PRACTICE SET-1

PC 22-Government Audit

1. The figures in summary of Appropriation Accounts are reconciled with

a. Statement 10 of Finance Accounts b. Statement 11 of Finance Accounts
c. Statement 13 of Finance Accounts d. Statement 12 of Finance Accounts
2. The financial attest audit of State Government accounts has to be conducted as per
a. MSO (Audit), 2002 b. Financial Attest Audit Manual, 2014
c. Financial Attest Audit Guidelines, 2009 d. All of the above
3. Pick the incorrect one
a. Audit planning for the Financial Attest Audit of State Government Accounts is the responsibility of
the Accountant General in charge of audit of FA&AA and preparation of Audit Report on State
Finances, henceforth, referred to as the Principal Auditor.
b. The other audit offices which contribute to audit of FA&AA would be referred as Sub-Auditors for
the purpose of these guidelines.
c. O/o the Accountant General (A&E) would be the audited entity for the purpose of this audit.
d. None of the given
4. Pick the correct one
a. The audit of FA&AA currently commences with the issue of a time schedule by the Government
Accounts wing of the Headquarters office (C&AG’s office) in consultation with the PPG wing.
b. The process of financial attest audit of State Government gets completed with finalization of audit
certificate and signing of Report on State Finances by the CAG.
c. It is expected that this process is completed by mid of December of the ensuing year to enable the
State government to take on board important concerns before the next year’s budget.
d. All of the above
5. Verification of receipt of daily scrolls, pass books from the bank and proper maintenance register of
daily receipts and payments. This should be done at least for transactions of
a. two days in a month selected at random b. three days in a month selected at random
c. five days in a month selected at random d. one week in a month selected at random
6. Financial statements include Appropriation and Finance Accounts pertaining to
i. Central Government ii. State Government
iii. Union Territories iv. Externally Aided Project

a. All of the above b. ii, iii and iv

c. i, ii and iv d. i, ii and iii
7. i. The Auditing Standards of the CAG of India comprise of General Standards, Field Standards,
Reporting Standards and Follow-up reporting.
ii. The General Standards are concerned with the relationship of the auditor to the audited
organisation and with the personal conduct of the auditor in carrying out the audit
iii. The Field Standards regulate the audit activity.
iv. The Reporting Standards regulate what the auditor has to say after completing the audit.
v. The Follow-up Standards regulate the department activity in pursuing reply to inspection report.

a. i, ii, iii and iv b. ii, iii and iv

c. i, ii, iii and v d. All of the above.
8. Precision is calculated as
a. (Materiality + Anticipated Most Likely Error) x Range of error possible but with no room for
unexpected error
b. (Materiality + Anticipated Most Likely Error) x Range of error possible but with room for
unexpected error
c. (Materiality – Anticipated Most Likely Error) x Range of error possible but with no room for
unexpected error

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Prepared by Deepak Kumar Rahi, AAO (Patna/Bihar)
 d. (Materiality – Anticipated Most Likely Error) x Range of error possible but with room for
unexpected error
9. Generally, a population should be divided or stratified into at least three segments. Pick the incorrect
one
a. high value items b. no value items
c. key items d. the remainder.
10. Sampling approach that is required if transactions are processed or accounting records are held at a
number of locations in such a way that we cannot directly extract a sample from across the entire population
is
a. Multi-stage sampling b. Stratified random sampling
b. Monetary Unit Sampling (MUS) d. Average Sampling
11. Steps in planning process of financial attest audit are
a. Understanding the auditee entity>auditee entity operation>Materiality>Risk Assessment>Plan
finalisation
b. Plan Finalisation> Understanding the auditee entity>auditee entity operation>Materiality>Risk
Assessment
c. Understanding the auditee entity>auditee entity operation> Risk Assessment>Materiality> Plan
finalisation
d. Plan Finalisation> Understanding the auditee entity>auditee entity operation> Risk Assessment
>Materiality
12. An error which will only occur in defined circumstances and hence affects only a proportion of the
population is
a. random error b. planned error
c. systematic error d. unexpected error
13. Effective documentations
i. confirm, support the auditor's opinions and reports and help the auditor's professional
development.
ii. serve as a source of information for preparing reports or answering any enquiries from the audited
entity or from any other party and increase the efficiency and effectiveness of the audit;
iii. serve as evidence of the auditor's compliance with Auditing Standards, facilitate planning and
supervision and help to ensure that delegated work has been satisfactorily performed
iv. save the auditor from audit procedures at planning stage in audits of ensuing years.

a. ii, iii and iv b. i, ii and iv

c. i, ii and iii d. All of the above.
14. Pick the incorrect one
a. The Accountant General responsible for the certification of the annual accounts as a whole is
termed as ‘principal auditor’ and the other Accountants General who are also responsible for the
audit of the units of the entity are termed as ‘sub auditors’
b. It is preferable to hold meeting between the principal auditor and sub auditors for better co-
ordination and smoothening the audit process.
c. The sub auditors shall communicate their findings, together with working papers. They shall also,
if required by the principal auditor, furnish copies of their findings as set out in the inspection reports
and any management letters issued by them, together with supporting working papers.
d. For the purposes of any clarifications regarding sampling and projection of errors involving the
transactions audited by sub auditors, the advice of the principal auditor may be obtained.
15. If the level of assurance required is 95% and Inherent risk (IR) was assessed at a level of 40%, and
assurance from the testing of controls is 50%, the detection Risk would be
a. 5% b. 25%
c. 50% d. 60%
16. The Accounts and Entitlement functions and the Audit functions are discharged by separate
Accountants General w.e.f
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 a. 1st March 1984 b. 1st April 1984
c. 1st April 1982 d. 1st March 1983
17. Verification of voucher in support of payment to ensure that
i. The vouchers should be in the prescribed form, in original and duly acknowledged by the payees
in token of receipt.
ii. Vouchers should be numbered with reference to the Schedule of List of Payments, Schedule
Dockets or other accounts, as the case may be.
iii. The vouchers should bear a pay order signed by the Treasury Officer where the vouchers are
encashed at treasuries, or by the concerned disbursing officer in other cases.
iv. No bills pertaining to pay or any allowance not claimed within one year of its becoming due or
such other period as may be prescribed in this behalf should have been admitted for payment
without the sanction of the Accountant General (A & E) in cases where the rules of the Government
so prescribe.

a. ii, iii and iv b. i, iii and iv

c. i, ii and iv d. All of the above.
18. What is NIL payment voucher?
a. Detailed contingent bill submitted against settlement of Abstract Contingent Bill
b. Payments of money by transfer from the Consolidated Fund to the Public Account
c. Payments of money by transfer from the Consolidated Fund to the Contingency Fund.
d. Payments of money by transfer from the Public Account to the Consolidated Fund
19. If the sanctioning authority has not prescribed any time frame for the purpose, the grant will
normally be spent within a period of
a. one year from the date of issue of the sanction.
b. one year from the end of the financial year in which the sanction was issued.
c. eighteen months from the date of issue of the sanction.
d. eighteen months from the end of the financial year in which the sanction was issued.
20. Number of copies of Central Accounts & Reports bearing the signature of the CAG that are forwarded
to the Government for submission to the president
a. two b. three
c. five d. eight
21. i. Central Audit will be carried out by Central Audit Parties of the Audit Office in the Accounts and
Entitlement office.
ii. Central Audit Support Sections in the Audit Offices will coordinate and pursue the work of the
Central Audit Parties and perform all support functions, such as preparation of audit programmes,
audit of sanctions, etc., and discharge follow-up responsibilities like maintenance of objection books,
selection of potential material for Audit Reports, etc.
iii. Generally, an Audit Officer will be in charge of each Central Audit Support Section, while an
Assistant Audit Officer will be responsible for two Central Audit Parties.
iv. With a view to ensuring control over unauthorised and excess expenditure and to enabling the
State Administration to exercise adequate control over their Annual budget, the Monthly
Appropriation Accounts and Finance Accounts prepared by the Accountant General (A&E) should
also be checked by the Central Audit Supporting Section.

a. ii, iii and iv b. I, iii and iv

c. i, ii and iii d. All of the above
22. Who will be responsible for watching the systems and procedures for and the effectiveness of
pursuance of objections of an accounting nature, such as non-availability of D.C. Bills, vouchers or payees’
receipts, errors in the treasury and divisional accounts, etc.?
a. Accountant General (A&E)

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 b. Accountant General (Audit)
c. Both AG (A&E) and AG (Audit) jointly
d. Both AG (A&E) and AG (Audit) individually and jointly
23. The broad objectives of audit are to ensure legality, regularity, economy, efficiency and effectiveness
of financial management and public administration mainly through assessment as to
a. whether the financial statements are properly prepared, are complete in all respects and are
presented with adequate disclosures
b. whether the provisions of the Constitution, the applicable laws, rules and regulations made
thereunder and various orders and instructions issued by competent authority are being complied
with
c. the extent to which an activity, programme or organisation operates economically, efficiently and
effectively.
d. All of the above
24. Pick the incorrect one
a. The audit office shall as far as possible give advance intimation of a minimum period of three
weeks to the officer in charge of the office to be audited.
b. The intimation for audit shall state the likely duration of audit and also provide a list of the basic
records that should be kept ready before the arrival of the audit team.
c. In cases where the audit involves an element of surprise check, an advance of a week in maximum
needs to be given
d. None of the above.
25. Responsibility with reference to annual accounts of a Government company or a deemed
Government company rests with
a. the Statutory auditor b. the Management
c. the AG (Audit) d. All of the above
26. The CAG or any officer so authorised shall give due consideration to a request for special audit of a
programme, project or organisation within the audit jurisdiction provided that every such request
i. is made with the approval of the Cabinet/Chief Secretary to Government.
ii. shall state the justification and reasons that necessitate a special audit, including the results of any
preliminary inquiry, investigation or study that may have already been conducted; and
iii. specify the period to be covered in the special audit.
iv. The decision of the CAG or any officer so authorised in regard to the special audit shall be final.

a. i, ii and iii b. i, ii and iv

c. ii, iii and iv d. All of the above
27. The auditing standards include the
i. Basic postulates ii. General standards
iii. Field standards iv. Reporting standards

a. i, ii and iii b. ii, iii and iv

c. i, iii and iv d. All of the above
28. According to the UN, Public Private Partnerships which aim at financing, designing, implementing
and operating public sector facilities and services will have three main characteristics, namely except
a. Long term (sometimes up to 100 years) service provisions
b. The transfer of risks to the private sector
c. Different forms of long-term contracts drawn up between legal entities and public authorities.
d. None of the given
29. Types of PPP
i. Build, Operate and Transfer (BOT)
ii. Lease, Operate and Transfer (LOT)
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 iii. Build, Own, Operate (BOO) or Build, Own, Operate and Transfer (BOOT)
iv. Design, Build, Finance and Operate (DBFO) or Design, Build, Finance, Operate and Maintain
(DBFOM)
iv. Plan, Design, Finance and Operate (PDFO)

a. ii, iii, iv and v b. i, ii, iii and iv

c. i, ii, iii and iv d. All of the above
30. The generic term, used to clarify the essential features of PPP arrangements under which concession
may be by collecting tolls and user charges or by the public sector making periodical payments of annuities
or monthly / quarterly/ half-yearly charges on certain assumed basis, like shadow tolls etc. is
a. Operation consideration b. Working Reimbursement
c. Operation Concession d. Fair Transfer
31. Characteristics of a sound PPP
i. Fair & transparent selection process
ii. assurance of value for money
iii. Improvement of essential public services
iv. increase in the exchequers of Government and private party
v. fair incentives to all parties and fair returns to risk takers

a. i, ii, iii and iv b. i, ii, iii and v

c. i, iii, iv and v d. All of the above
32. To address the risks attached to PPP project “Public Private Partnership Appraisal Committee”
(PPPAC) has been established with following power
i. projects costing below the limit of Rs.100 crores will be considered and approved by the
Expenditure Finance Committee / Standing Finance Committee (EFC/SFC) of the Ministry concerned.
ii. projects costing more than Rs.100 crores but less than Rs.250 crores – appraisal by a Committee
comprising Secretary, DEA and the Secretary of the Department sponsoring the project
iii. projects under the National Highway Development Authority (NHDA) which are of Rs.250 crores
or more but less than Rs.500 crores- committee with Secretary, DEA and the Secretary, Department
of Road Transport and Highways (DRTH)
iv. Above 250 crore/500 crore as the case may be-PPPAC

a. i, ii and iii b. ii, iii and iv

c. i, ii and iv d. All of the above
33. Pick the incorrect one
a. Total Project Cost (TPC)-The lowest of the capital cost of the project (less equity support) as set
forth in the Financial Package or the actual capital cost of the PPP project upon completion of the
project including financing charges, interest during construction and provision for contingencies,
minus grants given, if any.
b. Value for Money (VFM)- Provision of the institutional function or the use of the public sector
property by a private party or JVC, in terms of the Concession Agreement, results in the benefit to
the institutions defined in terms of cost, price, quality, quantity, risk sharing and a combination
thereof.
c. Viability Gap Funding (VGF)- A grant, one time or deferred, provided and given by the Government
under the scheme for Financial Support to Public Private Partnerships in Infrastructure, with the
objective of making such projects commercially viable.
d. None of the given
34. Performance Audit guidelines 2014 are based on
a. the existing guidelines of C&AG of India, International Standards of Supreme Audit Institutions-
(ISSAI) 100, 300 and 3000 and ASOSAI Performance Auditing Guidelines.
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 b. the existing guidelines of C&AG of India, International Standards of Supreme Audit Institutions-
(ISSAI) 100, 400 and 4000 and ASOSAI Performance Auditing Guidelines.
c. the existing guidelines of C&AG of India, International Standards of Supreme Audit Institutions-
(ISSAI) 100, 200 and 2000 and ASOSAI Performance Auditing Guidelines.
d. the existing guidelines of C&AG of India and International Standards of Supreme Audit Institutions-
(ISSAI) 100, 500 and 5000 and ASOSAI Performance Auditing Guidelines.
35. Elements of Performance Audit are except
i. 3 Parties-(a) Auditor (b) Responsible Party and (c) Intended users
ii. Subject matter
iii. Criteria to assess the subject matter
iv. Audit method and procedure

a. ii, iii and iv b. i, ii and iii

c. i, iii and iv d. All of the above
36. The objectives of strategic audit planning are to
i. Provide a firm basis for the Department's Management to give strategic direction for future audit
coverage
ii. Identify and select audits with the potential to improve public sector accountability and
administration
iii. Understand entity risks and take them into account in audit selection
iv. Provide a basis for Department's accountability and
v. Produce a work programme that can be achieved with expected/available resources

a. i, ii, iii and iv d. ii, iii, iv and v

c. i, ii, iii and v d. All of the above
37. Pick the correct one
a. In order to ensure the timely completion of the performance audits and also that the topics may
not lose their importance, all the performance Audits should ideally be completed within a period of
ten (10) months.
b. The audit implementation cycle i.e. from the date of entry conference to the finalisation of the
audit report by the headquarters should be completed preferably within this period.
c. Both A&B
d. None of the given
38. A good Performance audit report includes
i. Completeness ii. Objectivity
iii. Concise & Constructive iv. Relevance
v. Timeliness

a. i, ii, iii and iv d. ii, iii, iv and v

c. i, ii, iii and v d. All of the above
39. Pick the correct one
a. While no uniform time frame for the planning of performance audits by the field audit offices can
be determined, a reference frame of five (5) years may be considered for performance audit
planning.
b. The planning drill would be reviewed every two year at the time of preparation of the annual audit
plans as a rollover exercise.
c. Both A&B
d. None of the given
40. The minutes of exit conference should be recorded and endorsed to the entity with a request to
acknowledge the minutes within

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 a. three weeks stating that in case of non-receipt of acknowledgement within stipulated period, it
will be presumed that audited entity concurs with the minutes.
b. two weeks stating that in case of non-receipt of acknowledgement within stipulated period, it will
be presumed that audited entity concurs with the minutes.
c. four weeks stating that in case of non-receipt of acknowledgement within stipulated period, it will
be presumed that audited entity concurs with the minutes.
d. one week stating that in case of non-receipt of acknowledgement within stipulated period, it will
be presumed that audited entity concurs with the minutes.
41. Pick the correct Audit Criteria
i. Criteria is what is required or expected?' and 'what results are to be achieved and how?
ii. Audit criteria are standards used to determine whether a program meets or exceeds expectations.
iii. Audit criteria are reasonable and attainable standards of performance against which economy,
efficiency and effectiveness of programmes and activities can be assessed.
iv. The criteria may be general or specific. In audits covering complex issues it is always desirable to
predefine the criteria rather than defining the same during the audit process.

a. i, ii and iii b. ii, iii and iv

c. i, ii and iv d. All of the above
42. Points to be kept in mind while selecting a topic for performance audit
i. Materiality & significance ii. Visibility
iii. Past audits iv. Estimated Impact
v Stage of programme development

a. i, ii, iii and iv b. ii, iii, iv and v

c. i, iii. iv and v d. All of the above
43. Which of the following is not an Audit approach
a. result-oriented b. problem oriented
c. System oriented d. fraud and corruption oriented
44. Control Environment
a. The control environment is the foundation for the entire internal control system
b. It provides the discipline and structure as well as the climate which influences the overall quality
of internal control
c. It has overall influences on how strategy and objectives are established, and control activities are
structured
d. All of the above
45. Limitation on effective internal control includes
i. Internal control can by itself ensure the achievement of the general objectives of the organisation
ii. It provides only reasonable – not absolute – assurance to management about the achievement of
an entity's objectives or its survival
iii. But internal control cannot change an inherently poor manager into a good one.
iv. The design of an internal control system faces resource constraints
v. Organisational changes and management attitude can have a profound impact on the
effectiveness of internal control and the personnel operating the system.

a.i, ii, iii and iv b. ii, iii, iv and v

c. i, iii, iv and v d. All of the above
46. Walk through Test
a. Tests are designed to confirm the auditor's understanding of how a system operates which is
derived from a combination of observation, interviews, and examination of management's
documentation of the system.

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 b. the auditor looks primarily for evidence of the existence of controls. This may involve examining
a number of different transactions at each stage of the process or following the same transaction
from start to finish.
c. Both A&B
d. None of the given
47. If there was a 50% risk of a material misstatement in a financial statement item in the unaudited
financial statements and a probability of 80% that the misstatement would be detected by the auditor, audit
risk, or the risk of a material misstatement would be equal to
a. 0.10%. b. 0.20%
c. 0.50% d. 0.40%
48. A well designed and operated, internal control system can provide
a. only absolute assurance
b. only reasonable assurance
c. only complete assurance
d. partially absolute and partially reasonable assurance
49. Pick the correct one
i. Section 20 (1) deals with audit the accounts of such authority or body if the CAG is requested in
this behalf, after prior consultation, by the President or the Governor of State/Administrator of a
Union Territory having a Legislative Assembly, on such terms and conditions as may be agreed upon
between the CAG and the Government concerned
ii. Section 20 (2) empowers the President or the Governor of a State or the Administrator of a Union
Territory having a Legislative Assembly to entrust the CAG to undertake the audit of the accounts of
anybody or authority, not entrusted to the CAG for audit, with the prior approval of the CAG, if the
President or the Governor of a State or the Administrator of a Union Territory is of the opinion that
such audit is necessary
iii. Audit under Sub-sections (1) and (2) of Section 20 of the Act can be entrusted to the CAG only in
public interest and only after giving a reasonable opportunity to the concerned authority or body to
represent in respect of the proposal for such audit
iv. Audit of Government Companies is conducted in accordance with the provisions of the Companies
Act, 1956 contained in Sections 617 and 619 and of Corporations set up by or under law made by the
Parliament, in accordance with provisions of the respective Legislations

a. i, ii and iii b. i, iii and iv

c. ii, iii and iv d. All of the above
50. Any rule made by the Central Government under Section 22 shall be laid before both the houses of
the Parliament for a total period of
a. 60 days b. 15 days
c. 45 days d. 30 days
51. Section 16 of the DPC Act, 971 requires the CAG to be satisfied that the rules and procedures in that
behalf are designed to secure an effective check on the
a. Assessment of revenue b. Assessment & collection of revenue
c. Collection and proper allocation of revenue
d. Assessment, Collection and proper allocation of revenue
52. Where the receipts and expenditure of a body or authority are audited by the CAG under sub-section
(1) or (2) of Section 14 for a particular year, the CAG is authorised under Section 14(3) of the Act to
continue to audit its receipts and expenditure for
a. a further period of two years even if the conditions stated in sub-section (1) or (2) are not satisfied
during any of the two subsequent years.
b. a further period of two years if the conditions stated in sub-section (1) or (2) are satisfied during
any of the two subsequent years.
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 c. a further period of three years even if the conditions stated in sub-section (1) or (2) are not satisfied
during any of the two subsequent years.
d. a further period of three years if the conditions stated in sub-section (1) or (2) are satisfied during
any of the two subsequent years.
53. The audit of bodies and authorities, other than Government establishments and companies, by the
Comptroller and Auditor General is governed by the provisions contained in Sections
a. 14 and 15
b. 19(2), 19(3), 19A and 20 of the Act
c. 14, 15, 19(2), 19(3), 19A and 20 of the Act
d. 14, 15, 18, 19(2), 19(3), 19A and 20 of the Act
54. Pick the correct one
a. The concept of compliance audit is embedded in the description of the purpose of public sector
audit in the Tokyo Declaration (October 1977 at the IX INCOSAI) of Guidelines on Auditing Precepts
b. Compliance audit deals with the degree to which the audited entity follows rules, laws and
regulations, policies, established codes, or agreed upon terms and conditions, etc. Compliance
auditing may cover a wide range of subject matters as given ISSAI 2100
c. Both A&B
d. None of the given
55. Pick the correct one
i. Compliance Audit is concerned with regularity and propriety audit
ii. The subject matter of the audit adheres to formal criteria emanating from the relevant laws,
regulations and agreements which are applicable to the auditable entity denotes regularity
iii. Propriety is general principles of sound public sector financial management and ethical conduct
have been adhered to, legality and competence are ensured.
iv. compliance audit not only includes examination of rules, regulations, orders, instructions but also
every matter which, in the judgment of the auditor, appears to involve significant unnecessary,
excessive, extravagant or wasteful expenditure of public money and resources despite compliance
with the rules, regulations and orders.

a. i, ii and iii b. ii, iii and iv

c. i, ii and iv d. All of the above
56. The auditor makes a critical assessment, with a questioning mind, of the sufficiency and
appropriateness of evidence obtained throughout the audit is called
a. Professional Scepticism b. Professional Judgement
c. Critical Analysis d. Best judgement
57. Code of ethics includes
a. Integrity and Independence
b. Integrity, Independence and Confidentiality
c. Integrity, Independence Objectivity, Confidentiality and Competence.
d. Integrity, Independence Objectivity, Confidentiality, Competence and Timeliness
58. There are three components of audit risk, pick the exception
a. Inherent b. Professional
c. Control d. Detection Risk
59. A matter can be judged material if knowledge of it would be likely to influence the decisions of the
a. auditors b. auditee entities
c. intended users d. All of the above
60. Audit units are identified beginning with higher organisational hierarchies of the Apex Auditable
Entity and fanning out to operational units at the field level under
a. top-down approach b. bottom-up approach
c. system approach d. rational approach
61. Components of Annual Compliance Audit Plan are
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 i. Selection of Apex Auditable Entities and Audit Units that would be taken up for compliance audits
ii. Selection of implementing units under the audit units as necessary
iii. Determination of specific subject matter, where considered necessary and
iv. Allocation of audit resources for the audits to be undertaken

a. i, ii and iv b. ii, iii and iv

c. i, ii and iv d. All of the above
62. Assertions are
a. positive statements about the state of being
b. negative statements about the state of being
c. positive statements about the state of not being
d. negative statements about the state of not being
63. Misclassification of revenue expenditure as capital expenditure is an example of
a. Completeness objective b. Measurement Objective
c. Disclosure Objective d. Regularity objective
64. The audit opinion provides
a. reasonable assurance that the financial statements are free from material misstatement and
irregularity
b. absolute assurance that the financial statements are free from material misstatement and
irregularity
c. reasonable and absolute assurance that the financial statements are free from material
misstatement and irregularity
d. reasonable, reliable and absolute assurance that the financial statements are free from material
misstatement and irregularity
65. Pick the correct one regarding materiality percentage for Accounts prepared on Cash Basis i.e.
Finance and Appropriation Accounts
i. Very Sensitive- ½ % ii. Sensitive- ½ % to 2%
iii. Not sensitive-2% iv. Less sensitive-2%

a. i, ii and iv b. i, ii and iii

c. i and ii d. All of the above
66. Pick the correct one
i. Planning materiality is primarily concerned with materiality by value. At this stage highest amount
which would not distort the overall view of the accounts given to the addressee of the audit report.
ii. The materiality of errors by nature and by context is a matter to be considered specifically at the
end of the audit. At the planning stage, the possibility of such errors occurring should be recognised
by ensuring that audit programmes include year-end procedures to detect them.
iii. Reporting materiality applies at the end of the audit when all errors are evaluated and viewed in
relation to their known effects on the financial statements. At this stage, the Auditor has to consider
the audit findings by value, by nature and by context, and errors or omissions may be considered
material which otherwise by value would not.
iv. As a matter of abundant caution, planning materiality may be taken at a lower figure than
reporting materiality.

a. i, ii and iii b. i, iii and iv

c. ii, iii and iv d. All of the above
67. To deal with the certification work, a separate cell on financial (attest) audit may be formed within
each Group in every Audit Office headed by
a. a Senior/Audit Officer b. An Assistant Account General
c. a Dy. AG/ Sr. Dy. AG d. the AG
68. Match the following
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 Sl Auditee Entity Sl Financial Statement Certification
No. No.
A Central/State/UT Govt. I Balance Sheet and Profit and Loss Account/Revenue
Account
B Statutory Corporation II Balance Sheet and Profit and Loss Account
C Government Companies III Appropriation and Finance Accounts
D Externally Aided Projects IV Statements of Expenditure

a. A-III, B-I, C-II, D-IV b. A-I, B-II, C-III, D-IV

c. A-III, B-II, C-IV, D-I d. A-III, B-IV, C-I, D-II
69. An in-depth analysis of the mechanics of a system reveals that it is designed with appropriate
controls, checks and balances to safeguard against errors, frauds, etc. is called
a. System Audit b. Concrete Audit
c. Focused Audit d. Detective Audit
70. Where the Accountant General is unable to satisfy himself that the financial statements are free
from material misstatement whether caused by fraud, error or other irregularity, the opinion given will be
a. disclaimer b. unqualified
c. qualified d. adverse
71. In States where the Finance and Appropriation Accounts are compiled by the AG (A&E), primarily
responsible for the correctness of the initial and subsidiary accounts as well as ensuring the regularity of
financial transactions in accordance with the applicable laws, standards, rules and regulations concerning
such accounts and transactions is
a. the AG (A&E)
b. the State Government
c. treasuries, offices or departments functioning under the State Government
d. All of the above.
72. How may testing control approaches are there in financial attest audit?
a. five b. four
c. three d. two
73. The letter sent by the A.G to the secretary / chief executive of the entity, communicating the launch
of the audit along with the entity units tentatively selected for audit, respective responsibilities of Audit and
the entity management, the time-frame for audit and request him/her to issue necessary directions to the
functional officers and field units to provide documents is called
a. Letter of Understanding
b. Engagement Letter
c. Letter of Understanding for statutory financial attest audit and Engagement Letter for and non-
statutory audit
d. Engagement Letter for statutory financial attest audit and Letter of Understanding for non-
statutory audit
74. The levels/degree of inherent risk can be recognised in audit
a. five- Extreme Risk, High Risk, Medium Risk, Low Risk and No Risk
b. two-High Risk and Low Risk
c. four- High Risk, Medium Risk, Low Risk and No Risk
d. three-High Risk, Medium Risk and Low Risk
75. When the audit objectives can be achieved without relying on the systems in place in the auditee
and without undertaking tests of control, it is known as the
a. Detailed Audit Approach b. Test Check Approach
c. Direct Substantive Testing approach d. None of the above
76. Standard Error is due to
a. Observer error b. System error
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Prepared by Deepak Kumar Rahi, AAO (Patna/Bihar)
 c. Sampling error d. Conceptual error
77. In Random Sampling, chance of being selected is:
a. Not same and not known b. Same and known
c. Same and not known d. Not same but known
78. For a survey, a village is divided into 5 lanes then each lane is sampled randomly. It is an example of
a. Simple Random Sampling b. Stratified Random Sampling
c. Systematic Random Sampling d. Multi stage Sampling
79. In systematic random sampling, the sample interval is determined using
a. Random numbers
b. Total population/Sample size desired
c. (Total population/Sample size desired) * 100 d. None of the above
80. As sample size increases, standard deviation of sample means
a. Decrease b. Increase
c. Remains the same d. Approaches to infinity
81. Which auditing standard is currently being used?
a. 1997 b. 2002
c. 2014 d. 2017
82. SAI India shall have a Code of Ethics aligned with the Code of Ethics elaborated under which ISSAIs?
a. ISSAI 30 b. ISSAI 40
c. ISSAI 50 d. ISSAI 55
83. Conflict of interest between the auditor and the audited entity is avoided by
a. carrying out audit and reporting the results in conformity with reporting standards
b. maintaining SAI’s independence and objectivity
c. by maintaining confidentiality regarding audit matters
d. All of the above
84. Who is not the intended user of public sector audits?
a. the executive which includes auditable entity and those charged with Governance
b. the legislature, the primary intended user
c. the citizens, who are the ultimate users of compliance audit reports.
d. the auditor
85. Which among the following is not relevant as to independency of SAI
a. SAI maintains his independence from political influence, in order to preserve an impartial
approach to its audit responsibilities
b. while observing the laws enacted by the legislature, SAI is subject to direction by the legislature in
planning and conduct of audit
c. the essential relationship of SAI with the executive is that of an external auditor
d. none of the above
86. The primary objectives of Central Audit are to
i. Check whether vouchers are in the prescribed form and have been prepared according to extant
rules
ii. Scrutinize whether the rules and orders issued by Government themselves are intra vires
iii. Examine whether the contract agreements are definite and precise and are based on standard
practices
iv. Provide support to local audit parties with preliminary observation during field audit
v. Examine whether the sanctions have been issued by the competent authority

a. i, ii, iii and iv b. ii, iii, iv and v

c. i, ii, iii and v d. All of the above
87. Pick the incorrect one

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Prepared by Deepak Kumar Rahi, AAO (Patna/Bihar)
 a. In all cases where the Audit Reports are placed before the Parliament or the State/ Union
Territory Legislature, the Reports, along with the annual accounts and the audit certificate
proposed to be issued, should be shown to the CAG at the draft stage.
b. Simultaneously, a copy of the draft Audit Report may be issued to the heads of the
organisations concerned calling for their comments, if any, within a period of three weeks.
c. It is mandatory to send the draft Reports to Government for comments before they are
finalised.
d. None of the given
88. Pick the correct one
i. Copies of sanctions issued by the Central and State Governments and their subordinate
authorities will be received by the Central Audit Support Sections concerned
ii. The Accountant General (Audit) will make arrangements for the receipt, scrutiny and
processing of sanctions and maintenance of files/folders in a regular and systematic manner.
iii. The Central Audit Support Sections shall communicate objections arising out of audit of
sanctions to the departments concerned with copies thereof to the Accountant General (A&E),
and closely watch their settlement.
iv. It is the duty of the concerned Central Audit Support Section to supply the relevant sanction
files along with important points to the Central Audit Parties.

a. ii, iii and iv b. i, ii and iii

c. i, ii and iv d. All of the above
89. Audit evidence should be sufficient, competent and relevant and may be gathered by
i. physical observation, including joint inspection by the auditors and the executive, the resultant
observations being signed by both as confirmation of performance or achievements
ii. review of documents
iii. evaluation of the quality of internal control mechanisms
iv. interviews with executives
v. media report

a. i, ii, iii and iv b. ii, iii, iv and v

c. i, ii, iv and v d. All of the above
90. The Central Audit Support Sections shall communicate objections arising out of audit of sanctions to
a. the AG (A &E) with copies to concerned departments
b. the departments concerned with copies to the AG (A&E)
c. the State Government with copies to concerned departments
d. None of the given.
91. Extent of audit means
a. the quantum of audit including the period b. the units of the auditable entity
c. the extent of test check and the boundaries of audit enquiry to be covered in an audit.
d. All of the above
92. The audit office shall as far as possible issue the inspection report or audit notes within
a. four weeks from the date of completion of audit
b. six weeks from the date of completion of audit
c. three weeks from the date of completion of audit
d. eight weeks from the date of completion of audit
93. On intimation of the major irregularity by AG (Audit), the Government shall undertake prima facie
verification of facts and send to AG (Audit) a preliminary report confirming or denying the facts within
a. four weeks of receipt of intimation b. six weeks of receipt of intimation
c. two months of receipt of intimation d. three months of receipt of intimation
94. Pick the correct one
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Prepared by Deepak Kumar Rahi, AAO (Patna/Bihar)
 a. The AG (Audit) of the State shall in the first quarter of each year make an annual public statement
regarding pending audit observations relating to the State Government.
b. The Chief Secretary to the Government shall in the first quarter of each year make an annual public
statement regarding pending audit observations relating to the State Government.
c. The Secretary to Finance Department shall in the first quarter of each year make an annual public
statement regarding pending audit observations relating to the State Government.
d. Each Head of Department shall in the first quarter of each year make an annual public statement
regarding pending audit observations relating to his department.
95. Action Taken Note (ATN) is prepared for submission to
a. the AG (Audit) b. Secretary Finance Ministry/Department
c. President/Governor/Administrator d. PAC/COPU
96. The normal level or percentage of assurance (confidence) and risk in auditing is
a. Assurance 80% Risk 20% b. Assurance 85% Risk 15%
c. Assurance 90% Risk 10% d. Assurance 95% Risk 5%
97. Audit risk is
a. Inherent Risk + Control Risk + Detection Risk b. Inherent Risk X Control Risk X Detection Risk
c. Inherent Risk X Control Risk + Detection Risk d. Inherent Risk + Control Risk - Detection Risk
98. Anything which has an influence on whether or not an error is likely to occur in the first place is called
a. Audit Environment b. Audit Matrix
c. Accounting Environment d. Accounting Matrix
99. The analysis that involves the creation of an expectation using not just financial data but also
operating or external data, independent of the accounting system is termed as
a. System analysis b. Predictive analysis
c. Regression analysis d. Business Analysis
100. Pick the correct one
i. Statistical sampling unlike subjective selection of the individual transactions to be tested is free
from auditor’s bias and uncertainty.
ii. While using statistical sampling, a random mechanism is applied to choose the transactions to be
tested in which each transaction has the same chance of being included in the sample.
iii. A pre-condition for any statistical sampling is the availability of a sampling frame, in effect, a listing
of all the transactions which make up the account or account area.
iv. Where accounting records are computerised, this listing may be readily accessible. The use of
computer assisted audit techniques (CAATs), in particular IDEA, is likely to provide a cost-effective
means of sample selection in such cases.

a. i, ii and iii b. i, iii and iv

c. ii, iii and iv d. All of the above.

Pattern
Sl No. Topic No. of Ques Sl No.
1. FAA Guidelines 5 1-5
2. FA Manual 29 6-15, 62-75 & 96-100
3. MSO Audit 12 16-22 & 86-90
4. Regulation on Audit and Accounts 10 23-27 & 91-95
5. PPP 6 28-33
6. Performance Audit 10 34-43
7. Internal Control 5 41-48
8. DPC Act 5 49-53
9. Compliance Audit 8 54-61
10. Sampling 5 76-80
11. Auditing Standard 5 81-85
TOTAL 100

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