Management
714. Internal control, no matter how effective, c) Ineffective Operation of Control
can provide an entity with only reasonable d) Role of Human Judgement & Error

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718. Identify the correct option as what type of a) more; more

inherent Limitations of Internal Control is b) more; less
referred, taking into consideration the c) less; more
respective statement d) none of the above
"The operation of a control may not be
effective, such as where information produced
722. Chances of complex system, cyber-attacks will
for the purposes of internal control (for
be more in _________
example, an exception report) is not
a) Automated environment
effectively used because the individual
b) Manual environment
responsible for reviewing the information
does not understand its purpose or fails to
take appropriate action" 723. Which from the following will be considered
Options- more complex to audit?
a) Collusion among Employees a) A company uses an integrated enterprise
b) Judgement by Management resource planning system.
c) Ineffective Operation of Control b) A company is using an off-the-shelf accounting
d) Role of Human Judgement & Error software.
c) Both of the above
719. Identify the correct option as what type of
inherent Limitations of Internal Control is 724. The fundamental principle of an automated
referred, taking into consideration the respective environment is the ability to carry out business
statement with________________
"Smaller entities often have fewer employees a) less manual intervention
which may limit the extent to which segregation b) more system driven
of duties is practicable" c) both of the above
Options- d) None of the above
a) Collusion among Employees
b) Judgement by Management 725. The term ""Automated Environment""
c) Ineffective Operation of Control basically refers to a business environment
d) Considerations specific to Smaller Entities where the ______________ are carried out by
using computer systems.
a) operations, processes or procedures
AUTOMATED AUDIT
b) accounting
ENVIRONMENT c) decisions
d) all of the above
(Only for New Course)
726. Which from the following is not a feature of
720. By using _______________, it is possible to improve
automated environment?
the effectiveness and efficiency of an audit in
a) Connectivity and Networking capability
automated environment.
b) Accuracy in data processing and
a) Judgement
computation
b) data analytics
c) More prone to human errors
c) manual intervention
d) Better security and controls
d) all of the above

727. Which out of the following options, is/are the

721. Choose the correct option:
situation/(s) in which IT will be relevant to an
The complexity of a business environment
audit?
depends on the level of automation i.e., if a
a) Complexity of transactions
business environment is _______ automated, it
b) Volume of transactions
is likely to be ________ complex.
c) Regulatory Requirements
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d) All of the above 733. The objective of _______________ is to maintain

728. The auditor should understand the risks the accuracy of data.
that arise from the use of IT systems. a) General IT Controls
Which from the following do not b) Application Controls
constitute as an example of specific risks c) IT Dependent Controls
to an entity's internal control due to use of d) None of the above
IT systems?
a) Unauthorized changes to data
734. General IT Controls are known as
b) Unauthorized access to data
_______________ controls
c) Necessary changes to systems or
a) pervasive
programs
b) indirect
d) Inappropriate manual intervention
c) either of the above
729. Choose the correct option: d) none of the above
Impact of IT related risks includes
1. Impact on Controls 735. ________________ are basically manual controls
2. Impact on Substantive Audit that make use of some form of data or
3. Impact on Reporting information or report produced from IT
Choose the correct option: systems and applications
a) IT General Controls
a) Only 1
b) Both 1 and 2 b) Application Controls
c) IT Dependent Controls
c) Both 2 and 3
d) System Development Controls
d) 1,2 and 3

730. The impact of IT related risks on Substantive 736. _________________ are embedded into IT
Audit includes: applications and help in ensuring the
a) Non-reliance of data obtained from completeness, accuracy and integrity of data.
system a) IT General Controls
b) Need of more audit evidence b) Application Controls
c) Both of the above c) IT Dependent Controls
d) System Development Controls
d) None of the above

731. To mitigate the IT related risks and maintain 737. State whether true or false:
the _______________________ of data, the The relationship between the application
companies implement IT controls. controls and general IT controls is such that
a) confidentiality, integrity and availability General IT Controls are needed to support the
b) confidentiality, availability and security functioning of application controls, but they
c) confidentiality, integrity, availability and are not necessarily needed to ensure
complete and accurate information
security
processing through IT systems.
d) confidentiality, integrity and security
a) True
732. Type of controls in an automated b) False
environment include:
a) General IT Controls 738. The basic types of audit tests that are
b) Application Controls performed in an automated environment
c) IT Dependent Controls include:
d) All of the above 1. inquiry
2. observation
3. inspection

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4. performance 743. The combination of processes, tools and

Choose the correct option: techniques that are used to tap vast amounts
a) 1 and 4 of electronic data to obtain meaningful
b) 1,2 and 3 information is called______________
c) 1,2, 3 and 4 a) data mining
d) 2,3 and 4 b) data analytics
c) data processing
739. The types of audit tests to be performed in an d) none of the above
automated environment do not include:
1. inquiry 744. State whether true or false:
2. observation Companies can benefit immensely from the
3. recalculation use of data analytics in terms of increased
4. performance profitability, better customer survive, gaining
5. inspection competitive advantage, more efficient
Choose the correct option: operations etc.
a) only 1 a) True
b) only 4 b) False
c) only 3
d) only 5 745. The tools and techniques that auditors use in
applying the principles of data analytics are
740. Combination of ____________ with known as
_____________gives the most effective and a) Computer Assisted Accounting
efficient audit evidence. Techniques
a) inquiry; observation b) Computer Assisted Auditing
b) observation; inspection Technologies
c) investigation; performance c) Computer Assisted Auditing Techniques
d) inquiry; inspection d) Computer Assisted Auditing Tests

741. Which audit test is to be performed or used, BANK AUDIT

when and in what combination is a matter of?
a) Professional Skepticism (Only for New Course)
b) Professional Judgement
c) Independence 746. Choose the correct one:
d) Any of the above The principal enactments which govern the
functioning of various types of banks are:
742. In a controls-based audit, the audit approach a) Reserve Bank of India Act 1934
can be classified into broad phases b) Banking Regulation Act 1949
comprising of c) State Bank of India Act 1955
1. planning d) All of the above
2. execution
3. completion 747. Choose the correct one:
Choose the correct option: The principal enactments which govern the
a) 1 and 2 functioning of various types of banks are:
b) 1 and 3 a) Information Technology Act 2000
c) 1,2 and 3 b) Prevention of Money Laundering Act 2013
d) only 2 c) Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest
Act 2002

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d) All of the above 754. The remuneration of the auditor of subsidiaries

of State Bank of India shall be fixed
748. Who from the following appoints the auditor of by___________________
State Bank of India? a) Central Government
a) Central Government b) Reserve Bank of India
b) Comptroller and Audit General of India c) State Bank of India
c) Shareholders in the AGM d) Comptroller and Audit General of India
d) Comptroller and Audit General of India in
consultation with Central Government 755. The remuneration of the auditor of Nationalized
Banks shall be fixed by___________________
749. Who from the following appoints the auditor of a) Central Government
Subsidiaries of State Bank of India? b) Reserve Bank of India
a) Central Government c) State Bank of India
b) State Bank of India d) Board of Directors with prior approval of
c) Comptroller and Audit General of India Reserve Bank of India
d) Comptroller and Audit General of India in
consultation with Central Government 756. The remuneration of the auditor of Other
Banking Companies in general shall be fixed
750. Who from the following appoints the auditor of by___________________
Nationalized Banks? a) Central Government
a) Central Government b) Reserve Bank of India
b) Reserve Bank of India c) As per Sec 142 of the Companies Act 2013
c) Board of Directors with prior approval of d) None of the above
Reserve Bank of India
d) Comptroller and Audit General of India 757. The remuneration of the auditor of Regional
Rural Banks shall be fixed by___________________
751. Who from the following appoints the auditor of a) Bank with approval of Central Government
Other Banking Companies? b) Central Government
a) Shareholders at AGM c) Bank with approval of Reserve Bank of India
b) Central Government d) Reserve Bank of India
c) Reserve Bank of India
d) Shareholders at AGM with prior approval of 758. The auditors, central as well as branch, should
Reserve Bank of India also ensure that the audit report issued by them
complies with the requirements of
752. Who from the following appoints the auditor of _______________________
Regional Rural Banks? a) SA 700
a) Bank with approval of Central Government b) SA 705
b) Central Government c) SA 706
c) Bank with approval of Reserve Bank of India d) All of the above
d) Reserve Bank of India
759. Besides the audit report as per the statutory
753. The remuneration of the auditor of State Bank requirements, the terms of appointment of
of India shall be fixed by___________________ auditors of public sector banks, private sector
a) Central Government banks and foreign banks (as well as their
b) Reserve Bank of India branches), require the auditors to also furnish
c) Reserve Bank of India in consultation with _________________
Central Government a) Long Form Audit Report (LFAR)
d) Comptroller and Audit General of India b) Short Form Audit Report (SFAR)

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c) Long Form Audit Statement (LFAS)
d) Short Form Audit Statement (SFAS)
760. The matters which the banks require their
auditors to deal with in the long form audit report
have been specified by the _____________
a) Central Government
b) State Bank of India
c) Reserve Bank of India
d) Comptroller and Audit General of India
761. As per the initial consideration by the
statutory auditor, he shall undertake the
following activities prior to starting an initial
audit:
a) Performing procedures required by SA
220, ""Quality Control for Audit Work""
b) Communication with the predecessor
auditor
c) Both a and b
d) None of the above
762. The RBI has advised that the banks, before
appointing their statutory central/circle/branch
auditors, should obtain a declaration of
_______________
a) insolvency
b) indebtedness
c) business relationships
d) none of the above
763. Planning an audit of banks or branches of banks
involves the following steps
1. Establishing the overall Audit Strategy
2. Determining Audit Materiality
3. Developing the Audit Plan
4. Audit Planning Memorandum
Choose the correct option:
a) 1 and 2
b) Only 1
c) 1,2 and 3
d) 1,2,3 and 4
764. An understanding of the bank and its
environment, including its internal control,
enables the auditor:
a) to identify and assess risk
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CA INTER AUDIT MCQs
b) to develop an audit plan so as to
determine the operating effectiveness of
the controls
c) to address the specific risk
d) all of the above
765. An effective risk management system in a bank
generally requires the following:
a) Oversight and involvement in the control
process by TCWG
b) Identification, measurement and monitoring
of risks
c) Control activities
d) all of the above
766. An effective risk management system in a bank
generally requires the following:
a) Reliable Information
b) Identification, measurement and monitoring
of risks
c) Control activities
d) all of the above
767. For managing the risks, a bank should have
appropriate controls excluding_______________
a) Credit Risks
b) Operational Risks
c) Market Risks
d) none of the above
768. A term loan is treated as ______________ if interest
and/or instalment of principal remain overdue for
a period of ___________________
a) Non-Performing Asset; more than 60 days
b) Loss Asset; less than 90 days
c) Non-Performing Asset; more than 90 days
d) Loss Asset; more than 90 days
769. How long should the State Government
Guaranteed advances remain overdue to be
considered as Non-Performing Asset?
a) if it remains overdue for more than 90 days
b) if it remains overdue for more than 180 days
c) if it remains overdue for more than 120 days
d) if it remains overdue for more than 60 days
770. Accounts where regular/ad hoc limits are not
reviewed within __ days from the due date/date
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CA RAVI TAORI CA INTER AUDIT MCQs

of ad hoc sanction, should be considered as Non- 775. Government audit serves as a mechanism or
Performing Asset. process for ____________.
a) 60 a) public accounting of government funds
b) 120 b) public accounting of the operational,
c) 90 management, programme and policy aspects
d) 180 of public administration
c) accountability of the administering officials
771. Which of the following is not true about the d) all of the above
examination by the auditor in case of
Sale/Purchase of NPA by Bank? 776. Identify the incorrect one:
a) only such NPA has been sold which has a) Government audit is neither equipped nor
remained NPA in the books of the bank for intended to function as an investigating
at least 2 years agency
b) the assets have been sold/ purchased
b) Government audit incorporates investigative
“without recourse’ only
tools and is intended to function as an
c) the assets have been sold/ purchased
investigating agency
“with recourse’ only
d) the NPA has been sold at cash basis only.
777. Identify the main objectives of the government
audit:
772. How much % risk weights should be assigned by
a) ensuring accountability of administration to
the banks to the NPAs purchased from other
legislature
banks for the purpose of capital adequacy?
b) functioning as an aid to administration
a) 50
c) both of the above
b) 100
d) none of the above
c) 25
d) 75
778. Identify the correct one:
a) In government audit, criticism of
773. What treatment should be given to interest
for the purpose of income recognition if administrative actions wherever warranted is
government guaranteed advance becomes inherent in auditoria function. Criticism is
NPA? made in a constructive spirit.
a) interest on such advance should always be b) In government audit, criticism of
taken to income administrative actions wherever warranted is
b) interest on such advance should never be inherent in auditoria function. Criticism is
taken to income made in an unconstructive spirit.
c) interest on such advance should not to be c) In government audit, criticism of
taken to income unless interest is realized administrative actions wherever warranted is
d) interest on such advance should be taken not inherent in auditoria function. Criticism is
to income irrespective of interest is made in a constructive spirit.
realized or not
d) In government audit, criticism of
administrative actions wherever warranted is
GOVERNMENT AUDIT not inherent in auditoria function. Criticism is
made in an unconstructive spirit.
774. Government auditing is the systematic and
779. As per Article 148 of C & AG Act, 1971 the
independent examination of_________
appointment of the Comptroller and Auditor
a) financial operations of a public entity
General is made by the
b) administrative operations of a public entity
a) President of India
c) operations (other than financial and
b) Governor of India
administrative) of a public entity
c) Central Government
d) all of the above
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CA RAVI TAORI
d) Any of the above
780. State whether true or false-
As per C & AG Act, 1971 the Comptroller and
Auditor General shall not be eligible for further
office under CG or SG after end of tenure.
a) True
b) False
781. As per C & AG Act, 1971 the Comptroller and
Auditor General can only be removed from his
office on the grounds of proven
a) Mis-behavior
b) incapacity
c) Either of the above
d) None of the above
782. Comptroller and Auditor General of India, if
falls under circumstances which demand
removal from the
Office, can be removed only when each House
of Parliament decides to do so by
a) majority of not less than 2/3 of the
members present and voting
b) majority of not less than 1/3 of the
members present and voting
c) majority of not less than 3/4 of the
members present and voting
d) majority of not less than 1/4 of the
members present and voting
783. The report of the CAG relating to the accounts
of the union shall be submitted to the
___________who shall cause them to be laid before
the ___________.
a) President; Parliament Legislature
b) Governor; State Legislature
c) President; State Legislature
d) Governor; Parliament Legislature
784. The report of the CAG relating to the accounts
of the state shall be submitted to the ___________
who shall cause them to be laid before the
___________.
a) President; Parliament Legislature
b) Governor; State Legislature
c) President; State Legislature
d) Governor; Parliament Legislature
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785. As per articles 150 of the C&AG (Duties, Powers
and Conditions of Services) Act, 1971, accounts of
Union and the States will be maintained as per
the descriptions given by the________ on advice of
_______.
a) President; C&AG
b) C&AG; President
c) C&AG; Governor
d) Governor; C&AG
786. In terms of remuneration, CAG shall be paid as
equivalent to that of __________Judge
a) District Court
b) High Court
c) Supreme Court
d) Fast track court
787. Identify the correct one:
a) CAG shall hold office for six years or up to 60
years, whichever is earlier
b) CAG shall hold office for five years or up to 65
years, whichever is earlier
c) CAG shall hold office for six years or up to 65
years, whichever is earlier
d) CAG shall hold office for five years or up to 60
years, whichever is earlier
788. The C&AG shall audit and report on-
a) All expenditure from consolidated fund of
India
b) All transactions of the Union/State relating to
Contingency Funds and Public Accounts
c) All trading, manufacturing, Profit and Loss
Accounts and Balance Sheets of the
Union/State
d) All of the above
789. According to ‘___________', the auditors aims to
bring out cases of improper, avoidable, or in
fructuous expenditure even though the
expenditure has been incurred in conformity with
the existing rules
and regulations.
a) propriety audit
b) performance audit
c) audit of Sanctions
d) audit against Rules & Orders
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790. The type of Government Audit which is c) Propriety audit

concerned with expenditure incurred conforms d) Both (b) and (c)
to the relevant provisions of the statutory
enactment and is in accordance with the financial 795. The income Tax Department has sent Mr. X
rules and regulations framed by the competent double refund of advance tax. The Government
authority? Auditor detected this while conducting
a) audit of sanctions a) audit of expenditure
b) audit of provision of funds b) performance audit
c) audit of rules and orders c) audit of stores and stock
d) audit of financial propriety d) audit of receipts

791. The type of Government Audit which is 796. Money for road construction should be used
concerned with examining whether for road construction, it should not be used
expenditure incurred has been on the purpose for development of villages on the sides of
for which the grant and appropriation had road or planation or pollution control. It is an
been provided? example of –
a) audit of sanctions a) Propriety audit
b) audit of provision of funds b) Performance audit
c) audit of rules and orders c) Audit against provision of funds
d) audit of financial propriety d) None of the above

792. Audit, under which the auditor has to ensure 797. A state Government spent rupees fifty lakhs on
that each item of expenditure is covered by a renovation of Raj Bhavan’ for its Governor. In the
proper permission, either general or special, C & AG’s opinion, this expenditure was more than
accorded by the competent authority, what occasion demanded? It is an example of –
authorizing such expenditure? a) Propriety audit
a) audit of sanctions b) Performance audit
b) audit of provision of funds c) Audit against provision of funds
c) audit of rules and orders d) None of the above
d) audit of financial propriety
798. The C & AG shall compile the accounts relating
793. Audit whose objective is examination of the to the annual receipts and disbursements of the
financial and operational performance of an Union Territory and shall submit those accounts
organization, programme, authority or function to the:
and is oriented towards identifying opportunities a) President
for greater economy, and effectiveness? b) Governor
a) audit of sanctions c) Administrator
b) audit of provision of funds d) any of the above
c) audit of rules and orders
d) Performance Audit 799. While auditing receipts of Government
Company, auditor shall check whether all
794. The C & AG, some years ago, gave adverse revenues or other debts due to government have
comments on expenditure incurred on buying been correctly _____________to government
coffins for soldiers killed in a war. In his opinion, account by the designated authorities.
the coffins cases imported could have been a) assessed
replace with less expensive, domestically b) realized
produced ones. This is an aspect of – c) credited
a) Audit of sanctions d) all of the above
b) Audit of stores and stocks
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800. Identify the correct one:
a) The audit of receipts is neither all pervasive or
as old as audit of expenditure
b) The audit of receipts is all pervasive and is as
old as audit of expenditure
c) Audit of receipt and audit of expenditure are
one and the same thing
d) None of the above
801. Identify the correct one:
a) The basic principle of audit of receipts is that
“Individual is important as compared to
Overall"
b) The basic principle of audit of receipts is that
"Overall is important as compared to
Individual"
c) The basic principle of audit of receipts is that
"Overall is as important as Individual"
d) None of the above
802. "Audit of the accounts of stores and inventories
has been developed as a part of ______________
a) audit of receipts
b) audit of expenditure
c) audit of commercial accounts.
d) None of the above
803. "Under the audit of stores and stock, one of the
aims is to bring to the notice of the government
any ________ in quantities of stores held or any
_____ in the system of control.
a) defects; deficiencies
b) deficiencies; defects
c) either of the above
d) none of the above
804. In case of Audit of commercial accounts,
taking into consideration the nature of entity,
identify who will undertake the audit?
Departmental Enterprises engaged in
commercial and trading operations, which are
subject to the same laws, financial and other
regulations as other Government
departments and agencies.
a) Audit of these enterprises are undertaken
by the C&AG in the same manner as any
other Government department
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b) Audit is conducted by Statutory Auditors
(Chartered Accountants) appointed by the
C&AG.
c) Audit of these bodies depends upon the
nature and type of governing statutes
d) Either of the above
805. In case of Audit of commercial accounts, taking
into consideration the nature of entity, identify
who will undertake the audit?
"Statutory Bodies, Corporations, created by
specific statutes mostly financed by Government
in the form of loans, grants, etc."
a) Audit of these enterprises are undertaken by
the C&AG in the same manner as any other
Government department
b) Audit is conducted by Statutory Auditors
(Chartered Accountants) appointed by the
C&AG.
c) Audit of these bodies depends upon the
nature and type of governing statutes
d) Either of the above
806. "In case of Audit of commercial accounts, taking
into consideration the nature of entity, identify
who will undertake the audit?
"Government Companies set up under the
Companies Act, 2013."
a) Audit of these enterprises are undertaken by
the C&AG in the same manner as any other
Government department
b) Audit is conducted by Statutory Auditors
(Chartered Accountants) appointed by the
C&AG
c) Audit of these bodies depends upon the
nature and type of governing statutes
d) Either of the above
807. Identify the incorrect one:
a) In government audit, the extent and quantum
of audit required to be done under each
category of audit are determined by the
C&AG. These are neither negotiable nor
questioned.
b) In government audit, the extent and quantum
of audit required to be done under each
category of audit are determined by the
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C&AG. However, these are negotiable and
can be questioned.
808. Which from the following is not examined
by Public Accounts Committee?
a) That the moneys were disbursed legally on
the service or purpose to which they were
applied
b) Examine the statement of accounts of
autonomous and semi-autonomous bodies
c) To examine the reports and accounts of
public undertakings
d) None of the above
809. Which from the following is not examined by
Committee on Public Undertaking?
a) To examine the reports and accounts of
public undertakings.
b) Whether Public undertaking are being
managed in accordance with sound business
principles and prudent commercial practices
c) Examine the evaluation of the policies,
programmes and financial working of the
public undertaking
d) Distribution of funds
810. The functions of Committee on Public
Undertakings include:
a) To examine the reports and accounts of
public undertakings
b) To examine the reports of the Comptroller &
Auditor General on public undertakings
c) To examine the evaluation of the policies,
programmes and financial working of the
undertaking
d) all of the above
811. To examine that the government moneys were
disbursed legally on the service or purpose to
which they were applied and whether the
expenditure was authorized is a function of-
a) Committee on Public Undertakings
b) Estimate committee
c) Public Accounts committee
d) Public finance committee
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812. The C&AG Act gives which of the following
power to the C&AG in connection with the
performance of his duties-
a) To inspect any office of accounts under
the control of the Union or a State
Government including office responsible
for the creation of the initial or subsidiary
accounts.
b) To require that any accounts, books,
papers and other documents which deal
with or are otherwise relevant to the
transactions under audit, be sent to
specified places.
c) To put such questions or make such
observations as he may consider necessary
to the person in charge of the office and
to call for such information as he may
require for the preparation of any account
or report which his duty is to prepare.
d) All of the above
813. ________aims at ascertaining that the
expenditure incurred has been on the purpose for
which the grant and appropriation had been
provided and that the amount of such
expenditure does not exceed the appropriation
made.
a) Audit against provision of funds
b) Propriety audit
c) Audit of sanctions
d) Audit against rules and orders
814. Under audit of local bodies, municipal
government in India covers ___ distinct types of
urban local authorities.
a) two
b) three
c) five
d) six
815. Municipal authorities cover which of the specific
local functions:
a) regulatory
b) maintenance
c) development
d) all of the above
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816. Local bodies may receive different types of 820. In Audit of local bodies, Municipal accounting
grants from the state administration as well. and budget format have been criticized as neither
Taking into consideration the following _______ nor __________.
statement identify to which type of grant such a) simple; comprehensible
statement refers to? b) difficult; comprehensible
"These are primarily intended to substantially
c) simple; unclear
bridge the gap between the needs and
d) difficult; unclear
resources of the local bodies"
a) General purpose grants
821. Audit of local bodies does not incorporate
b) Specific purpose grants
which of the following objectives:
c) Statutory and compensatory grants
d) None of the above a) detection and prevention of error, fraud and
misuse of resources
817. Local bodies may receive different types of b) reporting upon whether value is being fully
grants from the state administration as well. received on money spent
Taking into consideration the following c) reporting on the fairness of the content and
statement identify to which type of grant such presentation of financial statements
statement refers to? d) None of the above
"These grants which are tied to the provision of
certain services or performance of certain tasks" 822. Who among the following is eligible to be
a) General purpose grants appointed as an audit of Government Company?
b) Specific purpose grants a) A chartered accountant in practice
c) Statutory and compensatory grants b) A chartered accountant whether in practice
d) None of the above or not
c) An auditor appointed by the C & AG
818. Local bodies may receive different types of d) Any of the above
grants from the state administration as well.
Taking into consideration the following 823. The statutory auditor of a Government
statement identify to which type of grant such Company submits his report to-
statement refers to? a) the BODs of the company
"These grants, under various enactments, are b) the C & AG
given to local bodies as compensation on c) the Legislature
account of loss of any revenue on taking over a d) Both a & b
tax by state government from local government."
a) General purpose grants AUDIT OF CO-OPERATIVE
b) Specific purpose grants
SOCIETY
c) Statutory and compensatory grants
d) None of the above (Only for New Course)

819. In Audit of local bodies, one important feature 824. State which from the following are pre-requisites
of the municipal budgets is that there is no strict to be an auditor of co-operative society:
separation between revenue and capital items; 1. Chartered Accountant
usually there is a ‘head’ called ________ which 2. Diploma in co-operative accounts
cover most of the capital transactions. 3. Cost Accountant
a) Composite items 4. Any person (expert) that auditor considers
b) Extraordinary items appropriate.
c) Special items Options:
d) Ordinary items of special nature a) 1 & 4
b) 1 & 2

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c) 3 & 2 830. A registered society is a member of a co-

d) 1 & 3 operative society, how much shares a
registered society being a member of the co-
825. Auditor of the co-operative society is appointed operative society can hold?
by - 1. Maximum 20 % of the total number of
shares
a) registrar
2. Value of shareholding maximum to Rs
b) co-operative society
1000
c) state government
3. Both of the above
d) any of the above
4. No such limit is applicable to member
being a registered society.
826. Fees of the auditor of the co-operative society Options:
is prescribed by - a) 1 only
a) registrar b) 2 only
b) co-operative society c) 3 only
c) state government d) 4 only
d) any of the above
831. A co-operative society can give loan without any
827. Fees of the auditor of the co-operative society restriction to:
is paid by - a) members of the society only
a) registrar b) any other registered society
b) co-operative society c) both of the above
c) state government d) none of the above
d) any of the above
832. A co-operative society can give loan to
828. To whom the auditor of the co-operative society _______________subject to special sanction from
is required to report? registrar.
1. registrar a) members of the society only
2. co-operative society b) any other registered society
3. state government c) both of the above
4. central government d) none of the above
Options:
a) 1 & 4 833. A co-operative society can invest in which of the
b) 1 & 2 following, as specified from below
c) 3 & 2 a) Central or State co-operative bank
d) 1 & 3 b) Securities of Indian Trust Act ,1882
c) In shares, bonds or debentures of other
829. In case of society where liability of the member society with limited liability.
is limited, how much shares the members of the d) Any of the above
co-operative society required to hold?
1. Maximum 20 % of the total number of shares 834. A co-operative society is required to transfer
2. Value of shareholding minimum to Rs 1000 ______of profit to reserve fund, before distribution
3. Value of shareholding maximum to Rs 1000 of dividend or bonus.
4. Minimum 20 % of the total number of shares a) 15 %
Options: b) 20 %
a) 1 & 4 c) 25 %
b) 1 & 2 d) 10 %
c) 3 & 2
d) 1 & 3

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835. A co-operative society is required to transfer
______of profit to reserve fund, before distribution
of dividend or bonus. However, the registrar can
reduce the percentage, but not less than _____.
a) 15 %; 5 %
b) 20 %; 10 %
c) 25 %; 10 %
d) 10 %; 2 %
836. A co-operative society can contribute towards
charitable purpose. However, such contribution
shall not exceed ______of profit after transfer to
reserve fund.
a) 15 %
b) 20 %
c) 25 %
d) 10 %
837. Some of the State Acts may provide that every
society shall contribute annually towards the
education fund of state federal society. Such a
contribution is a ___________the profits.
a) charge on
b) appropriation of
c) allotment of
d) setting apart of
838. The Registrar shall audit or cause to be audited
by some person authorized by him by general or
special order in writing in this behalf the accounts
of every registered society _______________.
a) once at least in every three year
b) once at least in every two years
c) once at least in every year
d) once at least in every 5 years
839. Overdue debts for a period from
______________and more than ________will have to
be classified and shall have to be reported by an
auditor
a) six months to five years; five years
b) six months to four years; four years
c) six months to three years; three years
d) six months to two years; two years
840. Auditor shall check that the overdue interest is
_______ interest outstanding and accrued due
while calculating profit.
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CA INTER AUDIT MCQs
a) excluded from
b) included in
841. During the course of audit, if the auditor
notices that there are some serious
irregularities in the working of the society, he
may report these special matters to the
Registrar. In which of the following cases such
special report is issued by auditor:
1. Personal Profiteering
2. Detection of fraud
3. Reckless Advancing
4. Mismanagement
Options:
a) 1, 2 and 4
b) 1, 2 and 3
c) 1,2,3 and 4
d) 2,3 and 4
842. Following is not a feature of co-operative
society audit?
a) Adherence to Co-operative Principles
b) Certification of Bad Debts
c) Special report to the Registrar
d) CARO reporting
843. Which from following persons shall be not be
disqualified for appointment as auditor of a
multistate cooperative society?
a) a body corporate
b) an officer or employee of the multi-state
cooperative society
c) a person who is indebted to the multi-state
cooperative society for a sum of RS 800
d) a person who is in the employment, of an
officer or employee or the multi-state
cooperative society
844. First auditor or auditors of a multi-state
cooperative society shall be appointed by the
board within _____________________.
a) one month of the date of start of operations
of such society
b) one month of the date of registration of such
society
c) two months of the date of start of operations
of such society
d) two months of the date of registration of
such society
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845. First auditor or auditors of a multi-state
cooperative society shall hold office until the
__________________.
a) conclusion of the first annual general
meeting
b) conclusion of the second annual general
meeting
c) conclusion of the sixth annual general
meeting
d) none of the above
846. Every multi-state cooperative society shall, at
each annual general meeting, appoint an auditor
or auditors to hold office from the conclusion of
that meeting until _____________
a) conclusion of the first annual general
meeting
b) conclusion of the second annual general
meeting
c) conclusion of the sixth annual general
meeting
d) conclusion of the next annual general
meeting
847. Every auditor of the co-operative society so
appointed shall be intimation within _________ of
the appointment.
a) fifteen days
b) seven days
c) fourteen days
d) thirty days
848. In case of Multi-State co-operative society,
central government can direct special audit of
co-operative in certain cases - under Section
77 where the Central Government is of the
opinion that:
a) Multi-State co-operative society are not
being managed as per prudent
commercial practices
b) Multi-State co-operative society is being
managed in a manner likely to cause
damage to the interests of the trade
industry
c) financial position of any Multi-State co-
operative society is such as to endanger its
solvency.
d) Any of the above
849. In case of special audit directed by central
government, fees of the auditor of the co-
operative society is prescribed by -
a) registrar
b) co-operative society
c) state government
d) central government
850. In case of special audit directed by central
government, fees of the auditor of the co-
operative society is paid by -
a) registrar
b) multi state co-operative society
c) state government
d) central government
AUDIT OF DIFFERENT TYPES OF
ENTITY
Audit of Hospitals
851. Internal checks as regards to the receipt and issue
of stores are examined, so as to ensure that
purchases have been properly recorded in the
_____________ and that the issues have been made
only against proper ________________.
a) Assets Register; documents
b) Inventory Register; documents
c) Inventory Register; authorization
d) Assets Register; authorization
852. As an auditor of a hospital, what areas would
you consider while verifying the incomes of the
hospital?
a) Legacies & Donations
b) Grants & TDS Refund
c) Investment Income
d) All of the above
853. Bills issued to patients are verified for a selected
period with the patients' attendance records to:
a) See that bills have been properly prepared.
b) See that bills have been documented.
c) both of the above
d) none of the above

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854. The auditor has to vouch all the purchases and
expenses and verify that the capital expenditure
was incurred only with the prior sanction of
_______________
a) Trustees
b) Managing Committee
c) Either a or b
d) None of the above
855. The auditor has to verify that the grants, if any,
received from _______________has been duly
accounted for.
a) General Public
b) Reserve Bank of India
c) Government
d) Trustees
856. The significant variations, if any, which have
taken place while comparing the totals of various
items of expenditure and income with the
budgeted amount are to be reported to:
a) Trustees
b) Managing Committee
c) Either a or b
d) None of the above
857. The auditor should obtain proper ______________
and _______________ with respect to various
aspects covered during the course of audit of
hospital.
a) Management Letter; Certificate
b) Management Representation; Certificate
c) Management Representation; Statement
d) Management Letter; Statement
Audit of Educational Institutes
858. The auditor of a school while verifying the
students' fees, shall verify that there operates a
system of ___________ which ensures that demand
against the students are properly raised.
a) internal controls
b) internal guidelines
c) internal checks
d) none of the above
859. What are the areas to be considered by the
auditor while verifying student’s fees in an
audit of a school?
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a) Checking names entered in the Students
Fees Register with the respective class
registers showing names of students on
rolls and test amount of fees charged.
b) Checking fees received by comparing
counterfoils of receipts granted with
entries in the Cash Book and tracing the
collections in the Fees Register to confirm
that the revenue from this source has been
duly accounted for.
c) Totaling up the various columns of the
Fees Register for each month or term to
ascertain that fees paid in advance have
been carried forward and that the arrears
that are irrecoverable have been written
off under the sanction of an appropriate
authority.
d) All of the above
860. The auditor shall check admission fees with
admission slips signed by the head of the
institution and confirm that the amount has been
credited to a ______________, unless the
_____________ has taken a decision to the contrary.
a) Student Fund; Managing Committee
b) Capital Fund; Managing Committee
c) Any of the above
861. State whether true or false:
The auditor has to report old heavy arrears, if
any, on account of fees, dormitory rents etc.,
to the Managing Committee.
a) True; it is the duty of the auditor to report
heavy arrears on account of fees,
dormitory rents etc. to the Managing
Committee as he/she looks after all the
affairs of the institute.
b) False; it is the duty of the auditor to report
old heavy arrears, if any, on account of
fees, dormitory rents etc., not to the
Managing Committee but to the
Government.
c) False; there is no need for the auditor to
report on old heavy arrears.
d) True; it is the duty of the auditor to report
heavy arrears on account of fees,
dormitory rents etc. to the Managing
Committee only if the government has
dedicated managing power to the
Managing Committee
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862. While vouching the donations received, if some
donations were meant for any specific purpose,
then as an auditor what would you do?
a) Verify whether the specific purpose was
approved by the proper authority.
b) See whether the money was utilized for the
purpose.
c) Both of the above
d) None of the above
867. The charge for the room sales is normally
posted to ________________ by the
receptionist/front office or in case of large hotels
by the night auditor. The source of these entries
is variably the _____________________.
a) guest bills; service register
b) guest bills; guest register
c) service bills; guest register
d) service bills; service register

Audit of Hotels 868. ________________ should be carried out to ensure

863. _______________is one of the greatest problems in that the correct number of guests are charged for
any hotel and the importance of internal control the correct period.
cannot be undermined. a) Audit checks
a) Charity b) Internal checks
b) Donation c) Audit tests
c) Pilferage d) None of the above
d) None of the above
869. In many hotels, the ______________ prepares a
864. It is the responsibility of ____________ to daily report of the rooms which were occupied
introduce controls which will minimize the the previous night and the number of beds kept
leakage as far as possible. in each room.
a) Auditor a) manager
b) Management b) service staff
c) Both of the above c) housekeeper
d) None of the above d) none of the above

865. If the internal control in a hotel is weak or
perhaps breaks down, then a very serious
problem exists for the auditor. As a result of
___________ nature of many of his clients' records,
the auditor must rely to a very large extent on the
gross margin shown by the accounts.
a) Continuing
b) Persistent
c) Durable
d) Transient
866. In the event of a material margin discrepancy
being unexplained, the auditor will have to
consider___________ his audit report.
a) Qualifying
b) disclosing the matter in Emphasis of
Matter paragraph
c) disclosing the matter in Other Matter
paragraph
d) None of the above
870. The main areas that the auditor while
conducting the audit of a hotel, should look into,
includes:
a) Proper valuation of occupancy in progress at
the balance sheet date
b) Ensuring that proper records maintained for
booking of halls and recovered on the basis
of tariff.
c) Verifying a few restaurants bills by reference
to Kitchen Order Tickets or basic records
d) All of the above
871. The hotel trade operates to very large extent on
casual labour. The records maintained of such
wage payments are frequently inadequate. The
auditor should ensure that _____________ on this
account does not take place by suggesting
proper controls to the management.
a) adequacy
b) sufficiency
c) stealing

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d) defalcation
872. State whether true or false:
All expenses incurred at a hotel such as cost of
repairs, alterations and additions to the hotel
building are all capitalized.
a) True; all the expenditure incurred irrespective
of its nature shall be capitalized.
b) False; all the major alterations and additions
to the hotel building only will be capitalized.
873. Many hotels account for certain quasi-fixed
assets such as silver and cutlery on _____________
basis.
a) fixed assets
b) inventory
c) Both of the above
d) None of the above
874. Many hotels account for certain quasi-fixed
assets such as silver and cutlery on inventory
basis. This can lead to confusion between each
inventory items and similar assets which are
accounted for on a more normal fixed assets
basis. In such cases, it is important that
very__________ definitions of inventory items
exist, and the auditor should carry out tests to
ensure that definitions have been closely
followed.
a) summarized
b) compiled
c) detailed
d) None of the above
875. Many hotels use _______________ to take and
value the inventories on a continuous basis
throughout the year. Such a valuation is then
invariably used as the basis of the balance sheet
inventory figure at the year end.
a) specialized professional valuers
b) auditor expert
c) auditors
d) none of the above
Audit of Cinema Halls
876. How an auditor of a cinema hall, would verify
the internal control mechanism?
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a) The auditor should verify that whether the
entry to the cinema hall during show is only
through printed tickets or not.
b) The auditor should verify that whether for
advance booking a separate series of tickets
is issued or not.
c) The auditor should verify that whether the
inventory of tickets is kept in the custody of a
responsible person or not.
d) All of the above
877. Which from the following constitutes the major
sources of income for a cinema hall?
a) Sale of movie tickets
b) Advertisement slides
c) Income from restaurant
d) All of the above
878. Amount of Entertainment Tax collected shall be
reconcile by the auditor with:
a) Total number of tickets issued for each class
b) Register of Slides and Shorts Exhibited kept
at the cinema
c) Agreements, entered into with advertisers
d) All of the above
879. Charges collected for advertisement shall be
reconcile by the auditor with:
a) Register of Slides Exhibited kept at the
cinema
b) Agreements, entered into with advertisers
c) Register of Shorts Exhibited kept at the
cinema
d) All of the above
880. State whether true or false:
In case of cinema halls all expenses incurred on
an advertisement, repairs and maintenance
should be capitalized.
a) True, all expenses incurred on an
advertisement, repairs and maintenance
should be capitalized
b) False, only major expenses incurred on an
advertisement, repairs and maintenance
should be capitalized
c) False, no expenses incurred on an
advertisement, repairs and maintenance
should be capitalized
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c) both of the above

Audit of Clubs d) none of the above
881. The auditor of a club while conducting the audit,
should vouch the receipt on account of Audit of Firm
_________________with members' application, 886. The auditor to a firm is usually appointed by the
counterfoils issued to them, as well as on a partners on the basis of:
reference to minutes of the managing a) decision taken by the partners of the firm
committee. b) complying with a condition in the partnership
a) service fees agreement
b) entrance fees c) either a or b
c) subscription fees d) only b
d) none of the above
887. The remuneration for the auditor of the firm is
882. For verification of subscriptions being a fixed by the ___________
major source of revenue generation, the a) board
auditor should: b) registrar
a) vouch members' subscriptions with the c) CAG
counterfoils of receipts issued to them, d) Partners
trace receipts for a selected period to the
Register of Members; also reconcile the
888. The auditor of the firm may, particularly, ensure
amount of total subscriptions due with the
application of _____________________ prescribed by
amount collected and that outstanding.
the institute.
b) Ensure that arrears of subscriptions for the
a) auditing standards
previous year have been correctly brought
over and arrears for the year under audit b) accounting standards
and subscriptions received in advance c) accounting estimates
have been correctly adjusted. d) none of the above
c) both of the above
d) none of the above 889. In case the firm is required to get its accounts
audited under the requirements of any statute,
883. The auditor should vouch purchases of sports the auditor will have to ___________his report in
items, linen, crockery etc. and trace their entries case of non-compliance with the accounting
into the respective _____________ standards.
a) fixed assets register a) qualify
b) inventory register b) give disclaimer of opinion
c) purchases register c) introduce emphasis of matter paragraph
d) none of the above d) none of the above

Audit of Sole Trader
884. State whether true or false:
A sole trader is under no obligation to have his
account audited.
a) True
b) False
885. Auditors of sole proprietary concern shall be
appointed by_______________.
a) sole proprietor himself
b) any relative of sole proprietor
890. Before starting the audit, the auditor should
examine the partnership agreement and note the
provisions as regards:
a) The name and style under which the business
shall be conducted.
b) The duration of the partnership, if any, has
been agreed upon.
c) Borrowing capacity of the partnership
d) All of the above

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891. State whether true or false:
The auditor should consider, the amount of
capital that shall be contributed by each partner
and shall check whether it will be fixed or could
be varied from year to year, from partnership
firm.
a) False
b) True
892. Before starting the audit, the auditor should
examine the partnership agreement and note
the provisions as regards:
a) The provisions as regards maintenance of
books of account and the matters which
must be taken into account for
determining the profits.
b) The rate at which interest will be allowed
on the capitals and loans provided by
partners and the rate at which it will be
charged on their drawings and current
accounts.
c) Limitations and restrictions that have been
agreed upon, the rights and powers of
partners and on their implied authority to
pledge the firm's credit or to render it
liable.
d) All of the above
893. The advantages of audit of accounts of a
partnership firm includes:
a) Audited statements of accounts are relied
upon by the bank when advancing loans as
well as by prospective purchasers of the
business, as evidence of profitability of the
concern and its financial position.
b) An audit is an effective safeguard against any
undue advantage being taken by a working
partner or partners specially in case of those
partners who are not actively associated with
the working of the firm.
c) Audited statements of accounts can be
helpful in the negotiations to admit a person
as a partner, especially when they are
available for a number of past years.
d) All of the above
894. On the retirement or death of a partner, audited
accounts, which have been accepted by the
partners, constitute a reliable evidence for
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CA INTER AUDIT MCQs
computing the amounts due to the retiring
partner or to the representative of the deceased
partner in respect of his share of _______________
a) capital
b) profits
c) goodwill
d) all of the above
895. Identify the correct option:
In conducting the audit of a partnership firm, the
auditor should not give special considerations to
matters such as:
1) Verifying that the business in which the
partnership is engaged is authorized by the
partnership agreement or by any extension or
modification thereof agreed to subsequently.
2) Examining whether books of account appear
to be reasonable and are considered
adequate in relation to the nature of business
of the partnership.
3) Verifying that the profits and losses have
been divided among the partners in their
agreed profit-sharing ratio.
Choose the correct option:
a) 1
b) 1 ,2 & 3
c) 3
d) none of the above
Audit of Hire Purchase
896. ______________________ means an agreement
under which goods are let on hire and hirer has
an option to purchase them in accordance with
the terms of the agreement.
a) Operating Lease
b) Finance Lease
c) Hire Purchase
d) None of the above
897. The terms of hire purchase agreement mean:
 Possession of goods is delivered by the
owner to a person on condition that such
person pays the agreed amount in periodical
instalments.
 The property in the goods is to pass to such
person on the payment of the very first
instalment.
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 Such person has no right to terminate the
agreement at any time before the property so
passes.
Choose the correct option:
a) True; True; False
b) False; True; True
c) True; False; False
d) False; False; True
898. While checking the hire-purchase transaction,
the auditor will not examine whether:
a) Hire Purchase agreement is in writing and is
signed by all the partners
b) Instalment payments are being received
regularly as per the agreement
c) Hire purchase agreement specifies clearly the
goods to which the agreement relates, in a
manner that is sufficient to identify them.
d) None of the above
Audit of Lease Agreement
899. In a lease agreement, a party called ___________
acquires the right to use an asset for an agreed
period of time in consideration of payment of
rent to another party called _______________.
a) Lessor; Lessee
b) Acquirer; Lessor
c) Lessee; Lessor
d) Lessee; Acquirer
900. In certain lease agreements, the legal ownership
of the asset remains with the lessor, but in
substance all the risks and rewards of ownership
of the asset are transferred to the lessee. Such
leases are termed as _____________.
a) Operating Lease
b) Finance Lease
c) Hire Purchase Agreement
d) None of the above
901. _______________ is a simple arrangement where, in
return for rent, the lessor allows the lessee to use
the asset for a certain period.
a) Finance Lease
b) Rental Agreement
c) Hire Purchase Agreement
d) Operating Lease
902. During the lease period, the lessee:
 Will pay rentals regularly at periods agreed-
upon, which are usually each calendar month.
 Will keep the equipment in good repair and
working condition, etc.
 Will not be entitled to any manufacture's
warranties or after-sales services.""
Choose the correct option:
a) False; True; True
b) True; True; True
c) True; True; False
d) False; True; False
903. Which from the following options, should
not be looked into while examining any lease
transaction?
a) The description of lessee, the lessor, the
equipment and the location where the
equipment is to be installed.
b) The amount of tenure of lease, dates of
payment, late charges, deposits or
advances etc.
c) Whether the equipment shall be returned
to the lessor on termination of the
agreement and the cost shall be born by
the lessee
d) None of the above
904. Which from the following options, is not an
attribute of a finance lease?
a) The lessee has the option to purchase the
asset at a price which is expected to be
sufficiently lower than the fair value at the
date the option becomes exercisable for it to
be reasonably certain, at the end of the lease
term, that option will be exercised.
b) The lease term is not for the major part of the
economic life of the asset even if title is not
transferred.
c) At the inception of the lease, the present
value of the minimum lease payments
amounts to at least substantially all the fair
value of the leased asset.
d) The leased assets are of such a specialized
nature that only the lessee can use them
without modifications.

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Audit of NGO
905. Major sources of income of NGO does not
includes:
a) Contributions and Grants for projects and
programmes
b) Membership Fees
c) Receipts from fund raising programmes
d) None of the above
Audit of LLP
906. The accounts of every LLP shall be audited in
accordance with Rule 24 of LLP, Rules 2009.
a) The above shall be applicable to all the LLP
b) The above shall not be applicable to all the
LLP whose turnover does not exceed, in
any financial year, forty lakh rupees, or
whose contribution does not exceed
twenty-five lakh rupees.
c) The above shall be applicable to only the
LLP whose turnover does not exceed, in
any financial year, forty lakh rupees, or
whose contribution does not exceed
twenty-five lakh rupees.
d) The above shall not be applicable to all the
LLP whose turnover does not exceed, in
any financial year, twenty-five lakh
rupees, or whose contribution does not
exceed forty lakh rupees.
907. State the correct one:
a) There is a mandatory insurance requirement
under LLP Act.
b) There is no mandatory insurance requirement
under LLP Act.
c) There is no mandatory insurance requirement
under LLP Act to whom audit is not required.
d) There is a mandatory insurance requirement
under LLP Act to whom audit is required.
908. Every LLP would be required to file annual return
in __________ with ROC.
a) Form 12
b) Form 11
c) Form 10
d) Form 9
909. Every LLP would be required to file annual return
within ___________from the closure of the financial
year.
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CA INTER AUDIT MCQs
a) 45 days
b) 60 days
c) 30 days
d) 7 days
910. Identify the correct one:
a) A Statement of Accounts and Solvency in
prescribed form shall be filed by every LLP
with the Registrar every year.
b) A Statement of Accounts and Solvency in
prescribed form shall be filed by every LLP
with the Registrar in every two year.
c) A Statement of Accounts and Solvency in
prescribed form shall be filed by every LLP
with the Registrar in every three year.
d) A Statement of Accounts and Solvency in
prescribed form shall be filed by every LLP
with the Registrar in every five year.
911. Statement of Accounts and Solvency shall be
filed in_________
a) Form 8
b) Form 9
c) Form 10
d) Form 11
912. Statement of Accounts and Solvency shall be
filed within a period of ____________from the end
of__________the financial year to which the
Statement of Account and Solvency relates.
a) fifteen days; three months
b) thirty days; six months
c) sixty days; six months
d) thirty days; three months
913. In case LLPs files relevant documents after their
due dates only additional fees will be required, if
the delay is of__________
a) upto 300 days
b) upto 200 days
c) upto than 100 days
d) upto than 400 days
914. In case LLP files relevant documents after their
due dates, assessee shall be liable to pay
additional fees and shall also be liable to be
prosecuted, if the delay is of____________.
a) more than 300 days
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b) more than 200 days d) none of the above

c) more than 100 days
d) more than 400 days 920. The work is conducted throughout the course
of the financial year.
915. The fees for inspection of an LLP's annual return a) Final audit
is________ b) Completed Audit
a) Rs 40/- c) Continuous Audit
b) Rs 50/- d) Any of the above
c) Rs 60/-
d) Rs 30/- 921. State whether true or false-
Audit is not legally obligatory for all types of
916. Fees for certified copy or extract of any business organizations or institutions.
document u/s 36 of LLP Act is Rs. ___________ a) True. It is obligatory for those
a) 5/- per page organizations on whom obligation are
b) 15/- per page imposed by law to get their accounts
c) 20/- per page audited
d) 10/- per page b) False. It is obligatory for all organizations
whether obligation are imposed by law
917. In case of first financial year, the auditor may be or not to get their accounts audited.
appointed by the designated partners of the LLP
a) At any time, but before the end of first 922. State whether true or false-
financial year. Organizations or institutions can conduct
b) At any time, but before the end of six months audit voluntarily even if it is not required by
of the first financial year. law.
c) At any time, but before the end of three a) True. Organizations or institutions can
months of the first financial year. conduct audit voluntarily even if it is not
d) At any time, but before the end of nine required by law.
months of the first financial year. b) False. Organizations or institutions
cannot conduct audit voluntarily, if it is
918. In case of other than first financial year, the not required by law.
auditor may be appointed by the designated
partners of LLP. 923. Identify the correct one:
a) At least sixty days prior to the end of each 1. Audit is mandatory for Companies.
financial year. For others, it is voluntary.
b) At least thirty days prior to the end of each 2. Investigation is mandatory for
financial year. Companies. For others, it is voluntary.
3. Audit is voluntary for Companies. For
c) At least ninety days prior to the end of each
others, it is mandatory.
financial year.
4. Investigation is voluntary.
d) At least forty-five days prior to the end of
Choose the correct options-
each financial year.
a) 1 & 4
b) 2 & 4
CONCEPTS IN AUDITING c) 3 & 4
d) 3 only
919. The word ‘auditing’ has been derived from
Latin word “______” which means “_______” 924. Statutory Audit can be conducted by -
a) audire; to hear a) A Chartered Accountant within the
b) auditor; to act meaning of the Chartered Accountants
c) auditee; to verify Act 1949

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b) A Chartered Accountant in practice
c) A Cost Accountant whether in practice
d) Any of the above
925. Investigation can be conducted by -
a) A Chartered Accountant within the
meaning of the Chartered Accountants
Act 1949
b) A Chartered Accountant whether in
practice or not
c) A Cost Accountant whether in practice
d) Any person, who may or may not be a
Chartered Accountant.
926. Auditor is appointed by the ___________ of the
enterprise.
a) shareholders of the enterprise
b) Lawyers of the enterprise
c) third parties
d) Any of the above
927. Investigator is appointed by the ___________.
a) Owners
b) management of the enterprise
c) third parties
d) Any of the above
928. Scope and coverage of financial audit
includes the following:
a) Seeks to answer only those questions lay
down in the engagement letter
b) It seeks to form an opinion on the
Financial Statements.
c) Both of the above
d) None of the above
929. Scope and coverage of investigation includes
the following:
a) Seeks to answer only those questions lay
down in the engagement letter
b) It seeks to form an opinion on the
Financial Statements.
c) Any of the above
d) None of the above
930. What is the period covered by financial audit?
a) Not necessarily restricted to a financial
year. It can extend for a period consisting
of a number of years.
b) A period of one financial year.
c) A period of three financial year.
d) A period of five financial year.
931. What is the period covered by investigation?
a) Not necessarily restricted to a financial
year. It can extend for a period consisting
of a number of years.
b) A period of one financial year.
c) A period of three financial year.
d) A period of five financial year.
932. Which of the following statement is
appropriate to audit of financial statement?
a) Audit is not based on suspicion unless
circumstances exist to arouse suspicion.
b) Its essence lies in going into the matter
with some pre-conceived notion suited
to the objective
933. Which of the following statement is a pre-
conception to investigation?
a) Audit is not based on suspicion unless
circumstances exist to arouse suspicion.
b) Its essence lies in going into the matter
with some pre-conceived notion suited
to the objective
934. Identify the correct one:
1. Evidence in financial audit is persuasive
rather than conclusive
2. Evidence in investigation is persuasive
rather than conclusive
3. Evidence in financial audit is conclusive
and corroborative evidence
4. Evidence in investigation is conclusive
and corroborative evidence
Choose the correct options-
a) 2 & 3
b) 1 & 3
c) 1 & 4
d) 2 & 4

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935. Identify to which type of audit the following
statement relates to?
The work is conducted throughout the course
of the financial year.
1. Continuous audit
2. Final audit
3. Completed Audit
4. None of the above
Choose the correct options-
a) 1 & 3
b) 1 & 2
c) 2 & 3
d) 1 only
936. Identify to which type of audit the
following statement relates to?
This does not begin until the books have
closed at the end of the accounting period.
And thereafter is carried on until
completed. Whether an audit ought to be
conducted after the close of the financial
year should be decided on a consideration
of the size of the business and the extent
of detailed checking required.
1. Continuous audit
2. Final audit
3. Completed Audit
4. None of the above
Choose the correct options-
a) 1 only
b) 1 & 2
c) 2 & 3
d) 4 only
937. Which from the following is disadvantage of
continuous audit?
a) delay which may occur particularly if size
of the business is large
b) several clients may end on the same date
c) Waste of time and effort if the size of the
concern is small.
d) All of the above
938. Which from the following is disadvantage of
final or completed audit?
a) danger that the records of transactions
after they have been audited may be
altered either innocently or fraudulently
b) several clients may end on the same date
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CA INTER AUDIT MCQs
c) waste of time and effort if the size of the
concern is small
d) examination of item left incomplete on a
visit for being undertaking on the next
visit may be overlooked
939. Identify the incorrect one:
1. Generally, final or completed audit
approach is advisable in case size of the
entity is very small.
2. Generally, Continuous audit may be
followed only in case size of the entity is
very small.
3. Generally, final or completed audit
approach is advisable in case size of the
entity is very large.
4. Generally, Continuous audit may be
followed only in case size of the entity is
very large.
Choose the correct options-
a) 2 & 3
b) 1 & 3
c) 1 & 4
d) 2 & 4
940. Which from the following are advantages of
continuous audit?
a) Work can be carried on till the audit is
over, thus, avoiding the necessity of
having to return on separate occasions
to complete the work
b) Allocation of work for staff also becomes
easier
c) The possibility of figures being altered
after work has been done is also avoided
d) The attendance of the audit staff acts a
moral check on the client staff. Because
of the frequent attendance of the
auditor, the opportunities of committing
frauds are reduced
941. Which from the following are advantages of
completed audit?
1. Work can be carried on till the audit is
over, thus, avoiding the necessity of
having to return on separate occasions
to complete the work
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2. The client accounts are always kept up-
to-date.
3. The possibility of figures being altered
after work has been done is also avoided
4. The attendance of the audit staff acts a
moral check on the client staff. Because
of the frequent attendance of the
auditor, the opportunities of committing
frauds are reduced
Choose the correct options-
a) 1 only
b) 2 & 4
c) 1 & 3
d) 3 only
942. Choose the correct one:
1. Audit procedures cannot consist merely
of any set of rules or precepts to be
applied to all and every situation
2. Element of surprise in an audit can be
only with regard to the time of the audit.
3. Audit procedures should consist set of
rules or precepts to be applied to all and
every situation.
945. Identify the correct one:
4. Element of surprise in an audit can be
both with regard to the time of the audit,
and the selection of the items which are
subjected to audit.
a) 2 & 3
b) 2 only
c) 1 & 4
d) none of the above
943. Surprise checks are mainly intended to
ascertain:
946. Which of the following circumstances may
a) system of internal control is operating
effectively
b) whether the accounting and other
records are prepared concurrently and
kept up-to-date
c) When EDP system is being used,
programmes are operating satisfactorily
d) All of the above
944. Identify the incorrect one:
A director of the company was of the
opinion that since an auditor is only
appointed for a particular accounting
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CA INTER AUDIT MCQs
year, he cannot do surprise check after the
end of that accounting year.
a) The auditor is appointed at the AGM
to hold office until the next AGM. He
is not appointed for a particular
accounting year. He has the right of
examination of the accounts and
records of the company at any time
during the period covered by his
appointment. Therefore, auditor can
carry out surprise checks of
transactions beyond the end of the
accounting year for which he is
reporting.
b) Auditor is appointed for a particular
accounting year. He has the right of
examination of the accounts and
records of the company at any time
during the period covered by his
appointment. Therefore, auditor can
carry out surprise checks of
transactions only during the
accounting year for which he is
reporting.
Examination of a few selected transactions
from the beginning to the end through the
entire flow of the transaction, i.e., from
initiation to the completion of the
transaction.
a) Sampling
b) Examination in depth
c) Surprise check
d) None of the above
not create advocacy threats?
a) Promoting shares in a listed entity when
that entity is a financial statement audit
client.
b) Acting as an advocate on behalf of an
assurance client in litigation or disputes
with third parties
c) Reporting on the operation of financial
systems after being involved in their
design or implementation.
d) All of the above
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947. Which of the following circumstances may d) continuous audit

not create Familiarity threats?
a) A member of the engagement team
having a close or immediate family
relationship with a director or officer
of the client
b) Accepting gifts or preferential
treatment from a client, of significant
value.
c) Long association of senior personnel
with the assurance client.
d) None of the above
948. Which of the following circumstances may
not create intimidation threats?
a) Being threatened with dismissal or
replacement in relation to a client
engagement.
b) Being threatened with litigation.
c) Being pressured to reduce
inappropriately the extent of work
performed in order to reduce fees
d) Acting as an advocate on behalf of an
assurance client in litigation or disputes
with third parties
949. Identify the areas in which different
accounting policies may be encountered?
a) Treatment of expenditure during
construction
b) Valuation of inventories
c) Valuation of investment
d) All of the above
950. Identify the areas in which different
accounting policies may be encountered?
a) Treatment of retirement benefits
b) Recognition of profit on long term
contracts
c) Treatment of contingent liabilities
d) All of the above
951. A___________ does not begin until the books
have closed at the end of the accounting
period and thereafter is carried on until
completed.
a) final audit
b) completed audit
c) both a and b
952. A _________ is independent examination of
financial information of any entity, when such
an examination is conducted with a view to
expressing an opinion thereon.
a) audit
b) investigation
c) vouching
d) verification
953. ___________ implies systematic, critical and
special examination of the records of a
business for a specific purpose.
a) Audit
b) Investigation
c) Vouching
d) Verification
954. The state of mind that permits the provision
of an opinion without being affected by
influences allowing an individual to act with
integrity, and exercise objectivity and
professional skepticism.
a) Independence of Mind
b) Independence in Appearance
c) Independence of auditor
d) None of the above
955. The avoidance of facts and circumstances
that are so significant that a third party would
reasonably conclude an auditor’s integrity,
objectivity or professional skepticism had
been compromised.
a) Independence of Mind
b) Independence in Appearance
c) Independence of auditor
d) None of the above
956. Undue dependence on total fees from a client
may create-
a) self-Interest threats
b) self-review threats
c) advocacy threats
d) intimidation threats
957. Which of the following circumstances that
may not create self-interest threats?

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a) A financial interest in a client or jointly
holding a financial interest with a client
b) Potential employment with a client
c) A loan to or from an assurance client or
any of its directors or officers
d) Reporting on the operation of financial
systems after being involved in their
design or implementation
958. What types of audit are covered under bank
audit?
a) Statutory audit
b) Balance sheet audit
c) Concurrent audit
d) All of the above
959. Concurrent audit is a part of-
a) Internal check system
b) Continuous audit
c) Internal audit system
d) None of the above
960. 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
961. The Delhi Government had constructed six
bungalows for its ministers. They are lying
unoccupied for last three years. This would
be a matter of concern for-
a) Propriety Auditor
b) Performance Auditor
c) Financial Auditor
d) None of the above
962. Balance sheet Audit 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
963. 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
964. ______the RMM, ______ the materiality of Items
and _______the audit effort
a) Lower, Higher, Lower
b) Lower, Lower, Higher
c) Higher, Lower, Lower
d) Lower, Higher, Higher
965. 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
966. 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
967. 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

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any issue of shares or debentures of the

AUDIT OF ITEMS OF
company
FINANCIAL STATEMENTS 3. in providing for the premium payable on
(Only for New Course) the redemption of any redeemable
preference shares or of any debentures of
the company
968. As per section 2(8) of the Companies Act, 2013
4. for the purchase of its own shares or other
“_________” means such capital as is authorized by
securities under sec 68
the memorandum of a company to be the
5. Towards issue of unissued shares of the
maximum amount of share capital of the
company to the members of the company
company in terms of Face Value. as fully paid bonus shares.
a) Authorized capital Choose the correct option:
b) Nominal capital a) 1,2,3 and 4
c) Either of the above b) 2,3,4 and 5
d) None of the above c) 2,3 and 4
d) 1,2,3,4 and 5
969. As per Section 2(50) of the Companies Act, 2013,
“________” means that part of authorized capital 973. As per Sec 52 of Companies Act, 2013, The
which is offered by the company for subscription securities premium account may be applied by
and includes the shares allotted for consideration the company
other than cash. a) for the purchase of company’s own shares or
a) issued capital other securities under section 68
b) subscribed capital b) towards the issue of unissued shares of the
c) nominal capital company as fully paid bonus shares
d) none of the above c) either of the above
d) none of the above
970. A company has issued shares at a________, that
is, at amount in excess of the nominal value of the 974. As per Sec 52 of Companies Act, 2013, the
shares. securities premium account may be applied by
a) discount the company towards the issue of unissued
b) par shares of the company to the _________ of the
c) premium company as fully paid bonus shares.
d) none of the above a) members
b) employees
971. As per which section of Companies Act, 2013, c) board
application of premiums received on issue of d) all of the above
shares deals with?
a) Section 52 975. According to section __ of the Companies Act,
b) Section 51 2013, a company shall not issue shares at a
c) Section 54 discount, except
d) Section 53 In the case of an issue of sweat equity shares
given under section __ of the Companies Act,
972. As per Sec 52 of Companies Act, 2013, The 2013.
securities premium account may be applied by a) 51; 52
the company b) 53; 54
1. in writing off the preliminary expenses of c) 54; 55
the Company d) 52; 53
2. in writing off the expenses of, or the
commission paid, or discount allowed on,

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976. Where a company contravenes the b) the issue is authorized by a special

provisions of section 53 of the Companies Act, resolution passed by the company
2013, punishment for non-compliance shall c) where the equity shares of the company
be- are listed on a recognized stock exchange,
a) on company which shall not be less than the sweat equity shares are issued in
1,00,000 rupees but which may extend to accordance with the regulations made by
5,00,000 rupees the Securities and Exchange Board of India
b) every officer who is in default shall be d) all of the above
punishable with imprisonment for a term
which may extend to 6 months or with fine 980. For verifying reduction of capital, the auditor
which shall not be less than 1,00,000 needs to undertake which of the following
rupees but which may extend to 5,00,000 procedures?
rupees, or with both a) Verify that the Articles of Association
c) either of the above authorizes reduction of capital
d) both of the above
b) Verify that the meeting of the shareholder
held to pass the special resolution was
977. Which of the following statement is not true
properly convened and that the proposal was
regarding audit procedures generally required to
circularized in advance among all the
be undertaken while auditing share capital?
shareholders
a) Verify year-end balance from MOA / AOA
c) Verify the adjustment made in the members’
b) Check whether shares are shown at Face
accounts in the Register of Members and
Value if fully paid, otherwise at partly paid
confirm that either the paid-up amount
amount.
shown on the old share certificates have been
c) Verify whether the paid-up capital as at the
altered or new certificates have been issued
period- end is within the limits of authorized
in lieu of the old, and the old ones have been
capital
cancelled
d) Asking confirmation from brokers who deal
d) all of the above
in company shares
981. __________ are amounts appropriated out of
978. __________means equity shares issued by the
profits that are not intended to meet any liability,
company to employees or directors at a discount
contingency,
or for consideration other than cash for providing
Commitment or diminution in the value of assets
know-how or making available right in the nature
known to exist as at the date of the Balance Sheet.
of intellectual property rights or value additions,
a) Reserves
by whatever name called.
b) Provisions
a) Sweat equity shares
c) Surplus
b) Employee stock option shares
d) All of the above
c) Bonus shares
d) Right share
982. ________are normally charged to the Statement
of Profit and Loss before arriving at the amount
979. The auditor needs to verify that the Sweat
of profit and _______ are appropriations out of
Equity Shares issued by the company are of a
profits.
class of shares and already issued. In respect
a) Provisions, Reserve
of the above statement, which of the
b) Reserve, Provisions
following conditions need not to be complied
with? c) Expenses, Provisions
a) not less than 1 year has, at the date of such d) Reserves, Expenses
issue, elapsed since the date on which the
company had commenced business

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983. Concurrent audit is a part of- a) Tally the opening balance of reserves and
a) Internal check system surplus to the previous year audited
b) Continuous audit financial statements
c) Internal audit system b) trace the movement as disclosed in
d) None of the above Statement of changes in Equity to
Surplus/Deficit as per Income Statement
for the year under audit
984. ____________represents a reserve which does not
c) For adjustment related to dividend
include any amount regarded as free for
payment and the tax related thereto i.e.
distribution.
dividend distribution tax, verify the
a) General reserve
resolution passed by the board of
b) Capital reserve directors regarding declaration of
c) Revenue reserves dividend
d) Excess in Profit and loss appropriation A/c d) All of the above

985. To augment the working capital of the business 989. The auditor should obtain and verify the
or to generally strengthen the company’s resolution passed by the ________, in case
financial position is objective of- company has issued shares in excess of the
a) Revaluation Reserve nominal value of the shares.
b) Revenue reserves a) board of directors
c) Capital Reserve b) shareholders
d) None of the above c) debenture holders
d) None of the above
986. Which of the following is not an example of
capital reserve? 990. While auditing borrowings, the auditor should
a) Share premium account review _________ for approval of new lending
b) Capital redemption reserve agreements and ensure that significant debt
c) Revaluation Reserve commitments should be approved by
d) Dividend Equalization reserve the_________.
a) agenda, shareholders
987. State whether true or false: b) board minutes, board of directors
As per Ind AS 10 and AS-4 (revised), if dividends c) agenda, board of directors
to holders of equity instruments are proposed or d) board minutes, shareholders
declared after the balance sheet date, an entity
should not recognize those dividends as a liability 991. While auditing borrowings through debentures,
as at the balance sheet date. examine __________for terms and dates of
a) True. It should disclose the amount of redemption, borrowing restrictions and
dividends that were proposed or declared compliance with covenants.
after the balance sheet date, but before the a) trust deed
financial statements were approved for issue. b) registers
b) False. It should recognize as liability and c) letter
disclose the amount of dividends that were d) all of the above
proposed or declared after the balance sheet
date, but before the financial statements 992. In case of verification of bank borrowings,
were approved for issue auditor can consider evidence of additional debt
obtained through examination of-
988. Which of the following audit procedures are a) minutes of the board
generally required to be undertaken while b) significant contracts
auditing reserves and surplus/ other equity? c) confirmations of bank accounts

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d) any of the above b) For secured borrowings, nature of security

separately in each case
993. For valuation of foreign current loans, auditor c) Terms of repayment for each loan
agree the _______________ used and test the respectively even though the repayment
_________ terms of individual loans within a category
are similar, in which case, they may be
a) Closing exchange rate(s), translation
aggregated.
calculations.
d) Where loans are guaranteed by directors
b) Average exchange rate(s), summary
or others, the company must disclose the
calculation.
aggregate amount of such loans under
c) Opening exchange rate(s), transcription
each head.
calculations.
d) none of the above 998. Auditor shall verify that the company has not
contravened the restrictions laid down by section
994. State whether true or false: ___ of the Companies Act, 2013 on the
In case the value of the security falls below the borrowings of the company
amount of the loan outstanding, the loan is a) 180
classified as secured only to the extent of the b) 179
market value of the security. c) 181
a) False. Loan is classified as secured and
d) 182
unsecured on the basis of guarantee
provided.
999. In case where the entity has accepted deposits,
b) True. Loan is classified as secured to the
examine the directives issued by the___________
extent of market value of security and have been complied with.
balance classified as unsecured loan. a) Reserve Bank of India
b) other appropriate authority
995. Auditor shall verify the correctness of the c) either a or b
amount of instalments of long-term loans falling d) Banking regulation act
due within the next ______ months have been
separately disclosed in the financial statements. 1000. Which of the following criteria required to be
a) six
fulfilled in order to classify liability as current
b) eight
liability?
c) twelve a) It is expected to be settled in the entity’s
d) eighteen normal operating cycle
b) It is held primarily for the purpose of being
996. In case of presentation and disclosure of traded
borrowing, which types of liabilities towards c) It is due to be settled within twelve months
banks should be verified carefully? after the reporting period
a) bills discounted
d) any of the above
b) bills negotiated
c) cheque discounted 1001. While auditing trade payables, the trade
d) all of the above creditors may be requested to confirm the
balances
997. Which of the following disclosures as
a) as at the date of the balance sheet
required under Ind AS compliant to Schedule
b) as at any other selected date which is
III to Companies Act, 2013 made regarding
reasonably close to the date of the balance
each amount disclosed under the heading
sheet
‘long term borrowings’ is not true?
a) Sub-classification as secured and c) either of the above
unsecured d) both of the above

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1002. The form of requesting confirmation from the
trade creditor may be the ‘_______’ form of
request, wherein the trade creditor is requested
to respond whether or not he is in agreement
with the balance shown
a) positive
b) negative
c) either of the above
d) none of the above
1003. The form of requesting confirmation from the
trade creditor may be the ‘________’ form of
request wherein the trade creditor is requested to
respond only if he disagrees with the balance
shown.
a) positive
b) negative
c) either of the above
d) none of the above
1004. In case auditor employs direct confirmation
procedure for auditing trade payables and
where no reply is received, the auditor should
perform additional testing regarding the
balances. This testing could include:
a) Agreeing the detail of the respective
balance to the underlying vendor invoices
b) Preparing a detailed analysis of the
balance, ensuring it consists of identifiable
transactions and confirming that these
purchases/ expense transactions actually
occurred
c) Agreeing the balance to subsequent cash
paid
d) All of the above
1005. Which from the following condition is required
to be fulfilled for recognition of provision?
1. when an entity has a present obligation (legal
or constructive) as a result of a past event;
2. when it is probable that an Inflow of
resources embodying economic benefits will
be required to settle the obligation;
3. when a reliable estimate can be made of the
amount of the obligation
Choose the correct option:
a) 1 and 2
b) 2 and 3
c) all of the above
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d) none of the above
1006. As per _________- Provisions, Contingent
Liabilities and Contingent Assets, the term
‘contingent’ is used for liabilities and assets that
are not recognized because their existence will be
confirmed only by the occurrence or non-
occurrence of one or more uncertain future
events not wholly within the control of the entity.
a) Ind AS 8
b) Ind AS 18
c) Ind AS 37
d) Ind AS 38
1007. While auditing provisions and contingent
liabilities auditor obtain the underlying working
and the basis for each of the provisions made,
from the ___________ and verify whether the same
is complete and accurate.
a) management
b) directors
c) internal auditor
d) all of the above
1008. For calculation and underlying working for
employee defined benefit provision, the auditor
may request the management to share the
_____________.
a) provident fund report
b) actuarial valuation report
c) legal expert report
d) either of the above
1009. Which of the following disclosures, the auditor
should check as required under Ind AS compliant
Schedule III to Companies Act, 2013 whether
have been made for each class of provision or
not?
a) the carrying amount at the beginning and
end of the period
b) additional provisions made in the period,
including increases to existing provisions
c) amounts used & unused amounts reversed
during the period
d) all of the above
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1010. Which of the following is not an example of
revenue expenditure?
a) Repairs, maintenance and renewals of fixed
assets
b) Legal and professional expenses
c) Premium paid for the lease of a building
d) Advertisement and sales promotion
1011. Expenses which are essentially of a ______
nature, if incurred for creating an asset or adding
to its value for achieving _______ productivity, are
also regarded as expenditure of a _________nature.
a) capital, lower, revenue
b) revenue, higher, capital
c) capital, higher, revenue
d) revenue, lower, capital
1012. By whom physical verification of property,
plant and equipment can be performed?
a) own staff of client
b) third party of client
c) either of the above
d) auditor of client
1013. Which of the following audit procedure
need to be performed by auditor after
obtaining property, plant and equipment
(PPE) physical verification report backed by
the working sheets from the client?
a) Assess if all items of PPE are properly
tagged and carry identification marks.
b) Physical verification work papers do
capture the asset identification mark for
assets physically verified.
c) Reconciliation of items of PPE as
physically verified with the fixed asset
register maintained by the entity as at the
date of undertaking physical verification.
d) All of the above
1014. Any identified shortages or assets not in
working condition may lead to ____________ noted
based on physical verification of property, plant
and equipment
a) discrepancies
b) alikeness
c) synchronism
d) any of the above
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1015. The movement in the property, plant and
equipment schedule compiled by the
management can be expressed as-
a) Opening - Additions + Deletions= Closing
b) Opening + Additions - Deletions= Closing
c) Closing+ Deletions-Additions=Opening
d) None of the above
1016. While verifying property, plant and equipment,
auditor check the _________accuracy of the
movement in PPE schedule and tally the
____________ to the previous year audited financial
statements.
a) declining, closing balances
b) attrition, opening balances
c) arithmetical, opening balances
d) minimum, closing balances
1017. The cost of an item of property, plant and
equipment shall be recognized as an asset only if:
a) it is probable that future economic benefits
associated with the item will flow to the entity
b) the cost of the item can be measured reliably
c) both of the above
d) none of the above
1018. Auditor needs to verify whether the additions
to property, plant and equipment have been
approved by appropriate entity’s personnel and
is as per the __________ budget approved by the
___________ at the start of the financial year.
a) revenue expenditure; management
b) capital expenditure; board of directors
c) financial; board of directors
d) operational; management
1019. The value of fixed assets/PPE depreciates due
to:
a) efflux of time
b) use
c) obsolescence
d) all of the above
1020. Which of the following statement is not
true regard to auditor’s verification of
depreciation charged on fixed assets/PPE?
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a) The auditor should verify that the entity
has charged depreciation on all items of
PPE unless any item of PPE is non-
depreciating
b) The auditor should verify that the
depreciation method used reflects the
pattern in which the asset’s future
economic benefits are expected to be
consumed by the entity
c) A variety of depreciation methods can be
used to allocate the depreciable amount of
an asset on a systematic basis over its
useful life
d) None of the above
1021. A depreciation method which results in a
constant charge over the useful life, if the asset’s
residual value does not change is known as-
a) Straight line method
b) diminishing balance method
c) units of production method
d) none of the above
1022. A depreciation method which results in a
decreasing charge over the useful life of an asset
is known as-
a) Straight line method
b) diminishing balance method
c) units of production method
d) none of the above
1023. A depreciation method which results in a
charge based on the expected use or output is
known as-
a) Straight line method
b) diminishing balance method
c) units of production method
d) none of the above
1024. The auditor needs to verify whether the entity
has applied ________- Impairment of Assets for
determining the manner of reviewing the
carrying amount of its PPE, determining the
recoverable amount of the PPE to determine
impairment loss, if any.
a) Ind AS 8
b) Ind AS 18
c) Ind AS 36
d) Ind AS 38
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1025. All Property, Plant & Equipment purchase
invoices are in the name of the entity that entitles
legal title of ownership to the respective entity.
The assertion involved is:
a) Existence
b) Completeness
c) Valuation
d) Rights and Obligations
1026. Which of the following disclosures as
required under Ind AS compliant Schedule III
to Companies Act, 2013 is not required by an
entity for each class of property, plant and
equipment?
a) Opening accumulated depreciation
b) Charge for the year
c) Depreciation formula used
d) Closing accumulated depreciation
1027. Which of the following disclosures as required
under Ind AS compliant Schedule III to
Companies Act, 2013 are not required by an
entity for each class of property, plant and
equipment?
a) Opening accumulated impairment losses
b) Impairment losses and reversals
c) Closing accumulated impairment losses
d) None of the above
1028. Under presentation and disclosure of property,
plant and equipment, entity has to disclose assets
“under lease” separately under each class of
asset. The term “under lease” means:
a) assets given on operating lease and assets
taken on finance lease
b) assets given on finance lease and assets taken
on operating lease
c) assets taken on operating lease and finance
lease
d) assets given on operating lease and finance
lease
1029. An asset which is an identifiable non-monetary
asset, without physical substance, held for use in
the production or supply of goods or services, for
rental to others, or for administrative purposes is
known as-
a) Tangible asset
b) Intangible asset
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c) Non-current asset
d) Current asset
1030. Verifying an intangible asset is in active use in
the production or supply of goods or services, for
rental to others, or for administrative purposes to
address the following balance sheet assertion:
a) Rights and obligations
b) Valuation
c) Completeness
d) Existence
1031. In order to recognize an intangible asset, which
of the following condition needs to be fulfilled?
1. asset is identifiable
2. entity controls the asset
3. probable that future economic benefits
associated with the asset will flow to the
entity
4. cost of the item can be measured reliably
Options-
a) 1 & 2
b) 1 & 4
c) 2 &3
d) 1,2,3 &4
1032. While auditing intangible fixed assets, which of
the following statement is incorrect?
a) Check the arithmetical accuracy of the
movement in intangible asset schedule
b) In relation to Intangible asset addition, verify
if the additions have been approved by
appropriate entity’s personnel and is as per
the capital expenditure budget approved by
the board of directors at the start of the
financial year
c) In relation to deletions to intangible assets,
understand from the management the
reason and rationale for deletion and the
manner of disposal
d) None of the above
1033. __________ is an item of intangible nature which
either arises on acquisition or is internally
generated.
a) Telecom Rights
b) Goodwill
c) Mining Rights
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d) Import Quotas
1034. During the course of audit of intangible assets,
expenditure incurred during following phase is
generally not capitalized:
a) Development phase
b) Research phase
c) None of the above
d) Both a and b
1035. Identify the correct one:
a) Goodwill recognized in a business
combination is an asset representing the
future economic benefits arising from same
assets acquired in a business combination
that are individually identified and separately
recognized.
b) Goodwill recognized in a business
combination is an asset representing the
future economic benefits arising from same
assets acquired in a business combination
that are not individually identified but
separately recognized.
c) Goodwill recognized in a business
combination is an asset representing the
present economic benefits arising from other
assets acquired in a business combination
that are not individually identified or
separately recognized.
d) Goodwill recognized in a business
combination is an asset representing the
future economic benefits arising from other
assets acquired in a business combination
that are not individually identified and
separately recognized.
1036. In case any intangible asset is not in ____ use,
deletion should have been recorded in the books
of account post approvals by the entity’s
management and _________ charge should have
ceased to be charged beyond the date of
deletion.
a) temporary, amortization
b) idle, depreciation
c) active, amortization
d) idle, amortization
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1037. For presentation and disclosures, classification 1042. Under which circumstances inventory count
for items of intangible assets can be done under should be undertaken at end of period by an
following head- auditor?
a) Brands or trademarks a) client uses periodic system
b) Copyrights and patents b) control risk is high
c) Licenses and franchise c) either of the above
d) All of the above d) none of the above

1038. As per generally accepted accounting 1043. If client uses _________ with proper and
principles under AS 2- ‘Valuation of Inventories’ adequate records, inventory may be counted at
and IND AS 2- 'Inventories’, inventory is valued at interim dates by an auditor while auditing
- inventories.
a) lower of cost or net realizable value, a) perpetual system
whichever is lower b) periodic system
b) lower of cost or net realizable value, c) double entry system
whichever is higher d) none of the above

1039. While reviewing client’s plan for performing 1044. While auditing inventories, trace shipping
inventory count, auditor should ensure that documents to accounting records immediately
_________ goods have been segregated and not before and after year-end. The assertion involved
included in balance sheet. is:
a) obsolete a) Existence
b) consigned b) Cut off
c) damaged c) Valuation
d) inter department d) Rights and Obligations

1040. State whether true or false:
While observing inventory being counted,
auditor should not perform any test counts to
verify counts.
a) True. As auditor is not responsible for
performing test count it is the management's
duty to verify counts.
b) False. Auditor should personally perform test
counts to verify counts.
1041. Auditor at the time of observing counting
of inventory should personally perform test
counts to verify counts. However, test counts
by auditor would not include:
a) Ensuring exclusion of third-party stocks
b) assuring that all items are properly
tagged, and proper amounts are shown on
tags
c) Staying alert at all times and specifically
being cautious about empty boxes, etc.
and obsolete items
d) none of the above
1045. Auditor examine ___________ information
related to inventory, such as weights and
measures.
a) analytical
b) arithmetical
c) non-financial
d) financial
1046. Which of the following is not an example of
analytical procedures involved during the audit of
inventories?
a) Compute inventory turnover ratio
b) Compare budgetary expectations vis-à-vis
actual
c) Verify the clerical and arithmetical accuracy of
inventory listings
d) Perform vertical analysis
1047. Which of the following indicate that the entity
has valid legal ownership rights over the
inventories?
a) Examine invoices for evidence of ownership

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b) Review consignment agreements
c) Vouch recorded purchases to underlying
documentation
d) All of the above
1048. In case of inventory held by third party, the
auditor should insist on obtaining declaration
from the third party on its business letterhead
and signed by authorized personnel of that
third party confirming that -
a) the items of inventory belong to the third
party and are being held by such entity on
behalf of and for the benefit of the third
party under audit
b) the items of inventory are in safe custody
of third party and only rights has
transferred to the entity under audit
c) the items of inventory belong to the entity
and are being held by such third party on
behalf of and for the benefit of the entity
under audit
d) the items of inventory are in safe custody
of third party but still rights and
ownership has transferred to the entity
under audit
1049. First-in first-out, called FIFO, values inventory
at close to its _________cost and Last-in first-out,
called LIFO, values inventory at close to its
__________ cost.
a) original purchase, current replacement
b) current replacement, original purchase
c) opening purchase, closing purchase
d) any of the above
1050. As per IND AS, depending on how the business
operates of an entity, the management may value
inventory using:
a) first-in first-out method
b) last-in first-out method
c) weighted average method
d) all of the above
1051. Auditor must ensure that inventories are
valued at _______ if they are likely to fetch a value
lower than their cost.
a) market value
b) book value
c) net realizable value
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d) none of the above
1052. Identify the incorrect statement regarding
valuation of inventory-
a) Follow up valuation of all damaged or
obsolete inventories noted during
observance of physical counting with a view
to establishing a realistic net realizable value.
b) Ascertain how the various stages of
production/value add are measured and in
case estimates are made, understand the
basis for such estimates.
c) Test check cost prices used with purchase
invoices received in the month(s) prior to
counting.
d) Ensure that material costs include any
abnormal wastage factors.
1053. Under presentation and disclosure of
inventory which of the following disclosures
as required under Ind AS compliant Schedule
III to Companies Act, 2013 -
a) Whether mode of valuation has been
stated separately for each class of
inventory
b) Whether inventory has been properly
classified
c) Whether goods-in-transit have been
disclosed separately under each sub-head
of inventory
d) All of the above
1054. State whether true or false:
Debts once recorded in the balance sheet cannot
be eliminated.
a) False. Once recorded, the debts can only be
eliminated by receipt of cash or on the
authority of a responsible official
b) True. Debts once recorded cannot be
eliminated except writing of bad debts
1055. In case of realization from trade debtors is not
recorded invoice, wise auditor needs to check
that money received from debtors is adjusted
chronologically invoice wise and on ________.
a) LIFO basis i.e. latest bill is adjusted first
b) FIFO basis i.e. previous bill is adjusted first
c) Both of the above
d) None of the above
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1056. The auditor employs direct confirmation
procedure with the consent of the entity during
audit of trade receivable address the following
assertion-
a) Existence
b) Completeness
c) Valuation
d) Rights and Obligations
1057. When the positive form of requesting
confirmation from the trade receivables is
preferable?
a) individual account balances are relatively
large
b) internal controls are weak
c) auditor has reasons to believe that there may
be a substantial number of accounts in
dispute
d) all of the above
1058. While auditing any related party receivables
auditor needs to verify:
a) authorization of transaction
b) value of transaction must be reasonable
c) value of transaction at arm’s length
d) all of the above
1059. A situation where the Company is billing
customers for sales despite still retaining the
goods on-site known as_________
a) goods hold for approval
b) bill and hold
c) both of the above
d) none of the above
1060. During the course of audit of trade receivable,
auditor review the _________to see if the Company
has recorded an inordinately large amount of
customer returns after the audit period, which
would suggest that the Company may have
shipped more goods near the end of the audit
period, than the customers had authorized.
a) test invoices
b) ageing report
c) receiving log
d) dispatch log
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CA INTER AUDIT MCQs
1061. State whether true or false:
Under system of giving discounts auditor should
check the cash discount is given on the basis of
date of realization of cheque or on the basis of
date of receipt of cheque.
a) True
b) False
1062. During the audit of trade receivable auditor
review the process followed by the Company to
derive an allowance for doubtful accounts
address the following assertion -
a) Existence
b) Completeness
c) Valuation
d) Rights and Obligations
1063. Identify the correct one:
a) Auditor verify that the split between more
than 6 months and less than 6 months has
been done from the due date instead of sales
invoice date.
b) Auditor verify that the split between more
than 8 months and less than 8 months has
been done from the sales invoice date and
not due date.
c) Auditor verify that the split between more
than 12 months and less than 12 months has
been done from the due date instead of sales
invoice date.
d) both a and c
1064. At the time of disclosure requirement for trade
receivable auditor check classification of amount
due is properly disclosed as:
a) Secured, considered good
b) Unsecured, considered good
c) Doubtful
d) All of the above
1065. Which of the following does not fall under
category of cash and cash equivalent?
a) cash in hand
b) stamps in hand
c) fixed deposits
d) IOU
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CA RAVI TAORI CA INTER AUDIT MCQs

1066. The cash should be checked not only on the 1070. During audit of cash and cash equivalents, the
last day of the year, but also checked again auditor should emphasize for confirmation of
sometime after the close of the year without 100% of bank account balances and in case no
giving notice of the auditor’s visit either to the reply is received, the auditor should perform
client or to his staff known as ________ testing regarding the balances.
a) Precautions while Cash Counting
a) Supplementary
b) Surprise check
b) additional
c) Subsequent checking
c) supplementary
d) All of the above
d) both of the above
e) none of the above
1067. While auditing cash and cash equivalents, the
auditor should also perform a _________ analysis
1071. The auditor should ensure that all bank
by compiling a summary of total cash receipts
account holding foreign currency have been
and payments each month and analyses the
restated at the closing exchange rates. The
______ to see if there have been variations in any
assertion involved is:
specific month and request explanations from the
a) Existence
management.
b) Completeness
a) cash sensitivity, trends
c) Valuation
b) vertical, difference
d) Rights and Obligations
c) profit and loss, graphics
d) horizontal, ratio
1072. Under disclosure requirements, Cash and cash
equivalents shall be classified as:
1068. Which of the following is not true in respect
a) Balances with banks
of verification of Bank Reconciliation
Statement? b) Cheque, drafts on hand
a) Tallying the balance as per books to the c) Cash on hand
Company’s books of account and trial d) All of the above
balance
b) Tallying the balance as per bank to the 1073. A prepaid taxes and insurance paid can be
bank confirmation/statement classify as:
c) The auditor should request for bank a) loans
statement of previous period and should b) liability
verify if the cheque issued have c) advances
subsequently been cleared by inter bank d) All of the above
d) Checking of all material reconciling items
included under cheque issued but not 1074. ______ could be understood in normal parlance
presented ‘for payment’ to the underlying
to mean money advanced to related or other
bank book forming part of books of
parties, with or without interest clause, ______
account
include amounts recoverable either in cash or in
kind or for value to be received.
1069. In case of verification of Bank Reconciliation
a) Loans, advances
Statement, where cheque issued have become
b) Current asset, loans
stale i.e. 3 months or more has lapsed since the
c) Borrowing, advances
issue date, the same should not appear in the
d) Other current asset, cash and cash equivalent
Bank Reconciliation Statement and should have
instead been clubbed under________.
1075. In the case of company, a loan or an advance,
a) reserve and surplus
if material, can be granted only if authorized by
b) liabilities
the-
c) assets
a) Memorandum of Association
d) cash and cash equivalents
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CA RAVI TAORI CA INTER AUDIT MCQs

b) Articles of Association 1080. While auditing sale of products and services an

c) Both a and b
d) only b
1076. Auditor inspect the ___________ of board of
directors to confirm if all material loans and
advances were approved by the board of
directors.
a) loan agreements
b) minutes of meeting
c) acknowledgements of parties
d) agenda
1077. While auditing Loans and advances, auditor
check compliance of Section 2(22) (e) of Income
Tax Act, 1961 and ensure that payment by way of
advance or loan to a shareholder holding not less
than___ of voting power or any concern in which
such shareholder is a member or a partner and in
which he has substantial interest, shall be treated
as dividend.
a) 10%
b) 15%
c) 20%
d) 25%"
1078. Obtaining the ageing report of loans and
advances, split between not currently due, 30
days old, 30-60 days old, 60- 180 days
old,180-365 days old and more than 365 days
old during audit of loans and advances and
other current assets addresses the following
assertion:
a) Existence
b) Completeness
c) Valuation
d) Rights and Obligations
auditor needs to identify the control points over
sales which include -
a) segregation of duties
b) authorization of sales orders
c) both a and b
d) major selling product/service
1081. If there are any export sales, auditor consider
calculating/reviewing “Exchange gain/ loss”
arising from the sales. The assertion involved is:
a) Occurrence
b) Measurement/Accuracy
c) Valuation
d) Completeness
1082. In order to perform a robust sale ______ test,
auditors need to understand and consider the
specific _______error risk of each engagement.
a) Cut-off, Cut-off
b) Surprise Check, Cut-off
c) Surprise Check, Surprise Check
d) Cut-off, Examination in Depth.
1083. Under sale of product and service which of the
following disclosures as required under Ind AS
compliant Schedule III to Companies Act, 2013
a) Whether disclosure of sales in respect of each
class of goods has been made.
b) Whether brokerage and discount on sales,
other than the usual trade discount has been
disclosed.
c) Whether the transactions with related parties
are appropriately disclosed in notes to
accounts.
d) All of the Above.

1084. Dividends are recognized in the statement of

1079. The _______ cycle in a business refers to the set
profit and loss only when:
of processes that begin when a customer
purchases goods or services and ends when the a) The entity’s right to receive payment of the
entity receives complete payment for the dividend is established.
purchase. b) It is probable that the economic benefits
a) purchases and payments associated with the dividend will flow to the
b) sales and collections entity.
c) operating c) The amount of the dividend can be measured
d) non-operating reliably.
d) All of the Above.

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1085. Under disclosure requirements, Other Income a) understanding of entity’s process of

shall be classified as: charging depreciation and amortization
a) Interest income b) depreciation and amortization as per the
b) Dividend income relevant provisions of Companies Act,
c) Other non-operating income applicable accounting standards
c) list of all the components identified by the
d) All of the above
management depreciated separately has
been properly identified
1086. Interest income on fixed deposits is recognized
d) All of the above
on a time proportion basis taking into account
the amount outstanding and the applicable
1091. Identify the correct statement:
interest rate. State whether the Statement is true
a) There is always a risk that an entity could
/ false.
capitalize expense of revenue nature to
a) True.
decrease its Profit or charge capital
b) False.
expenditure directly in income and expense
statement to increase its Profit
1087. Interest income from debt instruments is
b) There is always a risk that an entity could
recognized using the ___________ method.
capitalize expense of revenue nature to
a) Ex-Interest rate.
increase its Profit or charge capital
b) Accrued on Period Basis.
expenditure directly in income and expense
c) Effective interest rate.
statement to reduce its Profit
d) Cum-Interest rate.

1092. While checking for depreciation auditor shall

1088. Gain/ (loss) on sale of investment in mutual
ensure that _________________
funds is recorded as other income on transfer of
a) Depreciation has been calculated after
title from the entity and is determined as the
making adjustment of residual value from the
difference between the _______________ and
cost of the assets.
____________ of the investments.
b) Depreciation has been calculated before
a) Discount Price, Fair Value.
making adjustment of residual value from the
b) Premium Price, Market Price.
cost of the assets.
c) Issue Price, Face Value.
d) Redemption price, carrying value.
1093. While checking for depreciation auditor shall
ensure that:
1089. Auditor should check whether disclosures as
a) depreciation on revalued amount has been
required under Ind AS compliant Schedule III to
properly accounted from revaluation reserve
Companies Act, 2013, Following is one of the
b) depreciation on revalued amount has not
requirements of the above:
been properly accounted from revaluation
Whether employee benefit expense has been
reserve
classified as:
a) Salaries and wages.
1094. Auditor should check whether disclosures as
b) Contributions to provident and other funds.
required for depreciation under Ind AS compliant
c) Staff welfare expenses.
Schedule III to Companies Act, 2013 are provided,
d) All of the above
Following is not one of the requirements of the
above:
1090. Which of the following are audit
a) Disclosure of accounting policy for
procedures generally required to be
undertaken while auditing depreciation and depreciation and amortization
amortization expense? b) Disclosure of Depreciation method
c) Useful lives of assets as per schedule II
d) None of the above
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1095. With respect to expenses like rent, power and 1099. Identify which of the following is not the audit
fuel, an auditor generally prefers to vouch for procedures generally required to be undertaken
other expenses to verify which of the following while auditing travel, repair and maintenance,
attributes? printing and stationery, miscellaneous expenses?
a) Whether the expenditure pertained to a) select a sample and vouch for the attributes
current period under audit b) prepare a summary of expenditure on
b) Whether the expenditure qualified as a monthly basis
revenue and not capital expenditure c) Analytically compare the trends.
c) Whether the expenditure was in relation to d) none of the above
the entity’s business and not a personal
expenditure 1100. An auditor needs to identify the control points
d) All of the above" over purchases.
a) whether segregation of duties exist,
1096. Identify which of the following is not the audit b) whether competitive quotes are
procedures generally required to be undertaken invited,
while auditing other expenses like rent? c) who issues and authorizes purchase
a) Obtain Rent Agreement orders,
b) verify if the agreement is in the name of the d) all of the above
entity and whether the expense pertains to
premises used for running business 1101. In case of purchases, Substantive analytical
operations of the entity procedure will consist of-
c) Consideration should be given to escalation a) trend analysis,
clause in the agreement b) comparison with previous accounting
d) None of the above period,
c) category wise purchases,
1097. Identify which of the following is not the audit d) all of the above
procedures generally required to be undertaken
while auditing other expenses like power and 1102. Purchases are recognized in the correct
fuel? accounting period.
a) Obtain power bills and check accuracy of a) Surprise check,
expense. b) Examination-in-depth,
b) Obtain a month wise expense schedule. c) Perform cut-off arrangement,
c) Verify if expense has been recorded for all 12 d) Internal Checks,
months.
d) none of the above 1103. Perform analytical procedures to obtain audit
evidence as to overall reasonableness of
1098. Identify which of the following is the audit purchase quantity and price which may include:
procedures generally required to be undertaken a) Consumption Analysis
while auditing other expenses like Legal and b) Stock Composition Analysis,
professional expenses? c) Ratios,
a) verify if the expenditure for all 12 months has d) all of the above,
been recorded correctly
b) Obtain a month wise and consultant wise
summary
c) Both of the above
d) none of the above

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ANSWER KEYS
CA RAVI TAORI CA INTER AUDIT MCQs

SA 200 SERIES 45 d 90 d 135 c 202 d

46 d 91 a 136 b 203 a
1 b
47 a 92 a 137 a 204 a
2 b
48 b 93 b 138 a 205 d
3 b
49 d 94 b 139 b 206 a
4 a
50 b 95 a 140 a 207 a
5 c
51 b 96 a 141 c 208 a
6 c
52 b 97 a 166 C 209 b
7 b
53 b 98 a 167 b 210 c
8 a
54 d 99 a 168 c 211 b
9 a
55 b 100 b 169 c 212 a
10 a
56 c 101 d 170 a 213 b
11 a
57 a 102 a 171 b 214 a
12 d
58 a 103 b 172 d 215 d
13 c
59 c 104 a 173 b 216 c
14 a
60 c 105 a 174 c 217 b
15 b
61 d 106 b 175 a 218 a
16 a
62 d 107 a 176 d 219 b
17 d
63 d 108 a 177 d 220 b
18 c
64 b 109 b 178 b 221 a
19 a
65 d 110 c 179 d 222 b
20 b
66 b 111 a 180 a 223 d
21 a
67 b 112 c 181 b 224 c
22 b
68 b 113 b 182 d 225 b
23 d
69 a 114 d 183 c 226 a
24 c
70 b 115 a 227 a
25 c
116 a SA 300 SERIES 228 a
26 b 71 b
72 a 117 b 229 a
27 b 184 a
73 a 118 b 230 a
28 b 185 b
74 d 119 b 231 a
29 d a
120 a 186 232 b
30 c 75 a
121 a 187 b 233 d
31 b 76 d
122 c 188 a 234 a
32 b 77 a
123 d 189 a 235 c
33 d 78 a
124 a 190 d 236 b
34 a 79 a
125 c 191 c 237 d
35 c 80 a
126 a 192 a 238 d
36 b 81 c
127 d 193 d 239 b
37 a 82 c
128 b 194 a 240 a
38 b 83 d
129 b 195 d 241 c
39 c 84 a
130 a 196 c 242 a
40 b 85 b
131 b 197 b 243 c
41 d 86 a
132 d 198 a 244 b
42 c 87 b
133 c 199 a 245 a
43 b 88 b
134 b 200 a 246 a
44 b 89 a
201 b

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CA RAVI TAORI CA INTER AUDIT MCQs

247 b 315 b 360 a 412 d 448 d

248 a 316 b 361 d 413 c 449 a
249 a 317 a 362 d 414 a 450 d
250 b 318 b 363 d 415 a
251 d 319 c 364 d 416 d SA 700 SERIES
252 c 320 a 365 a 417 d
253 a 321 b 366 b 418 d 466 b
254 d 322 c 367 c 419 d 467 b
255 b 323 a 368 a 420 b 468 a
256 b 324 b 369 b 421 a 469 a
257 c 325 b 370 c 422 b 470 b
258 c 326 a 371 d 423 a 471 a
259 c 327 b 372 b 424 b 472 c
260 a 328 d 373 b 425 a 473 a
261 d 329 c 374 a 426 a 474 b
262 b 330 d 375 b 427 b 475 b
263 b 331 c 376 d 428 b 476 a
264 a 332 a 377 d 429 c 477 b
265 a 333 b 378 c 430 c 478 a
266 b 334 b 379 c 431 b 479 a
267 a 335 d 380 a 431.1 d 480 b
268 c 336 a 381 a 431.2 c 481 a
269 b 337 a 382 b 431.3 d 482 b
270 a 338 b 383 a 431.4 d 483 a
271 a 339 b 384 a 431.5 a 484 c
272 a 340 a 385 b 431.6 a 485 b
273 a 341 b 386 c 431.7 b 486 b
274 b 342 c 387 a 431.8 a 487 a
275 a 343 b 388 c 431.9 a
SA 701
276 a 344 a 389 a 431.10 b
277 b 345 a 390 b 431.11 d 487.1 d
278 a 346 b 391 a 431.12 c 487.2 a
279 d 347 a 392 c 431.13 b 487.3 b
280 d 348 b 393 b 431.14 c 487.4 c
281 a 349 c 394 a 431.15 d 487.5 d
282 b 350 d 395 c 487.6 d
283 d 351 a 396 c SA 600 SERIES 487.7 b
487.8 a
284 d 352 a 397 d
440 a 487.9 D
353 b 405 d
441 b 488 d
SA 500 SERIES 354 b 406 a
442 a 489 a
355 b 407 b 490 b
310 c 443 b
356 d 408 b 491 c
311 c 444 b
357 c 409 b 492 c
312 c 445 d
358 b 410 d 493 b
313 d 446 c
359 b 411 c 494 b
314 a 447 d
495 a
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CA RAVI TAORI CA INTER AUDIT MCQs

496 d 552 b 597 a 638 d 681 d

497 d 553 c 598 c 639 a 682 c
498 a 554 a 640 b 683 d
499 b COMPANY
555 b 641 a 684 b
500 c ACCOUNTS
556 b 642 b 685 c
501 d AND MISC.
557 d 643 a 686 a
502 a
503 a 558 b 599 a 687 b
559 b 600 b CARO 688 b
504 d
505 a 560 b 601 c 689 a
644 b
506 b 561 b 602 a 690 b
645 d
507 b 562 a 603 b 691 c
646 d
508 a 563 b 692 c
604 d 647 a
509 d 564 a 693 c
605 b 648 a
510 d
565 a 606 a 694 b
511 d 649 c
566 b 607 a
512 a 650 a
567 a INTERNAL
513 b 608 b 651 a CONTROL
514 a 568 a 609 c 652 a SYSYTEM
515 a 569 b 610 d 653 b
516 b 570 b 611 c 695 d
654 a
517 b 571 b 612 d 696 a
655 d
518 a 572 c 613 d 697 b
656 a
519 b 573 c 698 c
614 d 657 b
520 a 574 b 615 d 658 c 699 d
521 b
575 b 616 d 700 b
522 b 659 c
576 b 617 c 701 b
523 a 660 c
577 a 618 d 702 a
524 b 661 a
525 a 578 b 619 b 703 a
662 b
526 a 579 b 620 b 704 b
663 d
527 a 580 b 621 c 705 a
664 d
528 b 581 a 622 c 706 a
665 a
529 a 582 b 623 c 707 b
666 b
530 b 583 a 708 d
624 c 667 b
584 d 625 d 709 a
COMPANY 668 b
585 b 626 b 710 d
AUDIT - I 669 c
586 d 627 d 711 b
670 d
542 c 587 a 628 d 712 a
671 b
543 a 588 d 629 a 713 c
672 a
544 a 589 d 630 d 714 a
673 c
545 b 590 b 631 a 715 d
674 d
546 a 591 a 632 a 716 a
675 b
547 b 592 a 633 a 717 b
676 b
548 a 593 c 634 b 718 c
677 c
549 b 594 d 635 a 719 d
678 d
550 c 595 b 636 b 679 a
551 b 596 b 637 d 680 c

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CA RAVI TAORI CA INTER AUDIT MCQs

AUTOMATED 760 c 802 b 844 b 885 a

AUDIT
761 c 803 b 845 a 886 c
ENVIRONMENT
762 b 804 a 846 d 887 d
720 b 763 d 805 c 847 b 888 b
721 a 764 d 806 b 848 d 889 a
722 a 765 d 807 b 849 d 890 d
723 a 766 d 808 c 850 b 891 b
724 c 767 d 809 d 892 d
725 d 768 c 810 d AUDIT OF 893 d
769 a 811 c DIFFERENT 894 d
726 c
ENTITIES
727 d 770 d 812 d 895 d
728 c 771 c 813 a 851 c 896 c
729 d 772 b 814 c 852 d 897 c
730 c 773 c 815 d 853 a 898 d
731 c 816 a 854 c 899 c
732 d GOVERNMENT 817 b 900 b
855 c
AUDIT 818 c 901 d
733 a 856 c
734 c 774 d 819 b 857 b 902 c
735 c 775 d 820 a 858 c 903 d
736 b 776 b 821 d 859 d 904 b
737 b 777 c 822 a 860 b 905 d
738 c 778 a 823 d 861 a 906 b
739 c 779 a 862 b 907 b
740 d CO-OPERATIVE 908 b
780 a 863 c
SOCIETY 909 b
741 b 781 c 864 b
742 c 782 a 824 b 865 d 910 a
743 b 783 a 825 a 866 a 911 a
744 a 784 b 826 a 867 b 912 b
745 c 785 a 827 b 868 c 913 a
786 c 828 b 869 c 914 a
BANK AUDIT 870 d 915 b
787 c 829 d
788 d 830 d 871 d 916 a
746 d
789 a 831 a 872 b 917 a
747 d
790 c 832 b 873 b 918 b
748 d
749 b 791 b 833 d 874 c
CONCEPTS IN
750 c 792 a 834 c 875 a
AUDITING
751 d 793 d 835 c 876 d
752 a 794 c 836 d 877 d 919 a
753 c 795 d 837 a 878 a 920 c
754 c 796 c 838 c 879 d 921 a
755 d 797 a 839 a 880 c 922 a
756 c 798 c 840 a 881 b 923 a
757 a 799 d 841 c 882 c 924 b
758 d 800 a 842 d 883 b 925 d
759 a 801 b 843 c 884 a 926 a

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CA RAVI TAORI CA INTER AUDIT MCQs

927 d AUDIT OF 1009 d 1054 a 1099 d

928 b ITEMS OF 1010 c 1055 b 1100 d
FINANCIAL
929 a 1011 b 1056 a 1101 d
STATEMENT
930 b 1012 c 1057 d 1102 c
931 a 968 c 1013 d 1058 d 1103 d
932 a 969 a 1014 a 1059 b
933 b 970 c 1015 b 1060 c
934 c 971 a 1016 c 1061 a
935 d 972 d 1017 c 1062 c
936 c 973 c 1018 b 1063 a
937 c 974 a 1019 d 1064 d
938 b 975 b 1020 d 1065 d
939 a 976 d 1021 a 1066 b
940 d 977 d 1022 b 1067 a
941 c 978 a 1023 c 1068 c
942 c 979 a 1024 c 1069 b
943 d 980 d 1025 d 1070 a
944 b 981 a 1026 c 1071 c
945 b 982 a 1027 d 1072 d
946 c 983 c 1028 a 1073 c
947 d 984 b 1029 b 1074 a
948 d 985 b 1030 d 1075 c
949 d 986 d 1031 d 1076 b
950 d 987 a 1032 d 1077 a
951 c 988 d 1033 b 1078 c
952 a 989 a 1034 b 1079 b
953 b 990 b 1035 d 1080 c
954 a 991 a 1036 c 1081 b
955 b 992 d 1037 d 1082 a
956 a 993 a 1038 a 1083 d
957 d 994 b 1039 b 1084 d
958 d 995 c 1040 b 1085 d
959 c 996 d 1041 d 1086 a
960 c 997 c 1042 c 1087 c
961 a 998 a 1043 a 1088 d
962 d 999 c 1044 b 1089 d
963 d 1000 d 1045 c 1090 d
964 a 1001 c 1046 c 1091 b
965 b 1002 a 1047 d 1092 a
966 b 1003 b 1048 c 1093 a
967 d 1004 d 1049 b 1094 d
1005 c 1050 d 1095 d
1006 c 1051 c 1096 d
1007 a 1052 d 1097 d
1008 b 1053 d 1098 c

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MCQS ISSUED BY ICAI
RTP, MTP, SAMPLE
 ICAI MCQs INDEX
SR.NO TOPICS PAGE NO
1 SA 200 series* 125-134
2 SA 300 series* 134-141
3 SA 500 series* 141-149
4 SA 700 series* 150-154
5 Company Audit I 154-159
6 Company Accounts and Misc. 160
7 CARO 161
8 Internal Control System 162
9 Automated Audit Environment 162-163
(Only for New Course)
10 Bank Audit (Only for New Course) 163-164
11 Government Audit 164-165
12 Audit of Different types of Entities 165
13 Concepts in Auditing 165-167
14 Audit of Items of Financial Statement (Only for 167-170
New Course)
15 ICAI Answer Key 171

*Note:

The following SAs are applicable for old course only from November 2019 exams-
 SA 260, SA 265, SA 330, SA 402, SA 450, SA 540, SA 600, SA 620 & SA 720.
 These are not included in this book. However if someone wants, can contact to support
team for PDF
CA RAVI TAORI CA INTER AUDIT MCQs
1. SA 200 SERIES

SA 200

200.1 M19M
The matter of difficulty, time, or cost involved is:
a) not in itself a valid basis for the auditor to omit an audit procedure for which there is no
alternative.
b) in itself a valid basis for the auditor to omit an audit procedure for which there is no
alternative.
c) not in itself a valid basis for the auditor to omit an audit procedure for which alternative
exists.
d) not in itself a valid basis for the auditor to omit an audit procedure.

200.2 S-2
As explained in SA 200, “Overall Objectives of the Independent Auditor and the Conduct
of an Audit in Accordance with Standards on Auditing”, _________is obtained when the
auditor has obtained sufficient appropriate audit evidence to reduce audit risk (i.e., the
risk that the auditor expresses an inappropriate opinion when the financial statements
are materially misstated) to an acceptably low level.
a) absolute assurance
b) limited assurance
c) reasonable assurance
d) reasonable or absolute assurance

200.3 S-1
______ refers to an attitude that includes a questioning mind, being alert to conditions
which may indicate possible misstatement due to error or fraud, and a critical
assessment of audit evidence.
a) Professional skepticism
b) Professional Judgement
c) Integrity
d) Objectivity

200.4 SM
As per SA-200 “Overall Objectives of the Independent Auditor”, in conducting an audit
of financial statements, the overall objectives of the auditor are:
a) To obtain reasonable assurance
b) To report on the financial statements
c) Both (a)and (b) above
d) none of the above

SA 210

210.1 S-1 / N19M

According to SA 210 “Agreeing the Terms of Audit Engagements”, The auditor shall
agree the terms of the audit engagement with:
a) management
b) those charged with governance
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CA RAVI TAORI CA INTER AUDIT MCQs
c) management or those charged with governance, as appropriate.
d) Audit committee

210.2 S-1
According to SA 210 “Agreeing the Terms of Audit Engagements”, The auditor shall
agree the terms of the audit engagement:
a) with management and those charged with governance, as appropriate.
b) with management
c) with those charged with governance
d) with management or those charged with governance, as appropriate.

210.3 S-1
The agreed terms of the audit engagement shall be recorded in
a) an audit engagement letter
b) an audit engagement letter or other suitable form of written agreement
c) any suitable form of written agreement
d) None of the above

210.4 S-1 / N19M

If law or regulation prescribes in sufficient detail the terms of the audit engagement,
a) the auditor need not record them in a written agreement, except for the fact that such
law or regulation applies and that management acknowledges and understands its
responsibilities.
b) the auditor need not record them in a written agreement
c) the auditor needs to record them in a written agreement
d) None of the above

210.5 S-1
A request from the client for the auditor to change the engagement may result from-
a) a change in circumstances affecting the need for the service,
b) a misunderstanding as to the nature of an audit or related service originally requested
c) a restriction on the scope of the engagement, whether imposed by management or
caused by circumstances.
d) All of the above

210.6 S-2
A request from the client for the auditor to change the engagement may result from-
1. a change in circumstances affecting the need for the service,
2. a misunderstanding as to the nature of an audit or related service originally
requested
3. 3. a restriction on the scope of the engagement, whether imposed by management
or caused by circumstance
a) (1) only
b) (1) and (2)
c) (1), (2) and (3)
d) (1) or (2) or (3)

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210.7 S-2 / M19M
If the auditor concludes that there is reasonable justification to change the engagement
and if the audit work performed complied with the SAs applicable to the changed
engagement, the report issued would be appropriate for the revised terms of
engagement. In order to avoid confusion, the report would not include reference to:
a) The original engagement; or any procedures that may have been performed in the
original engagement.
b) the original engagement;
c) any procedures that may have been performed in the original engagement
d) The original engagement and any procedures that may have been performed in the
original engagement.

210.8 S-2
If the auditor is unable to agree to a change of the terms of the audit engagement and
is not permitted by management to continue the original audit engagement, the auditor
shall:
a) Withdraw from the audit engagement where possible under applicable law or
regulation;
b) Determine whether there is any obligation, either contractual or otherwise, to report the
circumstances to other parties, such as those charged with governance, owners or
regulators.
c) Withdraw from the audit engagement where possible under applicable law or regulation
and determine whether there is any obligation, either contractual or otherwise, to report
the circumstances to other parties, such as those charged with governance, owners or
regulators.
d) Withdraw from the audit engagement where possible under applicable law or regulation
or determine whether there is any obligation, either contractual or otherwise, to report
the circumstances to other parties, such as those charged with governance, owners or
regulators.

210.9 (M20M)
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the
opening balances, the auditor shall express :
a) a disclaimer opinion
b) a qualified opinion
c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705.
d) unmodified opinion

SA 220

220.1 S-1
SA 220 recognises that the _____ is entitled to rely on a firm’s systems in meeting its
responsibilities with respect to quality control procedures.
a) engagement partner
b) engagement team
c) firm
d) Senior Audit Assistant

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220.2 S-1
SA 220 sets out the responsibilities with respect to relevant ethical requirements
a) firm’s
b) Senior Audit Assistant
c) engagement partner’s
d) All the above

220.3 S-1
The firm’s system of quality control should include policies and procedures addressing
which of the following element:
a) Leadership responsibilities for quality within the firm.
b) Ethical requirements.
c) Acceptance and continuance of client relationships and specific engagements.
d) All of the above

220.4 S-1
The purpose of monitoring compliance with quality control policies and procedures is
to provide an evaluation of:
a) Adherence to professional standards and regulatory and legal requirements;
b) Whether the quality control system has been appropriately designed and effectively
implemented; and
c) Whether the firm’s quality control policies and procedures have been appropriately
applied, so that reports that are issued by the firm or engagement partners are
appropriate in the circumstances.
d) All of the above

220.5 S-1
SQC 1 requires firms to establish policies and procedures for the retention of
engagement documentation. The retention period for audit engagements ordinarily is:
a) no shorter than eight years from the date of the auditor’s report, or, if later, the date of
the group auditor’s report.
b) no shorter than six years from the date of the auditor’s report, or, if later, the date of the
group auditor’s report.
c) no shorter than seven years from the date of the auditor’s report, or, if later, the date of
the group auditor’s report.
d) no shorter than ten years from the date of the auditor’s report, or, if later, the date of
the group auditor’s report.

220.6 S-1
SQC 1 requires firms to establish policies and procedures for the retention of
a) Audit File
b) Engagement documentation.
c) Final Audit file
d) Audit Documentation

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220.7 S-2
Standard on Quality Control (SQC) 1 provides that,
a) unless otherwise specified by law or regulation, audit documentation is the property of
the management.
b) unless otherwise specified by law or regulation, audit documentation is the property of
those charged with governance.
c) unless otherwise specified by law or regulation, audit documentation is the property of
the management or those charged with governance.
d) unless otherwise specified by law or regulation, audit documentation is the property of
the auditor.
220.8 S-1
Standard on Quality Control (SQC) 1 sets out the responsibilities of the for establishing
policies and procedures regarding compliance with relevant ethical requirements:
a) Firm
b) engagement partner
c) Senior Audit Assistant
d) All the above

220.9 SM
As per SQC-1 “An appropriate time limit within which to complete the assembly of the
final audit file is ordinarily not more than ______days after the date of the auditor’s
report”.
a) 30
b) 60
c) 90
d) 45

220.10 S-1
SQC 1 “Quality Control for Firms that perform Audits and Review of Historical Financial
Information, and other Assurance and related services”, requires firms to establish
policies and procedures for the timely completion of the assembly of audit files. An
appropriate time limit within which to complete the assembly of the final audit file is
a) ordinarily not more than 60 days after the date of the auditor’s report.
b) ordinarily not more than 30 days after the date of the auditor’s report.
c) ordinarily not more than 90 days after the date of the auditor’s report.
d) ordinarily not more than 120 days after the date of the auditor’s report.

220.11 N19M
Standard on Quality Control (SQC) 1 provides that,
a) unless otherwise specified by law or regulation, audit documentation is the property of
the management.
b) unless otherwise specified by law or regulation, audit documentation is the property of
those charged with governance.
c) unless otherwise specified by law or regulation, audit documentation is the property of
the management or those charged with governance.
d) unless otherwise specified by law or regulation, audit documentation is the property of
the auditor.

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SA 230

230.1 S-1 / N19M

_________refers to the record of audit procedures performed, relevant audit evidence
obtained, and conclusions the auditor reached.
a) Audit documentation
b) Audit File
c) Audit Note Book
d) Completion Memorandum

230.2 SM
_______ refers to the record of audit procedures performed, relevant audit evidence
obtained, and conclusions the auditor reached.
a) Audit Techniques
b) Audit evidence
c) Audit Documentation
d) None of the above

230.3 S-1
After the assembly of the final audit file has been complete
a) the auditor shall delete or discard the audit documentation of any nature before the end
of its retention period.
b) the auditor may delete or discard audit documentation of any nature before the end of
its retention period.
c) the auditor may not delete or discard audit documentation of any nature before the end
of its retention period.
d) the auditor shall not delete or discard audit documentation of any nature before the
end of its retention period.

230.4 S 2 / M19M
Audit documentation provides:
a) evidence of the auditor’s basis for a conclusion about the achievement of the overall
objectives of the auditor; or evidence that the audit was planned and performed in
accordance with SAs and applicable legal and regulatory requirements.
b) evidence of the auditor’s basis for a conclusion about the achievement of the overall
objectives of the auditor; and evidence that the audit was planned and performed in
accordance with SAs and applicable legal and regulatory requirements
c) evidence of the auditor’s basis for a conclusion about the achievement of the overall
objectives of the auditor
d) evidence that the audit was planned and performed in accordance with SAs and
applicable legal
and regulatory requirements.

230.5 S 3 / M19R
CA. Bobby is a recently qualified Chartered Accountant. He is appointed as an auditor
of Droopy Ltd. for the current Financial Year 2017-18. He is quite conservative in nature
which is also replicated in his professional work. CA. Bobby is of the view that he shall
record all the matters related to audit, audit procedures to be performed, audit evidence
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obtained and conclusions reached. Thus, he maintained a file and recorded each and
every of his findings during the audit. His audit file, besides other thing, includes audit
programmes, notes reflecting preliminary thinking, letters of confirmation, e-mails
concerning significant matters, etc. State which of the following need not be included
in the audit documentation?
a) Audit programmes.
b) Notes reflecting preliminary thinking.
c) Letters of confirmation.
d) E-mails concerning significant matters.

230.6 S 1 / N19R
Judging the significance of a matter require____ of the facts and circumstances
a) objective analysis
b) subjective analysis
c) Both subjective and objective analysis
d) qualitative analysis

230.7 S-1
The auditor shall assemble the audit documentation in and complete the administrative
process of assembling the final audit file on a timely basis after the date of the auditor’s
report.
a) audit note book
b) completion memorandum
c) audit file
d) any of the above

230.8 S-1
The completion of the assembly of the final audit file after the date of the auditor’s
report is
a) an administrative process that does not involve the performance of new audit
procedures but certainly involves the drawing of new conclusions.
b) an administrative process that involves the performance of new audit procedures or the
drawing of new conclusions.
c) an administrative process that does not involve the performance of new audit
procedures or the drawing of new conclusions.
d) a statutory process

230.9 S-2 / N19M / M19M

Which of the following is correct:
a) The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis after the date
of the auditor’s report.
b) The auditor shall assemble the audit documentation in an audit file and shall not
complete the administrative process of assembling the final audit file.
c) The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis before the date
of the auditor’s report.
d) The auditor shall not assemble the audit documentation in an audit file

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230.10 SM
______ may be defined as one or more folders or other storage media, in physical or
electronic form, containing the records that comprise the audit documentation for a
specific engagement.
a) Audit File
b) Audit evidence
c) Completion Memorandum
d) both (a) and (b) above

230.11 S-1
• Audit programmes.
• Analyses.
• Issues memoranda.
• Summaries of significant matters, are examples of:
a) Audit Evidence
b) Audit Documentation
c) Audit File
d) Final Audit File

230.12 S-1 / N19R

An important factor in determining the form, content and extent of audit
documentation of significant matters is the extent of _____ exercised in performing the
work and evaluating the results.
a) professional skepticism
b) professional integrity
c) professional judgment
d) Professional sincerity

230.13 S-2 / M19M

Which of the following is not an example of audit documentation:
a) Audit programmes
b) Summaries of significant matters
c) Audit file
d) Checklists

SA 240

240.1 SM / M19M
The type of errors, existence of which becomes apparent in the process of compilation
of accounts is known as:
a) Self-revealing errors.
b) Intentional errors
c) Concealed errors
d) Unconcealed errors.

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240.2 SM
When credit purchases of Rs 5,100 is recorded on credit side and credit sales of Rs 5,100
is recorded on debit side, this kind of error is called________
a) Error of omission
b) Compensating error
c) Error of principle
d) Error of commission

240.3 S-1
Professional skepticism is necessary to the critical assessment of
a) audit documentation
b) audit evidence.
c) audit procedures
d) All of the above

240.4 SM / M19M/M20M
If as a result of a misstatement resulting from fraud, the auditor encounters exceptional
circumstances that bring into question his performing the audit, he shall-
a) Withdraw from the engagement immediately
b) Report to Audit team regarding withdrawal ability to continue
c) Determine the professional and legal responsibilities applicable in the circumstances.
d) Ask the management for his withdrawal

240.5 SM
Misappropriation of assets may occur because there is-
a) Adequate record keeping with respect to assets
b) Known history of violations of securities laws.
c) Lack of complete and timely reconciliations of assets
d) Dispute between shareholders in a closely held entity

240.6 S-3
Misstatements in the financial statements can arise either from fraud or error. The
auditor is concerned with fraud that causes a material misstatement in the financial
statements which may further be classified as fraudulent financial reporting or
misappropriation of assets.
There are certain events or conditions that indicate an incentive or pressure to commit
fraud or provide an opportunity to commit fraud which may be termed as fraud risk
factors. Which of the following is an example of fraud risk factor relating to
misstatements arising from misappropriation of assets?
a) Known history of violations of laws and regulations.
b) Management failing to remedy known significant deficiencies in internal control on a
timely basis.
c) Inventory items that are small in size, but of high value or in high demand.
d) An interest by management in employing inappropriate means to minimize reported
earnings for tax- motivated reasons.

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240.7 SM / M19M
Which of the following is an example of inflating cash payments?
a) Making payments against purchase vouchers.
b) Teeming and lading
c) Not accounting for cash sales fully.
d) Making payments against inflated vouchers.

240.8 SM / M19M
The standard that requires auditors to analyse journal entries in an audit is?
a) SA 260
b) SA 230
c) SA 315
d) SA 240

SA 299

299.1 N19M
Which of the following is not an advantage Joint Audit:
a) Sharing of expertise.
b) General superiority complexes of some auditors.
c) Lower workload.
d) Displacement of the auditor of the company taken over in a take - over often obviated.

2. SA 300 SERIES

SA 300

300.1 S-1
Once the overall audit strategy has been established, can be developed to address the
various matters identified in the overall audit strategy, taking into account the need to
achieve the audit objectives through the efficient use of the auditor’s resources.
a) audit strategy
b) audit plan
c) audit plan and audit strategy
d) audit note book

300.2 S-2 / M19M

When planning the audit,
a) the auditor considers what would make the financial information materially misstated.
b) the auditor need not consider what would make the financial information materially
misstated.
c) the auditor need not consider what would make the financial information materially
misstated at planning stage
d) the auditor needs to consider what would make the financial information materially
misstated while conducting audit only

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300.3 S-1
Planning an audit involves establishing the overall audit strategy for the engagement
and
a) developing an audit plan.
b) developing an audit program
c) developing detailed strategy
d) any of the above

300.4 N19M
According to SA 300,
a) planning is not a continual and iterative phase of an audit, but rather a discrete process
b) planning is not a discrete phase of an audit, but rather a continual and iterative process
c) planning is not continual and iterative process
d) planning is not a discrete phase of an audit

300.5 N19M
Planning an audit involves
a) establishing the overall audit strategy for the engagement and developing an audit plan.
b) establishing the overall audit plan for the engagement and developing an audit strategy.
c) establishing the overall audit plan for the engagement
d) developing an audit strategy.

300.6 SM
Planning is _______ process of an audit that often begins shortly after (or in connection
with) the completion of the previous audit and continues until the completion of the
current audit engagement:
a) continuous
b) discreet
c) neither continuous nor discreet

300.7 SM
The audit plan is _______detailed than the overall audit strategy
a) Less
b) More
c) Equal

300.8 SM
The auditor shall develop an audit plan that shall include a description of:
a) the nature, timing and extent of planed risk assessment procedure
b) The nature, timing and extent of planned further audit procedures at the assertion level.
c) Other planned audit procedures that are required to be carried out so that the
engagement complies with SAs.
d) All of the above.

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300.9 SM
The overall audit strategy and the audit plan remain the ______ responsibility.
a) auditor's
b) management's
c) those charge with governance's
d) All of the above

300.10 SM / M19M
With reference to SA 300, the auditor shall document:
a) The overall audit strategy
b) The audit plan
c) Any significant changes made during the audit engagement to the overall audit strategy
or the audit plan, and the reasons for such changes.
d) All of the above

300.11 (M20M)
The auditor shall update and change ______as necessary during the course of the audit.
a) overall strategy
b) the overall audit strategy and the audit plan
c) audit plan
d) audit program

SA 315

315.1 SM / S-2 / M19M

Audit risk is a function of the
a) risks of material misstatement and detection risk.
b) audit risk and detection risk.
c) control risk and detection risk.
d) inherent risk and detection risk.

315.2 S-1
Components of risk of material misstatement at the assertion level are:
a) Inherent risk and detection risk
b) inherent risk and control risk
c) control risk and detection risk
d) inherent risk, control risk and detection risk

315.3 S-2
Risk of material misstatement may be defined as the risk
a) that the financial statements are materially misstated after audit.
b) that the financial statements are materially misstated during audit.
c) that the financial statements are materially misstated prior to audit.
d) All of the above

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315.4 S-2
The assessment of risks is a
a) matter capable of precise measurement rather than matter of professional judgment
b) matter of professional judgement, rather than a matter capable of precise measurement.
c) matter of professional judgement as well as capable of precise measurement
sometimes.
d) None of the above

315.5 S-2
The assessment of the risks of material misstatement may be expressed in
a) quantitative terms, such as in percentages, or in non-quantitative terms.
b) quantitative terms, such as in percentages,
c) non-quantitative terms.
d) None of the above

315.6 S-2
The susceptibility of an assertion about a class of transaction, account balance or
disclosure to a misstatement that could be material, either individually or when
aggregated with other misstatements, before consideration of any related controls is-
a) Control Risk
b) Inherent Risk
c) Detection Risk
d) Audit Risk

315.7 S 1 / N19R
____ refer to the audit procedures performed to obtain an understanding of the entity
and its environment, including the entity’s internal control, to identify and assess the
risks of material misstatement, whether due to fraud or error, at the financial statement
and assertion levels.
a) Audit assessment procedures
b) substantive procedures
c) test of control
d) Risk assessment procedures

315.8 S-2 / M19M / N19M

_____refers to a difference between the amount, classification, presentation, or disclosure
of a reported financial statement item and the amount, classification, presentation, or
disclosure that is required for the item to be in accordance with the applicable financial
reporting framework.
a) Misstatement
b) Error
c) Fraud
d) Any of the above

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315.9 S-1
Because the assessment of the risk of material misstatement takes account of internal
control,
a) the extent of substantive procedures may need to be increased irrespective of the results
from tests of controls.
b) the extent of substantive procedures may need to be increased when the results from
tests of controls are satisfactory.
c) the extent of substantive procedures may need to be decreased when the results from
tests of controls are unsatisfactory.
d) the extent of substantive procedures may need to be increased when the results from
tests of controls are unsatisfactory.

315.10 SM
For a given level of audit risk, the acceptable level of detection risk bears _____
relationship to the assessed risks of material misstatement at the assertion level.
a) direct
b) Inverse
c) no
d) none of the above
315.11 M19M
In the case of tests of details
a) the projected misstatement plus anomalous misstatement, if any, is the auditor’s best
estimate of misstatement in the population.
b) the projected misstatement is the auditor’s best estimate of misstatement in the
population
c) the anomalous misstatement is the auditor’s best estimate of misstatement in the
population.
d) the projected misstatement plus anomalous misstatement, if any, cannot be the
auditor’s best estimate of misstatement in the population.

315.12 M19M
One of your junior audit team members is confused with the term ‘material
misstatement’. You explain him that a material misstatement is untrue information in a
financial statement that could affect the financial decisions of one who relies on the
statement. Which of the following would constitute material misstatement?
(1) An error of Rs. 5,000 in relation to assets of Rs.20 lakhs.
(2) A payroll fraud of Rs.100 in a company where profit before tax is Rs. 11,000.
(3) Non-disclosure of a material uncertainty.
(4) Financial statements have been prepared on a going concern basis when the
company is in the process of being liquidated.
a) 1 and 2
b) 3 and 4
c) 2 and 3
d) 1 and 4

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315.13 SM
Risk of material misstatement has ________ components
a) one
b) two
c) three
d) four

315.14 M19M / N19M

Risk of material misstatement may be defined as the risk
a) that the financial statements are materially misstated after audit.
b) that the financial statements are materially misstated during audit.
c) that the financial statements are materially misstated prior to audit.
d) All of the above

315.15 M19M / N19M

SA 315 establishes requirements and provides guidance on identifying and assessing the
risks of material misstatement -
a) at the financial statement levels only.
b) at the assertion levels only.
c) at the financial statement and assertion levels.
d) at the financial statement or assertion levels.

315.16 N19M
The assessment of the risks of material misstatement may be expressed in
a) quantitative terms, such as in percentages, or in non-quantitative terms.
b) quantitative terms, such as in percentages,
c) non-quantitative terms.
d) None of the above

315.17 M19M
The risks of material misstatement at the assertion level consist of two components:
a) Inherent risk and detection risk
b) control risk and detection risk
c) audit risk and detection risk
d) Inherent risk and control risk

315.18 M19M
Which of the following is correct:
a) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot
therefore obtain absolute assurance that the financial statements are free from material
misstatement due to fraud or error.
b) The auditor is expected to and can reduce audit risk to zero and can therefore obtain
absolute assurance.
c) The auditor is not expected to, and cannot, reduce audit risk to zero and cannot
therefore obtain reasonable assurance that the financial statements are free from
material misstatement due to fraud or error.

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d) The auditor is expected to and can reduce audit risk to zero and can therefore obtain
reasonable assurance that the financial statements are free from material misstatement
due to fraud or error.

315.19 M19M
Which of the following is correct:
a) When the projected misstatement exceeds tolerable misstatement, the sample does not
provide a reasonable basis for conclusions about the population that has been tested
b) When the projected misstatement plus anomalous misstatement, if any, exceeds
tolerable misstatement, the sample does not provide a reasonable basis for conclusions
about the population that has been tested
c) When the anomalous misstatement exceeds tolerable misstatement, the sample does
not provide a reasonable basis for conclusions about the population that has been
tested.
d) When the projected misstatement plus anomalous misstatement, if any, exceeds
tolerable misstatement, the sample provides a reasonable basis for conclusions about
the population that has been tested

SA 320

320.1 S-1 / M19M / SM

Determining a percentage to be applied to a chosen benchmark (in relation to
materiality) involves the exercise of ___________
a) Independence
b) Professional Judgement
c) Professional skepticism
d) All of the above

320.2 M19M
SA 320 on “Materiality in Planning and Performing an Audit” requires that an auditor
a) should not consider materiality and its relationship with audit risk while conducting an
audit.
b) should consider materiality and its relationship with audit risk while conducting an audit.
c) should not consider materiality but should consider its relationship with audit risk while
conducting an audit.
d) should consider materiality but need not consider its relationship with audit risk while
conducting an audit.

SA 330

330.1 S-1
When deviations from controls upon which the auditor intends to rely are detected,
a) the auditor shall not make any inquiries to understand these matters and their potential
consequences
b) the auditor shall make specific inquiries to understand these matters and their potential
consequences

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c) the auditor shall make general inquiries to understand these matters and their potential
consequences
d) the auditor shall make both general as well as specific inquiries to understand these
matters and their potential consequences

330.2 N19R / S-1

When more persuasive audit evidence is needed regarding the effectiveness of a control,
a) it may be appropriate to increase the extent of testing of the control and reduce the
extent of the degree of reliance on controls.
b) it may be appropriate to decrease the extent of testing of the control as well as the
degree of reliance on controls.
c) it may be appropriate to decrease the extent of testing of the control and increase the
extent of the degree of reliance on controls.
d) it may be appropriate to increase the extent of testing of the control as well as the
degree of reliance on controls.

330.3 M20M
Statement 1: Audit procedures consist of Risk Assessments Procedures and other
procedures.
Statement 2: Substantive procedures consist of test of details and analytical procedures.
a) Only Statement 1 is correct
b) Only Statement 2 is correct
c) Both 1 & 2 are correct
d) Both 1 & 2 are incorrect

3. SA 500 SERIES

SA 500

500.1 S-2 / N19M / M19M

Audit evidence includes
a) information contained in the accounting records underlying the financial statements
b) both information contained in the accounting records underlying the financial
statements and other information.
c) other information.
d) information contained in the accounting records underlying the financial statements or
other information.

500.2 S-1 / N19R / N19M

Audit evidence is necessary to support the auditor’s opinion and report. It is _____ in
nature and is primarily obtained from audit procedures performed during the course of
the audit.
a) cumulative
b) regressive
c) selective
d) objective

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500.3 S-2
Audit procedures to obtain audit evidence can include
a) inspection, observation, confirmation, recalculation, re-performance and analytical
procedures
b) inspection, observation, confirmation, recalculation and re-performance
c) inspection, observation, confirmation and analytical procedures
d) inspection, observation, recalculation, re-performance and analytical procedures

500.4 SM
Auditor's judgement as to sufficiency may be affected by which factor
a) Materiality
b) Risk of material misstatement
c) Size and characteristics of the population.
d) All of the above

500.5 M19M
Most of the auditor’s work in forming the auditor’s opinion consists of:
a) obtaining audit evidence.
b) evaluating audit evidence.
c) obtaining or evaluating audit evidence.
d) obtaining and evaluating audit evidence.

500.6 N19M
Professional skepticism is necessary to the critical assessment of
a) audit documentation
b) audit evidence.
c) audit procedures
d) All of the above

500.7 SM
Which of the following is not an audit procedure to obtain audit evidence:
a) Inspection
b) Observation
c) External Confirmation
d) None of the above

500.8 M19M
Which of the following is incorrect:
a) Inquiry consists of seeking information of unknown persons, both financial and non-
financial, within the entity or outside the entity
b) Inquiry is used extensively throughout the audit in addition to other audit procedures.
c) Inquiries may range from formal written inquiries to informal oral inquiries. Evaluating
responses to inquiries is an integral part of the inquiry process
d) Responses to inquiries may provide the auditor with information not previously
possessed or with corroborative audit evidence.

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500.9 S-1 / SM
Which of the following is not an assertion about presentation and disclosure?
a) Occurrence and rights and obligations
b) Completeness
c) Classification and understandability
d) Existence

500.10 S-1
Which of the following assertion is not related to assertion about presentation and
disclosure:
a) Occurrence and rights and obligations
b) Completeness
c) Classification and understandability
d) Valuation and allocation

SA 501

501.1 M19R / S-3

Coyote Ltd. is dealing in trading of electronic goods. Huge inventory (60%
approximately) of the company is lying on consignment (i.e. under the custody of third
party). CA. Star, the auditor of the company, wants to obtain sufficient appropriate audit
evidence regarding the existence and condition of the inventory lying on consignment.
Thus, he requested & obtained confirmation from the third party as to the quantities
and condition of inventory held on behalf of the entity, however, it raised doubts about
the integrity and objectivity of the third party. Which of the following other audit
procedures may be performed by CA. Star to obtain sufficient appropriate audit
evidence regarding the existence and condition of the inventory under the custody of
third party?
a) Attend third party’s physical counting of inventory.
b) Arrange for another auditor to attend third party’s physical counting of inventory.
c) Inspect warehouse receipts regarding inventory held by third parties.
d) All of the above.

501.2 M19M
The auditor shall design and perform audit procedures in order to identify litigation and
claims involving the entity which may give rise to a risk of material misstatement,
including:
a) Inquiry of management and, where applicable, others within the entity, including in-
house legal counsel.
b) Reviewing minutes of meetings of those charged with governance and correspondence
between the entity and its external legal counsel.
c) Reviewing legal expense accounts
d) All of the above

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SA 505

505.1 S-3 / M19R

While auditing the accounts of Thought Co. Ltd., CA. Bliss, the auditor of the company
came across certain accounts payable balances for which direct confirmation procedure
needs to be applied. Thus, for the year ending 31st March, 2018, he sent positive
confirmation requests wherein the trade payables are requested to respond whether or
not they are in agreement with the balance shown. The auditor received all the
confirmation replies from the trade payables on time as correct except from five of
them. What other option the auditor is left with regard to trade payables from which no
reply for confirmation requests received?
a) Perform additional testing which may include agreeing the balance to subsequent cash
paid
b) Accept the balances as it is assuming other replies against received confirmation
requests being correct.
c) Accept the balances as it is assuming that the trade payables must have replied in case
of any discrepancies.
d) None of the above.

505.2 N19R
A failure of the confirming party to respond, or fully respond, to a positive confirmation
request, or a confirmation request returned undelivered is called-
a) Negative confirmation request
b) Non-response
c) Exception
d) Positive confirmation request

505.3 M19M /SM/M20M

A request that the confirming party respond directly to the auditor only if the
confirming party disagrees with the information provided in the request is-
a) Positive confirmation request
b) Non-response
c) Exception
d) Negative confirmation request

505.4 SM
Where no reply is received during the performance of direct confirmation procedures as
part of audit of accounts receivable balances, the auditor should perform:
a) No additional testing
b) Additional testing including subsequent collections testing and agreeing the detail of
the respective balance to the customer’s remittance advice.
c) Additional testing including preparing a detailed analysis of the balance, ensuring it
consists of identifiable transactions and confirming that these revenue transactions
actually occurred.
d) Both (b) and (c)

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SA 520

520.1 S-1 / SM
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

520.2 S-3 / M19R

Marvin Ltd. is a renowned food chain supplier in a posh area providing restaurant facility
along with food delivering. CA. Felix was appointed as an auditor of the company for
the Financial Year 2017-18. While examining the books of account of the company, CA.
Felix came to know about one of the major expenses of the company i.e. rent expense
of Rs. 1,20,000 per month, for which he applied substantive analytical procedure for
verification purpose. Explain, how would CA. Felix perform substantive analytical
procedure in the given scenario?
a) CA. Felix would inspect every single rent invoice per month of Rs. 1,20,000 and verify
other elements appropriately.
b) CA. Felix would compare the rental expense of the company with that of another nearby
company having corresponding dimensions, for high degree of accuracy.
c) CA. Felix would select the first month rent invoice of Rs. 1,20,000 and appropriately
verifying other elements would predict that the rent for the whole year would be Rs.
14,40,000 (i.e. Rs. 1,20,000 * 12). Thereafter, he would compare the actuals with his
prediction and follow-up for any fluctuation.
d) (a) and (b), both.

520.3 S-1 / SM / N19M

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

520.4 N19R / S-1

Which of the following statement is correct:
a) Substantive analytical procedures are generally more applicable to large volumes of
transactions that tend to be predictable over time
b) Substantive analytical procedures are generally less applicable to large volumes of
transactions that tend to be predictable over time
c) Substantive analytical procedures are generally more applicable to small volumes of
transactions that tend to be predictable over time
d) None of the above

520.5 SM
The basic assumption underlying the use of analytical procedures is:
a) It helps he auditor to study relationship among elements of financial information

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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

520.6 SM / S-1
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 non-financial
data
d) All of the above

520.7 SM
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

520.8 N19M
Which of the following is correct:
a) Different types of analytical procedures provide different levels of assurance.
b) Different types of analytical procedures provide similar levels of assurance.
c) Similar type of analytical procedures provide different levels of assurance.
d) All are correct

520.9 M19M
Which of the following is correct:
a) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical
procedures” means evaluations of financial information through analysis of financial
data.
b) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical
procedures” means evaluations of financial information through analysis of non-
financial data.
c) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical
procedures” means evaluations of financial information through analysis of plausible
relationships among both financial and non-financial data.
d) As per the Standard on Auditing (SA) 520 “Analytical Procedure” ‘the term “analytical
procedures” means evaluations of financial information through analysis of plausible
relationships among both financial and non-financial data.

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520.10 (M20M)
Statement I As per the Standard on Auditing (SA) 520 “Analytical Procedures”, the term
“analytical procedures” means evaluations of financial information through analysis of
plausible relationships among financial data.
Statement II Analytical procedures also encompass such investigation as is necessary of
identified fluctuations or relationships that are inconsistent with other relevant
information or that differ from expected values by a significant amount.
a) Only Statement I is correct
b) Only Statement II is correct
c) Both statements are correct
d) Both Statements are incorrect

520.11 (M20M)
Which of the following is not an example of Analytical Procedures having consideration
of comparisons of the entity’s financial information?
a) Comparable information for prior periods.
b) Anticipated results of the entity, such as budgets or forecasts, or expectations of the
auditor, such as an estimation of depreciation.
c) Similar industry information, such as a comparison of the entity’s ratio of sales to
accounts receivable with industry averages or with other entities of comparable size in
the same industry.
d) Among elements of financial information that would be expected to conform to a
predictable pattern based on the entity’s experience, such as gross margin percentages.

SA 530

530.1 S-1 / SM
Which of the following is source of Non Sampling risk:
a) Human Mistakes
b) Applying audit procedures not appropriate to the objectives of audit
c) Misinterpreting the sample results
d) All of the above

530.2 S-3
While auditing TEN Ltd., CA. Porky divided the whole population of trade receivables
balances to be tested in a few separate groups called ‘strata’ and started taking a sample
from each of them. He treated each stratum as if it was a separate population. He divided
the trade receivables balances of TEN Ltd. for the Financial Year 2017-18 into groups on
the basis of personal judgment as follows:
S. Particulars
No.
1 Balances in excess of Rs. 10,00,000
2 Balances in the range of Rs. 7,75,001 to Rs.
10,00,000
3 Balances in the range of Rs. 5,50,001 to Rs.
7,75,000
4 Balances in the range of Rs. 2,25,001 to Rs.
5,50,000
5 Balances Rs. 2,25,000 and below
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From the abovementioned groups, CA. Porky picked up different percentage of items
for examination from each of the groups, for example, from the top group i.e. balances
in excess of Rs.10,00,000, he selected all the items to be examined; from the second
group, he opted for 25 % of the items to be examined; from the lowest group, he
selected 2% of the items for examination; and so on from rest of the groups. Which one
of the following methods of sample selection is he following?
a) Systematic sampling.
b) Stratified sampling.
c) Section sampling.
d) Selection sampling.

530.3 M19M
It is a type of value-weighted selection in which sample size, selection and evaluation
results in a
conclusion in monetary amounts:
a) Haphazard sampling
b) Monetary Unit Sampling
c) Stratified Sampling
d) Interval sampling

530.4 SM
The main advantage of using statistical sampling techniques is that such techniques:
a) Mathematically measure risk
b) Eliminate the need for judgmental sampling
c) Defines the values of tolerable error
d) All of them.

530.5 SM / S-1
Tolerable error is the maximum monetary error that the auditor is prepared to accept in
the population and still conclude that audit achieved, is directly related to
a) Sample size
b) Audit risk
c) Materiality
d) Expected error

530.6 SM / S-1
Which of the following factors is (are) considered in determining the sample size for
tests of control?
a) Projected error
b) Tolerable error
c) Expected error
d) Both (b) and (c)

530.7 SM
Which of the following is more scientific:
a) Statistical
b) Non- statistical

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c) both (a) and (b)
d) none of the above

SA 560

560.1 M19M
The auditor has no obligation to perform any audit procedures regarding the financial
statements after the date of the auditor’s report. However, when, after the date of the
auditor’s report but before the date the financial statements are issued, a fact becomes
known to the auditor that, had it been known to the auditor at the date of the auditor’s
report, may have caused the auditor to amend the auditor’s report, the auditor shall:
a) Discuss the matter with management and, where appropriate, those charged with
governance
b) Determine whether the financial statements need amendment
c) Inquire how management intends to address the matter in the financial statements.
d) All of the above

SA 580

580.1 S-1
Which statement is correct regarding written representations
a) Although written representations provide necessary audit evidence, they do not provide
sufficient appropriate audit evidence on their own about any of the matters with which
they deal.
b) Written representations provide sufficient appropriate audit evidence on their own
about any of the matters with which they deal.
c) Written representations neither provide necessary audit evidence nor they provide
sufficient appropriate audit evidence.
d) Written representations are not related to audit evidence.

580.2 M19M
Which of the following is incorrect:
a) Written representations are necessary information that the auditor requires in
connection with the audit of the entity’s financial statements
b) Similar to responses to inquiries, written representations are audit evidence
c) Written representations are requested from those responsible for the preparation and
presentation of the financial statements
d) Written representations provide necessary audit evidence and also they provide
sufficient appropriate audit evidence on their own about any of the matters with which
they deal.

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4. SA 700 SERIES

SA 700

700.1 M19R / S-3

CA. Goofy has been appointed as an auditor for audit of a complete set of financial
statements of Dippy Ltd., a listed company. The financial statements of the company are
prepared by the management in accordance with the Accounting Standards prescribed
under section 133 of the Companies Act, 2013. However, the inventories are m is stated
which is deemed to be material but not pervasive to the financial statements. Based on
the audit evidences obtained, CA. Goofy has concluded that a material uncertainty does
not exist related to events or conditions that may cast significant doubt on the entity’s
ability to continue as a going concern in accordance with SA 570. Further, CA. Goofy is
also aware of the fact that a qualified opinion would be appropriate due to a material
misstatement of the Financial Statements. State what phrases should the auditor use
while drafting such opinion paragraph?
a) In our opinion and to the best of our information and according to the explanations
given to us, except for the effects of the matter described in the Basis for Qualified
Opinion section of our report, the aforesaid financial statements present fairly, in all
material respects, or give a true and fair view in conformity with the applicable financial
reporting framework.
b) In our opinion and to the best of our information and according to the explanations
given to us, with the foregoing explanation, the aforesaid financial statements present
fairly, in all material respects, or give a true and fair view in conformity with the
applicable financial reporting framework.
c) In our opinion and to the best of our information and according to the explanations
given to us, subject to the misstatement regarding inventories, the aforesaid financial
statements present fairly, in all material respects, or give a true and fair view in
conformity with the applicable financial reporting framework.
d) In our opinion and to the best of our information and according to the explanations
given to us, with the explanation described in the Basis for Qualified Opinion section of
our report, the aforesaid financial statements present fairly, in all material respects, or
give a true and fair view in conformity with the applicable financial reporting framework.

700.2 S-2
Most of the auditor’s work in forming the auditor’s opinion consists of ________
a) obtaining audit evidence.
b) evaluating audit evidence.
c) obtaining or evaluating audit evidence.
d) obtaining and evaluating audit evidence.

700.3 S-1 / SM
SA-700 requires the use of specific headings, which are intended to assist in making
auditor’s reports that refer to audits that have been conducted in accordance with SAs
more recognizable. Which of the following is that specific heading:
a) Key audit matters
b) Basis of opinion
c) Date
d) All of the above

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700.4 N19M
An Audit report is:
a) an opinion drawn on the entity’s financial statements to make sure that the records are
true and correct representation of the transactions they claim to represent.
b) an opinion drawn on the entity’s books of accounts to make sure that the records are
true and fair representation of the transactions they claim to represent.
c) an opinion drawn on the entity’s financial statements to make sure that the records are
true and fair representation of the transactions they claim to represent.
d) an opinion drawn on the entity’s books of accounts to make sure that the records are
true and correct representation of the transactions they claim to represent.

700.5 SM
In order to form the opinion, the auditor shall conclude as to whether the auditor has
obtained ______ about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error.
a) reasonable assurance
b) absolute assurance
c) Limited assurance
d) None of the above

700.6 N19M
Most of the auditor’s work in forming the auditor’s opinion consists of:
a) obtaining audit evidence.
b) evaluating audit evidence.
c) obtaining or evaluating audit evidence.
d) obtaining and evaluating audit evidence.

700.7 SM
The opinion section of the auditor’s report shall:
a) Identify the entity whose financial statements have been audited;
b) State that the financial statements have been audited;
c) Identify the title of each statement comprising the financial statements;
d) All of the above

700.8 N19M
Which of the following is not a Specific Evaluation by the Auditor:
a) The financial statements adequately disclose the significant accounting policies selected
and applied;
b) The accounting policies selected and applied are consistent with the applicable financial
reporting framework and are appropriate;
c) The accounting estimates made by management are reasonable;
d) The sufficient appropriate audit evidence has been obtained;

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SA 701

701.1 M19M
Which of the following is incorrect:
a) Communicating key audit matters in the auditor’s report is not a substitute for
disclosures in the financial statements that the applicable financial reporting framework
requires management to make, or that are otherwise necessary to achieve fair
presentation;
b) Communicating key audit matters in the auditor’s report is not a substitute for the
auditor expressing a modified opinion when required by the circumstances of a specific
audit engagement in accordance with SA 705 (Revised);
c) Communicating key audit matters in the auditor’s report is not a substitute for reporting
in accordance with SA 570 when a material uncertainty exists relating to events or
conditions that may cast significant doubt on an entity’s ability to continue as a going
concern;
d) Communicating key audit matters in the auditor’s report is a substitute for the auditor
expressing a modified opinion when required by the circumstances of a specific audit
engagement in accordance with SA 705 (Revised)

SA 705

705.1 S-3
Minnie Ltd., a listed company, appointed CA. Kranny for auditing complete set of
consolidated financial statements of the company. CA. Kranny is unable to obtain
sufficient appropriate audit evidence regarding an investment in a foreign associate.
The possible effects of the inability to obtain sufficient appropriate audit evidence are
deemed to be material but not pervasive to the consolidated financial statements. Based
on the audit evidence obtained, CA. Kranny concludes that a material uncertainty does
not exist related to events or conditions that may cast significant doubt on the
company’s ability to continue as a going concern in accordance with SA 570. State what
type of opinion CA. Kranny must have provided in the given scenario?
a) Unmodified opinion.
b) Qualified opinion.
c) Adverse opinion.
d) Disclaimer of opinion.

705.2 N19M
A company did not disclose accounting policies required to be disclosed under Schedule
III or any other provisions of the Companies Act, 2013, the auditor should issue–
a) a qualified opinion
b) an adverse opinion
c) a disclaimer of opinion
d) emphasis of matter paragraph.

705.3 N19M
If the auditor is unable to obtain sufficient appropriate audit evidence regarding the
opening balances,
a) the auditor shall express a qualified opinion in accordance with SA 705.

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b) the auditor shall express a disclaimer of opinion in accordance with SA 705.
c) the auditor shall express a qualified opinion or adverse opinion, as appropriate, in
accordance with SA 705.
d) the auditor shall express a qualified opinion or a disclaimer of opinion, as appropriate,
in accordance with SA 705.

705.4 M19M / N19R

If the auditor is unable to obtain sufficient appropriate audit evidence regarding the
opening balances, the auditor shall express:
a) a disclaimer opinion
b) a qualified opinion
c) a qualified opinion or a disclaimer of opinion, as appropriate, in accordance with SA 705
d) unmodified opinion

705.5 S-1 / SM
The auditor shall express ______ opinion when the auditor, having obtained sufficient
appropriate audit evidence, concludes that misstatements, individually or in the
aggregate, are both material and pervasive to the financial statements.
a) Adverse
b) Qualified
c) Disclaimer
d) None of the above

705.6 SM
Which of the following is not a type of modified opinion:
a) qualified opinion
b) adverse opinion
c) disclaimer of opinion
d) None of the above

705.7 M19M
Which of the following is correct:
a) The auditor shall express a qualified opinion when the auditor, having obtained
sufficient appropriate audit evidence, concludes that misstatements, individually or in
the aggregate, are both material and pervasive to the financial statements.
b) The auditor shall express a disclaimer opinion when the auditor, having obtained
sufficient appropriate audit evidence, concludes that misstatements, individually or in
the aggregate, are both material and pervasive to the financial statements.
c) The auditor shall express an adverse opinion when the auditor, having obtained
sufficient appropriate audit evidence, concludes that misstatements, individually or in
the aggregate, are both material and pervasive to the financial statements.
d) The auditor shall express an adverse opinion when the auditor, having obtained
sufficient appropriate audit evidence, concludes that misstatements, individually or in
the aggregate, are material, but not pervasive, to the financial statements

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SA 706

706.1 M19M
Which of the following is correct:
a) When reporting on prior period financial statements in connection with the current
period’s audit, if the auditor’s opinion on such prior period financial statements differs
from the opinion the auditor previously expressed, the auditor need not disclose the
substantive reasons for the different opinion.
b) When reporting on prior period financial statements in connection with the current
period’s audit, if the auditor’s opinion on such prior period financial statements differs
from the opinion the auditor previously expressed, the auditor shall disclose the
substantive reasons for the different opinion in an Other Matter paragraph in
accordance with SA 706.
c) When reporting on prior period financial statements in connection with the current
period’s audit, if the auditor’s opinion on such prior period financial statements differs
from the opinion the auditor previously expressed, the auditor shall disclose the
substantive reasons for the different opinion in an emphasis of Matter paragraph in
accordance with SA 706.
d) When reporting on prior period financial statements in connection with the current
period’s audit, if the auditor’s opinion on such prior period financial statements differs
from the opinion the auditor previously expressed, the auditor shall disclose the
substantive reasons for the different opinion in an Other Matter paragraph or emphasis
of matter paragraph in accordance with SA 706.

5. COMPANY AUDIT- I

CA1.1 M19R / S-3

CA. Daffy is the auditor of x Bose Ltd. for the previous 2 years. However, due to certain
unavoidable circumstances, no Annual General Meeting (AGM) was held for the current
Financial Year ending on 31st March, 2018 within every possible time limit and thus, the
ratification procedure for her appointment in the AGM could not be performed.
Whether she may continue to hold the office of the auditor?
a) CA. Daffy may continue to hold the office of the auditor for the current Financial Year
only and thereafter shall resign herself as the ratification procedure could not be
completed.
b) CA. Daffy shall continue to hold the office of the auditor and ask the Board to reappoint
her in a private meeting.
c) CA. Daffy shall continue to hold the office of the auditor as no such ratification provisions
for appointment by members at every AGM exist.
d) CA. Daffy shall not continue to hold office of the auditor as the ratification procedure
could not be completed as per proviso to section 139(1) of the Companies Act, 2013.

CA1.2 S-3
CA. Donald was appointed as the auditor of PS Ltd. at the remuneration of Rs. 30,000.
However, after 4 months of continuing his services, he could not continue to hold his
office of the auditor as his wife got a government job at a distant place and he needs to
shift along with her to the new place. Thus, he resigned from the company and did not
perform his responsibilities relating to filing of statement to the company and the

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registrar indicating the reasons and other facts as may be relevant with regard to his
resignation. How much fine may he be punishable with under Companies Act, 2013?
a) Nothing.
b) Rs. 30,000.
c) Not less than Rs. 50,000 but which may extend to Rs. 5, 00,000.
d) Not less than Rs. 30,000 but which may extend to Rs. 5, 00,000.

CA1.3 S-3
CA. Sylvester, the statutory auditor of Yosemitee Pvt. Ltd., encountered unavoidable
circumstances that bring into question his ability to continue holding office of the
auditor. Considering it appropriate, CA. Sylvester resigned from the office of auditor of
Yosemitee Pvt. Ltd. and thus, the Board of Directors itself appointed CA. Granny, a
practicing Chartered Accountant, as the statutory auditor of the company to hold office
of the auditor till the conclusion of 6th meeting. Which of the following statement is
true in the given scenario?
a) The appointment of CA. Granny made by the Board of Directors is invalid.
b) Casual vacancy can be filled by the Board of Directors subject to approval by the
company at a general meeting convened within 3 months of the recommendation of
the Board.
c) CA. Granny cannot hold the office of auditor till the conclusion of 6th meeting i.e. the
appointment cannot be made for five years. The auditor can hold office only till the
conclusion of the next AGM.
d) All of the above.

CA1.4 S-3
Miss Betty, relative of CA. Tweety (one of the partners of M/s AB & Co.), owed Rs.
1,50,000 to Satyan Ltd. for goods purchased in the normal course of business. Later on,
M/s AB & Co. was appointed as statutory auditors of Prakash Ltd. (which holds 51%
shares in Satyan Ltd.). On discovering the said fact, Miss Betty cleared the dues to Satyan
Ltd. on 59th day following the date of appointment of M/s AB & Co. as statutory
auditors of Prakash Ltd. Which of the following statement is true in the given scenario
with respect to validity of appointment of M/s AB & Co.?
a) Miss Betty, relative of CA. Tweety (one of the partners of M/s AB & Co.) is indebted to
the subsidiary of Prakash Ltd. but not to the company itself. Thus, the appointment of
M/s AB & Co. as the statutory auditors of Prakash Ltd. is valid.
b) M/s AB & Co. is not eligible for appointment as an auditor of Prakash Ltd. as Miss Betty,
relative of CA. Tweety (one of the partners of M/s AB & Co.) is indebted to Satyan Ltd.
(subsidiary of Prakash Ltd.) Thus, the appointment made is not valid.
c) As the corrective action has been taken regarding indebtness to Satyan Ltd. (subsidiary
of Prakash Ltd.) within 60 days of such appointment, the appointment of M/s AB & Co.
is valid.
d) There is no such contravention of the provisions of the Companies Act, 2013 in the given
scenario. Thus, the appointment of M/s AB & Co. as the statutory auditors of Prakash
Ltd. is valid.

CA1.5 M19M
As per Section 139(6), the first auditor of a company, other than a Government
company, shall be
appointed
a) by the Board of Directors within 30 days from the date of registration of the company.
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b) by the audit committee within 30 days from the date of registration of the company.
c) by the Managing Director within 30 days from the date of registration of the company.
d) by the shareholders within 30 days from the date of registration of the company

CA1.7 M19M
As per Section 139(8), any casual vacancy in the office of an auditor shall in the case of
a company other than a company whose accounts are subject to audit by an auditor
appointed by the Comptroller and Auditor-General of India.
a) be filled by the Audit committee within 60 days.
b) be filled by the Audit committee within 30 days.
c) be filled by the Board of Directors within 60 days.
d) be filled by the Board of Directors within 30 days.

CA1.8 N19R
In case of a company that is required to constitute an Audit Committee under section
177, the committee, and, in cases where such a committee is not required to be
constituted, __________, shall take into consideration the qualifications and experience of
the individual or the firm proposed to be considered for appointment as auditor and
whether such qualifications and experience are commensurate with the size and
requirements of the company.
a) the board
b) any director
c) Managing Director
d) Whole time director

CA1.9 M19M
In case of a fraud involving less than Rs. 1 crore, the auditor shall
a) report the matter to the audit committee constituted under section 177 or to the Board
in other
cases within such time and in such manner as prescribed.
b) report the matter to the audit committee constituted under section 177 within such time
and in such manner as prescribed.
c) report the matter to the Board within such time and in such manner as prescribed.
d) report the matter to the audit committee constituted under section 177 and also to the
Board within such time and in such manner as prescribed.

CA1.10 M19M
Section 139(7) provides that in the case of a Government company or any other
company owned or controlled, directly or indirectly, by the Central Government, or by
any State Government, or Governments, or partly by the Central Government and partly
by one or more State Governments, the first auditor shall be appointed by the
Comptroller and Auditor-General of India _________ from the date of registration of the
company.
a) within 60 days
b) within 30 days
c) within 90 days
d) within 45 days

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CA1.11 M19M
Springfield Hospital located in the rural area of Lonawala region is a government
hospital run by the local doctors who are appointed by the government. The hospital
was registered on 1 October 2018.
Which of the following is correct in respect of the appointment of the first auditor for
Springfield Hospital?
a) The Board of Directors of the hospital have appointed the first auditor on 5th November
2018.
b) The Comptroller Auditor-General of India appointed the first auditor on 15th December
2018.
c) Since the Comptroller Auditor-General of India did not appoint the first auditor, the
Board of Director appointed the first auditor on 15th December 2018.
d) Since the Comptroller Auditor-General of India did not appoint the first auditor, the
Board of Director appointed the first auditor on 10th November 2018.

CA1.12 N19M
Under sub-section (3) of section 141 along with Rule 10 of the Companies (Audit and
Auditors) Rules, 2014 (hereinafter referred as CAAR), the following persons shall not be
eligible for appointment as an auditor of a company, namely-
(i) a limited liability partnership registered under the Limited Liability Partnership Act,
2008;
(ii) an officer or employee of the company;
(iii) a person who is a partner, or who is in the employment, of an officer or employee
of the company;
(iv) a person who, or his relative or partner is holding any security of or interest in the
company or its subsidiary, or of its holding or associate company or a subsidiary of such
holding company. It may be noted that the relative may hold security or interest in the
company of face value not exceeding Rs. 1,00,000.
Which of the above is incorrect:
a) All statements are incorrect.
b) (i) and (ii)
c) (i) only
d) (iv) only

CA1.13 M19M
Where a company is required to constitute an Audit Committee under section 177,
a) all appointments, including the filling of a casual vacancy of an auditor under this section
shall be made after taking into account the recommendations of such committee.
b) all appointments, excluding the filling of a casual vacancy of an auditor under this
section shall be made after taking into account the recommendations of such
committee.
c) appointment of first auditors shall be made after taking into account the
recommendations of such committee.
d) appointment of subsequent auditors shall be made after taking into account the
recommendations of such committee.

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CA1.14 M19M
Which of the following is correct:
a) A firm whereof all the partners practising anywhere are qualified for appointment may
be appointed by its firm name to be auditor of a company.
b) A firm whereof majority of partners practising anywhere are qualified for appointment
may be appointed by its firm name to be auditor of a company.
c) A firm whereof all the partners practising in India are qualified for appointment may be
appointed by its firm name to be auditor of a company.
d) A firm whereof majority of partners practising in India are qualified for appointment may
be
appointed by its firm name to be auditor of a company

CA1.15 M19M
Which of the following is correct:
a) As per section 142 of the Act, the remuneration of the auditor of a company shall be
fixed in its
general meeting or in such manner as may be determined therein.
b) As per section 142 of the Act, the remuneration of the auditor of a company shall be
fixed in its
general meeting.
c) As per section 142 of the Act, the remuneration of the auditor of a company shall be
fixed in its
extra ordinary general meeting.
d) As per section 142 of the Act, the remuneration of the auditor of a company shall be
fixed in its
Board meeting or in such manner as may be determined therein.

CA1.16 N19M
Which of the following is correct as per section 143(10) of the Companies Act, 2013:
a) IFAC may prescribe the standards of auditing as recommended by the Institute of
Chartered Accountants of India, in consultation with and after examination of the
recommendations made by the National Financial Reporting Authority.
b) The International Auditing Standards Board may prescribe the standards of auditing as
recommended by the Institute of Chartered Accountants of India, in consultation with
and after examination of the recommendations made by the National Financial
Reporting Authority.
c) The MCA may prescribe the standards of auditing as recommended by the Institute of
Chartered Accountants of India, in consultation with and after examination of the
recommendations made by the National Financial Reporting Authority.
d) The Central Government may prescribe the standards of auditing as recommended by
the Institute of Chartered Accountants of India, in consultation with and after
examination of the recommendations made by the National Financial Reporting
Authority.

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CA1.17 M19M
Which of the following is incorrect:
a) According to Section 140(1), the auditor appointed under section 139 may be removed
from his office before the expiry of his term only by a special resolution of the company,
after obtaining the previous approval of the Central Government in that behalf as per
Rule 7 of CAAR, 2014
b) The application to the Central Government for removal of auditor shall be made in Form
ADT -2 and shall be accompanied with fees as provided for this purpose under the
Companies (Registration Offices and Fees) Rules, 2014
c) The application shall be made to the Central Government within 30 days of the
resolution passed by the Board
d) The company shall hold the general meeting within 30 days of receipt of approval of the
Central Government for passing the special resolution.

CA1.18 N19M
Which of the following is not a duty of auditor to report under section 143 (1)
a) whether loans and advances made by the company on the basis of security have been
properly secured and whether the terms on which they have been made are prejudicial
to the interests of the company or its members;
b) whether transactions of the company which are represented merely by book entries are
prejudicial to the interests of the company;
c) where the company not being an investment company or a banking company, whether
so much of the assets of the company as consist of shares, debentures and other
securities have been sold at a price less than that at which they were purchased by the
company;
d) whether the report on the accounts of any branch office of the company audited under
sub-section (8) by a person other than the company’s auditors has been sent to him
under the proviso to that sub-section and the manner in which he has dealt with it in
preparing his report;

CA1.19 (M20M)
Statement I : A firm whereof majority of partners practising in India are qualified for
appointment may be appointed by its firm name to be auditor of a company.
Statement II : Where a firm including a limited liability partnership is appointed as an
auditor of a company, all the partners shall be authorised to act and sign on behalf of
the firm.
a) Only Statement I is correct
b) Only Statement II is correct
c) Both statements are correct
d) Both Statements are incorrect

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6. COMPANY ACCOUNTS AND MISC.

CA2.1 N19M
Which of the following is correct:
a) Under section 128 of the Act, books of account of a company must be kept at the
registered office.
b) Under section 128 of the Act, books of account of a company must be kept at the
corporate office.
c) Under section 128 of the Act, books of account of a company must be kept at the Head
office of the company.
d) Under section 128 of the Act, books of account of a company must be kept at the usual
place of business.

CA2.2 M19M
Which of the following is incorrect:
a) In terms of the general principles of law, any person having the lawful possession of
somebody
else’s property, on which he has worked, may retain the property for non-payment of
his dues on account of the work done on the property.
b) Under section 128 of the Act, books of account of a company must be kept at the
registered office. These provisions ordinarily make it impracticable for the auditor to
have possession of the books and documents.
c) The company provides reasonable facility to auditor for inspection of the books of
account by directors and others authorized to inspect under the Act.
d) Working papers not being his own property, auditor can exercise lien on working papers.

CA2.3 (M20M)
With respect to the forms specified by companies (Cost Records & Audit) Rule 2014,
which of the following is incorrect combination:
a) Form CRA 1- Maintenance of cost records by the Company.
b) Form CRA 2- Intimation of appointment of another cost auditor to Central Government.
c) Form CRA 3- Submission of Cost Audit Report to the Board of Directors of the company.
d) Form CRA 4- Submission of Cost Audit Report by the company to the Registrar

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7. CARO

CARO.1 S-3 / M19R

Eeyore Pvt. Ltd. is incorporated on 1st July, 2017. During the Financial Year ending on
31st March, 2018, the company did not opt for any borrowing at any point of time and
have a total revenue of Rs. 60 Lakh. At the year end, it provides the following
information regarding its paid-up capital and reserve & surplus-

Particulars Amount (in

Rs)
Paid-up Capital
-Consideration received in cash for equity shares 40,00,000
(including unpaid calls of Rs. 5,00,000)
-Consideration received in cash for preference shares 25,00,000
-Bonus shares allotted 7,00,000
-Share application money received pending allotment 10,00,000
Sub-Total 82,00,000

Reserves & Surplus

-Balance in Statement of Profit & Loss 15,00,000
-Capital Reserve 10,00,000
Sub-Total 25,00,000

Grand Total 1,07,00,000

You are provided with the provisions regarding applicability of Companies (Auditor’s
Report) Order, 2016, (CARO, 2016) issued under section 143(11) of the Companies Act,
2013 to a private limited company that it specifically exempts a private limited company
having a paid up capital and reserves and surplus not more than Rs. 1 crore as on the
Balance Sheet date and which does not have total borrowings exceeding Rs. 1 crore from
any bank at any point of time during the financial year and which does not have a total
revenue as disclosed in Scheduled III to the Companies Act, 2013 exceeding Rs. 10 crore
during the financial year.
Considering the information given above, which of the following shall be considered as
a reason regarding applicability or non-applicability of CARO, 2016?
a) Reporting under CARO, 2016 shall be applicable as the company is having a paid up
capital and reserves and surplus of Rs. 1.07 crore i.e. more than Rs. 1 crore as on the
Balance Sheet date.
b) Reporting under CARO, 2016 shall be applicable as the company is having a paid up
capital and reserves and surplus of Rs. 1.02 crore i.e. more than Rs. 1 crore as on the
Balance Sheet date.
c) Reporting under CARO, 2016 shall not be applicable as the company is having a paid up
capital and reserves and surplus of Rs. 0.92 crore i.e. not more than Rs. 1 crore as on the
Balance Sheet date.
d) Reporting under CARO, 2016 shall not be applicable as the company is having a paid up
capital and reserves and surplus of Rs. 0.82 crore i.e. not more than Rs. 1 crore as on the
Balance Sheet date.

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8. INTERNAL CONTROL SYSTEM

ICS.1 S-3
The management of Magoo Ltd. has developed a strong internal control in its
accounting system in such a way that the work of one person is reviewed by another.
Since no individual employee is allowed to handle a task alone from the beginning to
the end, the chances of early detection of frauds and errors are high. CA. Olive has been
appointed as an auditor of the company for current Financial Year 2017-18. Before
starting the audit, she wants to evaluate the internal control system of Magoo Ltd. To
facilitate the accumulation of the information necessary for the proper review and
evaluation of internal controls, CA. Olive decided to use internal control questionnaire
to know and assimilate the system and evaluate the same. Which of the following
questions need not be framed under internal control questionnaire relating to
purchases?
a) Are authorized signatories for purchases limited to elected officials?
b) Are payments approved only on original invoices?
c) Does authorized officials thoroughly review the documents before signing cheques?
d) Are monthly bank reconciliations implemented for each and every bank accounts of the
company?

ICS.2 SM
Controls can be related to an assertion _______
a) directly
b) indirectly
c) directly or indirectly
d) none of the above

ICS.3 SM
Control activities, whether within IT or manual systems, have various objectives and are
applied at various organisational and functional levels. Which of the following is an
example of control activities?
a) Authorization
b) Performance reviews.
c) Information processing.
d) All of the above

9. AUDIT IN AN AUTOMATED ENVIRONMENT

(Only for New Course)

AAE.1 SM
Who is mainly responsible for implementation of internal financial controls in a
company?
a) Auditors
b) Directors
c) Employees
d) Regulators

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AAE.2 SM
Which of the following is a General IT control?
a) IT Environment
b) Application Control
c) Access Security
d) IT Dependent Control

AAE.3 SM
Which of the following is an automated control?
a) Program change
b) System generated report
c) Application control
d) Configurations

AAE.4 M19M / SM
The Guidance Note on Audit of Internal Financial Controls over Financial Reporting has
been issued by?
a) ICAI
b) SEBI
c) MCA
d) RBI

10. BANK AUDIT

(Only for New Course)

BA.1 S-1 / SM
Which of the following is fund based advance?
a) Term loans
b) Cash credits,
c) Demand Loans
d) All of the above

BA.2 S-1 / SM
Which of the following is not classification of NPA?
a) Impaired
b) sub standard
c) doubtful
d) Loss

BA.3 SM
Regulating body in case of banks is:
a) SEBI
b) IRDA
c) RBI
d) ICAI

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BA.4 N19M
Which of the following is correct:
a) Sub-section (1) of section 30 of the Banking Regulations Act, 1949 requires that the
balance sheet and profit and loss account of a banking company should be audited by
a Firm of Chartered Accountants only.
b) Sub-section (1) of section 30 of the Banking Regulations Act, 1949 requires that the
balance sheet and profit and loss account of a banking company should be audited by
a person duly qualified under any law for the time being in force to be an auditor of
companies.
c) Sub-section (1) of section 30 of the Banking Regulations Act, 1949 requires that the
balance sheet and profit and loss account of a banking company should be audited by
a CAG Auditor only.
d) Sub-section (1) of section 30 of the Banking Regulations Act, 1949 requires that the
balance sheet and profit and loss account of a banking company should be audited by
a by a person duly qualified under Banking Law.

BA.5 M19M
Which of the following is correct in case of Banks:
a) The policy of income recognition should be subjective.
b) The policy of income recognition should be objective and based on record of recovery
rather than on any subjective considerations.
c) The policy of income recognition should be objective.
d) The policy of income recognition may be objective or subjective.
BA.6 M19M
You are at the planning stage for one of your firm’s client XYZ Bank for the year ended
31 March 2018. The bank is a commercial bank that provides a number of products and
services to the general public and other segments of the economy in the area of South
Mumbai. You are assigned the audit of one of the branches of XYZ Bank. The audit
engagement team was called to have a detailed discussion on the following matters.
Which one of the following should not be included in the discussion for the audit of
banks?
a) Discuss on the error of last year in the application of accounting policies of the bank.
b) Discuss on the method of fraud if any perpetrated by the bank employee within
particular balances and/or disclosures
c) Discuss with the team the appointment and remuneration to be received on this bank
audit.
d) Discuss the effect of the results of the risk assessment procedures on other aspects to
decide the nature, timing and extent of further audit procedures.

11. GOVERNMENT AUDIT

GA.1 SM
________aims at ascertaining that the expenditure incurred has been on the purpose for
which the grant and appropriation had been provided and that the amount of such
expenditure does not exceed the appropriation made.
a) Audit against provision of funds
b) Propriety audit

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c) Audit of sanctions
d) Audit against rules and orders

GA.2 SM
Article 151 requires that the reports of the C&AG relating to the accounts of the
Union/State shall be submitted to the _______ who shall cause them to be laid before
House of Parliament/State Legislature
a) President/Governor
b) Prime Minister/ Chief Minister
c) Union Finance Minister/State Finance Minister
d) All of the above

GA.3 SM
The C&AG Act gives which of the following power to the C&AG in connection with the
performance of his duties-
a) To inspect any office of accounts under the control of the Union or a State Government
including office responsible for the creation of the initial or subsidiary accounts.
b) To require that any accounts, books, papers and other documents which deal with or
are otherwise relevant to the transactions under audit, be sent to specified places.
c) To put such questions or make such observations as he may consider necessary to the
person in charge of the office and to call for such information as he may require for the
preparation of any account or report which is his duty to prepare.
d) All of the above

12. AUDIT OF DIFFERENT TYPES OF ENTITIES

ADE.1 SM
While auditing a cinema hall, the auditor needs to verify that-
a) entrance to the cinema-hall during show is only through printed tickets
b) tickets are serially numbered and bound into books
c) that for advance booking a separate series of tickets is issued
d) All of the above

13. CONCEPTS IN AUDITING

CIA.1 SM
______ along with other disciplines such as accounting and law, equips you with all the
knowledge that is required to enter into auditing as a profession.
a) Auditing
b) Taxation
c) Finance
d) Taxation and Finance both

CIA.2 S-1 / M19M

______ are self-evident, and occur when auditors form relationships with the client
where they end up being too sympathetic to the client’s interests.
a) Familiarity threats

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b) Self-interest threats
c) Advocacy threats
d) Intimidation threats

CIA.3 SM
The auditor’s ______ safeguards the auditor’s ability to form an audit opinion without
being affected by any influences.
a) Objectivity
b) Independence
c) Confidentiality
d) Integrity

CIA.4 SM
No business or institution can effectively carry on its activities without the help of
proper ______
a) Audit
b) Records and accounts
c) neither (a) nor (b)
d) both (a) and (b)

CIA.5 S-1
Loan or guarantee to or from the concerned client is an example of
a) Self-review threats
b) Self-interest threats
c) Advocacy threats
d) Intimidation threats

CIA.6 S-1/M20M
Direct financial interest or materially significant indirect financial interest in a client is
an example of
a) Self-review threats
b) Self-interest threats
c) Advocacy threats
d) Intimidation threats

CIA.7 S-1
When an auditor deals with shares or securities of the audited company is an example
of:
a) Self-review threats
b) Self-interest threats
c) Advocacy threats
d) Intimidation threats

CIA.8 SM
(IESBA Code) related to an audit of financial statements establishes which of the
following as the fundamental principles of professional ethics relevant to the auditor
when conducting an audit of financial statements:

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a) Integrity;
b) Objectivity;
c) Professional competence and due care;
d) All of the above

CIA.9 S-2
Auditor’s judgment as to sufficiency may be affected by the factors such as:
a) Materiality
b) Risk of material misstatement
c) Size and characteristics of the population.
d) All of the above

CIA.10 S-1
There are two interlinked perspectives of independence of auditors, one, independence
of mind; and two,
a) objectivity
b) Professional competence
c) Integrity
d) independence in appearance

14. AUDIT OF ITEMS OF FINANCIAL STATEMENTS

(Only for New Course)

AFS.1 S-3
The management of BOB Ltd. could not differentiate between any obligation for which
either provisions need to be made or the contingent liability to be shown. The auditor
of the company clarifies the management that the provisions are the amounts charged
against revenue to provide for a known liability, the amount whereof cannot be
determined with substantial accuracy. On the other hand, a contingent liability is a
possible obligation that arises from past events and whose existence will be confirmed
only by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the entity; or a present obligation that arises from past
events but is not recognized because it is not probable that an outflow of resources
embodying economic benefits will be required to settle the obligation or the amount of
the obligation cannot be measured with sufficient reliability. The auditor further
explains the concept with the help of examples. State which of the following examples
the auditor must have provided in respect of contingent liability?
a) Depreciation.
b) Clean-up costs for unlawful environmental damage.
c) Product warranties.
d) Lawsuit against the company where it is more likely that no present obligation exists.

AFS.2 S-3
The notes to the account statement of ASD Ltd. shows the break-up of accounts payable
for the Financial Year 2016-17 as follows:

Accounts Amount (in

Payable Rs.)
Mr. Kraby 1,20,000
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Mr. Runny 40,000
Mr. Bluffy 14,56,000
Total 16,16,000
CA. Sandy, the auditor of ASD Ltd., wants to investigate the valuation of accounts
payable of Mr. Bluffy amounting to Rs. 14,56,000. Which of the following procedures is
best fitted & more reliable to be followed by CA. Sandy to get more reliable evidence
for the existence of such balance as on 31st March, 2017?
a) Inspect each and every journal entry passed in the books of ASD Ltd.
b) Ask ASD Ltd. to provide the details of payment made during the year 2017-18.
c) Inspect the invoices issued by Mr. Bluffy and the payments made.
d) Interrogate the cash manager of ASD Ltd.

AFS.3 M19R / S-3

While auditing the books of accounts of QHMP Ltd., CA. Ranker, the statutory auditor
of the company, came to know that the management of the company has recognized
internally generated goodwill as a fixed asset. CA. Ranker discussed with the
management that according to accounting standards, internally generated goodwill is
not recognized as an asset because it is not an identifiable resource controlled by the
enterprise that can be measured reliably at cost. However, the management is quite rigid
to the accounting treatment followed for internally generated goodwill and not paying
attention to the auditor. Thus, through an example, CA. Ranker explained which type of
goodwill may be recognized as a fixed asset for which the management got justified.
State which of the following examples the auditor must have given to the management?
a) If an item meeting the definition of an intangible asset is acquired in a business
combination, it forms part of the goodwill to be recognized at the date of the
amalgamation.
b) Only those goodwill needs to be recognized as a fixed asset which can be touched like
physical assets, for example, land and buildings.
c) Goodwill is recognized only when there is a contractual or other legal rights for a
physical asset which shall not be amortized over the period.
d) All of the above.

AFS.4 SM
ABC's investee company-XYZ declares final dividend for financial year 2016-17 in the
meeting of board of directors held on April 10, 2017. In which financial year should ABC
account for the dividend income:
a) Proportionately i.e. considering 10 days of financial year 2017-18 and 355 days of
financial year 2016-17
b) Financial year 2016-17
c) Financial year 2017-18
d) Equally between financial year2016-17 and financial year 2017-18

AFS.5 SM
Direct confirmation procedures are performed during audit of accounts receivable
balances to address the following balance sheet assertion:
a) Rights and obligations
b) Existence
c) Valuation
d) Completeness

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AFS.6 SM
During the course of audit of intangible assets, expenditure incurred during following
phase is not capitalised:
a) Development phase
b) Research phase
c) None of the above
d) Both (a) and (b)

AFS.7 SM
Wages paid to workers would qualify as:
a) Revenue expenditure
b) Capital expenditure
c) Revenue or capital expenditure depending upon facts and circumstances.
d) None of the above

AFS.8 SM
Which assertion is common among the statement of profit and loss and balance sheet
captions:
a) Existence
b) Valuation
c) Completeness
d) Measurement

AFS.9 SM
Which of the following is not an example of revenue expenditure -
a) Salaries and wages of employees engaged directly or in-directly in production
b) Repairs, maintenance and renewals of fixed assets
c) Legal and professional expenses
d) development expenditure on land

AFS.10 SM
Observing inventory being counted and personally performing test counts to verify
counts is performed during audit of inventory balances to address the following balance
sheet assertion:
a) Rights and obligations
b) Valuation
c) Completeness
d) Existence

AFS.11 SM
Obtaining trade receivables ageing report and analysis and identification of doubtful
debts is performed during audit of accounts receivable balances to address the
following balance sheet assertion:
a) Valuation
b) Rights and obligations
c) Existence
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d) Completeness

AFS.12 SM
Cut-off testing is performed during audit of sales to address the following assertion:
a) Occurrence
b) Measurement
c) Cut-off
d) All of the above

AFS.13 SM
Search for unrecorded liability is performed during audit of current liabilities to address
the following balance sheet assertion:
a) Valuation
b) Rights and obligations
c) Existence
d) Completeness

AFS.14 SM
All inventory units held by the audit entity and that should have been recorded, have
been recognized in the financial statements. The assertion involved is:
a) Existence
b) Completeness
c) Rights and Obligations
d) Valuation

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1. SA 200 2. SA 300 500.10 d 5. Company BA.2 a

Series Series 501.1 d Audit I BA.3 c
501.2 d BA.4 b
200.1 a 300.1 b CA1.1 c
505.1 a BA.5 b
200.2 c 300.2 a CA1.2 d
505.2 b BA.6 c
200.3 a 300.3 a CA1.3 d
505.3 d
200.4 c 300.4 b CA1.4 d
505.4 b
210.1 c 300.5 a CA1.5 a 11. Govt. Audit
520.1 d
210.2 d 300.6 a CA1.6 d
520.2 c
210.3 b 300.7 b CA1.7 b GA.1 a
520.3 a
210.4 a 300.8 d CA1.8 a GA.2 d
520.4 a
210.5 d 300.9 a CA1.9 a GA.3 d
520.5 b
210.6 d 300.10 d CA1.10 a
520.6 c 12. Audit of
210.7 a 300.11 b CA1.11 c
520.7 a Diff. Types of
210.8 c 315.1 a CA1.12 c
520.8 a Entities
210.9 c 315.2 b CA1.13 a
520.9 c
220.1 b 315.3 c CA1.14 d ADE.1 d
520.10 B
220.2 c 315.4 b CA1.15 a
520.11 d
220.3 d 315.5 a CA1.16 d 13. Concepts in
530.1 d
220.4 d 315.6 b CA1.17 d Auditing
530.2 b
220.5 c 315.7 d CA1.18 d
530.3 b
220.6 b 315.8 a CA1.19 a CIA.1 a
530.4 a
220.7 d 315.9 d CIA.2 a
530.5 c 6. Company
220.8 a 315.10 b CIA.3 b
530.6 d Accounts and
220.9 b 315.11 a CIA.4 b
530.7 a Misc.
220.10 a 315.12 b CIA.5 b
560.1 d
220.11 d 315.13 b CIA.6 b
580.1 a CA2.1 a
230.1 a 315.14 c CIA.7 c
580.2 d CA2.2 d
230.2 c 315.15 c CIA.8 d
CA2.3 d
230.3 d 315.16 a 4. SA 700 CIA.9 d
230.4 b 315.17 d Series 7. CARO CIA.10 d
230.5 b 315.18 a
230.6 315.19 700.1 a CARO 14. Audit of
a b c
700.2 d 1 Items of
230.7 c 320.1 b
230.8 320.2 700.3 d Financial
c b 8. Internal
230.9 330.1 700.4 c Statements
a b Control System
230.10 a 330.2 d 700.5 a AFS.1 d
230.11 b 330.3 c 700.6 d ICS.1 d AFS.2 c
230.12 c 700.7 d ICS.2 c AFS.3 A
230.13 c 3. SA 500 700.8 d ICS.3 d AFS.4 c
240.1 a Series 701.1 d AFS.5 b
240.2 b 705.1 b 9. Automated AFS.6
500.1 b b
240.3 b 705.2 a Audit Envir.
500.2 a AFS.7 c
240.4 c 705.3 d AFS.8
500.3 a AAE.1 b c
240.5 c 705.4 c
500.4 d AAE.2 c AFS.9 d
240.6 c 705.5 a
500.5 d AAE.3 d AFS.10 d
240.7 d 705.6 d AFS.11
500.6 b AAE.4 a a
240.8 d 705.7 c AFS.12
500.7 d c
299.1 b 706.1 b 10. Bank Audit AFS.13
500.8 a d
500.9 d AFS.14 b
BA.1 d

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BASED
MCQs
CA RAVI TAORI CA INTER AUDIT MCQs

CASE STUDY MCQs :- Issued by ICAI

1 (M20R)
M/s NSG & Associates have been appointed as auditors of Viaan Ltd. for the financial year 2019-
20. The processes, operations, accounting and decisions are carried out by using computers in Viaan
Ltd. The auditors understand that there are several aspects that they should consider to determine
the level of automation and complexity in the business environment of Viaan Ltd. While planning
the audit work, the engagement partners discussed with the audit staff about the various types of
controls in the automated environment.
The different types of audit tests that can be used in audit of an automated business environment
were also discussed within the engagement team. The responsibility regarding the Internal
Financial Controls was also discussed in detail. Further the tools and techniques that can be used
to deal with the enormous data and information of Viaan Ltd. were briefed to the audit staff by the
engagement partners.
I. Based on the above facts, answer the following: -
………. are the manual controls that make use of some form of data or information or report
produced from the IT systems and applications.
(a) Application Controls
(b) IT dependent Controls
(c) Automated Controls
(d) General IT Controls
II. Statement 1: Application controls include both manual and automated controls that operate
at a business process level.
Statement 2: General IT Controls apply to mainframe, miniframe as well as end user
environment.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both Statements 1 & 2 are correct
(d) Both Statements 1 & 2 are incorrect
III. …………… are also known as pervasive or indirect controls :-
(a) General IT Controls
(b) Application Controls
(c) IT dependent Controls
(d) None of the above
IV. Which of the following are not the types of audit tests that can be used in the audit in an
automated environment?
(a) Observation
(b) Inspection
(c) Re performance
(d) None of the above
V. …………… is the combination of processes, tools and techniques that are used to tap vast
amounts of electronic data to obtain meaningful information: -
(a) Computer Assisted Audit Techniques
(b) Automated Controls
(c) Data Analytics
(d) None of the above

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2 (M20R)
M/s JK & Associates have been appointed as auditors of Venus Ltd. for the financial year 2019-20.
The team consist of Mr. J & Mr. K both Chartered Accountants as also the engagement partners
and the audit staff consisting of 2 article assistants. While starting the audit work of Venus Ltd, the
engagement partners briefed the audit staff about the audit work, areas to be covered and the
various auditing concepts and their application in the audit of Venus Ltd along with applicable
Standard on Auditing.
Various topics like audit planning, overall audit strategy, audit programme were discussed in detail.
The team was told about the purpose and implication of various statements and guidance notes
issued by the Institute of Chartered Accountants of India (ICAI) from time to time. Mr. K also briefed
the team about the concept of materiality to be applied while planning and performing audit. The
team was also explained in detail about the area where benchmark materiality can be applied in
case of Venus Ltd.
I. Based on the above facts, answer the following:-
1. .………. sets the scope, timing & direction of the audit and guides the development of the
more detailed plan.
(a) Audit Programme
(b) Overall Audit Strategy
(c) Completion Memorandum
(d) Audit Plan
II. Statement 1: The establishment of the overall audit strategy and the detailed audit plan are
not necessarily discrete or sequential process but are closely inter -related.
Statement 2: The auditor shall establish an overall audit strategy that guides the
development of audit plan.
(a) Only Statement 1 is correct
(b) Only Statement 2 is correct
(c) Both Statements 1 & 2 are correct
(d) Both Statements 1 & 2 are incorrect
III. …………… means the amount set by the auditor at less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatement exceeds materiality for the financial
statements as a whole :-
(a) Benchmark Materiality
(b) Materiality in Planning
(c) Performance Materiality
(d) Materiality.
IV. Which of the following is not an example of benchmark that can be used in determining the
materiality in the case of financial statements:-
(a) Total Revenue
(b) Profit before tax
(c) Net Asset Value
(d) None of the above
V.
(i) Guidance notes issued by ICAI provide guidance to members on matters which may arise
in the course of their professional work
(ii) Statements are issued by ICAI with a view to secure compliance by members on some
matters.
(iii) Guidance notes are recommendatory in nature.
(iv) Statements are mandatory in nature.
(a) All the above statements are correct.
(b) Statements 1 & 2 are correct

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(c) Statements 1, 2 & 3 are correct
(d) Statements 1,2 & 4 are correct

3 (M20M)
• M/s TPR & Associates have been appointed as the auditors of Octopus Ltd. for the Financial Year
2019-20.
• During the course of audit, the auditor notices that there is significant change in the number of
debtors of the company. The auditor decided to check the debtors account in detail.
• Further the company has made various provisions like the provisions for taxation, provision for
bad & doubtful debts.
• Also during the current Financial Year, the auditor attended the physical verification of the
inventory being carried out by the management.
• The auditor notices that there is no substantial change in the bifurcation of amount of items
representing the liabilities side of the balance sheet of Octopus Ltd. Still the auditor understands
that he needs to check the liability side in detail.
• Further the company has also recognised various income like interest income and dividend
income which auditor understands need to be checked in detail.
• The auditor is of the understanding that certain matters need to be reported under Companies
Auditors Report Order (CARO).
I. Based on the above facts, answer the following:-
1. ………..is a possible obligation that arises from the past events and whose existence will be
confirmed only by the occurrence/ non occurrence of one or more uncertain future events
not wholly within the control of the entity:-
(a) Provision
(b) Reserve
(c) Contingent Liability
(d) Liability
II. Which of the following is not correct with respect to the inventory held by Octopus
Limited:-
(a) All inventory units held by the company should have been recorded and recognized in the
financial statements.
(b) Any inventory held by a third party on behalf of the company should not be included as
part of the inventory balance.
(c) Inventory should be recognized at cost or net realizable value whichever is lower.
(d) Inventory balance as at the year end does not include any element of next year
III. If the management of Octopus Ltd. refuses to allow the auditor, to send the confirmation
request to the debtors, the auditor should:-
(a) Withdraw from the engagement.
(b) Not listen at all to any requests of the management.
(c) Consider the management’s request for refusal and assess its validity and decide the
nature, timing, extent of his audit procedures accordingly.
(d) Agree to management request and proceed with audit of other items of the financial
statements.
IV. Which of the following statements is not true so far as the liabilities of a company are
concerned:-
(a) Liabilities are the financial obligations of a company including owner’s funds.
(b) Liabilities include borrowing, trade payable and other current liabilities and provisions.
(c) Verification of liabilities is an important as that of assets.
(d) All of the above.
V. Statement 1: Confirmations as well as undelivered letters should be given/ returned to the
auditor and not to the client

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Statement 2: When no reply is received, the auditor should perform alternate procedures
regarding the balances:-
(a) Only statement 1 is correct
(b) Only statement 2 is correct
(c) Both 1 & 2 are correct
(d) Both 1 & 2 are incorrect

4 (M20M)
ABC Ltd. is a company dealing in products namely chocolate and coffee. ABC Ltd. approached audit
firm XYZ & Associates for the statutory audit of its financial statements for the year ended
31.03.2019. The Gross turnover of the company is Rs.105 crores, out of which turnover from one of
its product namely coffee is of Rs.95 crores during the immediate preceding Financial Year.
During the course of Audit, XYZ & Associates found certain delay in the payment of the Employees
Provident Fund by ABC Ltd. They understand that the same need to be reported under the relevant
provisions of Companies (Auditors Report) Order 2016.
During the FY 2018-2019, Mrs. X wife of CA Mr. X who is partner in XYZ & Associates acquires certain
shares of ABC Ltd. The audit firm is of the opinion that this may call for a disqualification for the
firm for being working as the auditor of the company under the relevant provisions of the
Companies Act 2013.
Further, ABC Ltd. also approached the auditors to provide them the Investment Banking service to
which the auditors denied as per the provisions of Companies Act 2013.
During the course of audit, XYZ & Associates has reason to believe that an offence of fraud involving
some amount has been committed in the ABC Ltd. by its General Manager. The auditors understand
that there is a requirement for reporting of fraud by the auditors under the Companies Act and the
relevant rules.
I. Based on the above facts, answer the following:-
1. After the appointment of XYZ & Associates, ABC Ltd. should inform the auditor and file a
notice of such appointment with registrar within:-
(a) 60 days
(b) 30 days
(c) 15 days
(d) 20 days
II. If Mrs. X acquires security exceeding the prescribed limit in the ABC Ltd., then XYZ &
Associates shall take corrective actions within………….days. What is the prescribed limit:-
(a) 100 days, Market Value Rs 1,00,000
(b) 60 days, Face value Rs 1,00,000
(c) 90 days, Face value Rs 1,00,000
(d) 15 days, Market Value Rs 1,00,000
III. Under which section reporting of fraud by an auditor to the Central Government is required
and what is the amount of fraud:-
(a) Section 143(12), 1 crore & above
(b) Section 139(12), 1 crore & above
(c) Section 143(12), 2 crore & above
(d) None of the above
IV. What is the requirement for ABC Ltd as per the relevant provisions regarding maintenance
of cost records:-
(a) Maintenance of cost records is mandatory, in form CRA 1.
(b) Maintenance of cost records is mandatory, in form CRA 2.
(c) Maintenance of cost records is mandatory, in any general format.

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(d) No requirement of maintenance of cost records
V. Under relevant clause of CARO,2016, XYZ & Associates is required to report the extent of
arrears of Employees Provident Fund as at the balance sheet date:-
(a) Exceeding 9 months
(b) Exceeding 3 months
(c) Exceeding 6 months
(d) Exceeding 12 months

ADDITIONAL CASE STUDY MCQs FOR PRACTICE

(OTHER THAN ICAI)

1.
X ltd. had a net worth of Rs. 1,600 cr because of which Ind AS became applicable to them. The
company had various derivative contracts like options, forward contracts, interest rate swaps etc.,
which were required to be fair valued. The company got the fair valuation done through an external
third party.
The statutory auditors involved an auditor’s expert, Mr. Raju, to audit valuation of derivatives.
Auditor and auditor’s expert were new to each other but developed a good bonding during the
course of audit. The auditor had obtained information on the competence, capability & objectivity
of the expert before appointing him. In order to complete the audit within time, the auditor did
not enter into any agreement with the auditor’s expert.
X Ltd has an employee Mr. Kaju, who being a Chartered Financial Analyst is an expert in valuation
of derivatives. The auditor was of the opinion that it would be beneficial to use the services of Mr.
Kaju as per SA 620 since he was already aware of the company’s business.
Mr. Raju submitted his valuation report to the auditor within 7 days of his appointment. After
evaluating the report, the auditor concluded that Mr. Raju’s work was not adequate for his
purpose. The auditor was neither able to engage any other expert due to time constraint nor he
could resolve the matter through further audit procedures.
The auditor was in the dilemma of the type of opinion to be given & weather to refer the name of
Mr. Raju (auditor’s expert) in his audit report. Referring the above case answer the following:
VI. Before appointing Mr. Raju as an expert, the auditor needs to obtain information on the
competence, capability & objectivity of the expert. Which of the following is not the source
of such information?
a) Published papers or books written by the expert.
b) Discussion with that expert.
c) Discussion with management of X Ltd. about the expert.
d) Discussion with other auditors who are familiar with that expert
VII. Whether any agreement is required between the auditor & auditor’s expert? If yes, then in
which form?
a) Yes, such agreement can be in any form.
b) Yes, such agreement shall be in the form of written representation
c) Yes, such agreement shall be in the form of Engagement letter
d) No, agreement is not required.
VIII. Can the auditor use Mr Kaju’s (employee of X Ltd.) services as per SA 620? Comment
a) Auditor’s expert should not have relation with auditee.
b) Auditor’s expert can be anyone who is an expert in a field other than accounting &
auditing.
c) Auditor’s expert can be anyone with whom he has a formal agreement.

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d) Auditor’s expert can be anyone whose work is used by the auditor in obtaining sufficient
& appropriate evidence.
IX. What should the auditor do when the expert’s work is inadequate for the auditor’s purpose
& auditor cannot resolve the matter through further audit procedures?
a) Express modified opinion as per SA 705. (Answer)
b) Ignore the expert and give an unmodified opinion.
c) Communicate with those charge with governance about the inadequacy
d) None of the above
X. Suppose the auditor gave an unmodified opinion. Can he refer the name of the auditor’s
expert (Mr. Raju) in the auditor’s report?
a) Yes, reference can be made as per his wish.
b) Yes, reference should be made to make modification more clear.
c) Yes, only if it is required as per law & regulation (Answer)
d) No, reference is not required.

2.
Bharat Ltd. is an Indian state government owned oil and gas company headquartered in New Delhi.
It is the largest commercial oil company in the country, with a net profit of INR 19,110 crore for the
financial year 2017–18. It ranked 21st in Fortune India 500 list for year 2018 and 117th in Fortune
Global 500 list of world's largest companies in the year 2019. As of 31 March 2019, Bharat Ltd.’s
employee strength is 30,145, out of which 19,545 are in the officer cadre. It is India's largest
downstream oil company, with a work force of more than 33,000 employees, a turnover of Rs.
4,96,513 crores and a net profit of Rs. 20,355 crores in FY 2019-20.
Bharat Ltd.’s business interest overlaps the entire hydrocarbon value-chain, including refining,
pipeline transportation, and marketing of petroleum products, exploration and production of crude
oil, natural gas and petrochemicals.
Bharat Ltd has ventured into alternative energy and globalization of downstream operations. It has
subsidiaries in Sri Lanka, Mauritius, and the Middle East.
In May 2020, Bharat Ltd. became India's most profitable state-owned company for the second
consecutive year, with a record profit of ₹20,355 crores in 2019-20, followed by Oil and Natural Gas
Corporation, whose profit stood at ₹18,941 crores. The company had a customer base all over the
world. In order to serve the huge cliental base, the company required huge amount of investment
in fixed asset & had to maintain stock of refined oil at multiple places.
Bharat Ltd. accounted for nearly half of India's petroleum products market share, 35% national
refining capacity (together with its subsidiary), and 71% downstream sector pipelines through
capacity. The Bharat Group owned and operated 11 of India's 23 refineries with a combined refining
capacity of 80.7 MMTPA (million metric tonnes per annum). Indian Oil's cross-country pipeline
network, for transportation of crude oil to refineries and finished products to high-demand enters,
spans over 13,000 km. The company had a throughput capacity of 80.49 MMTPA for crude oil and
petroleum products and 9.5 MMSCMD for gas.
The company has appointed Ishan & Co. as the internal auditor & Shalu & Co. as the statutory
auditor of the company. CA Ishan conducted the physical verification of inventory & fixed asset at
the year-end, and handed over the report of such verification to CA Shalu. CA Shalu was in dilemma
whether she could rely on the report of internal auditor for the statutory audit.
Further CA Shalu is of the opinion that internal auditor could be used to provide direct assistance
for the purpose of statutory audit. She wanted the internal auditor to perform audit procedures
under her direction, supervision & review. However, she was not sure about the areas & the extent
of work of internal auditor which can be used.
I. Which of the following is not included in the scope of internal audit function?
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a) Activities relating to risk management.
b) Activities relating to internal control.
c) Activities relating to preparation of financial statements
d) Activities relating to governance.
II. Can CA Shalu rely on the physical verification report given by the internal auditor CA Ishan
a) No, she cannot rely.
b) Yes, only after detailed check.
c) Yes, only after performing sufficient audit procedures on the internal auditor’s work.
d) Yes ,but the internal auditor will continue to be responsible for such work.
III. If using internal auditors to provide direct assistance is not prohibited by law & the
external auditor wants such direct assistance, the external auditor shall evaluate-
a) The level of competence of internal auditors.
b) The existence & significance of threats to objectivity of the internal auditors
c) (a) & (b)
d) (a) or (b)
IV. CA Shalu can use direct assistance from CA Ishan with respect to which work-
1. Complex in nature
2. Requires significant judgements
3. Risk of material misstatement is high
4. None of the above
V. CA Shalu shall not use the work of CA Ishan, if she determines that-
1) The internal audit function’s organisational status & relevant policies & procedures do
not adequately support the objectivity of internal auditor.
2) The internal auditor lacks competency
3) The internal auditor does not apply a systematic & disciplined approach
a) Only 1
b) 1&2
c) 2&3
d) 1, 2 & 3

3.
Sharma Group is an Indian conglomerate founded by Anuj Sharma in Mumbai in 1949. Sharma
Group is one of the oldest and largest conglomerates based in Mumbai, Maharashtra. The group
comprises 30 companies and its flagship company (also the parent company) Sharma Automotive
Ltd. is ranked as the world's seventh largest two- and three-wheeler manufacturer. Some of the
notable branches the group are Sharma Finserv Ltd, Hercules Hoists Ltd ,Sharma Electricals, Sharma
Hindustan Ltd and Sharma Holding & Investment Ltd. Hercules Hoists Ltd is the only foreign branch
of the group located in Nepal.
Sharma Group is also involved in a variety of welfare activities, which are carried out with the
support of its companies and trusts. The social and welfare objectives of the Sharma Group are
being fulfilled through the many Trusts and Foundations it has established. Spending up to ₹10
crore every year.
The parent company, Sharma Automotive was desirous of appointing RGV & Co. as the principal
auditor of the whole group. RGV & Co. has expertise in auditing companies of automobile industry.
Sharma Group is involved in various industries that include automobiles (2- and 3-wheelers), home
appliances, lighting, iron and steel, insurance, travel and finance. The partners of RGV & Co. had a
meeting where they considered the factors regarding whether their own participation would be
sufficient to be able to act as principal auditor. They concluded that work of the component
auditors would be required to be used, since they were expert in auditing companies of

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automobiles industry only. Further RGV & Co. was informed about the auditor of Hercules Hoists
Ltd, who was an accountant graduated from the Institute of Nepal.
The component wise breakup of revenue of Sharma Group was-
Components % of Revenue
Sharma Automotive Ltd. (Parent Co.) 60%
Hercules Hoists Ltd (Foreign Branch) 10%
Other Branches 30%
Before using the work of other auditors, the principal auditor, RGV & Co. performed procedures to
obtain sufficient & appropriate audit evidence that the work of other auditors is adequate for the
principal auditor’s purposes. RGV & Co. conducted a meeting with the other auditors for the same.
They also requested the other auditors to provide a written summary of their procedures &
findings.
For the foreign branch, Hercules Hoists Ltd, RGV & Co. concluded based on his procedures that the
work of the component auditor cannot be used. Moreover they were not able to perform further
sufficient additional procedures for the same. RGV & Co. was in a dilemma regarding the type of
opinion to be given in such case.
I. The auditor should consider whether the auditor’s own participation is sufficient to be able
to act as the principal auditor. For this purpose, auditor should check.
1) The materiality of the portion of financial information audited by principal auditor.
2) The performance of additional procedures as set out in SA 600 regarding the components
audited by other auditor resulting in the principal auditor having significant participation
in such audit.
3) The risk of material misstatement in financial information of the components audited by
the other auditor.
4) The principal auditor’s degree of knowledge regarding the business of the components.
a) Option 1,2,3&4
b) Option 1, 2 & 3
c) Option 1 & 2
d) Option 3 & 4
II. As per SA 600, what should be considered by the principal auditor in the context of the
component auditor if he is not a member of the ICAI?
a) Experience
b) Professional competence
c) Independence
d) None of the above
III. RGV & Co. requested the other auditors to provide a written summary of their procedures
& findings. Such written summary may be in the form of-
a) Questionnaire
b) Check-List
c) Written representation
d) (a) or (b)
IV. RGV & Co. concluded based on their procedures that the work of the component auditor
cannot be used & also they were not able to perform sufficient additional procedures
regarding the same. Which type of opinion should be expressed in such case?
a) Adverse Opinion
b) Disclaimer of Opinion
c) Qualified Opinion
d) (b) or (c)
V. Hercules Hoists Ltd was being audited by an accountant in Nepal. RGV & Co. was confused
about who would be responsible for the reporting of financial information of the entity?

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a) The accountant in Nepal
b) RGV & Co.
c) Either (a) or (b)
d) Management will decide.

4.
Vodafone India is the Indian subsidiary of UK-based Vodafone Group plc and is a provider of
telecommunications services in India with its operational head office in Mumbai. As of March 2018,
Vodafone India has a market share of 21% and with its merger with Idea, the collective Vodafone
Idea network has approximately 375 million subscribers and is the largest mobile
telecommunications network in India.
Since 2011, Vodafone launched 3G network using 900 MHz and 2100 MHz The first city to receive
3G service was Lucknow in Uttar Pradesh.
On 28 June 2012, Vodafone launched a new international roaming package under which the users
shall have not to pay multiple rentals in the countries they are visiting.
On 19 May 2015, TRAI announced that Vodafone had been awarded spectrum in 9 circles for 3G
coverage, bidding around 11617.86 million (the second highest amount in the auctions) for the
spectrum.
On 8 December 2015, Vodafone announced the roll out of its 4G LTE coverage in India on 1.8 GHz
and 2.1 GHz bands starting from Kochi. The service became available to customers in India
nationally in 2017, with plans for further expansion. Vodafone now starts 2100Mhz and 2500 MHz
for 4G by which customers will get superior 4G speed than previous.
Vodafone India had started rolling its 4G Volte services in the country under the tag Vodafone Super
Volte. Gujarat was the first circle to receive that service.
The Telecom Regulatory Authority of India (TRAI) is the authority in India, which regulates telecom
services, including fixation/revision of tariffs for telecom services. TRAI requires the telecom
companies to provide circle-wise Profit & Loss in a specific format, which is suitable for decision
making of license fees. In earlier years, many telecom companies did not complied with this
requirement, because of which TRAI was unable to take correct decisions. No changes or deletions
were allowed in such format. Thus Vodafone India had to prepare two financial statements, one to
be presented in Annual General Meeting & other for TRAI.
Vodafone India also wanted to show the number of male & female employees working for them &
their average salary at the year-end. The auditor refused to show such information along with the
audit report as it is not an integral part of financial statements & is not related to it. However,
management was firm that it wanted such information to be presented along with audit report.
Further TRAI also required the telecom companies to verify the exact figure of Average Revenue
per User (ARPU) as on the year-end. Vodafone India approached their auditor for providing a
written confirmation of accuracy of figures of ARPU. The auditor was in dilemma which type of
statement he should provide in such a case.
I. TRAI had asked for circle wise profit and loss in a specific format, which is suitable for decision
making of license fees. This relates to which financial reporting framework.
a) General purpose financial reporting framework
b) Special purpose financial reporting framework
c) Government purpose financial reporting framework
d) Specific purpose financial reporting framework
II. State whether true or false:
Compliance Framework gives permission,
1. For additional Disclosures or
2.To amend requirement of Financial Reporting Framework, for better financial presentation

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a) True, as compliance framework does permits the same.
b) False, as only fair presentation framework permits the same.
c) True, as docility Framework does permits the same.
d) False, as only equitable presentation framework permits the same.
III. Identify the expected wording of Compliance Framework:
a) Whether financial statements give true & fair view.
b) Whether financial statements are as per compliance framework.
c) Auditor did not receive any information which suggests material misstatement exist.
d) None of the above
IV. Identify the correct one:
a) Supplementary Information is the additional information which is not required as per
financial reporting framework but is included voluntarily or as per law.
b) Supplementary Information is the additional information which is required as per financial
reporting framework or voluntarily or as per law.
c) Supplementary Information is the additional information which is required as per financial
reporting framework and not voluntarily or not as per law.
d) None of the above
V. Which from the following is a written confirmation of accuracy of facts?
a) Audit Report
b) Certificate
c) Review Report
d) None of the above

5.
A company “Central Power Distribution Company Ltd” provided the extract of its financial results
as follows-
During the year under review, the company earned an aggregate income of Rs 15,898.12 crore. The
financial performance of the Company is as follows:
2019-20 2018-19
S.No Particulars
(Rsin Crores) (Rs in Crores)
1. Revenue from Sale of Power 11,185.62 9,532.35
2. Fuel Surcharge Adjustment [FSA] 1,666.67 2,258.44
3. Revenue from Subsidies and Grantss 1,778.88 2,620.77
4. Other Income 1,068.73 550.41
5. Withdrawal of Depreciation on CC Assets 198.22 170.22
Total Income 15,898.12 15,132.19
6. Power Purchase Cost 15,235.31 12,675.67
7. Employee Benefit expense 766.15 830.52
8. Operation and Other Expenses 340.26 275.44
9. Interest and Finance Charges 1,181.64 935.50
10. Depreciation 452.79 390.35
11. Other Expenses 0.53 16.77
12. FSA Written off 948.17 -
13. Fixed Assets RESCOs- Write Off 17.17 -
14. FSA and Other Provisions 901.17 -
15. Provision for Govt. Receivables 3,877.87
Total Expenses 23,721.06 15,124.26
16. Profit/(Loss) Before Tax ( 7,822.94) 7.92
17. Provision for Income Tax - 1.28
18. Deferred Tax Income Provision 104.65 2.60
Net Profit/(Loss) (7,718.29) 4.05

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During the Financial Year 2019-20, company has incurred a Business Loss of Rs. 7,718.29 Crore
which include operational loss of Rs. 2,078.04 crores. The operational loss is due to increased power
purchase costs, and the Government of Andhra Pradesh (GoAP) has not subsidized in total the
Expensive Power purchases and the interest paid for Rs. 790.13 Crores on Short Term Loan drawn
for purchase of Expensive Power during the Financial Year 2019-20 which also resulted in loss for
the current financial year 2019-20. Apart from the above the Company had written off unapproved
Fuel Surcharge Adjustment [FSA] by Honourable APERC for FY 2016-17 to 2018-19 amounting to Rs.
948.17 Crores. During the year, the company had also made provisions towards unbilled and
uncollected FSA of Rs. 637.81 Crores for the period 2016-17 to 2018-19 (Ist Quarter) due to stay on
FSA billing and collections as per the Orders of Honourable High Court, and Government receivables
to the extent of Rs.181.23 crores which were due towards Single Bulb subsidy, Tatkal Subsidy and
Subsidy receivable from Government in support of Third Transfer Scheme in respect of taking over
of REC Loan and Vidyut bonds. The Government receivables towards addition power subsidy of Rs.
3,877.87 Crores have been provided as doubtful. The above provisions have been made due to non-
commitment by GoAP, non-receipt of subsidy from GoAP and there being no provision in budgetary
support for Government subsidy towards additional power during F.Y. 2020-21.
M/s Sharad & Associates, Chartered Accountants were appointed by Comptroller and Auditor
General of India (C&AG) as the Statutory Auditors of the Company for the financial year 2019-20.
M/s. Narasimha Murthy & Co, Chartered Accountants were appointed as Cost Auditors of the
Company for the financial year 2019-20.
The statutory auditor gave disclaimer of opinion in its report regarding the following matters-
1)Purchase of power: In Terms of GO. Ms. 53, Energy (Power III), April 28, 2015, more specifically
defined in the Note No. 4 of Notes forming part of Financial Statements the Government of Andhra
Pradesh has reallocated the power sharing among the all DISCOM’s with retrospective effect from
June 9, 2012, however no adjustments are carried out for the transactions already incorporated in
the books of accounts till March 31, 2015 at the original ratio of allocation. The impact of such
revision, if any, on the power purchase cost and its corresponding liabilities/receivables could not
be ascertained.
2) Balance conformation: The Company has not obtained confirmations of balances from Sundry
Creditors, Loans & Advances and Current Liabilities. Balances under these heads are subject to
reconciliation and review. The impact, if any that may result on reconciliation and review of the
balances under various heads in Assets and Liabilities could not be determined.
The statutory auditor gave qualified opinion in its report regarding the following matters-
1) Tangible assets and depreciation thereof:
(a) It was observed that defective meters which were being replaced with new meters are not
being devoluted from the SAP accounting system and there is no subsequent tracking of
such devoluted meters, these results in asset being carried in the books in spite of non-
existence. Furthermore, it was observed that new meters installed in lieu of the defective
meters are reduced from the stock but the same is not being capitalized, thus resulting in
non-adherence to the Accounting Standard 10 – “Accounting for fixed assets”. The impact
on the carrying value of asset and the on sequential effect on the depreciation and the loss
was material but not pervasive.
(b) Capitalization of employee cost of Rs 58.70 Crores (Previous year Rs. 49.92 Crores) and
Administrative and Genera expenses of Rs.10.35 crores (Previous year Rs. 8.80 crores) is
being carried out at 10% on the cost of capital works, more specifically detailed in Note No.
3 (vi)(a) of Notes forming part of Financial Statements, instead of capitalizing the directly
attributable costs in accordance with Accounting Standard – 10, ‘Accounting for Fixed
Assets’. The impact on the carrying value of asset and the consequential effect on the
depreciation and the loss was material but not pervasive.
Before modifying the opinion, the auditor had communicated with those charged with
governance in accordance with the Standards of Auditing issued by ICAI.
I. Pervasive effects on the financial statements are those that, in the auditor’s judgment:

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a) are not confined to specific element
b) if confined, represent a substantive portion in financial statement
c) are disclosure which are fundamental to user understanding
d) All of the above
II. What kind of opinion will be given by auditor in the following circumstance ?
Sufficient and appropriate audit evidence is not available but it’s not pervasive.
a) Disclaimer of opinion
b) Qualified opinion
c) Adverse opinion
d) Unmodified opinion
III. When auditor expects to modify the opinion in the audit report, the auditor shall
communicate to "those charged with governance".
a) True, SA 705 specifies the same
b) False, SA 705 does not specify the same
c) True, SA 706 specifies the same
d) False, SA 706 does not specify the same
IV. Suppose if any limitation is imposed on the auditor’s scope of work after acceptance, which
is likely to result in qualification or disclaimer, the auditor shall request management to
remove such limitation. If management refuses, auditor should go to those charged with
governance and shall perform alternate audit procedures. If the auditor is not able to obtain
sufficient and appropriate audit evidence and its pervasive, the auditor shall give a (if its early
stage):
a) Disclaimer of opinion
b) Qualified opinion
c) Adverse opinion
d) Resign from engagement
V. If any limitation is imposed on the auditor’s scope of work after acceptance, which is likely
to result in qualification or disclaimer, the auditor shall request management to remove such
limitation. If management refuses, auditor should go to those charged with governance and
shall perform alternate audit procedures. If the auditor is not able to obtain sufficient and
appropriate audit evidence and its pervasive, the auditor shall give a (if it is an advanced
stage):
a) Disclaimer of opinion
b) Qualified opinion
c) Adverse opinion
d) Resign from engagement

6.
AN Batliboi & Co. LLP was the auditor of Chirag Forge Limited. Following is the extract of audit
report for the FY 2019-20.
Independent Auditor's Report
To The Board of Directors of Chirag Forge Limited,
We have audited the accompanying consolidated financial statements of Chirag Forge Limited (“the
Company”) and its subsidiaries, associates and joint ventures (collectively referred to as “the
Group”), which comprise the consolidated Balance Sheet as at March 31, 2020, and the
consolidated Statement of Profit and Loss and the consolidated Cash Flow Statement for the year
then ended, and a summary of significant accounting policies and other explanatory information.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the
consolidated financial statements give a true and fair view in conformity with the accounting
principles generally accepted in India:
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(a) in the case of the consolidated Balance Sheet, of the state of affairs of the Group as at
March 31, 2020;
(b) in the case of the consolidated Statement of Profit and Loss, of the profit for the year ended
on that date; and
(c) in the case of the consolidated Cash Flow Statement, of the cash flows for the year ended
on that date.
Emphasis of Matter
We draw attention to the following emphasis of matter paragraph included in the audit reports as
under:
ALSTOM Chirag Forge Power Limited vide report dated May 6, 2020 issued by an Independent firm
of Accountants, reproduced by us as under:
“We draw your attention regarding the uncertainty arising out of the stay imposed by the Hon’ble
High court of Gujarat on the development and construction work being carried out by the joint
venture ALSTOM Chirag Forge Power Limited and Kalyani ALSTOM Power Limited to set up a
manufacturing facility at Adani Port and Special Economic Zones (APSEZ) prior to the developer of
the SEZ obtaining clearance from the ministry of environment and forests. The future outcome of
the matter cannot presently be determined and hence no impact thereof has been considered by
the management in the preparation and presentation of these consolidated financial statements.
Our opinion is not qualified in respect of this matter.”
Other Matters
We did not audit the financial information of all the overseas subsidiaries whose financial
information, as stated in notes of consolidated financial statements, have been prepared under
accounting principles other than accounting principles generally accepted in India (“Indian GAAP”),
and which, in the aggregate, reflect total assets of Rs. 19,014.74 Lakhs as at year ended December
31, 2019 and March 31, 2020 as applicable, revenues of Rs. 39,397.04 Lakhs and net cash outflows
of Rs. 188.27 Lakhs, for the year ended December 31, 2019 and March 31, 2020 as applicable. We
also did not audit the financial information of an overseas associate whose financial information
reflects net income of Rs. Nil Lakhs. Such financial information have been audited by other auditors
who have submitted their audit opinions, prepared under International auditing standards, to the
management of the respective companies, copies of which have been provided to us by the
Company. The management of the Company has converted these audited financial information and
financial statements as the case may be of the Company’s subsidiaries to Indian GAAP, for the
purpose of preparation of the accompanying consolidated financial statements. Our opinion,
insofar as it relates to these subsidiaries and associates is based solely on the reports of the other
auditors and the review of the aforesaid conversion undertaken by the management. Our opinion
is not qualified in respect of this matter.
The internal auditor was of the opinion that if any matter is provided in Emphasis of Matter
paragraph, the statutory auditor shall modify his opinion.
I. ________is used by the auditor to refer the matter appropriately presented in financial
statement, with the intention to highlight the matter.
a) Other Matter Para
b) Emphasis of Matter Para
c) Opinion para
d) None of the above
II. Examples where other matter para will be used:
a) Prior period item.
b) Amalgamation
c) Subsidiary is not audited by the auditor
d) (a) & (c)
III. When auditor expects to include emphasis of matter para or other matter para in the audit
report, the auditor shall communicate to _________, the fact and the expected wordings of
this para.
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a) those charged with governance
b) management
c) management & those charged with governance
d) any of the above
IV. The auditor shall include Other Matter Paragraph in the auditor’s provided-
a) It is not prohibited by law or regulation.
b) When SA 701 applies, the matter has not been determined to be a key audit matter to be
communicated in the auditor’s report.
c) (a) & (b)
d) (a) or (b)
V. EOM para is included in case of modified opinion ?
a) Yes, since only those matters are provided in EOM para where auditor considers it
necessary to draw user’s attention, due to which the auditor modifies his opinion.
b) No, since only those matters are provided in EOM para where auditor considers it necessary
to draw user’s attention & the auditor would not be required to modify his opinion.
c) Yes, since only those matters are provided in EOM para where auditor considers it
necessary to draw user’s attention which are material & pervasive.
d) None of the above.

7.
You are an audit senior of JOY& Co and are responsible for planning the audit of Pritam for the year
ended 31 March 20X8.
Pritam is a charity which was established over five years ago. The charity's aim is to provide support
to children from disadvantaged backgrounds who wish to take part in sports such as tennis,
badminton and football.
Pritam has a detailed constitution which explains how the charity's income can be spent. The
constitution also notes that expenditure relating to the administration of the charity cannot exceed
10% of the charity's income in any year. Pritam currently employs three permanent members of
staff. At present, 100 volunteers work for Pritam: some commit up to three days a week and others
help out on an ad hoc basis. The organisation, including its finance department, is primarily run by
volunteers.
The charity's income is derived wholly from voluntary donations. Sources of donations include the
public in the form of cash collected in buckets by volunteers in shopping areas, and from generous
individuals.
I. Based on your understanding of the nature of Pritam you have identified that income is
primarily in the form of cash. Which element of audit risk is increased by this fact?
a) Detection risk
b) Inherent risk
c) Control risk
d) Business risk
II. Your audit partner has highlighted to you that it is imperative that JOY & Co acts in line with
SA 315 Identifying and assessing the risks of material misstatement through understanding
the entity and its environment. This means it must identify and assess the risks of material
misstatement at both the financial statements level and at the assertion level, for classes of
transactions, events and their related disclosures, and account balances and their related
disclosures.
Which of the following statements is NOT an explanation of why SA 315 requires a risk
assessment to be carried out at the planning stage?
a) The risk assessment will help the audit team gain an understanding of the entity for audit
purposes

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b) The risk assessment will enable the audit senior to produce an accurate budget for the audit
assignment
c) The risk assessment will form the basis of the audit strategy and the detailed audit plan
d) Once the risks have been assessed, JOY & Co can select audit team members with sufficient
skill and experience to maximise the chance of those risks being addressed
III. You have identified several audit risks which you feel your team will need to address. One
such audit risk relates to the risk that income may be understated in the financial statements.
You are concerned that not all income may be recorded.
Which of the following statements is NOT a valid response to this audit risk?
a) Obtain a breakdown of the income recorded from the cash that was collected in buckets,
and vouch a sample of entries back to the volunteer in order to determine which volunteer
collected the relevant donations
b) Perform analytical procedures on the level of donations in shopping areas per volunteer
c) Review the internal controls relating to cash collected in buckets to determine whether
buckets are sealed, sequentially numbered and signed in and out by Pritam's volunteers
d) Observe the counting and recording of proceeds from collections, to determine whether
appropriate segregation of duties is in place
IV. Another identified audit risk is the susceptibility of Pritam's business to fraud due to the high
levels of cash involved.
Which of the following statements correctly describes the auditor's responsibilities in
accordance with SA 240 The auditor's responsibilities relating to fraud in an audit of financial
statements?
a) The auditor is responsible for the prevention and detection of fraud and error
b) The auditor is not responsible for the prevention of fraud and error but is responsible for
detection
c) The auditor is responsible for obtaining reasonable assurance that the financial statements
are free from material misstatement whether caused by fraud or error
d) The auditor is responsible for detecting all errors and should attempt to detect fraud where
information comes to light as a result of standard audit procedures
V. The audit manager has noted in the detailed audit plan that Pritam's control environment
may be weak.
Which TWO of the following statements are valid reasons as to why Pritam may have a weak
control environment?
a) Pritam has a detailed constitution which explains how the charity's income can be spent
b) Pritam's finance department relies on volunteers who may not have accounts experience
c) A high proportion of the income of Pritam is cash
d) Understaffing in the finance department at certain times is due to the ad hoc nature of
volunteer working hours

8.
You are the audit manager of Kishor & Co. Your client is Santosh Kitchen Designs Co (Santosh), who
is a kitchen manufacturer. The company's year-end is 31 March 20X2.
Santosh has had a challenging year. Gajendra Co, a major customer of Santosh who owes Rs.0.6 cr
is experiencing financial difficulties. However, the balance is included within the financial
statements. The sales director has recently left Santosh and has yet to be replaced. As a result,
Santosh has struggled to win any new business in the last six months.
The monthly cash flow has shown a net cash outflow for the last two months of the financial year
and is forecast as negative for the forthcoming financial year
You have performed some analytical procedures on the draft financial statements and have
calculated the following ratios:
20X2 20X1
Draft Actual
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Inventory turnover days 95 97
Receivables days 65 49
Payables days 120 86
Due to its poor cash flow, Santosh missed a loan repayment and, as a result of this breach in the
loan covenants, the bank has asked that the loan of Rs.4.8 cr be repaid in full within six months
I. Which of the following are potential indicators that Santosh is not a going concern?
(1) The breach of the loan covenants
(2) The departure of the sales director
(3) The fall in inventory turnover days
(4) The negative cash flow figures
a) 1, 2 and 3
b) 2, 3 and 4
c) 1, 3 and 4
d) 1, 2 and 4
II. You are reviewing the management's assessment of Santosh's ability to continue as a going
concern. What period must management's assessment cover?
a) At least 12 months from the date of the auditor's report
b) At least 12 months from the date of the financial statements
c) A maximum of 12 months from the date of the auditor's report
d) A maximum of 12 months from the date of the financial statements
III. You are concerned that the debt due from Gajendra Co may not be recoverable and believe
that this would have a significant effect on the viability of Santosh. Which of the following
would provide you with the most reliable evidence regarding the recoverability of this debt?
a) A management representation confirming its recoverability
b) The response from the customer to your circularisation performed earlier in the audit
confirming the amount owed
c) Identification during your subsequent events review of a cash receipt for the full amount
d) Correspondence between Santosh's lawyer and Gajendra Co's lawyers confirming that the
amount will be paid
IV. You have raised your concerns with management regarding the ability of Santosh to repay
the Rs.0.6 cr loan in six months. The directors have assured you that this will be possible as
they have a contingency plan.
Which of the following courses of action by the directors would provide you with the most
assurance that Santosh will be able to meet this commitment?
a) Plans to dispose of a property valued at Rs.5.2cr in July 20X2
b) The reopening of negotiations regarding the terms of the loan with the current provider
c) Plans to substantially cut production costs by moving production to Asia
d) Agreement by an alternative financial institution to lend Santosh Rs.4.8cr in August 20X2
V. You have concluded that Santosh is not a going concern.
If the directors refuse to amend the financial statements which of the following correctly
describes the impact on the auditor's report?
Audit opinion Explanation of circumstances
a) Adverse opinion Basis for adverse opinion
b) Qualified opinion Basis for qualified opinion
c) Adverse opinion Material Uncertainty Related to Going Concern section
d) Qualified opinion Material Uncertainty Related to Going Concern section

9.
Gunjan Co specialises in manufacturing equipment which can help to reduce toxic emissions in the
production of chemicals. The company has grown rapidly over the past eight years and this is due
partly to the warranties that the company gives to its customers. It guarantees its products for five

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years and if problems arise in this period it undertakes to fix them, or provide a replacement
product.
You are the manager responsible for the audit of Gunjan and you are performing the final review
stage of the audit and have come across the following issues.
Receivable balance owing from Yogesh Co.
Gunjan has a material receivable balance owing from its customer, Yogesh Co. During the year-end
audit, your team reviewed the ageing of this balance and found that no payments had been
received from Yogesh for over six months, and Gunjan would not allow this balance to be
circularised. Instead management has assured your team that they will provide a written
representation confirming that the balance is recoverable.
Warranty provision
The warranty provision included within the statement of financial position is material. The audit
team has performed testing over the calculations and assumptions which are consistent with prior
years. The team has requested a written representation from management confirming the basis
and amount of the provision are reasonable.
Management has yet to confirm acceptance of this representation.
Other information
You have reviewed a financial summary which is to be included in the annual report and have found
that the details are inconsistent with the financial statements. Your investigations have shown that
the error is in the summary and not the financial statements.
I. Assuming you received the written representations as described above for both the
receivables balance and the warranty provision, in respect of which balances is the auditor
most likely to conclude that sufficient appropriate evidence has been obtained?
a) Receivables balance only
b) Warranty provision only
c) Receivables balance and warranty provision
d) Neither the receivables balance nor the warranty provision
II. Which of the following audit procedures could the audit team carry out to obtain
independent evidence relating to the recoverability of the debt from Yogesh?
1) Review correspondence with Yogesh regarding the late payment
2) Trace a sample of goods despatched notes for Yogesh to sales invoices
3) Trace the entries in Yogesh's account in the receivables ledger to invoices and
remittances
4) Perform a review of post year-end cash receipts
a) 1 and 2
b) 1 and 4
c) 2 and 3
d) 2 and 4
III. Management has now stated that it is not prepared to confirm that the basis and amount of
the warranty provision are reasonable.
In accordance with SA 580 which of the following actions must you take?
1) Discuss with management why they have refused to provide the representations
requested
2) Re-asses the integrity of management and consider the implications for any other
representations
3) Seek legal advice
4) Resign as auditors
a) 1 and 2
b) 3 and 4
c) 1 and 3
d) 2 and 4

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IV. You have discussed the matter with management but they are still not prepared to provide
the representations you have requested. What type of modified opinion would be issued and
what would be the basis for this modification?
Audit opinion Reason
a) Qualified Material misstatement
b) Disclaimer Inability to obtain sufficient appropriate evidence
c) Adverse Material misstatement
d) Qualified Inability to obtain sufficient appropriate evidence
V. You have notified the directors of the error in the summary financial statements.
Which of the following correctly summarises the impact on the auditor's report if the
directors do not correct this error?
Audit opinion Disclosure
a) Modified - Other Information section stating that there is nothing to report
b) Modified - Other Information section would not be required as there is nothing to report
c) Unmodified -Other Information section including a description of the uncorrected
misstatement
d) Unmodified -Other Matter paragraph including a description of the uncorrected
misstatement

10.
You are the audit manager of Sanskar & Co. It is a busy time of year for you as you have several on-
going audit clients at the moment and you are in the process of dealing with a number of
outstanding issues and queries from members of your audit teams.
Chetan Co (Chetan)
Chetan is a pharmaceutical company. The fieldwork has been completed and you are currently
reviewing the audit file. The audit senior is not sure how to deal with the following issue.
Chetan has incurred research Rs.2.1cr and development expenditure of Rs.3.2cr during the year, all
of which has been capitalised as an intangible asset. Profit before tax is Rs.26.3cr.
Damodar Co (Damodar)
The fieldwork on this audit is also complete with the exception of the following issue which the
audit senior has been unable to deal with.
Damodar's computerised wages program is backed up daily, however for a period of two months
the wages records and back-ups have been corrupted, and therefore cannot be accessed. Wages
and salaries for these two months are Rs.1.1 cr. Profit before tax is Rs.10 cr. You have just received
a phone call from one particular audit senior who is unsure about the steps to take in relation to
uncorrected misstatements
I. Which of the following statements correctly describe the auditor's responsibility in respect
of misstatements?
a) SA 450 states that the auditor only has a responsibility to accumulate material
misstatements identified during the audit
b) Where misstatements are not material the auditor should request that management to
correct the misstatements in the following accounting period
c) If management refuses to correct some or all of the misstatements, the auditor should
consider the implications of this for their audit opinion
d) A written representation should be requested from management to confirm whether they
believe that the effects of the unadjusted misstatements are immaterial, both individually
and in aggregate, to the financial statements as a whole
II. Which of the following audit procedures should be performed in order to form a conclusion
on whether an amendment is required to Chetan's financial statements in respect of the
research and development expenditure?

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1) Discuss the requirements of AS 38 with the directors in order to determine whether they
understand the required accounting treatment of research and development expenditure
2) Obtain a breakdown of the Rs.5.3 cr capitalised as an intangible asset and agree to
supporting documentation to determine the nature of the projects to which the
expenditure relates
3) Review minutes of Board meetings to determine whether the expenditure was authorised
4) Visit the laboratory where the current research is being undertaken and to confirm
occurrence of the research expenditure
a) 1 and 2
b) 1 and 4
c) 2 and 3
d) 3 and 4
III. Which of the following options correctly summarises the impact on the auditor's report for
Chetan if the issue remains unresolved?
a) Unmodified opinion with key audit matters paragraph
b) Qualified opinion with key audit matters paragraph explaining the issue
c) Qualified opinion
d) Adverse opinion
IV. Which of the following correctly summarises the effect of the issue relating to the wages
balance in the financial statements of Damodar?
Material Financial statement impact
a) No Liabilities to tax authorities may be understated
b) No Profit may be overstated
c) Yes Wages may be materially misstated
d) Yes Proper accounting records have not been kept
V. Based on the above information which of the following options correctly summarises the
impact of the wages and salaries issue on the auditor's report for Damodar?
Audit opinion Disclosure in the auditor's report
a) Qualified Basis for qualified opinion
b) Disclaimer Basis for disclaimer of opinion
c) Qualified Key audit matters section
d) Qualified Emphasis of matter

11.
CHOPDA.com is a website design company whose year-end was 31 March 20X4. The audit is almost
complete and the financial statements are due to be signed shortly. Profit before tax for the year
is Rs 38 lakhs and revenue is Rs.11.2 cr.
The company has only required an audit for the last two years and the board of directors has asked
your firm to provide more detail in relation to the form and content of the auditor's report.
During the audit it has come to light that a key customer, Pirlo Co, with a receivables balance at the
year-end of Rs. 2.85 lakhs has just notified CHOPDA.com that they are experiencing cash flow
difficulties and so are unable to make any payments for the foreseeable future. The finance director
has notified the audit team that he will write this balance off as an irrecoverable debt in the 20X5
financial statements.
I. To explain to the board, the content of the audit report, the audit partner has asked you to
provide details as to why certain elements are included within an unmodified report. Which
of the following explains the purpose of the ADDRESSEE element of the unmodified audit
report in line with SA 700?
a) It demonstrates the point at which sufficient appropriate evidence has been obtained

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b) It clarifies who may rely on the opinion included within the report
c) It explains the role and remit of the audit
d) It sets out the location where the auditor practises
II. The audit assistant assigned to the audit of CHOPDA.com wants a better understanding of
the effect subsequent events have on the audit and has made the following statements:
1) All material subsequent events require the numbers in the financial statements to be
adjusted
2) A non-adjusting event is a subsequent event for which NO amendments to the current
year financial statements are required
3) The auditor's responsibilities for subsequent events which occur prior to the audit report
being signed are different from their responsibilities after the audit report has been
issued
4) The auditor should request a written representation confirming that all relevant
subsequent events have been disclosed
Which of the statements above in relation to subsequent events are TRUE?
a) 1 and 3
b) 2, 3 and 4
c) 1, 2 and 4
d) 3 and 4 only
III. The audit engagement partner has asked you to make an initial assessment of the materiality
of the issue with the outstanding receivables balance with Pirlo Co and to consider the overall
impact on the financial statements.
Which of the following correctly summarises the effect of the outstanding balance with Pirlo
Co?
Material Financial statement impact
a) No Revenue is overstated
b) No Gross profit is understated
c) Yes Profit is overstated
d) Yes Use of going concern basis of accounting is in doubt
IV. The audit engagement partner requires you to perform additional procedures in order to
conclude on the level of any adjustment needed in relation to the outstanding balance with
Pirlo Co.
Which TWO of the following audit procedures should be performed to form a conclusion as
to whether the financial statements require amendment?
(1) Discuss with management the reasons for not amending the financial statements
(2) Review the cash book post year end for receipts from Pirlo Co
(3) Send a request to Pirlo Co to confirm the outstanding balance
(4) Agree the outstanding balance to invoices and sales orders
a) 1 and 2
b) 1 and 4
c) 2 and 3
d) 2 and 4
V. Which of the following options correctly summarises the impact on the auditor's if the
issue remains unresolved?
a) Unmodified opinion with key audit matters paragraph
b) Qualified opinion with key audit matters paragraph explaining the issue
c) Qualified opinion
d) Adverse opinion

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12.
You are an audit supervisor in Seahgal & Co and are currently planning the audit of your existing
client, Eshu Heating Co (Eshu), for the year ending 31 December. Eshu manufactures and sells
heating and plumbing equipment to a number of home improvement stores across the country.
Unpaid receivable
The finance director of Eshu has notified you that one of Eshu’s key customers has been
experiencing financial difficulties. Eshu has agreed that the customer can take a six-month payment
break, after which payments will resume. The finance director does not believe that any allowance
is required against this receivable. Your review of industry journals has identified several articles
that suggest the key customer may soon cease trading.
Inventory
Eshu has experienced increased competition. In order to maintain its current levels of sales, it has
decreased the selling price of its products significantly. The finance director has informed you that
he expects increased inventory levels at the year-end. In addition to Eshu’s inventory, there will be
inventory stored on behalf of a third party at the year-end. You plan to attend the year-end
inventory count of Eshu which is being held three days before the year end due to staff availability
of Eshu. A reconciliation will be performed to determine the year-end inventory quantities.
Lawsuit
A customer has filed a claim against the company regarding a heating system that Eshu installed
two months before the year end. The customer claims the installation was not done properly
resulting in an explosion which caused damage to his home. The customer is claiming compensation
of $50,000 which is material to the financial statements. The finance director has informed you that
the claim is not probable to succeed so has not referred to it in the financial statements.
I. Which of the following substantive procedures would provide the MOST reliable evidence as
to the recoverability of the outstanding balance from Eshu’s key customer?
a) Obtain a direct confirmation letter from the key customer
b) Compare the current outstanding balance from the customer to the prior year
c) Review the industry journal articles referring to the customer’s financial difficulties
d) Review post year-end cash receipts from the key customer

II. Which of the following substantive procedures will provide evidence over the existence of
Eshu’s other trade receivables?
i. Calculate the receivables days ratio and compare with prior year
ii. Perform a receivables circularisation
iii. Review post year-end cash receipts from customers
iv. Recalculate the allowance for irrecoverable receivables
a) i, iii
b) i, ii, iii
c) ii, iii
d) i, ii, iii, iv
III. Which of the following factors may indicate overvaluation of inventory at Eshu?
i. Increased competition resulting in a decrease in selling price
ii. Increased inventory levels
iii. Increased inventory turnover ratio
iv. Inventory consists of heating and plumbing equipment for home improvement stores
a) i, ii, iii
b) i, ii, iv
c) ii, iii, iv
d) i, ii
IV. Select which of the following are tests of control in relation to Eshu’s inventory balance.
i. Observe the client’s staff to ensure they are following the inventory count instructions

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ii. Inspect the inventory for evidence of damage or obsolescence
iii. Re-perform the reconciliation from the inventory count date to the year-end date for
inventory to assess the accuracy of the inventory quantities
a) i, ii, iii
b) i, ii
c) ii, iii
d) i, iii
V. Which of the following are appropriate audit responses to the lawsuit?
1. Ask the finance director to include a provision in the financial statements
2. Inspect correspondence between the client and their legal advisers
3. Review board minutes to understand management’s view about the claim
4. Contact the customer to understand the details of the claim
a) 2 and 3 only
b) 2, 3 and 4
c) 1, 3 and 4
d) 1 and 4 only

13.
You are an audit manager at Bomkeysh& Co and are approaching the end of the audit of Santoor
Co, which is a large listed retailer. The draft financial statements currently show a profit before tax
of Rs.65 lakhs and revenue of Rs.660 lakhs for the financial year ended 31March 20X6. You have
been informed that the finance director left Santoor Co on 28Feb 20X6.
As part of the subsequent events audit procedures, you reviewed post year-end board meeting
minutes and discovered that a legal case for unfair dismissal has been brought against Santoor Co
by the finance director. During a discussion with the Human Resources (HR) director of Santoor Co,
you established that the company received notice of the proposed legal claim on 10 April 20X6.
The HR director told you that Santoor Co's lawyers believe that the finance director's claim is likely
to be successful, but estimate that Rs. 150,000 is the maximum amount of compensation which
would be paid. However, management does not intend to make any adjustments or disclosures in
the financial statements.
I. Bomkeysh& Co has a responsibility to perform procedures to obtain sufficient, appropriate
evidence that subsequent events are appropriately reflected in the financial statements of
Santoor Co. Until which date the auditor should perform subsequent events procedures
a) The date the subsequent events review is performed
b) The date of approval of the financial statement
c) The date of the auditor's report
d) The date the financial statements are issued
II. If, after the financial statements have been issued, Bomkeysh& Co becomes aware of a fact
which may have caused its report to be amended, the firm should consider several possible
actions.
Which TWO of the following are appropriate actions for Bomkeysh& Co to take?
i) Discuss the matter with management and, where appropriate, those charged with
governance
ii) Obtain a written representation from management
iii) Consider whether the firm should resign from the engagement
iv) Enquire how management intends to address the matter in the financial statements
where appropriate
a) i, ii
b) i, ii, iii
c) ii, iii, iv
d) i, iv

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III. Which of the following audit procedures should be performed to form a conclusion as to
whether the financial statements require amendment in relation to the unfair dismissal
claim?
(1) Inspect relevant correspondence with Santoor Co's lawyers
(2) Write to the finance director to confirm the claim and level of damages
(3) Review the post year-end cash book for evidence of payments to the finance director
(4) Request that management confirm their views in a written representation
a) 1, 2 and 3
b) 1, 2 and 4
c) 1, 3 and 4
d) 2, 3 and 4
IV. You are drafting the auditor's report for Santoor Co and the audit engagement partner has
reminded you that the report will need to reflect the requirements of SA 701.
According to SA 701, which of the following should be included in the 'Key Audit Matters'
paragraph in the auditor's report?
a) Matters which required significant auditor attention
b) Matters which result in a modification to the audit opinion
c) All matters which were communicated to those charged with governance
d) All matters which are considered to be material to the financial statements
V. Which of the following audit opinions will be issued if the unfair dismissal case is NOT
adjusted for or disclosed within the financial statements?
a) A qualified audit opinion as the financial statements are materially misstated
b) A qualified audit opinion as the auditor is unable to obtain sufficient appropriate evidence
c) An unmodified opinion with an emphasis of matter paragraph
d) An unmodified audit opinion

14.
Medicare Co is an established pharmaceutical company that has for many years generated 90% of
its revenue through the sale of two specific cold and flu remedies. Medicare has lately seen a real
growth in the level of competition that it faces in its market and demand for its products has
significantly declined.
You are the audit manager responsible for the audit of Medicare's financial statements for the year
ended 31 March 20X7.
In addition to recruiting staff, Medicare also needed to invest Rs.2 cr in plant and machinery. The
company wanted to borrow this sum but was unable to agree suitable terms with the bank;
therefore, it used its overdraft facility, which carried a higher interest rate. Consequently, some of
Medicare's suppliers have been paid much later than usual and hence some of them have
withdrawn credit terms meaning the company must pay cash on delivery.
I. Which of the following statements are correct with regards to the going concern basis of
accounting?
(i). The going concern basis of accounting is used when the entity will be able to continue in
business for the foreseeable future
(ii). The foreseeable future is defined for accounting purposes as 36 months from the
company's reporting date.
(iii).The going concern basis of accounting assumes that the entity will be able to realise its
assets and discharge its liabilities in the normal course of business
(iv). Financial statements that are prepared on a going concern basis assert that the company
intends to liquidate its operations.
a) i, ii, iii
b) ii, iii, iv
c) i, iii

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d) i, ii, iii, iv
II. Which of the following statements describe the most direct impact the withdrawal of
supplier credit has on Medicare's use of the going concern basis of accounting?
(i). Medicare now has to pay cash on delivery and this adds further cash flow strain imposed
by the overdraft
(ii). Some suppliers may end their relationship with Medicare, preventing the company from
producing its products, thus further reducing sales
(iii).Medicare will have to seek alternative suppliers, who may not meet Medicare's quality
control standards
(iv). The bank may impose strict covenants on the overdraft, restricting the way Medicare can
conduct its future operations
a) i, ii
b) ii, iii, iv
c) i, ii, iii
d) i, ii, iii, iv
III. It is May 20X7. The directors have informed you that the bank overdraft facility is due for
renewal next month, after the auditor's report is signed. They are confident that it will be
renewed.
Which of the following audit procedures would be most effective in assessing whether or not
Medicare is a going concern?
(i). Agree current overdraft level to bank letter
(ii). Obtain confirmation from the bank that the overdraft facility will be renewed
(iii).Obtain written representation from management that they consider the going concern
assumption to be appropriate
(iv). Review board minutes for meetings held after the year end for evidence which indicate
further financial difficulties or evidence of alternative sources of finance
a) ii, iv
b) ii, iii, iv
c) i, ii, iii
d) i, ii, iii, iv
IV. The directors have now agreed to include going concern disclosures, while continuing to use
the going concern basis of accounting.
You agree with Medicare's management that the going concern basis of accounting is
appropriate under the circumstances. You have reviewed the draft disclosures and believe
they are correct and adequate.
Indicate which form of audit opinion would be appropriate and how the going concern issue
would be disclosed in the auditor's report.
Audit opinion Disclosure in the auditor's report
a) Disclaimer Describe the nature of the going concern uncertainty in the
Material Uncertainty Related to Going Concern section
b) Unmodified opinion Describe the nature of the going concern uncertainty in the Key
Audit Matters section
c) Qualified opinion Describe the nature of the going concern uncertainty in the Basis
for Adverse Opinion Section
d) Adverse opinion Describe the nature of the going concern uncertainty in the Basis
for Qualified Opinion section
V. The audit is completed. The auditor's report and the financial statements have been signed
but not yet issued.
The finance director of Medicare has just informed the audit team that he has been informed
by the bank that the overdraft facility will not be renewed. Medicare currently does not have
any other source of finance.

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What actions, if any, should you now take in order to meet the auditor's responsibilities
under SA 560?
a) No actions required as the auditor's report and financial statements have already been
signed
b) Discuss with management about their plans for the company and determine whether the
20X7 financial statements should now be prepared on a break-up basis. If yes, request
management to adjust the financial statements, audit the adjustments and provide a new
auditor's report
c) Discuss with management about their plans for the company and determine whether
disclosures should be revised in the 20X7 financial statements. If yes, request management
to revise the disclosures and redraft the auditor's report to refer to the revised disclosures
d) Request that management adjust for this event in the 20X8 financial statements, as it
occurred in the year ending 31 March 20X8

15.
Humpty Co, your audit client, operates a chain of food wholesalers across the country and its year
end was 31 March 20X1. The final audit is nearly complete and it is proposed that the financial
statements and auditor's report will be signed on 13 June. Revenue for the year is Rs.78 cr and
profit before taxation is Rs.7.5 cr.
The following information comes to light:
Humpty Co has three warehouses; following extensive rain on 20 July, rain and river water flooded
the warehouse located in Bass. All of the inventory in the warehouse was damaged and has been
disposed of. The insurance company has been contacted. No amendments or disclosures have been
made in the financial statements.
A customer of Humpty Co has been experiencing cash flow problems and its year-end balance is
Rs.0.3cr. The company has just become aware that its customer is experiencing significant going
concern difficulties. The management of Humpty believes that as the company has been trading
for many years, they will receive some, if not full, payment from the customer; hence they have
not adjusted the receivable balance.
A key supplier of Humpty Co is suing them for breach of contract. The lawsuit was filed prior to the
year end, and the sum claimed by them is Rs.1 cr. This has been disclosed as a contingent liability
in the notes to the financial statements.
Correspondence has just arrived from the supplier indicating that they are willing to settle the case
for a payment by Humpty Co of Rs.0.6 cr. It is likely that the company will agree to this.
I. Which of the following audit procedures in general as per SA 560 would identify subsequent
events occurring up to the date of the auditor's report ?
1) Enquire of management whether there have been any unusual accounting adjustments
2) Enquire of management whether there have been any issues of shares/debentures, or
changes in business structure
3) Review management procedures for identifying subsequent events to ensure that such
events are identified
4) Obtain written representation that all subsequent events requiring adjustment or
disclosure have been adjusted or disclosed
a) 1 and 2
b) 1 and 3
c) 1, 3 and 4
d) 1, 2, 3 and 4
II. Which of the following statements correctly describe the likely impact that the flooding of
the warehouse will have on Humpty' financial statements for the year ended 31 March 20X1?
1) Inventory should be written down, because the flood damage is an adjusting event
2) Inventory should not be written down, because the damage is not an adjusting event

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3) If a material amount of inventory is uninsured, it may be necessary to disclose the event
and an estimate of the financial losses
4) If insurance proceeds are more likely than not to be received, a contingent asset should
be recognised
a) 1 only
b) 2 only
c) 1 and 4
d) 2 and 3
III. Which of the following audit procedures should be performed in order to form a conclusion
on the amendment required to Humpty' 20X1 financial statements in respect of the Rs.0.3cr
owed by the customer experiencing financial difficulties?
1) Reviewing the post year-end period for payments received from the customer in respect
of the year end debt
2) Reviewing correspondence with the customer to assess the likelihood of Humpty
recovering the Rs.0.3cr
3) Writing to the customer to request confirmation of the amount owed to Humpty at the
year end
4) Ask management to produce a revised cash flow forecast covering at least 12 months
after the year end
a) 1 and 2
b) 2 and 3
c) 1 and 4
d) 3 and 4
IV. Which of the following options correctly summarises the impact on the auditor's report if the
financial statements are not revised in the light of the new information regarding the lawsuit
for breach of contract?
a) Unmodified
b) Unmodified with emphasis of matter
c) Qualified 'except for'
d) Adverse opinion
V. It is now 13 July 20X1. The auditor's report has been signed. The financial statements are due
to be issued on 25 July 20X1. Which of the following statements correctly describes the
auditor's responsibility in relation to subsequent events occurring between now and 25 July?
a) The auditor must design procedures to obtain sufficient appropriate audit evidence that all
events up to that date that may require adjustment or disclosure have been identified
b) The auditor must perform procedures on matters examined during the audit, which may be
susceptible to change after the year-end.
c) The auditor has no obligation to perform procedures, or make enquiries regarding the
financial statements. Any subsequent events should be noted and considered in the next
period's audit.
d) If the auditor becomes aware of a fact that, had it been known to the auditor at the date of
the auditor's report, may have caused the auditor to amend the auditor's report, the auditor
shall discuss the need for any adjustments with management

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16.

You are a audit manager in Sampark & Co. You are reviewing the audit file of Atul Co which is nearing
completion. You have noted several issues during your review:
Several working papers have not been signed as reviewed. You are aware that a review has taken place
but it is not documented on the audit file.
One audit working paper states that a sample of 30 purchase invoices should be tested but the results
of the test show that only 15 invoices were tested. Several other areas document that samples sizes
were reduced in order to save time.
In the subsequent events review section of the file, the audit senior has documented that they have
enquired of management whether there have been any subsequent events and were told that there
have not been any. No further work was considered necessary as a result.
I. Which of the following statements are true in respect of the reduction in samples sizes?
1) The audit plan has not been followed
2) Sufficient appropriate evidence may not have been obtained
3) Material misstatements may go undetected
4) Those sections will need to be reviewed by a manager and the manager will form a conclusion
on the balances.
a) 1, 2 and 3 only
b) 2 and 4 only
c) 1, 3 and 4 only
d) 1, 2, 3 and 4
II. Select whether the following statements are true or false in respect of the subsequent events
review of Atul Co.
1. Enquiry does not provide sufficient appropriate evidence on its own
2. The auditor scepticism has demonstrated a lack of professional
3. A written representation should have been obtained from management confirming that they
have disclosed all subsequent events to the auditor
4. The auditor only needs to perform procedures if they are made aware of any subsequent events
a) True, False, False, True
b) True , True , False, False
c) True , False, True , False
d) True , True , True , False
III. As a result of the quality control issues encountered during the audit of Atul Co, which of the
following actions should now be taken?
1. The offending members of staff have demonstrated a lack of competence and due care
therefore the firm should report them to the disciplinary committee of ICAI
2. More frequent quality control reviews may need to take place
3. Further training may be provided to staff
4. The firm’s policies and procedures may need to be updated
a) 1 and 2 only
b) 1 and 3 only
c) 2, 3 and 4 only
d) 1, 2, 3 and 4
IV. Which of the following statements is true in respect of post and pre-issuance reviews?
a) A post-issuance review involves a review of the significant judgments affecting the audit
b) A pre-issuance review is also known as a cold review
c) A post-issuance review may identify the need for revision to the firm’s policies
d) None of the above
V. Select which of the following two statements are false in respect of review of audit working
papers
1. The audit partner will review all working papers on the audit file before issuing an opinion

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2. If working papers have been reviewed there is no quality control issue arising from the lack
of documentation
3. All working papers should be signed by the person who prepared them
4. All team members’ work should be reviewed by someone more senior than the preparer
a) 1&2
b) 2&3
c) 3&4
d) 1&4

17.
You are planning the audit of Veer Co, a new audit client which operates in the oil & gas exploration
industry. Companies wishing to operate in this industry require a licence which is valid for 20 years. Veer
Co has been in existence for 30 years and has grown its revenue at an average of 12% per annum. During
your planning meeting you were informed that the forecast profit before tax for this financial year is
Rs.6,650 cr. (prior year: Rs. 4,200 cr.) based on revenues of Rs.86,800 cr.(prior year: Rs.70,000 Cr.)
I. Which of the following is the LEAST significant audit risk to be considered when planning the audit
of Veer Co?
a) Non-compliance with laws and regulations
b) Understatement of trade payables
c) Adequacy of provisions and contingent liabilities
d) Reasonableness of estimates of oil and gas reserves
II. Which is the most appropriate responses to address the increased detection risk due to Veer Co
being a new audit client?
1. Extended controls testing should be performed
2. Obtain an understanding of Veer Co
3. Contact the previous auditor to request working papers
a) 1 ,2 ,3
b) 1 ,2
c) 2 ,3
d) None of the above
III. Which of the following is the LEAST appropriate materiality level to be used in the audit of Veer
Co?
a) Rs. 1050 cr.
b) Rs.700.0 cr.
c) Rs.5.25 cr.
d) Rs.3.15 cr.
IV. Select whether the following statements are not consistent with the movement in revenue.
1. Cut-off of revenue is an audit risk
2. Completeness of revenue is an audit risk
3. Occurrence of revenue is an audit risk
a) 1 ,2 ,3
b) 1
c) 2
d) 3
V. Match the audit risks listed with the MOST appropriate response the auditor of Veer Co should
take
Audit risk
Auditor’s response
1 Receivables may be overstated due
to long outstanding debts Contact a sample of customers to confirm
the year-end balance
2 Non-current assets may be

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impaired in relation to i. Ask management to adjust the
financial statements
exploration areas which have
been decommissioned

3 Intangible assets such a licences ii. Inspect the licence agreement

to operate in the industry may iii. Review correspondence with

customers
not have been amortised
correctly iv. Calculate the expected
amortisation

v. Review the depreciation charge for

adequacy

a) 1- (iii) , 2-(v) , 3-(iv)

b) 1- (iii) , 2-(iv) , 3-(v)
c) 1- (iv) , 2-(ii) , 3-(v)
d) 1- (v) , 2-(iii) , 3-(iv)

18
You are the manager responsible for the audit of Mansi Co and you are completing the audit of the financial
statements. The draft financial statements report revenue of Rs.12,600 cr. (prior year – Rs. 11,900 cr.). The
draft annual report of Mansi Co contains a Chairman’s statement in which the chairman has commented
that he is pleased to report an increase in revenue of 20% this year. The report also includes an operating
review, corporate social responsibility report, financial statements and notes to the financial statements.

The directors of Mansi Co have indicated that they intend to distribute the annual reportto prospective
investors in order to obtain additional finance. The engagement partner has informed the directors that
the auditor’s report is only intended for reliance by the existing shareholders and that no liability will
be assumed to any other party. The engagement partner has asked you to draft the auditor’s report for
Mansi Co and requested that this restriction is included.
I. Which of the following statements best describes the auditor’s responsibilities in respect of
other information?
a) The auditor provides limited assurance over the completeness and accuracy of the other
information
b) The auditor must read the other information to ensure it is consistent with the financial
statements and their knowledge of the entity obtained during the audit
c) The auditor must audit the other information and obtain sufficient appropriate evidence
that the other information is true and fair
d) Other information only needs to be considered if it is made available at the start of the
audit with the draft financial statements
II. Which of the following sections of Mansi Co’s annual report would NOT be considered ‘Other
information’?
a) Chairman’s statement
b) Operating review
c) Corporate social responsibility report
d) Notes to the financial statements
III. How should the inconsistency between the Chairman’s statement and financial statements be
referred to in the auditor’s report of Mansi Co
a) Within the Other Information section

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b) Within an Emphasis of Matter paragraph
c) Within an Other Matter paragraph
d) Within the audit opinion section
IV. Select whether the following statements are true or false in relation to referring to the Chairman’s
statement in the auditor’s report of Mansi Co.
1. Users may be misled if the other information contains incorrect information or information
which contradicts the financial statements such as that in the Chairman’s statement
2. Users may believe the auditor has not audited the financial statements properly if the
inconsistency is not highlighted
3. The auditor must expose management’s incompetence
4. The inconsistency may undermine the credibility of your auditor’s report if not highlighted
a) True, False, False, True
b) True , True , False ,True
c) True , False, True , False
d) True , True , True , False
V. In respect of the partner’s request for restricting liability, how should this be addressed in the
auditor’s report?
a) Within the Auditor’s Responsibility section
b) By including an Emphasis of Matter paragraph
c) By including an Other Matter paragraph
d) Within the Basis for Opinion section

19
You are an audit senior of YATHARTH & Co and have worked on the external audit of BHAIYAJI Co
(BHAIYAJI), an unlisted company, since your firm was appointed external auditor two years ago.
BHAIYAJI owns a chain of nine restaurants and is a successful company. BHAIYAJI has always been
subject to national hygiene regulations, especially in relation to the food preparation process. Non-
compliance can result in a large fine or closure of the restaurant concerned.
The board of BHAIYAJI has recently notified you that the national hygiene regulations have been
updated and are now much more stringent and onerous than before.
I. Despite running a successful company, BHAIYAJI's board has often needed to be reminded of
some fundamental principles and you often have to explain key concepts. Which of the following
statements best defines the external audit?
a) The external audit is an exercise carried out by auditors in order to give an opinion on whether
the financial statements of a company are fairly presented.
b) The external audit is an exercise carried out in order to give an opinion on the effectiveness of
a company's internal control system.
c) The purpose of the external audit is to identify areas of deficiency within a company and to
make recommendations to mitigate those deficiencies.
d) The external audit provides negative assurance on the truth and fairness of a company's
financial statements.
II. The board has also struggled to differentiate between its responsibilities and those of the external
auditor in circumstances such as the prevention and detection of fraud and error, and compliance
with regulations. Which of the following statements best describes YATHARTH & Co's
responsibility regarding BHAIYAJI's compliance with hygiene regulations, in line with SA 250
(Revised) Consideration of Laws and Regulations in an Audit of Financial Statements?
a) YATHARTH & Co should actively prevent and detect non-compliance with the regulations.
b) YATHARTH & Co should perform specific audit procedures to identify possible non-compliance.
c) YATHARTH & Co should obtain sufficient appropriate audit evidence about BHAIYAJI's
compliance with the regulations as they have a direct effect on the financial statements.
d) YATHARTH & Co does not have any responsibility as the hygiene regulations do not have a
direct effect on the financial statements.

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III. Which of the following would NOT have been relevant to the audit partner in forming this
opinion?
a) The existence of a three-party relationship
b) The existence of suitable criteria
c) The determination of materiality
d) The subject matter
IV. What level of assurance you believe YATHARTH & Co should provide, and also what type of
opinion the firm should give.What is the level of assurance and type of opinion that can be
provided on this audit engagement?
Level of assurance Report wording
a) Reasonable Positive
b) Reasonable Negative
c) Limited Positive
d) Limited Negative
V. Select the correct one
a) If the auditor has identified non-compliance with laws and regulations, auditor can report it to
outside the entity, if in public interest and would not be considered as misconduct under CA
Act and non-compliance of SA 250.
b) If the auditor has identified non-compliance with laws and regulations, auditor can report it to
outside the entity, if required by law and would not be considered as misconduct under CA Act
& non-compliance of SA 250.
c) If the auditor has identified non-compliance with laws and regulations auditor can report it to
outside the entity if required by law but would be considered as misconduct under CA Act &
Non-Compliance of SA 250.
d) All of the above.

20
Charcoal Co (Charcoal) is a computer hardware specialist and has been trading for over five years. The
company is funded partly through overdrafts and loans and also by several large shareholders; the year
end is 30 April 20X4.
Charcoal has experienced significant growth in previous years; however, in the current year a new
competitor, Drums Design Co (Drums), has entered the market and through competitive pricing has
gained considerable market share from Charcoal including one of its largest customers. Charcoal is
looking to develop new products to differentiate itself from the rest of its competitors. It has
approached its shareholders to finance this development; however, they declined to invest further in
Charcoal. Charcoal's loan is long term and it has met all repayments on time. The overdraft has increased
significantly over the year and the directors have informed you that the overdraft facility is due for
renewal next month and they believe it will be renewed.
The directors have produced a cash flow forecast which shows a significantly strengthening position
over the coming 12 months. They are confident with the new products being developed and, in light of
their trading history of significant growth, believe it is unnecessary to make any disclosures in the
financial statements regarding going concern.
At the year end, Charcoal received notification from one of its customers that the hardware installed by
Charcoal for the customers' online ordering system has not been operating correctly. As a result, the
customer has lost significant revenue and has informed Charcoal that they intend to take legal action
against them for loss of earnings.
Charcoal has investigated the problem post year end and discovered that other work in progress is
similarly affected and inventory should be written down by Rs.2.625cr. The finance director believes
that as this misstatement was identified after the year end, it can be amended in the 20X5 financial
statements. Draft financial statements for the year ended 30 April 20X4 showed profit after tax of
Rs.1,750 cr.

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I. Which of the following correctly summarises whether the uncorrected misstatement of inventory
is material and its impact on the 20X4 financial statements?
Material Adjust in 20X4 financial statements
a) No No
b) No Yes
c) Yes Yes
d) Yes No
II. Which of the following factors are indicators that may cast doubt on Charcoal's ability to continue
as a going concern?
1. The entry of the new competitor reducing Charcoal's market share
2. The significant increase in the overdraft
3. The company has a long-term loan
4. The reluctance of the shareholders to provide further investment in Charcoal
a) 1, 2 and 3
b) 1, 2 and 4
c) 1, 3 and 4
d) 2, 3 and 4
III. As part of your assessment of going concern you have reviewed the cash flow forecast. This is
based on the assumption of significant increases in revenue. Which of the following procedures
would provide the most reliable evidence regarding the validity of this assumption?
a) Email correspondence between the sales director and potential new customers
b) A review of board minutes showing details of new customers won
c) A review of post year end sales and the order book
d) Discussions with management regarding their plans for obtaining new business
IV. You have concluded that circumstances exist which cast significant doubt on Charcoal's ability to
continue as a going concern .Which of the following must you include in your communication
with those charged with governance in accordance with SA 570 Going Concern?
1. Whether the circumstances you have identified constitute a material uncertainty
2. Whether the use of the going concern basis of accounting is appropriate in the preparation
and presentation of the financial statement
3. The adequacy of the related disclosures
4. The period of time your assessment has covered if less than 12 months from the date of the
financial statements
a) 1, 2 and 3
b) 1, 2 and 4
c) 1, 3 and 4
d) 2, 3 and 4
V. The auditors have been informed that Charcoal's bankers will not make a decision on the
overdraft facility until after the auditor's report is completed. The directors have now agreed to
include some going concern disclosures and you believe these disclosures are adequate. Which
of the following correctly summarises the impact on the auditor's report of Charcoal if the auditor
believes the company is a going concern but that this is subject to a material uncertainty?
Opinion Disclosure
a) Modified Key audit matters
b) Unmodified Material uncertainty related to going concern
c) Unmodified Key audit matters
d) Modified Material uncertainty related to going concern

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ANSWER KEYS
CA RAVI TAORI CA INTER AUDIT MCQs

Issued by ICAI
1 I. b IV. a V. A
II. c V. b 13 I. C
III. a 5 I. d II. D
IV. d II. b III. C
V. c III. a IV. A
2 I. b IV. d V. A
II. c V. a 14 I. C
III. c 6 I. b II. A
IV. d II. c III. A
V. a III. a IV. B
3 I. c IV. c V. B
II. b V. b 15 I. d
III. c 7 I. b II. b
IV. a II. b III. a
V. c III. a IV. C
4 I. c IV. c V. D
II. b V. d 16 I. A
III. a 8 I. d II. D
IV. a II. b III. C
V. c III. c IV. C
IV. d V. A
Other than ICAI V. A 17 I. B
9 I. a II. C
For Practice
II. b III. A
1 I. c
III. a IV. C
II. c
IV. d V. A
III. a
V. C 18 I. B
IV. a
10 I. c II. D
V. c
II. a III. A
2 I. c
III. c IV. B
II. c
IV. c V. C
III. c
V. a 19 I. A
IV. d
11 I. b II. C
V. d
II. d III. a
3 I. a
III. c IV. a
II. b
IV. a V. b
III. d
V. C 20 I. c
IV. d
12 I. D II. b
V. b
II. C III. c
4 I. b
III. D IV. a
II. b
IV. A V. b
III. b

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