____________ is a systematic examination of the books and records or a business?

0 

A. Auditing
B. Vouching
C. Verification
D. Checking

The term ‘Audit’ is derived from a Latin word “audire” which means___________?
0 

A. To inspect
B. To examine
C. To hear
D. To investigate

The main object of an audit is _____________?

1 

A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.

An auditor is like a_______________?

0 

A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these

Process of verifying the documentary evidences of transactions are known as___________?

0 

A. Auditing
B. Testing
C. Vouching
D. Verification

Auditing is compulsory for____________?

0 

A. Small scale business

B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns

Concealment of shortage by delaying the recording of cash receipts is known

as_____________?
0 

A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these

The fundamental objective of the audit of a company is to_____________?

0 

A. Protect the interests of the minority shareholders

B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts

The concept of stewardship means that a company’s directors________________?

0 

A. Are responsible for ensuring that the company complies with the law
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the shareholders
D. Report suspected fraud and money laundering to the authorities

Why do auditors concentrate their efforts on material items in accounts?

0 

A. Because they are easier to audit

B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it

Which of the following is NOT the responsibility of a company’s directors?

0 

A. Reporting to the shareholders on the accuracy of the accounts

B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor

International auditing standards are issued by the______________?

6 
A. International Accounting Standards Board
B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board

Which of the following is not true about opinion on financial statements?

0 

A. The auditor should express an opinion on financial statements.

B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial
statements
D. He should examine whether recognised accounting principle have been consistently

A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?

0 

A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle

When an auditor is proposed for removal from office, which one of the following is he NOT
permitted to do?
0 

A. Circulate representations to members

B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed

Which one of the following is NOT a duty of the auditor?

0 

A. Duty to report to the company’s bankers

B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law

Assuming that it is not the first appointment of the auditor, who is responsible for the
appointment of the auditor?
1 

A. The shareholders in a general meeting

B. The managing director
C. The board of directors in a board meeting
D. The audit committee

The independent auditor’s primary responsibility is to______________?

0 

A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders

How long is the auditor’s term of office?

0 

A. Until the audit is complete

B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them

Which of the following is correct in relation to materiality?

0 

A. A matter is material only if it changes the audit report

B. A matter is material if the auditor and the directors both decide that further work needs to be
done in the area under question
C. A matter is material only if it affects directors’ emoluments
D. A matter is material if its omission or misstatement would reasonably influence the
decisions of an addressee of the auditors’ report

Which one of the following is NOT considered to be part of planning?

0 

A. Background i.e. industry

B. Previous year’s audit i.e. any qualifications in the report
C. Considering the work to be done by the client staff e.g. internal audit
D. Considering whether the financial statements show a true and fair view

Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
0 

A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk

Which of the following should NOT be considered at the planning stage?

0 

A. The timing of the audit

B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations

At the planning stage you would NOT consider____________?

0 

A. the timing of the audit

B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit

Which of the following describes sampling risk?

0 

A. The risk of the auditor carrying out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing

Which of the following is NOT an accepted method of selection in sampling?

0 

A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection

Which of the following are you unlikely to see in the current file of auditors’ working
papers?
0 

A. Memorandum & articles of association

B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count

According to ISA 500, the strength of audit evidence is determined by which two qualities?
0 

A. Appropriateness & competence

B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence

Which of the following is normally the most reliable source of audit evidence?
0 

A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review

The degree of effectiveness of an internal control system depends on:

0 

A. The design of the internal control system and the implementation of the controls
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting records

According to ISA 315, which of the following is NOT an element of the control
environment?
0 

A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices

According to ISA 315, which of the following is NOT a control activity?

0 

A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties

Lapping is also known as___________?

0 

A. Teeming and lading

B. Looping
C. Embezzlement
D. Hacking

Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
of____________?
1 

A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication

Which of the following statements is not true?

1 

A. Management fraud is more difficult to detect than employee fraud

B. Internal control system reduces the possibility of occurrence of employee fraud and
management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.

Internal audit is undertaken:

0 

A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor

The scope of internal audit is decided by the___________?

0 

A. Shareholders
B. Management
C. Government
D. Law

Audit of banks is an example of_____________?

0 

A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above

Concurrent audit is a part of____________?

0 

A. Internal check system

B. Continuous audit
C. Internal audit system
D. None of these

Audit in depth is synonymous for____________?

0 

A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit

Institute of Chartered Accountants of Pakistan was established in____________?

0 

A. 1949
B. 1956
C. 1961
D. 1972

Which of the following statements is not true about continuous audit?

0 

A. It is conducted at regular interval

B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive

Internal check is carried on by___________?

0 

A. Staff specially appointed for the purpose

B. Internal auditor
C. Supervisor of the staff
D. Members of the staff

Errors of Omission are_____________?

0 

A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above

Window dressing implies_______________?

0 
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets

Test Checking refers to___________?

0 

A. Testing of accounts and records

B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded

Which of the following statements is not correct about materiality?

0 

A. Materiality is a relative concept

B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of
an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial statement level
only

______the audit risks_______the materiality and_________the audit effort.

0 

A. Lower, Higher, Lower

B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher

When issuing unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the___________?
2 

A. Amount of known misstatement is documented in working papers

B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made

In determining the level of materiality for an audit, what should not be considered?
0 

A. Prior year’s errors

B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements

Analytical procedures issued in the planning stage of an audit, generally

0 

A. Helps to determine the nature, timing and extent of other audit procedures
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above

Which of the following statements is most closely associated with analytical procedure
applied at substantive stage?
0 

A. It helps to study relationship among balance sheet accounts

B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific account balance

Verification refers to_________?

0 

A. Examining the physical existence and valuation of assets.

B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.

Stock should be valued at_________?

0 

A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.

Floating assets are valued at____________?

0 

A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation

Goods sold on the basis of ‘sales or return ‘ should:

0 
A. Be included in the stock
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above

Of the following, which is the least persuasive type of audit evidence?

0 

A. Bank statements obtained from the client

B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor

Which of the following statements is, generally, correct about the reliability of audit
evidence?
0 

A. To be reliable, evidence should conclusive rather than persuasive

B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.

In an audit of financial statements, substantive tests are audit procedures that __________?
0 

A. May be eliminated for an account balance under certain conditions

B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures

The nature, timing and extent of substantive procedures is related to assessed level of
control risk
0 

A. Randomly
B. Disproportionately
C. Directly
D. Inversely

Which of the following factors is most important in determining the appropriations of

audit evidence?
0 

A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence

When is evidential matter, generally, considered sufficient?

0 

A. When it constitutes entire population

B. When it is enough to provide a basis for giving reasonable assurance regarding
truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently

Which of the following is not corroborative evidence?

0 

A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements

What would most appropriately describe the risk of incorrect rejection in terms of
substantive testing?
0 

A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above

Which of the following affects audit effectiveness?

0 

A. Risk of over reliance

B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A and C

What would most effectively describe the risk of incorrect acceptance in terms of
substantive audit testing?
0 

A. The auditor has ascertained that the balance is materially correct when in actual fact it
is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary
evidence
D. He applies random sampling on data which is inaccurate and inconsistent

Audit programme is prepared by____________?

0 

A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants

The working papers which auditor prepares for financial statements audit
are___________?
0 

A. Evidence for audit conclusions

B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors

The quantity of audit working papers complied on engagement would most be affected
by__________?
0 

A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk

Which of the following best describes the primary purpose of audit programme
preparation?
0 

A. To detect errors or fraud

B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk

Which of the following is not an advantage of the preparation of working paper?

0 

A. To provide a basis for review of audit work

B. To provide a basis for subsequent audits
C. To ensure audit work is being carried out as per programme
D. To provide a guide for advising another client on similar issues
The auditor’s permanent working paper file should not normally, include__________?
0 

A. Extracts from client’s bank statements

B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements

For what minimum period should audit working papers be retained by audit firm?
0 

A. For the time period the entity remains a client of the audit firm.
B. For a period of ten years
C. For a period auditor opines them to be useful in servicing the client
D. For the period the audit firm is in existence.

Which of the following factors would least likely affect the quantity and content of an
auditor’s working papers
0 

A. The assessed level of control risk

B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter

Which of the following statement is true regarding an auditor’s working papers?

0 

A. They document the level of independence maintained by the auditor

B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control

Which of the following statement best describes the understanding with respect to
ownership and custody of working papers prepared by an auditor?
0 

A. The working papers may be obtained by third parties when they appear to be relevant
to issues raised in litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors. The
approval of client is not required.

The current file of the auditor’s working papers, generally, should include____________?
0 
A. A flowchart of the internal controls
B. Organisation charts
C. A copy of financial statements
D. Copies of bond and debentures

Auditing is what?
1 

A. Reporting the financial information

B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records

Audit of banks is an example of__________?

0 

A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above

In Pakistan, balance sheet audit is synonymous to___________?

0 

A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit

Audit in depth is synonymous for_____________?

0 

A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit

Balance sheet audit includes verification of____________?

0 

A. Assets
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above
Which of the following statements is not true about continuous audit?
0 

A. It is conducted at regular interval

B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive

Balance sheet does not include:_____________?

0 

A. Verification of assets and liabilities

B. Vouching of income and expense accounts related to assets and liabilities
C. Examination of adjusting and closing entries
D. Routine checks

Which of the following statements is not correct about materiality?

0 

A. Materiality is a relative concept

B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of
an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial statement level
only

_______the audit risk,_______the materiality and _______the audit effort?

0 

A. Lower, Higher, Lower

B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher

When issuing unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the_____________?
0 

A. Amount of known misstatement is documented in working papers

B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made

In determining the level of materiality for an audit, what should not be considered?
0 
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements

Analytical procedures issued in the planning stage of an audit, generally?

0 

A. helps to determine the nature, timing and extent of other audit procedures
B. directs attention to potential risk areas
C. indicates important aspects of business
D. All of the above

Which of the following statements is most closely associated with analytical procedure
applied at substantive stage?
0 

A. It helps to study relationship among balance sheet accounts

B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific account balance

The basic assumption underlying the use of analytical procedures is:____________?

0 

A. It helps the auditor to study relationship among elements of financial information

B. Relationship among data exist and continue in the absence of known condition to the
contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.

What are analytical procedures?

0 

A. Substantive tests designed to assess control risk

B. Substantive tests designed to evaluate the validity of management’s representation letter
C. Substantive tests designed to study relationships between financial and nonfinancial
D. All of the above

Which of the following is not an analytical procedure?

0 

A. Tracing of purchases recurred in the purchase book to purchase invoices.

B. Comparing aggregate wages paid to number of employees
C. Comparing the actual costs with standard costs
D. All of them are analytical procedure
When applying analytical procedures, an auditor could develop independent estimate of an
account balance to compare it to___________?
0 

A. client’s unedited account balance

B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry

What is the primary objective of analytical procedures used in the overall review stage of
an audit?
0 

A. To help to corroborate the conclusions drawn from individual components of financial

statements
B. To reduce specific detection risk
C. To direct attention to potential risk areas
D. To satisfy doubts when questions arise about a client’s ability to continue

Of the following, which is the least persuasive type of audit evidence?

0 

A. Bank statements obtained from the client

B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor

In an audit of financial statements, substantive tests are audit procedures

that___________?
0 

A. may be eliminated for an account balance under certain conditions

B. are designed to discover significant subsequent events
C. will increase proportionately when the auditor decreases the assessed level of control risk
D. may be test of transactions, test of balance and analytical procedures

The nature, timing and extent of substantive procedures is _________ related to assessed
level of control risk?
0 

A. randomly
B. disproportionately
C. directly
D. inversely
Which of the following statements is, generally, correct about the reliability of
auditevidence?
0 

A. To be reliable, evidence should conclusive rather than persuasive

B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.

When is evidential matter, generally, considered sufficient?

0 

A. When it constitutes entire population

B. When it is enough to provide a basis for giving reasonable assurance regarding
truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently

Which of the following is not a corroborative evidence?

0 

A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements

Which of the following affects audit effectiveness?

0 

A. Risk of over reliance

B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A. and C.

Which of the following statements is not true with respect to management representations
obtained as per AAS11?
0 

A. Authenticated copy of relevant minutes of meetings may be regarded as management

representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor

What would most appropriately describe the risk of incorrect rejection in terms of
substantive testing?
0 

A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above

What would most effectively describe the risk of incorrect acceptance in terms of
substantive audit testing?
0 

A. The auditor has ascertained that the balance is materially correct when in actual fact it
is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary
evidence
D. He applies random sampling on data which is inaccurate and inconsistent

Which of the following factors is most important in determining the appropriations of

audit evidence?
0 

A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence

Which of the following is not a revenue expense?

0 

A. Cost of raising a loan

B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship

Depreciation does not arise form _______

0 

A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation

Which of the following will not lead to creation of secret reserve?

0 
A. Undervaluation of closing stock
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required

Which of the following is a revenue reserve?

0 

A. Capital redemption reserve

B. Security premium account
C. Debenture redemption reserve
D. Capital reserve

If the book value of an asset stands at________per cent of the original cost, a company need
not provide depreciation on it.
0 

A. two
B. fifteen
C. five
D. ten

Which of the following expenses should not be treated as capital expenditure?

0 

A. Expenses paid on installation of a plant.

B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent.
D. The fees paid to engineer who constructed the plant.

Who is responsible for the appointment of statutory auditor of a limited company ?

0 

A. Directors of the company

B. Members of the company
C. The Central Government
D. All of the above

The board of directors shall appoint first auditor of a company

0 

A. With in one month of completion of capital subscription state of the company

B. With in one month of the promotion of the company
C. With in one month of the commencement of the business of the company
D. With in one month of incorporation of the company
The term of the auditor ship of first auditor would be from the date of appointment
till________?
0 

A. the conclusion of statutory meeting

B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal

In case the directions fail to appoint first auditor (s), the shareholders shall appoint them
at_________by passing a resolution.
0 

A. a general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting

If a casual vacancy in the office of auditor arises by his resignation it should only be filled
by the company in a_________?
0 

A. Board meeting
B. extraordinary general meeting
C. General meeting
D. annual general meeting

The authority to remove the first auditor before the expiry of term is with__________?
0 

A. the shareholders in a general meeting

B. the shareholders in the first annual General meeting
C. the board of directors
D. the Central Government

Who out of the following cannot be appointed as a statutory auditor of the company?
0 

A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.

A statutory auditor has a right of access at all times to___________?

0 
A. Books and accounts of a company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company

The auditor has a right to___________?

0 

A. Obtain information and explanation

B. Obtain information and explanation from the employees and officers
C. Obtain information and explanation necessary for the purpose of audit
D. Both B. and C.

The branch auditor is appointed by___________?

0 

A. Shareholders in an annual general meeting

B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above

Auditor of a___________company does not have right to visit foreign branches of the
company?
0 

A. Unlimited liability
B. Manufacturing
C. Banking
D. Nonprofit making

The date on auditor’s report should not be____________?

0 

A. the data of AGM

B. later than the date on which the accounts are approved in board’s meeting
C. earlier than the date on which the accounts are approved by the management
D. Both A. and B.

When restrictions that significantly affect the scope of the audit are imposed by the client,
the auditor generally should issue which of the following opinion?
0 

A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph;
The auditor has serious concern about the going concern of the company. It is dependent
on company’s obtaining a working capital loan from a bank which has been applied for.
The management of the company has made full disclosure of these facts in the notes to the
balance sheet. The auditor is satisfied with the level of disclosure. He should
issue___________?
0 

A. unqualified opinion
B. unqualified opinion with reference to notes to the accounts
C. qualified opinion
D. disclaimer of opinion

Which of the following is true about explanatory notes?

0 

A. These are given by the directors of the company

B. These are given to adhere to requirements of section 211.
C. These are given by auditors of the company in auditor’s report
D. All of the above

The client changed method of depreciation from straight line to written down value
method. This has been disclosed as a note to the financial statements. It has an immaterial
effect on the current financial statements. It is expected, however, that the change will have
a significant effect on future periods. Which of the following option should the auditor
express?
0 

A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion

Which of the following documents is not relevant for vouching cash sales?
0 

A. Daily cash sales summary

B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement

To test whether sales have been recorded, the auditor should draw a sample from a file
of__________?
0 

A. purchase orders
B. sales orders
C. sales invoices
D. bill of loading

The auditor should examine subsequent realization of revenue such as dividends,

interest,commission, etc to:_____________?
0 

A. identify cases of unrecorded revenue

B. ensure proper disclosure in the balance sheet
C. recompute accrued income on the data of balance sheet
D. Any of these

What is meant by negative assurance?

0 

A. The auditor cannot give an opinion due to lack of evidence.

B. The client’s financial statements were found to be materially misstated.
C. The auditor could not conduct any tests due to lack of controls.
D. The auditor did not find anything to indicate that a material misstatement exists.

For companies required to produce interim financial statements (IFI):

0 

A. one audit firm should audit the IFI and a different firm should audit the financial statements
for the year as a whole.
B. one accountancy firm should review the IFI and a different firm should audit the financial
statements for the year as a whole.
C. the same firm should audit the IFI and the financial statements for the year as a whole.
D. the same firm should review the IFI and the financial statements for the year as a whole.

Which of the following statements is correct?

0 

A. When a company negotiates a ‘friendly’ takeover, it usually appoints a firm of

accountants to carry out due diligence on the takeover target.
B. In an attestation engagement, the accountant is required to report on the quality of work
performed.
C. In a review engagement, evidence is gathered mainly by means of computation and
inspection.
D. In an engagement to review financial statements, the amount of work required is the same as
for an audit

What sort of assurance is provided in a review engagement?

0 
A. Positive assurance
B. Negative assurance
C. High level of assurance
D. No assurance

Which one of the following is part of the auditor’s function?

0 

A. Conducting the inventory count

B. Obtaining and evaluating audit evidence on the financial statements
C. Calculating the year-end accruals figure for inclusion in the accounts
D. Providing representations to management

Which of the following does NOT belong in the auditors’ report?

0 

A. Introductory paragraph specifying the pages to which the report relates and the accounting
convention adopted
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of directors and auditors

What is meant by the expression ‘expectation gap’?

0 

A. The gap between how the directors of a company perform their duties and how the
shareholders expect them to perform
B. The gap between how the directors of a company perform their duties and how the general
public expects them to perform
C. The gap between the public perception of the role of company auditors and their
statutory role and responsibilities
D. The gap between the auditors’ own perception of their duties and how they are set out in the
Companies Act

Which of the following would you not use as a benchmark for comparison when
undertaking analytical procedures?
0 

A. Other audit clients

B. Previous years
C. Other companies in the same industry
D. Budget

Which of the following is true about written representations?

0 
A. They are the best source of audit evidence
B. They should be used only when there is a lack of other substantive audit evidence
C. They should be used only when there is other substantive audit evidence to complement it
D. Shareholders receive a copy of all material written representations

Which of the following statements is INCORRECT?

0 

A. An auditor may serve on the board of directors of an audit client.

B. An auditor who is an immediate family member of the director of an audit client must not be
assigned to the audit team.
C. Purchasing goods from an audit client on normal commercial terms does not create a threat to
the auditor’s independence.
D. An auditor who was recently a director of an audit client must not be assigned to the audit
team for that client.

An auditor should not accept a loan on favourable commercial terms from an audit client
because of the threat to his or her independence. The threat would be a___________?
0 

A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat

Which of the following are fundamental ethical principles for professional accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity
0 

A. 1, 2 and 3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only

Which one of the following may auditors NOT perform for their client?
0 

A. Taking management decisions

B. Preparation of accounting records
C. Preparing tax computations
D. Advising on weaknesses in the internal control systems
You have been proposed as auditor of a company. What is the first step that you should
take?
0 

A. Obtain the client’s permission to communicate with the existing auditor

B. Obtain the existing auditor’s working papers
C. Obtain a copy of the company’s most recent board minutes
D. Obtain a copy of the existing auditor’s letter of engagement

Which of these are types of Audit Report?

0 

A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion.
All of above 

Submitted by: Naveed Ali

Pick the odd one:

0 

A. Checking the vouchers

B. Preparation of vouchers
C. Evaluation of internal control
D. None of the above

Submitted by: ALIYA NAWAZ

Read More Details about this Mcq

Which of the following is not type of engagement standard?

0 

A. Standards on Auditing
B. Standard on Quality Control
C. Standards on Review Engagement
D. Standards on Assurance Engagement

Submitted by: ALIYA NAWAZ

How many Standards on Auditing have been issued?

0 
A. 32
B. 34
C. 36
D. 38

Submitted by: ALIYA NAWAZ

Auditing engagement can be performed w.r.t.

0 

A. Profit making entity

B. Non-profit making entity
C. Corporate entity only
D. Any entity

Scope of financial audit is__________?

0 

A. Financial information
B. Non-financial information
C. Both (a) and (b)
D. None of these

Submitted by: ALIYA NAWAZ

IFRS 9 explains about?

0 

A. Inventory
B. Accounts Payable
C. Accounts Receivable
D. Expenses

Submitted by: Amir

Read More Details about this Mcq

Audit fess is a part of__________.

0 

A. works on cost.
B. selling overhead.
C. distribution overhead.
D. administration overhead
Visit below website

https://mcqsforum.com/subject-related/auditing/

https://www.dynamictutorialsandservices.org/2019/04/auditing-multiple-choice-questions-and.html

Auditing engagement can be performed w.r.t.

A: Profit making entity

B: Non-profit making entity
C: Corporate entity only
D: Any entity
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Any entity

Scope of financial audit is__________?

A: Financial information
B: Non-financial information
C: Both (a) and (b)
D: None of these
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Financial information

Which of the following is not type of engagement standard?

A: Standards on Auditing
B: Standard on Quality Control
C: Standards on Review Engagement
D: Standards on Assurance Engagement
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Standard on Quality Control

How many Standards on Auditing have been issued?

A: 32
B: 34
C: 36
D: 38
Answer & ExplanationDiscussion
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38

You have been proposed as auditor of a company. What is the first step that you should
take?

A: Obtain the clients permission to communicate with the existing auditor

B: Obtain the existing auditors working papers
C: Obtain a copy of the companys most recent board minutes
D: Obtain a copy of the existing auditors letter of engagement
Answer & ExplanationDiscussion
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Obtain the clients permission to communicate with the existing auditor

Which of these are types of Audit Report?

A: Unqualified opinion
B: Qualified opinion
C: Adverse opinion
D: Disclaimer of opinion. All of above
Answer & ExplanationDiscussion
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All of above

Pick the odd one:

A: Checking the vouchers

B: Preparation of vouchers
C: Evaluation of internal control
D: None of the above
Answer & ExplanationDiscussion
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Preparation of vouchers

An auditor should not accept a loan on favourable commercial terms from an audit client
because of the threat to his or her independence. The threat would be a___________?

A: Self-interest threat
B: Self-review threat
C: Advocacy threat
D: Familiarity threat
Answer & ExplanationDiscussion
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Self-interest threat

Which of the following are fundamental ethical principles for professional accountants? 1
Competence 2 Compliance 3 Integrity 4 Objectivity

A: 1, 2 and 3 only
B: 1, 3 and 4 only
C: 2, 3 and 4 only
D: 1, 2 and 4 only
Answer & ExplanationDiscussion
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1, 3 and 4 only

Which one of the following may auditors NOT perform for their client?

A: Taking management decisions

B: Preparation of accounting records
C: Preparing tax computations
D: Advising on weaknesses in the internal control systems
Answer & ExplanationDiscussion
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Taking management decisions

Which of the following statements is INCORRECT?

A: An auditor may serve on the board of directors of an audit client.

B: An auditor who is an immediate family member of the director of an audit client must
not be assigned to the audit team.
C: Purchasing goods from an audit client on normal commercial terms does not create a
threat to the auditors independenc
D: An auditor who was recently a director of an audit client must not be assigned to the
audit team for that client.
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An auditor may serve on the board of directors of an audit client.

Which of the following does NOT belong in the auditors report?

A: Introductory paragraph specifying the pages to which the report relates and the
accounting convention adopted
B: Basis of the opinion
C: Involvement of any specialist
D: Statement of responsibilities of directors and auditors
Answer & ExplanationDiscussion
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Involvement of any specialist

What is meant by the expression ˜expectation gap?

A: The gap between how the directors of a company perform their duties and how the
shareholders expect them to perform
B: The gap between how the directors of a company perform their duties and how the
general public expects them to perform
C: The gap between the public perception of the role of company auditors and their
statutory role and responsibilities
D: The gap between the auditors own perception of their duties and how they are set
out in the Companies Act
Answer & ExplanationDiscussion
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The gap between the public perception of the role of company auditors and their
statutory role and responsibilities

Which of the following would you not use as a benchmark for comparison when
undertaking analytical procedures?

A: Other audit clients

B: Previous years
C: Other companies in the same industry
D: Budget
Answer & ExplanationDiscussion
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Other audit clients

Which of the following is true about written representations?

A: They are the best source of audit evidence

B: They should be used only when there is a lack of other substantive audit evidence
C: They should be used only when there is other substantive audit evidence to
complement it
D: Shareholders receive a copy of all material written representations
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They should be used only when there is a lack of other substantive audit evidence

What is meant by negative assurance?

A: The auditor cannot give an opinion due to lack of evidence
B: The clients financial statements were found to be materially misstate
C: The auditor could not conduct any tests due to lack of controls.
D: The auditor did not find anything to indicate that a material misstatement exists.
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The auditor did not find anything to indicate that a material misstatement exists.

For companies required to produce interim financial statements (IFI):

A: one audit firm should audit the IFI and a different firm should audit the financial
statements for the year as a whol
B: one accountancy firm should review the IFI and a different firm should audit the
financial statements for the year as a whol
C: the same firm should audit the IFI and the financial statements for the year as a
whole
D: None of these
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the same firm should audit the IFI and the financial statements for the year as a whole

Which of the following statements is correct?

A: When a company negotiates a ˜friendly takeover, it usually appoints a firm of

accountants to carry out due diligence on the takeover target.
B: In an attestation engagement, the accountant is required to report on the quality of
work performe
C: In a review engagement, evidence is gathered mainly by means of computation and
inspection.
D: In an engagement to review financial statements, the amount of work required is the
same as for an audit
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When a company negotiates a ˜friendly takeover, it usually appoints a firm of

accountants to carry out due diligence on the takeover target.

What sort of assurance is provided in a review engagement?

A: Positive assurance
B: Negative assurance
C: High level of assurance
D: No assurance
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Negative assurance

Which one of the following is part of the auditors function?

A: Conducting the inventory count

B: Obtaining and evaluating audit evidence on the financial statements
C: Calculating the year-end accruals figure for inclusion in the accounts
D: Providing representations to management
Answer & ExplanationDiscussion
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Obtaining and evaluating audit evidence on the financial statements

Which of the following documents is not relevant for vouching cash sales?

A: Daily cash sales summary

B: Salesmens summary
C: Monthly statements sent to customers
D: Bank statement
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Monthly statements sent to customers

To test whether sales have been recorded, the auditor should draw a sample from a file
of__________?

A: purchase orders
B: sales orders
C: sales invoices
D: bill of loading
Answer & ExplanationDiscussion
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sales invoices

The auditor should examine subsequent realization of revenue such as dividends,

interest,commission, etc to:_____________?

A: identify cases of unrecorded revenue

B: ensure proper disclosure in the balance sheet
C: recompute accrued income on the data of balance sheet
D: Any of these
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identify cases of unrecorded revenue

The auditor has serious concern about the going concern of the company. It is dependent
on companys obtaining a working capital loan from a bank which has been applied for.
The management of the company has made full disclosure of these facts in the notes to the
balance sheet. The auditor is satisfied with the level of disclosure. He should
issue___________?

A: unqualified opinion
B: unqualified opinion with reference to notes to the accounts
C: qualified opinion
D: disclaimer of opinion
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unqualified opinion with reference to notes to the accounts

Which of the following is true about explanatory notes?

A: These are given by the directors of the company

B: These are given to adhere to requirements of section 211.
C: These are given by auditors of the company in auditors report
D: All of the above
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These are given by the directors of the company

The client changed method of depreciation from straight line to written down value
method. This has been disclosed as a note to the financial statements. It has an immaterial
effect on the current financial statements. It is expected, however, that the change will have
a significant effect on future periods. Which of the following option should the auditor
express?

A: Unqualified opinion
B: Qualified opinion
C: Disclaimer of opinion
D: Adverse opinion
Answer & ExplanationDiscussion
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Unqualified opinion

When restrictions that significantly affect the scope of the audit are imposed by the client,
the auditor generally should issue which of the following opinion?

A: Qualified opinion
B: Disclaimer of opinion
C: Adverse opinion
D: Unqualified report with ˜an emphasis of matter paragraph;
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Qualified opinion

The branch auditor is appointed by___________?

A: Shareholders in an annual general meeting

B: Shareholders in general meeting
C: Board of directors in board meeting
D: Any of the above
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Shareholders in general meeting

Auditor of a___________company does not have right to visit foreign branches of the
company?

A: Unlimited liability
B: Manufacturing
C: Banking
D: Nonprofit making
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Manufacturing

The date on auditors report should not be____________?

A: the data of AGM

B: later than the date on which the accounts are approved in boards meeting
C: earlier than the date on which the accounts are approved by the management
D: Both and B.
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earlier than the date on which the accounts are approved by the management

The auditor has a right to___________?

A: Obtain information and explanation

B: Obtain information and explanation from the employees and officers
C: Obtain information and explanation necessary for the purpose of audit
D: Both
E: and C.
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Both and C.

In case the directions fail to appoint first auditor (s), the shareholders shall appoint them
at_________by passing a resolution.

A: a general meeting
B: first annual general meeting
C: statutory meeting
D: annual general meeting
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a general meeting

If a casual vacancy in the office of auditor arises by his resignation it should only be filled
by the company in a_________?

A: Board meeting
B: extraordinary general meeting
C: General meeting
D: annual general meeting
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General meeting

The authority to remove the first auditor before the expiry of term is with__________?

A: the shareholders in a general meeting

B: the shareholders in the first annual General meeting
C: the board of directors
D: the Central Government
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the shareholders in a general meeting

Who out of the following cannot be appointed as a statutory auditor of the company?

A: Erstwhile director
B: Internal auditor
C: Relative of a director
D: Only (
E: and (C.
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Internal auditor

A statutory auditor has a right of access at all times to___________?

A: Books and accounts of a company

B: Books, accounts and documents of the company
C: Books, accounts and vouchers of the company
D: Notices and documents of the company
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Books, accounts and vouchers of the company

Which of the following expenses should not be treated as capital expenditure?

A: Expenses paid on installation of a plant.

B: Cost of dismantling a building in case a new building is to be constructed on the land
C: Legal expenses incurred to defend a suit related to title of patent.
D: The fees paid to engineer who constructed the plant.
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Legal expenses incurred to defend a suit related to title of patent.

Who is responsible for the appointment of statutory auditor of a limited company ?

A: Directors of the company

B: Members of the company
C: The Central Government
D: All of the above
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Members of the company

The board of directors shall appoint first auditor of a company

A: With in one month of completion of capital subscription state of the company

B: With in one month of the promotion of the company
C: With in one month of the commencement of the business of the company
D: With in one month of incorporation of the company
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With in one month of incorporation of the company

The term of the auditor ship of first auditor would be from the date of appointment
till________?

A: the conclusion of statutory meeting

B: the conclusion of first annual general meeting
C: the conclusion of next annual general meeting
D: the date of removal
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the conclusion of first annual general meeting

Which of the following is a revenue reserve?

A: Capital redemption reserve

B: Security premium account
C: Debenture redemption reserve
D: Capital reserve
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Debenture redemption reserve

If the book value of an asset stands at________per cent of the original cost, a company need
not provide depreciation on it.

A: two
B: fifteen
C: five
D: ten
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five

Depreciation does not arise form _______

A: effluxion of time
B: use
C: obsolescence through technology be market changes
D: remarket expectation
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remarket expectation

Which of the following will not lead to creation of secret reserve?

A: Undervaluation of closing stock

B: Charging capital expenditure to revenue
C: Goods sent on consignment being shown as actual sales
D: Charging higher rates of depreciation on fixed assets than actually required
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Goods sent on consignment being shown as actual sales

Which of the following factors is most important in determining the appropriations of

audit evidence?

A: The reliability of audit evidence and its relevance in meeting the audit objective
B: The objectivity and integrity of the auditor
C: The quantity of audit evidence
D: The independence of the source of evidence
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The reliability of audit evidence and its relevance in meeting the audit objective

Which of the following is not a revenue expense?

A: Cost of raising a loan

B: Cost of accessories of motor vehicles spent at the time of purchase
C: Expenses incurred for laying of sewers on land purchased
D: Insurance premium paid at the time of registration of the ship
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Cost of accessories of motor vehicles spent at the time of purchase

What would most appropriately describe the risk of incorrect rejection in terms of
substantive testing?

A: The auditor concludes balance is materially correct when in actual fact it is not
B: The auditor concludes that the balance is materially misstated when in actual fact it
not
C: The auditor has rejected an item for sample which was material
D: None of the above
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The auditor concludes that the balance is materially misstated when in actual fact it not

What would most effectively describe the risk of incorrect acceptance in terms of
substantive audit testing?

A: The auditor has ascertained that the balance is materially correct when in actual fact
it is not
B: The auditor concludes the balance is materially misstated when in actual fact is not
C: The auditor has rejected an item from sample which was not supported by
documentary evidence
D: He applies random sampling on data which is inaccurate and inconsistent
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The auditor has ascertained that the balance is materially correct when in actual fact it
is not

Which of the following statements is not true with respect to management representations
obtained as per AAS11?

A: Authenticated copy of relevant minutes of meetings may be regarded as

management representation
B: It should always be in working
C: It may be dated prior to the report date
D: It should be addressed to the auditor
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It should always be in working

Which of the following affects audit effectiveness?

A: Risk of over reliance

B: Risk of incorrect rejection
C: Risk of incorrect acceptance
D: Both and C.
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Both and C.

Which of the following is not a corroborative evidence?

A: Minutes of meetings
B: Confirmations from debtors
C: Information gathered by auditor through observation
D: Worksheet supporting consolidated financial statements
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Worksheet supporting consolidated financial statements

The nature, timing and extent of substantive procedures is _________ related to assessed
level of control risk?

A: randomly
B: disproportionately
C: directly
D: inversely
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directly

Which of the following statements is, generally, correct about the reliability of
auditevidence?

A: To be reliable, evidence should conclusive rather than persuasive

B: Effective internal control system provides reliable audit evidence
C: Evidence obtained from outside sources routed through the client
D: All are correct.
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Effective internal control system provides reliable audit evidence

When is evidential matter, generally, considered sufficient?

A: When it constitutes entire population

B: When it is enough to provide a basis for giving reasonable assurance regarding
truthfulness
C: When it is objective and relevant
D: When auditor collects and evaluates it independently
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When it is enough to provide a basis for giving reasonable assurance regarding

truthfulness

Of the following, which is the least persuasive type of audit evidence?

A: Bank statements obtained from the client

B: Documents obtained by auditor from third parties directly.
C: Carbon copies of sales invoices inspected by the auditor
D: Computations made by the auditor
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Carbon copies of sales invoices inspected by the auditor

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 clients ability to continue
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To help to corroborate the conclusions drawn from individual components of financial

statements

In an audit of financial statements, substantive tests are audit procedures

that___________?

A: may be eliminated for an account balance under certain conditions

B: are designed to discover significant subsequent events
C: will increase proportionately when the auditor decreases the assessed level of
control risk
D: may be test of transactions, test of balance and analytical procedures
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may be test of transactions, test of balance and analytical procedures

Which of the following statements is most closely associated with analytical procedure
applied at substantive stage?

A: It helps to study relationship among balance sheet accounts

B: It helps to discover material misstatements in the financial statements
C: It helps to identify possible oversights
D: It helps to accumulate evidence supporting the validity of a specific account balance
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It helps to accumulate evidence supporting the validity of a specific account balance

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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All of the above

The basic assumption underlying the use of analytical procedures is:____________?

A: It helps the auditor to study relationship among elements of financial information

B: Relationship among data exist and continue in the absence of known condition to the
contrary
C: Analytical procedures will not be able to detect unusual relationships
D: None of the above.
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Relationship among data exist and continue in the absence of known condition to the
contrary

What are analytical procedures?

A: Substantive tests designed to assess control risk

B: Substantive tests designed to evaluate the validity of managements representation
letter
C: Substantive tests designed to study relationships between financial and nonfinancial
D: All of the above
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Substantive tests designed to study relationships between financial and nonfinancial

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
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Tracing of purchases recurred in the purchase book to purchase invoices.

When applying analytical procedures, an auditor could develop independent estimate of an
account balance to compare it to___________?

A: clients unedited account balance

B: clients unedited account balance adjusted for trends in the industry
C: Prior year audited balance
D: Prior year audited balance adjusted for trends in the industry
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Prior year audited balance adjusted for trends in the industry

_______the audit risk,_______the materiality and _______the audit effort?

A: Lower, Higher, Lower

B: Lower, Lower, Higher
C: Higher, Lower, Lower
D: Lower, Higher, Higher
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Lower, Higher, Lower

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
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Estimates of the total likely misstatement is less than materiality level

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
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It is needed when the organization has a good internal control system

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: Auditors consideration of materiality is influenced by the auditors 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
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At the planning state, the auditor considers materiality at the financial statement level
only

Audit in depth is synonymous for_____________?

A: Complete audit
B: Completed audit
C: Final audit
D: Detailed audit
Answer & ExplanationDiscussion
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Detailed audit

Balance sheet audit includes verification of____________?

A: Assets
B: Income and expense accounts where appropriate
C: Liabilities
D: All of the above
Answer & ExplanationDiscussion
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All of the above

In determining the level of materiality for an audit, what should not be considered?

A: Prior years errors

B: The auditors remuneration
C: Adjusted interim financial statements
D: Prior years financial statements
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The auditors remuneration

Balance sheet does not include:_____________?

A: Verification of assets and liabilities
B: Vouching of income and expense accounts related to assets and liabilities
C: Examination of adjusting and closing entries
D: Routine checks
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Routine checks

Which of the following best describes the primary purpose of audit programme
preparation?

A: To detect errors or fraud

B: To comply with GAAP appropriate evidence
C: To gather sufficient
D: To assess audit risk
Answer & ExplanationDiscussion
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To gather sufficient

Which of the following is not an advantage of the preparation of working paper?

A: To provide a basis for review of audit work

B: To provide a basis for subsequent audits
C: To ensure audit work is being carried out as per programme
D: To provide a guide for advising another client on similar issues
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To provide a guide for advising another client on similar issues

The auditors permanent working paper file should not normally, include__________?

A: Extracts from clients bank statements

B: Past years financial statements
C: Attorneys letters
D: Debt agreements
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Extracts from clients bank statements

For what minimum period should audit working papers be retained by audit firm?

A: For the time period the entity remains a client of the audit firm.
B: For a period of ten years
C: For a period auditor opines them to be useful in servicing the client
D: For the period the audit firm is in existence.
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For a period auditor opines them to be useful in servicing the client

Which of the following factors would least likely affect the quantity and content of an
auditors working papers

A: The assessed level of control risk

B: The possibility of peer review
C: The nature of auditors report
D: The content of management representation letter
Answer & ExplanationDiscussion
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The content of management representation letter

Which of the following statement is true regarding an auditors working papers?

A: They document the level of independence maintained by the auditor

B: They should be considered as the principle support for the auditors report
C: They should not contain details regarding weaknesses in the internal control system
D: They help the auditor to monitor the effectiveness of the audit firms quality control
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They should be considered as the principle support for the auditors report

Which of the following statement best describes the understanding with respect to
ownership and custody of working papers prepared by an auditor?

A: The working papers may be obtained by third parties when they appear to be
relevant to issues raised in litigation
B: The safe custody of working papers is the responsibility of client, if kept at his
premises
C: The working papers must be retained by an audit firm for a period of 10 years
D: Successor auditors may have access to working papers of the predecessor auditors.
The approval of client is not required.
Answer & ExplanationDiscussion
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The working papers may be obtained by third parties when they appear to be relevant to
issues raised in litigation
The current file of the auditors working papers, generally, should include____________?

A: A flowchart of the internal controls

B: Organisation charts
C: A copy of financial statements
D: Copies of bond and debentures
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A copy of financial statements

Audit of banks is an example of__________?

A: Statutory audit
B: Balance sheet audit
C: Concurrent audit
D: Both (and (
Answer & ExplanationDiscussion
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All of the above

In Pakistan, balance sheet audit is synonymous to___________?

A: Annual audit
B: Continuous audit
C: Detailed audit
D: Statutory audit
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Annual audit

Audit programme is prepared by____________?

A: The auditor
B: The client
C: The audit assistants
D: The auditor and his audit assistants
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The auditor and his audit assistants

The working papers which auditor prepares for financial statements audit
are___________?
A: Evidence for audit conclusions
B: Owned by the client
C: Owned by the auditor
D: Retained in auditors office until a change in auditors
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Owned by the auditor

The quantity of audit working papers complied on engagement would most be affected
by__________?

A: Managements integrity
B: Auditors experience and professional judgment
C: Auditors qualification
D: Control risk
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Auditors experience and professional judgment

Which of the following is not corroborative evidence?

A: Minutes of meetings
B: Confirmations from debtors
C: Information gathered by auditor through observation
D: Worksheet supporting consolidated financial statements
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Worksheet supporting consolidated financial statements

The nature, timing and extent of substantive procedures is related to assessed level of
control risk

A: Randomly
B: Disproportionately
C: Directly
D: Inversely
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Directly

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
Answer & ExplanationDiscussion
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All of the above

Verification refers to_________?

A: Examining the physical existence and valuation of assets.

B: Examining the journal and ledger
C: Examination of vouchers related to assets.
D: None of the above.
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Examining the physical existence and valuation of assets.

Stock should be valued at_________?

A: Cost
B: Market price
C: Cost or Market price whichever is lower.
D: Cost less depreciation.
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Cost or Market price whichever is lower.

Floating assets are valued at____________?

A: cost
B: Market price
C: Cost or market price whichever is lower
D: Cost less depreciation
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Cost or market price whichever is lower

Goods sold on the basis of ˜sales or return ˜ should:

A: Be included in the stock

B: Not be included in the stock
C: Not be checked by auditor
D: None of the above
Answer & ExplanationDiscussion
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Be included in the stock

Which of the following statements is, generally, correct about the reliability of audit
evidence?

A: To be reliable, evidence should conclusive rather than persuasive

B: Effective internal control system provides reliable audit evidence
C: Evidence obtained from outside sources routed through the client
D: All are correct.
Answer & ExplanationDiscussion
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Effective internal control system provides reliable audit evidence

In an audit of financial statements, substantive tests are audit procedures that __________?

A: May be eliminated for an account balance under certain conditions

B: Are designed to discover significant subsequent events
C: Will increase proportionately when the auditor decreases the assessed level of
control risk
D: May be test of transactions, test of balance and analytical procedures
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May be test of transactions, test of balance and analytical procedures

Window dressing implies_______________?

A: Curtailment of expenses
B: Checking of Wastages
C: Under valuation of assets
D: Over Valuation of assets
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Over Valuation of assets

Test Checking refers to___________?

A: Testing of accounts and records

B: Checking of selected number of transactions
C: Examination of adjusting and closing entries
D: Checking of all transactions recorded
Answer & ExplanationDiscussion
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Checking of selected number of transactions

______the audit risks_______the materiality and_________the audit effort.

A: Lower, Higher, Lower

B: Higher, Lower, Lower
C: Lower, Higher, Higher
D: Lower, Lower, Higher
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Lower, Higher, Lower

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
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Estimates of the total likely misstatement is less than materiality level

Internal check is carried on by___________?

A: Staff specially appointed for the purpose

B: Internal auditor
C: Supervisor of the staff
D: Members of the staff
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Members of the staff

Errors of Omission are_____________?

A: Technical errors
B: Errors of principle
C: Compensating errors
D: None of the above
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Technical errors

Internal audit is undertaken:

A: By independent auditor
B: Statutorily appointed auditor
C: By a person appointed by the management
D: By a government auditor
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By a person appointed by the management

The scope of internal audit is decided by the___________?

A: Shareholders
B: Management
C: Government
D: Law
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Management

Audit of banks is an example of_____________?

A: Statutory audit
B: Balance sheet audit
C: Concurrent audit
D: All of the above
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All of the above

Concurrent audit is a part of____________?

A: Internal check system

B: Continuous audit
C: Internal audit system
D: None of these
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Internal audit system

Audit in depth is synonymous for____________?

A: Complete audit
B: Completed audit
C: Final audit
D: Detailed audit
Answer & ExplanationDiscussion
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Detailed audit

Lapping is also known as___________?

A: Teeming and lading

B: Looping
C: Embezzlement
D: Hacking
Answer & ExplanationDiscussion
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Teeming and lading

Which of the following statements is not true?

A: Management fraud is more difficult to detect than employee fraud

B: Internal control system reduces the possibility of occurrence of employee fraud and
management fraud
C: The auditors responsibility for detection and prevention of errors and frauds is
similar.
D: All statements are correct.
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Internal control system reduces the possibility of occurrence of employee fraud and
management fraud

According to ISA 500, the strength of audit evidence is determined by which two qualities?

A: Appropriateness & competence

B: Sufficiency & appropriateness
C: Reliability & extensiveness
D: Objectivity & independence
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Sufficiency & appropriateness

Which of the following is normally the most reliable source of audit evidence?

A: Internal audit
B: Suppliers statements
C: Board minutes
D: Analytical review
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Suppliers statements

The degree of effectiveness of an internal control system depends on:

A: The design of the internal control system and the implementation of the controls
B: The design of the internal controls and the implementation of the control system
C: The implementation of the controls and the correctness of the accounting records
D: The design of the internal control system and the correctness of the accounting
records
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The design of the internal control system and the implementation of the controls

According to ISA 315, which of the following is NOT an element of the control
environment?

A: Participation of management
B: Information processing
C: Commitment to competence
D: Human resource policies and practices
Answer & ExplanationDiscussion
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Information processing

According to ISA 315, which of the following is NOT a control activity?

A: Performance reviews
B: Physical controls
C: Organizational structure
D: Segregation of duties
Answer & ExplanationDiscussion
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Organizational structure

Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
A: Compliance risk
B: Detection risk
C: Control risk
D: Inherent risk
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Compliance risk

Which of the following should NOT be considered at the planning stage?

A: The timing of the audit

B: Analytical review
C: Last years written representation letter
D: Obtaining written representations
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Obtaining written representations

At the planning stage you would NOT consider____________?

A: the timing of the audit

B: whether corrections from the inventory count have been implemented
C: last years audit
D: the potential use of internal audit
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whether corrections from the inventory count have been implemented

Which of the following describes sampling risk?

A: The risk of the auditor carrying out a test the wrong way round
B: The risk of reliance on unsuitable audit evidence
C: The risk that the sample does not reflect the population
D: The risk of the auditor reaching the wrong conclusions from testing
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The risk that the sample does not reflect the population

Which of the following is NOT an accepted method of selection in sampling?

A: Systematic selection
B: Pervasive selection
C: Random selection
D: Haphazard selection
Answer & ExplanationDiscussion
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Pervasive selection

Which of the following are you unlikely to see in the current file of auditors working
papers?

A: Memorandum & articles of association

B: Audit planning memorandum
C: Summary of unadjusted errors
D: Details of the work done on the inventory count
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Memorandum & articles of association

Which one of the following is NOT considered to be part of planning?

A: Background i.
B: industry
C: Previous years audit i.
D: any qualifications in the report
E: Considering the work to be done by the client staff e.g. internal audit
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Considering whether the financial statements show a true and fair view

Assuming that it is not the first appointment of the auditor, who is responsible for the
appointment of the auditor?

A: The shareholders in a general meeting

B: The managing director
C: The board of directors in a board meeting
D: The audit committee
Answer & ExplanationDiscussion
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The shareholders in a general meeting

The independent auditors primary responsibility is to______________?

A: the directors
B: the companys creditors (payables)
C: the companys bank
D: the shareholders
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the shareholders

How long is the auditors term of office?

A: Until the audit is complete

B: Until the financial statements are complete
C: Until the next AGM (Annual General Meeting)
D: Until the directors remove them
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Until the next AGM (Annual General Meeting)

Which of the following is correct in relation to materiality?

A: A matter is material only if it changes the audit report

B: A matter is material if the auditor and the directors both decide that further work
needs to be done in the area under question
C: A matter is material only if it affects directors emoluments
D: A matter is material if its omission or misstatement would reasonably influence the
decisions of an addressee of the auditors report
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A matter is material if its omission or misstatement would reasonably influence the

decisions of an addressee of the auditors report

The main object of an audit is _____________?

A: Expression of opinion
B: Detection and Prevention of fraud and error
C: Both (A) and (B)
D: Depends on the type of audit.
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Depends on the type of audit.

An auditor is like a_______________?

A: Blood haunt
B: Watch dog
C: May both according to situation
D: None of these
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Watch dog

Process of verifying the documentary evidences of transactions are known as___________?

A: Auditing
B: Testing
C: Vouching
D: Verification
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Vouching

Auditing is compulsory for____________?

A: Small scale business

B: Partnership firms
C: Joint stock Companies
D: Proprietary Concerns
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Joint stock Companies

Concealment of shortage by delaying the recording of cash receipts is known

as_____________?

A: Embezzlement
B: Misappropriation
C: Lapping
D: None of these
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Lapping

The fundamental objective of the audit of a company is to_____________?

A: Protect the interests of the minority shareholders

B: Detect and prevent errors and fraud
C: Assess the effectiveness of the companys performance
D: Attest to the credibility of the companys accounts
Answer & ExplanationDiscussion
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Attest to the credibility of the companys accounts

The concept of stewardship means that a companys directors________________?

A: Are responsible for ensuring that the company complies with the law
B: Are responsible for ensuring that the company pays its tax by the due date
C: Safeguard the companys assets and manage them on behalf of the shareholders
D: Report suspected fraud and money laundering to the authorities
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Safeguard the companys assets and manage them on behalf of the shareholders

Why do auditors concentrate their efforts on material items in accounts?

A: Because they are easier to audit

B: Because it reduces the audit time
C: Because the risk to the accounts of their being incorrectly stated is greater
D: Because the directors have asked for it
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Because the risk to the accounts of their being incorrectly stated is greater

Which of the following is NOT the responsibility of a companys directors?

A: Reporting to the shareholders on the accuracy of the accounts

B: Establishment of internal controls
C: Keeping proper accounting records
D: Supplying information and explanations to the auditor
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Reporting to the shareholders on the accuracy of the accounts

International auditing standards are issued by the______________?

A: International Accounting Standards Board

B: International Federation of Accountants
C: International Standards Board
D: Auditing Practices Board
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International Federation of Accountants

Which of the following is not true about opinion on financial statements?

A: The auditor should express an opinion on financial statements.

B: His opinion is no guarantee to future viability of business
C: He is responsible for detection and prevention of frauds and errors in financial
statements
D: He should examine whether recognised accounting principle have been consistently
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He is responsible for detection and prevention of frauds and errors in financial

statements

When an auditor is proposed for removal from office, which one of the following is he NOT
permitted to do?

A: Circulate representations to members

B: Apply to the court to have the proposal removed
C: Speak at the AGM/EGM where the removal is proposed
D: Receive notification of the AGM/EGM where the removal is proposed
Answer & ExplanationDiscussion
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Apply to the court to have the proposal removed

Which one of the following is NOT a duty of the auditor?

A: Duty to report to the companys bankers

B: Duty to report to the members
C: Duty to sign the audit report
D: Duty to report on any violation of law
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Duty to report to the companys bankers

____________ is a systematic examination of the books and records or a business?

A: Auditing
B: Vouching
C: Verification
D: Checking
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Auditing

The term ˜Audit is derived from a Latin word œaudire which means___________?

A: To inspect
B: To examine
C: To hear
D: To investigate
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To hear

The outcome of an audit is a/an :

(A) annual certificate
(B) report
(C) income and expenses
(D) profit or loss
Answer: (B) report
The outcome of an audit is a report.

An auditor is most likely to examine the related

party transaction very carefully while vouching:

(A) credit purchase

(B) credit sale
(C) purchase return
(D) sale return
Answer: (A) credit purchase
An auditor is most likely to examine the related party transaction very carefully while vouching
credit purchase.

As per AAS4 if auditor detects an error then?

(A)The auditor must ensure financial statements are adjusted for detected errors.
(B) He must communicate it to the management of organisation if it is material.
(C) He should not inform the management
(D) Both A and B
Answer: (D) Both A and B
Current audit is also called?

(A) Continuous Audit

(B) Internal Audit
(C) External Audit
(D) All of above
Answer: (A) Continuous Audit
Current audit is also called continuous audit.

Audit can be conduct by:

(A) Internally by employee

(B) Externally by certified public accountant
(C) Both A and B
(D) None of these
Answer: (C) Both A and B
Audit can be conduct by employee of an organisation or externally by certified public
accountant.

Who prepares audit program?

(A) The Auditor

(B) Auditor’s assistants
(C) Both A and B
(D) None of these
Answer: (C) Both A and B
Audit program is prepared by the auditor and his assistants.

What affects audit Effectiveness?

(A) Risk of incorrect rejection

(B) Risk of incorrect acceptance
(C) Risk of over reliance
(D) Both B and C
Answer: (D) Both B and C
Effectiveness of audit can be affect by risk of incorrect acceptance and risk of over reliance.

1. Interim audit is performed before the end of the accounting period, normally by the
(A) junior staff
(B) senior staff
(C) whole audit team
(D) board of directors

ANSWER: AUDITING MCQ

1. (B) senior staff. See below ↓ the regular auditing questions. Answers to these
auditing quiz are given after the 5th MCQ.

1. Fundamentally, the auditor report gives an opinion on whether the financial

statements
(A) are in accordance with the national standards
(B) are in accordance with the international standards
(C) have errors, mistakes, or fraud
(D) present fairly the position and results of an entity

2. The _____ certify or guarantee that the financial statements are correct.
(A) management
(B) board of governors
(C) auditor
(D) auditor does not

3. IFAC is an abbreviation for

(A) International Federation of Accountants
(B) International Federation of Auditors
(C) International Framework for Accounting Concepts
(D) International Framework for Auditing Concepts

4. IAASB is an abbreviation for

(A) International Accounting and Auditing Standards Board
(B) International Accountants and Auditors Standards Board

(C) International Auditing and Assurance Standards Board

(D) International Accounting and Assurance Standards Board

5. What type of standard is applied in the audit of historical financial information?

(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISRSs

ANSWERS: AUDITING MCQS

1. (D) present fairly the position and results of an entity
2. (D) auditor does not
3. (A) International Federation of Accountants
4. (C) International Auditing and Assurance Standards Board
5. (B) ISAs [International Standards on Auditing]

6. What type of standard is applied in the review of historical financial information?

(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISREs

7. What type of standard is applied in assurance engagements other than audits or

reviews of historical financial information?
(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISREs

8. What type of standard is applied on compilation engagements, engagements to apply

agreed upon procedures to information and other related services engagements?
(A) ISRSs
(B) ISREs
(C) ISAEs
(D) ISQCs

9. ISQCs is an abbreviation for

(A) International Standards on Quantity Control
(B) International Standards on Quality Control
(C) International Society for Quantity Control
(D) International Society for Quality Control

10. When the account balance of “cash at bank” is verified, which from the following
audit procedure(s) has/have to be performed?
I. Confirmation from the relevant banks
II. Bank reconciliations
(A) I only
(B) II only
(C) I or II
(D) I and II

ANSWERS: NTS AUDITING MCQS TEST

6. (D) ISREs [International Standards on Review Engagements]
7. (C) ISAEs [International Standards on Assurance Engagements]

8. (A) ISRSs [International Standards on Related Services]

9. (B) International Standards on Quality Control
10. (D) I and II
11. The outcome of an audit is a/an
(A) certificate
(B) report
(C) income and expenses
(D) profit or loss

12. Final audit is performed

(A) after the year ends
(B) near the year ends
(C) after 9 months of the year
(D) only if interim audit has problems

ANSWERS: AUDITING MCQ

11. (B) report
12. (A) after the year ends

International Standard on Auditing (ISA) 230

requires to keep the audit files for at least

(A) 1 year
(B) 3 years
(C) 5 years
(D) 8 years
The answer is: (C) 5 years

ISA 200 required the auditor to adopt an

attitude of professional _____ when planning and
performing an audit.

(A) kindness
(B) openness
(C) trustworthiness
(D) scepticism
The answer is: (D) scepticism
 What type of auditing standard is applied in the
audit of historical financial information?

(A) ISAs
(B) ISREs
(C) ISAEs
(D) ISRSs
The answer is: (A) ISAs [International Standards on Auditing]

What type of auditing standard is applied in the

review of historical financial information?

(A) ISAs
(B) ISREs
(C) ISAEs
(D) ISRSs
The answer is: (B) ISREs [International Standards on Review Engagements]

IFAC is an abbreviation of

(A) International Federation of Accountants

(B) International Federation of Accounting
(C) International Financial Accounting Concepts
(D) International Financial Auditing Concepts
The answer is: (A) International Federation of Accountants

Q: Having separate legal entity whose total capital can be divided into many shares are called ? Nave

 A: Partership

 B: Sole proprietorships

 C: Company
 D: None of these

Test Selected: fpsc senior auditor test

Q: Concurrent audit is a part of ?

 A: Internal Check System

 B: Continuous Audit

Adna

 C: Internal Audit System

 D: None of these

Test Selected: fpsc senior auditor test

Q: How many types of Audit ?

 A: 2

 B: 3

Adna

 C: 4

 D: 5

Test Selected: fpsc senior auditor test

Q: The current file of the auditor's working papers, generally, should include ? Fare

 A: A flowchart of the internal controls

 B: Organisation charts

 C: A copy of financial statements

 D: Copies of bond and debentures

Test Selected: general

Q: Which of the following statement is true regarding an auditor's working paper ?

 A: They document the level of independence maintained by auditor

 B: They should be considered as the principle support for the auditor's report

Fare

 C: They should not contain details regarding weaknesses in the internal control system

 D: They help the auditor to monitor the effectiveness of the audit firm's quality control

Test Selected: general

Q: Which of the following factors would least likely affect the quantity and content of an auditor's
working papers ?

 A: The assessed level of control risk

 B: The possibility of peer review Fare

 C: The nature of auditor's report

 D: The content of management representation letter

Test Selected: general

 Q: For what minimum period should audit working papers be retained by audit firm ?

 A: For the time period the entity remains a client of audit firm

 B: For a period of ten years

Fare

 C: For a period auditor opines them be useful in servicing the client

 D: For the period the audit firm is in existence

Test Selected: general

Q: The auditor's permanent working paper file should not normally, include ?

 A: Extracts from client's bank statements

 B: Past years financial statements

Fare

 C: Attorney's letters

 D: Debt Agreements

Test Selected: fpsc

Q: A statutory auditor has a right of access at all time to ?

Answer: Books, accounts and vouchers of the Company Sabir
Test Selected: fpsc senior auditor test

Q: The working paper which auditor prepares for financial statements audit are ?
Answer: Owned by the auditor

Q: Audit program is prepared by ? Sabir Al

Answer: The auditor and his audit assistants
Test Selected: fpsc senior auditor test

Q: The scope of work of a statutory auditor is determined by ?

Answer: Law Amber A
Test Selected: fpsc senior auditor test

Q: An auditor of a company is appointed for a period of ?

Answer: one year M Ajma
Test Selected: fpsc senior auditor test

Q: Balance sheet audit is helpful for ?

Answer: Big concerns M Ajma
Test Selected: fpsc senior auditor test

Q: Continuous audit is useful for ?

Answer: Big concerns M Ajma
Test Selected: fpsc senior auditor test

Q: Audit of sole proprietorship is ?

Answer: Unnecessary M Ajma
Test Selected: fpsc senior auditor test

Q: Internal check is a part of the whole system of ?

Answer: Internal Control M Ajma
Test Selected: fpsc senior auditor test

Q: Interim audit is conducted between two ?

Answer: Final audit M Ajma
Test Selected: fpsc senior auditor test

Q: Audit at the end of the year is known as ?

Answer: Partial audit M Ajma
Test Selected: fpsc senior auditor test

Q: Continuous audit is ?
Answer: Regular audit

MCQS Submitt

Q: Auditing is compulsory in the case of ?

Answer: joint stock companies M Ajma
Test Selected: fpsc senior auditor test
 Q: Internal auditor is appointed by ?
Answer: The management M Ajma
Test Selected: fpsc senior auditor test

Q: The main objective of audit of accounts of a partnership firm is to ?

Answer: Detect errors and funds
Test Selected: fpsc senior auditor test

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5fad0cb6a3e2589a16519ea9

Which of the following is not an

inherent limitation of internal control
system?
a) Management override
b) Collusion among employees
c) Inefficiency of internal auditor
d) Abuse of authority
4.
An auditor should study and evaluate
internal controls to-

a) determine whether assets are

safeguarded
b) Suggest improvements in internal
control
c) Plan audit procedures
d) express and opinion
5.
XYZ Ltd. Conducts quarterly review
of operations. It discovers that unrest
in a south east
Asian country may affect the supply
of raw materials to it the next quarter.
This is an
example of :

a) risk assessment b) control

procedure
c) supervision
d) control environment
6. The primary purpose of
performing tests of control is to
provide reasonable assurance tha
https://www.studocu.com/row/document/university-of-peshawar/fianancial-accounting/auditing-
mcqs-1pdf-503-kb-accounting-conceptspdf-22-mb/17127838

1. Goods purchased but not recorded in the purchase register is ________________

A. an error of omission

B. to reduce profits

C. an error of commission

D. affect on agreement of trial balance

Answer» A. an error of omission

discuss (2)

2.
Working papers are the property of the ________________
A. client and auditor

B. auditor
2.
Working papers are the property of the ________________

C. client

D. equity shareholders

Answer» B. auditor

discuss

3.
Which of the following documents is not relevant for vouching of sales ________________
A. daily cash sales summary

B. credit memos

C. delivery challans

D. sales department attendance record

Answer» D. sales department attendance record

discuss

4. The main object of an Audit is ________________

A. to ensure that final accounts are prepared

B. expression of an opinion on true and fair view of accounts

C. to ensure the future viability of the enterprise

D. detection and prevention of frauds and errors

Answer» B. expression of an opinion on true and fair view of accounts

discuss (1)

5.
An Audit Programme must be prepared ________________
A. before commencement of an audit

B. after completion of an audit

5.
An Audit Programme must be prepared ________________
C. after submission of an audit report

D. during the conduct of an audit

Answer» A. before commencement of an audit

discuss

6. Analytical Review is ________________

A. an audit technique

B. audit in depth

C. a compliance procedure

D. reporting requirement

Answer» A. an audit technique

discuss

7.
Audit in Depth means ________________
A. none of the above

B. detailed examination of all transactions

C. investigation of all transactions

D. detailed examination of selected transactions

Answer» D. detailed examination of selected transactions

discuss

8. Audit programme should be ________________

A. flexible

B. rigid

C. oral and flexible

8.
Audit programme should be ________________
D. oral

Answer» A. flexible

discuss

9.
________________ incorporates both Accounting and Administrative Controls.
A. internal control

B. internal check

C. statutory audit

D. internal audit

Answer» A. internal control

discuss

10. Debtors are valued at ________________

A. realizable value

B. as per articles of association

C. book value

D. decided by the customer

Answer» C. book value

discuss (1)

11.
The main objective of Window Dressing is ________________
A. increase liability

B. to mislead investors

C. to reduce tax liability

D. to understate profits
11.
The main objective of Window Dressing is ________________
Answer» B. to mislead investors

discuss

12. ________________ document is not relevant for vouching cash purchases

A. purchase order

B. goods inward register

C. purchase invoice

D. attendance record of cashier

Answer» D. attendance record of cashier

discuss

13.
To select a sample for Audit, the auditor should consider ________________
A. all the above

B. the size of the sample

C. the volume of transactions

D. adequacy of internal control system

Answer» A. all the above

discuss

14. Secret reserves are shown on ________________

A. assets side of balance sheet

B. none of the above

C. liabilities side of balance sheet

D. credit side of trading account

Answer» B. none of the above

discuss

15.
Stock of goods on consignment should be valued at ________________
A. none of the above

B. invoice price

C. cost of realizable value whichever is lower

D. cost price

Answer» C. cost of realizable value whichever is lower

discuss

16. ________________ is not an error of Commission

A. mathematical error

B. compensating error

C. posting error

D. none of the above

Answer» B. compensating error

discuss

17.
Telephone charges should be examine on the basis of ________________
A. cash memo

B. telephone bill

C. all the above

D. agreement with telephone department

Answer» B. telephone bill

discuss
18.
The Auditor examines Bill of Lading in order to vouch ________________
A. sales within the state

B. all the above

C. sales outside the state

D. sales outside the country

Answer» D. sales outside the country

discuss

19. ________________ Asset, which is not subject to physical verification

A. stock

B. cash

C. furniture

D. debtors

Answer» D. debtors

discuss

20.
Goods sold but not recorded in Sales Register is ________________
A. compensating error

B. an error of commission

C. an error of omission

D. none of the above

Answer» B. an error of commission

discuss (2)

21. Audit plan should be best on knowledge of the ________________

A. client\s reputation
21.
Audit plan should be best on knowledge of the ________________
B. client\s family

C. client\s share capital

D. client\s business

Answer» D. client\s business

discuss

22.
Confirmation is ________________
A. a compliance procedure

B. an audit technique

C. a principle of audit

D. none of the above

Answer» B. an audit technique

discuss

23. ________________ should be checked by the Auditor in verification of Machinery

A. all the above

B. charge/line

C. the possession

D. ownership

Answer» A. all the above

discuss

24.
Closing stock with the consignee is to be shown as the Asset of ________________
A. consignee

B. customer
24.
Closing stock with the consignee is to be shown as the Asset of ________________
C. all the above

D. consignor

Answer» D. consignor

discuss

25. If a material financial fraud is detected, Auditor should ________________

A. report it to police

B. report it to the institute of ca of india

C. ignore it

D. report it to the owners or shareholders

Answer» D. report it to the owners or shareholders

26. An auditor is like a

A. Blood haunt

B. Watch dog

C. May both according to situation

D. None of these

Answer» B. Watch dog

discuss

27.
The term ‘Audit’ is derived from a Latin word “audire” which means;
A. To inspect

B. To examine

C. To hear

D. To investigate
27.
The term ‘Audit’ is derived from a Latin word “audire” which means;

Answer» C. To hear

discuss

28.
Process of verifying the documentary evidences of transactions are known as:
A. Auditing

B. Testing

C. Vouching

D. Verification

Answer» C. Vouching

discuss

29. Auditing is compulsory for

A. Small scale business

B. Partnership firms

C. Joint stock Companies

D. Proprietary Concerns

Answer» C. Joint stock Companies

discuss

30.
The main object of an audit is ___
A. Expression of expert opinion

B. Detection and Prevention of fraud and error

C. Both (a) and (b)

D. Depends on the type of audit.

30.
The main object of an audit is ___
Answer» D. Depends on the type of audit.

discuss (1)

31. Concealment of shortage by delaying the recording of cash receipts is known as

A. Embezzlement

B. Misappropriation

C. Lapping

D. None of these

Answer» C. Lapping

discuss

32.
The title of AAS2 issued by Council of ICAI is ___
A. Objective and Scope of the Financial Statements

B. Objective and Scope of the Audit of Financial Statements

C. Objective and Scope of Business of an Entity

D. Objective and Scope of Financial Statements Audit

Answer» B. Objective and Scope of the Audit of Financial Statements

discuss

33. Lapping is also known as:

A. Teeming and lading

B. Embezzlement

C. Looping

D. Hacking

Answer» A. Teeming and lading

discuss

34.
Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.

B. His opinion is no guarantee to future viability of business

C. He is responsible for detection and prevention of frauds and errors in financial statements

D. He should examine whether recognised accounting principle have been consistently

Answer» C. He is responsible for detection and prevention of frauds and errors in financial statements

discuss

35. A sale of Rs. 25,000 to A was entered as a sale to B. This is an example of _

A. Error of omission

B. Error of commission

C. Compensating error

D. Error of principle

Answer» B. Error of commission

discuss

36.
‘Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
A. Error of principle

B. Error of commission

C. Error of omission

D. Error of duplication

Answer» A. Error of principle

discuss
37.
Which of the following statements is not true?
A. Management fraud is more difficult to detect than employee fraud

B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud

C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.

D. All statements are correct.

Answer» B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud

discuss

38. As per AAS4, if auditor detects an error then –

A. He should inform the management.

B. He should communicate it to the management if it is material

C. The auditor should ensure financial statements are adjusted for detected errors.

D. Both (b) and (c)

Answer» D. Both (b) and (c)

discuss

39.
Which of the following is not a limitation of audit as per AAS4?
A. Objectivity of auditor’s judgment

B. Selective testing

C. Persuasiveness of evidence

D. Limitations of internal control system.

Answer» A. Objectivity of auditor’s judgment

discuss

40. Internal audit is undertaken

A. By independent auditor
40.
Internal audit is undertaken
B. Statutorily appointed auditor

C. By a person appointed by the management

D. By a government auditor

Answer» C. By a person appointed by the management

discuss

41.
The scope of internal audit is decided by the :
A. Shareholders

B. Management

C. Government

D. Law

Answer» B. Management

discuss

42. Audit of banks is an example of –

A. Statutory audit

B. Balance sheet audit

C. Concurrent audit

D. All of the above

Answer» D. All of the above

discuss

43.
Concurrent audit is a part of
A. Internal check system

B. Continuous audit
43.
Concurrent audit is a part of
C. Internal audit system

D. None

Answer» C. Internal audit system

discuss

44. In India, balance sheet audit is synonymous to

A. Annual audit

B. Continuous audit

C. Detailed audit

D. Statutory audit

Answer» A. Annual audit

discuss

45.
Audit in depth is synonymous for
A. Complete audit

B. Completed audit

C. Final audit

D. Detailed audit

Answer» D. Detailed audit

discuss

46. Institute of Chartered Accountants of India was established

A. 1956

B. 1949

C. 1956
46.
Institute of Chartered Accountants of India was established
D. 1948

Answer» B. 1949

discuss

47.
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

Answer» C. It is needed when the organization has a good internal control system

discuss (1)

48. Internal check is carried on by

A. Staff specially appointed for the purpose

B. Internal auditor

C. Supervisor of the staff

D. Members of the staff

Answer» D. Members of the staff

discuss

49.
Errors of Omission are
A. Technical errors

B. Errors of principle

C. Compensating errors

D. None of the above

49.
Errors of Omission are
Answer» A. Technical errors

discuss

50. Window dressing implies:

A. Curtailment of expenses

B. Checking of Wastages

C. Under valuation of assets

D. Over Valuation of assets

Answer» D. Over Valuation of assets

51. Test Checking refers to

A. Testing of accounts and records

B. Checking of selected number of transactions

C. Examination of adjusting and closing entries

D. Checking of all transactions recorded

Answer» B. Checking of selected number of transactions

discuss

52.
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

Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of an informed decision
C.
rely on the financial statements

D. At the planning state, the auditor considers materiality at the financial statement level only

Answer» D. At the planning state, the auditor considers materiality at the financial statement level only

discuss
53.
…...the audit risks… the materiality and ……the audit effort
A. Lower, Higher, Lower

B. Lower, Lower, Higher

C. Higher, Lower, Lower

D. Lower, Higher, Higher

Answer» A. Lower, Higher, Lower

discuss

54. When issuing unqualified opinion, the auditor who evaluates the audit findings should
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

Answer» C. Estimate of the total likely misstatement is more than materially level

discuss

55. 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

Answer» B. The auditor’s remuneration

discuss

56.
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

56.
Analytical procedures issued in the planning stage of an audit, generally

C. Indicates important aspects of business

D. All of the above

Answer» D. All of the above

discuss

57. Which of the following statements is most closely associated with analytical procedure
substantive stage?
A. It helps to study relationship among balance sheet accounts

B. It helps to discover material misstatements in the financial statements

C. It helps to identify possible oversights

D. It helps to accumulate evidence supporting the validity of a specific account balance

Answer» D. It helps to accumulate evidence supporting the validity of a specific account balance

discuss

58. For all audits of financial statements made in accordance with AAS14, the use of analyt
procedures is at the discretion of the auditor in which stage?
A. Substantive testing

B. Planning stage

C. Overall review stage

D. All of the above

Answer» A. Substantive testing

discuss

59.
Verification refers to :
A. Examining the physical existence and valuation of assets.

B. Examining the journal and ledger

59.
Verification refers to :
C. Examination of vouchers related to assets.

D. None of the above.

Answer» A. Examining the physical existence and valuation of assets.

discuss

60. Stock should be valued at

A. Cost

B. Market price

C. Cost or Market price whichever is lower.

D. Cost less depreciation.

Answer» C. Cost or Market price whichever is lower.

discuss

61.
‘Auditor is not a valuer’, was stated in
A. Kingston Cotton Mills case

B. London Oil Storage Co. Case

C. London and General Bank case

D. None of the above

Answer» A. Kingston Cotton Mills case

discuss

62. Floating assets are valued at

A. cost

B. Market price

C. Cost or market price whichever is lower

D. Cost less depreciation

62.
Floating assets are valued at

Answer» C. Cost or market price whichever is lower

discuss

63.
Goods sold on the basis of ‘sales or return ‘ should
A. Be included in the stock

B. Not be included in the stock

C. Not be checked by auditor

D. None of the above

Answer» A. Be included in the stock

discuss

64. Of the following, which is the least persuasive type of audit evidence?
A. Bank statements obtained from the client

B. Documents obtained by auditor from third parties directly.

C. Carbon copies of sales invoices inspected by the auditor

D. Computations made by the auditor

Answer» C. Carbon copies of sales invoices inspected by the auditor

discuss

65.
Which of the following statements is, generally, correct about the reliability of audit ev
A. To be reliable, evidence should conclusive rather than persuasive

B. Effective internal control system provides reliable audit evidence

C. Evidence obtained from outside sources routed through the client

D. All are correct.

Answer» B. Effective internal control system provides reliable audit evidence

65.
Which of the following statements is, generally, correct about the reliability of audit ev

discuss

66. In an audit of financial statements, substantive tests are audit procedures that __
A. May be eliminated for an account balance under certain conditions

B. Are designed to discover significant subsequent events

C. Will increase proportionately when the auditor decreases the assessed level of control risk

D. May be test of transactions, test of balance and analytical procedures

Answer» D. May be test of transactions, test of balance and analytical procedures

discuss

67.
The nature, timing and extent of substantive procedures is related to assessed level of
A. Randomly

B. Disproportionately

C. Directly

D. Inversely

Answer» C. Directly

discuss

68. Which of the following factors is most important in determining the appropriations of a
evidence?
A. The reliability of audit evidence and its relevance in meeting the audit objective

B. The objectivity and integrity of the auditor

C. The quantity of audit evidence

D. The independence of the source of evidence

Answer» A. The reliability of audit evidence and its relevance in meeting the audit objective

discuss
69.
When is evidential matter, generally, considered sufficient?
A. When it constitutes entire population

B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness

C. When it is objective and relevant

D. When auditor collects and evaluates it independently

Answer» B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness

discuss

70. Which of the following is not corroborative evidence?

A. Minutes of meetings

B. Confirmations from debtors

C. Information gathered by auditor through observation

D. Worksheet supporting consolidated financial statements

Answer» D. Worksheet supporting consolidated financial statements

discuss

71. Which of the following statements is not true with respect to management representat
as per AAS11?
A. Authenticated copy of relevant minutes of meetings may be regarded as management representation

B. It should always be in working

C. It may be dated prior to the report date

D. It should be addressed to the auditor

Answer» B. It should always be in working

discuss

72. What would most appropriately describe the risk of incorrect rejection in terms of sub
testing?
A. The auditor concludes balance is materially correct when in actual fact it is not
72. What would most appropriately describe the risk of incorrect rejection in terms of sub
testing?
B. The auditor concludes that the balance is materially misstated when in actual fact it not

C. The auditor has rejected an item for sample which was material

D. None of the above

Answer» B. The auditor concludes that the balance is materially misstated when in actual fact it not

discuss

73. Which of the following affects audit effectiveness?

A. Risk of over reliance

B. Risk of incorrect rejection

C. Risk of incorrect acceptance

D. Both (a) and (c)

Answer» D. Both (a) and (c)

discuss

74. What would most effectively describe the risk of incorrect acceptance in terms of subst
testing?
A. The auditor has ascertained that the balance is materially correct when in actual fact it is not

B. The auditor concludes the balance is materially misstated when in actual fact is not

C. The auditor has rejected an item from sample which was not supported by documentary evidence

D. He applies random sampling on data which is inaccurate and inconsistent

Answer» A. The auditor has ascertained that the balance is materially correct when in actual fact it is not

discuss

75. Which of the following Auditing Assurance Standard deals with Audit Planning?

A. AAS7

B. AAS8
75. Which of the following Auditing Assurance Standard deals with Audit Planning?

C. AAS9

D. AAS3

Answer» B. AAS8

76.
Audit programme is prepared by
A. The auditor

B. The client

C. The audit assistants

D. The auditor and his audit assistants

Answer» D. The auditor and his audit assistants

discuss

77. The working papers which auditor prepares for financial statements audit are: _
A. Evidence for audit conclusions

B. Owned by the client

C. Owned by the auditor

D. Retained in auditor’s office until a change in auditors

Answer» C. Owned by the auditor

discuss

78.
The quantity of audit working papers complied on engagement would most be affected
A. Management’s integrity

B. Auditor’s experience and professional judgment

78.
The quantity of audit working papers complied on engagement would most be affected

C. Auditor’s qualification

D. Control risk

Answer» B. Auditor’s experience and professional judgment

discuss

79.
Which of the following best describes the primary purpose of audit programme prepar
A. To detect errors or fraud.

B. To comply with GAAP

C. To gather sufficient appropriate evidence

D. To assess audit risk

Answer» C. To gather sufficient appropriate evidence

discuss

80. Which of the following is not an advantage of the preparation of working paper?
A. To provide a basis for review of audit work

B. To provide a basis for subsequent audits

C. To ensure audit work is being carried out as per programme

D. To provide a guide for advising another client on similar issues

Answer» D. To provide a guide for advising another client on similar issues

discuss

81.
The auditor’s permanent working paper file should not normally, include
A. Extracts from client’s bank statements

B. Past year’s financial statements

81.
The auditor’s permanent working paper file should not normally, include
C. Attorney’s letters

D. Debt agreements

Answer» A. Extracts from client’s bank statements

discuss

82. For what minimum period should audit working papers be retained by audit firm?
A. For the time period the entity remains a client of the audit firm.

B. For a period of ten years

C. For a period auditor opines them to be useful in servicing the client

D. For the period the audit firm is in existence.

Answer» C. For a period auditor opines them to be useful in servicing the client

discuss

83. Which of the following factors would least likely affect the quantity and content of an a
working papers
A. The assessed level of control risk

B. The possibility of peer review

C. The nature of auditor’s report

D. The content of management representation letter

Answer» D. The content of management representation letter

discuss

84.
Which of the following statement is true regarding an auditor’s working papers?
A. They document the level of independence maintained by the auditor

B. They should be considered as the principle support for the auditor’s report

C. They should not contain details regarding weaknesses in the internal control system
84.
Which of the following statement is true regarding an auditor’s working papers?
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control

Answer» B. They should be considered as the principle support for the auditor’s report

discuss

85. Which of the following statement best describes the understanding with respect to own
custody of working papers prepared by an auditor?
A. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation

B. The safe custody of working papers is the responsibility of client, if kept at his premises

C. The working papers must be retained by an audit firm for a period of 10 years

D. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is not req

Answer» A. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litiga

discuss

86.
The current file of the auditor’s working papers, generally, should include
A. A flowchart of the internal controls

B. Organisation charts

C. A copy of financial statements

D. Copies of bond and debentures

Answer» C. A copy of financial statements

discuss

87. Knowledge of the entity’s business does not help the auditor to
A. Reduce inherent risk

B. Identify problem areas

C. Evaluate reasonableness of estimates

D. Evaluate appropriates of GAAP.

87.
Knowledge of the entity’s business does not help the auditor to
Answer» A. Reduce inherent risk

discuss

88. Payment for wage should be vouched with the help of

A. Piece Work Statement.

B. Wage sheets

C. Minutes book

D. Bank pass book.

Answer» B. Wage sheets

discuss

89.
Payment for building purchased should be vouched with the help of
A. Title Deed

B. Correspondence with the brokers

C. Building Account

D. Cash book

Answer» A. Title Deed

discuss

90. Purchase returns should be vouched with the help of

A. Bought notes

B. Credit notes

C. Goods inward book

D. Cash book

Answer» B. Credit notes

discuss

91.
Receipts from sale of investments should be vouched with the help of
A. Brokers bought notes

B. Brokers Sold notes

C. Minutes book

D. Inventory of investment

Answer» B. Brokers Sold notes

discuss

92. Which of the following expenses should not be treated as capital expenditure?
A. Expenses paid on installation of a plant.

B. Cost of dismantling a building in case a new building is to be constructed on the land

C. Legal expenses incurred to defend a suit related to title of patent. The suit has been lost

D. The fees paid to engineer who constructed the plant.

Answer» C. Legal expenses incurred to defend a suit related to title of patent. The suit has been lost

discuss

93.
Which of the following is not a revenue expense?
A. Cost of raising a loan

B. Cost of accessories of motor vehicles spent at the time of purchase

C. Expenses incurred for laying of sewers on land purchased

D. Insurance premium paid at the time of registration of the ship

Answer» B. Cost of accessories of motor vehicles spent at the time of purchase

discuss
94.
Depreciation does not arise form _______
A. Effluxion of time

B. Use

C. Obsolescence through technology be market changes

D. Remarket expectation

Answer» D. Remarket expectation

discuss

95. Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
A. Schedule XIV

B. Schedule V

C. Schedule XIII

D. Schedule X

Answer» A. Schedule XIV

discuss

96. Schedule XIV has prescribed rates of depreciation for double shift and triple shift work
one of the following assets?
A. Building

B. Plant and Machinery

C. Furniture and fittings

D. Ships

Answer» B. Plant and Machinery

discuss

97. A company has bought patents. Which of the following methods is most suitable for pro
depreciation on them?
A. SLM
97. A company has bought patents. Which of the following methods is most suitable for pro
depreciation on them?

B. WDV

C. Sum of year digits

D. Any of the above

Answer» A. SLM

discuss

98.
Which of the following is a revenue reserve?
A. Capital redemption reserve

B. Security premium account

C. Debenture redemption reserve

D. Capital reserve

Answer» C. Debenture redemption reserve

discuss

99. Which of the following will not lead to creation of secret reserve?
A. Undervaluation of closing stock

B. Charging capital expenditure to revenue

C. Goods sent on consignment being shown as actual sales

D. Charging higher rates of depreciation on fixed assets than actually required

Answer» C. Goods sent on consignment being shown as actual sales

discuss

100.
Who is responsible for the appointment of statutory auditor of a limited company?
A. Directors of the company
100.
Who is responsible for the appointment of statutory auditor of a limited company?
B. Members of the company

C. The Central Government

D. All of the above

Answer» B. Members of the company

101. Which of the following sections deal with qualifications of the auditor ?

A. Section 226 (1) and section 226(2)

B. Section 224 (1) and section 224 (2)

C. Section 226 (3) and section 226(4)

D. Section 224(3) & Sec.224

Answer» A. Section 226 (1) and section 226(2)

discuss (1)

102.
Which of the following statement is not true?
A. A partnership firm can be appointed as a statutory auditor of limited company

B. Appointment can be made in the name of the firm

C. Majority of the partners should be practicing in India

D. All partners should be chartered accountants

Answer» C. Majority of the partners should be practicing in India

discuss

103. As per the requirements of section 226(3) and 226(4) a person is disqualified from bei
appointed as a statutory auditor if he holds
A. Equity shares or debentures of the company

B. Equity shares carrying voting of the company

C. Shares carrying voting rights of the company

103. As per the requirements of section 226(3) and 226(4) a person is disqualified from bei
appointed as a statutory auditor if he holds
D. Security carrying voting rights of the company

Answer» D. Security carrying voting rights of the company

discuss

104. The board of directors shall appoint first auditor of a company

A. Within one month of completion of capital subscription state of the company

B. Within one month of the promotion of the company

C. Within one month of the commencement of the business of the company

D. Within one month of incorporation of the company

Answer» D. Within one month of incorporation of the company

discuss

105.
The term of the auditor ship of first auditor would be from the date of appointment till
A. the conclusion of statutory meeting

B. the conclusion of first annual general meeting

C. the conclusion of next annual general meeting

D. the date of removal

Answer» B. the conclusion of first annual general meeting

discuss

106. In case the directions fail to appoint first auditor (s), the shareholders shall appoint the
at…..by passing a resolution
A. a general meeting

B. first annual general meeting

C. statutory meeting

D. annual general meeting

106. In case the directions fail to appoint first auditor (s), the shareholders shall appoint the
at…..by passing a resolution

Answer» A. a general meeting

discuss

107. Which of the following statement is not true regarding appointment of statutory audito
Central Government?
A. Such powers have been conferred upon it by section 224(3)

B. If a company fails to appoint an auditor at a general meeting

C. If an auditor refuses to accept appointment, the powers of the Central

D. None of the above

Answer» B. If a company fails to appoint an auditor at a general meeting

discuss

108. If a casual vacancy in the office of auditor arises by his resignation it should only be fill
company in a……..
A. Board meeting

B. Extraordinary general meeting

C. General meeting

D. Annual general meeting

Answer» C. General meeting

discuss

109. For the purposes of section 224(IB) the number of partners of a firm which shall be tak
account would be as on the date of _
A. Completion of audit

B. Auditor’s report

C. Acceptance of audit
109. For the purposes of section 224(IB) the number of partners of a firm which shall be tak
account would be as on the date of _

D. Starting of audit work

Answer» C. Acceptance of audit

discuss

110. Which of the following is counted for the purposes of section 224(IB) the number of pa
a firm which shall be taken into account would be as on the data of ___
A. Joint audit

B. Audit to non-profit companies

C. Audit of unlimited companies

D. All of the above

Answer» D. All of the above

discuss

111. Mr. A, a Charted Accountant, has nineteen audits, Out of following audits which audits s
accept to ensure he doesn’t violate provisions of section 224(IB) __
A. Audit of a private company

B. Audit of branch of a foreign company

C. Audit of two branches of an Indian company

D. All of them

Answer» D. All of them

discuss

112. Which audit out of the following would not be regarded as one audit for the purposes o
224(IB)?
A. Audit of one branch each of two different companies

B. Joint audit
112. Which audit out of the following would not be regarded as one audit for the purposes o
224(IB)?

C. Audit head office & branches

D. Audit of one or more branches of a company

Answer» A. Audit of one branch each of two different companies

discuss

113. The auditor of a Government company is appointed by the C & AG. His remuneration is
by__
A. The C & AG

B. The shareholders

C. The shareholders at an annual general meeting

D. The board of directors

Answer» B. The shareholders

discuss

114. The section which contains provisions regarding remuneration of the auditor is_

A. Section 224(9)

B. Section 224(7)

C. Section 224(8)

D. Section 224(6)

Answer» C. Section 224(8)

discuss

115.
The authority to remove the first auditor before the expiry of term is with_
A. The shareholders in a general meeting

B. The shareholders in the first annual General meeting

115.
The authority to remove the first auditor before the expiry of term is with_

C. The board of directors

D. the Central Government

Answer» A. The shareholders in a general meeting

discuss

116. Which of the following statements is not correct regarding removal of first auditor befo
expiry of the term?
A. He is removed at a general meeting

B. The shareholders are authorized to do so

C. The approval of the Central Government is required for such removal

D. The provisions for such removal are contained in section 224(7)

Answer» C. The approval of the Central Government is required for such removal

discuss

117.
The retiring auditor does not have a right to___
A. make written representations

B. get his representations circulated.

C. be heard at the meeting

D. speak as a member of the company

Answer» D. speak as a member of the company

discuss

118. Who out of the following cannot be appointed as a statutory auditor of the company?

A. Erstwhile director

B. Internal auditor
118.
Who out of the following cannot be appointed as a statutory auditor of the company?
C. Relative of a director

D. Only (b) and (c)

Answer» B. Internal auditor

discuss

119. A statutory auditor has a right of access at all times to

A. Books and accounts of a company

B. Books, accounts and documents of the company

C. Books, accounts and vouchers of the company

D. Notices and documents of the company

Answer» C. Books, accounts and vouchers of the company

discuss

120.
The auditor has a right to
A. Obtain information and explanation

B. Obtain information and explanation from the employees and officers

C. Obtain information and explanation necessary for the purpose of audit

D. Both (b) and (c)

Answer» D. Both (b) and (c)

discuss

121. The principal auditor, as per clarification issued by the ICAI, does not have any right to

A. Inspect working papers of the branch auditor

B. Visit branches

C. Seek information necessary for audit purposes

121.
The principal auditor, as per clarification issued by the ICAI, does not have any right to
D. Incorporate the branch audit report in his audit report

Answer» A. Inspect working papers of the branch auditor

discuss

122. Under which of the following section auditor has a duty to enquire into six specified ma
report by exception?
A. Section 227(4A)

B. Section 227 (IA)

C. Section 227 (2)

D. Section 227(3)

Answer» A. Section 227(4A)

discuss

123. The auditor has to enquire, under section 227 (IA) into different aspects, related to sha
allotted for cash for the purpose of auditor include
A. Shares against whose allotment cash has actually been received

B. Shares allotted for consideration other than cash

C. Shares allotted against a debt payable

D. All of them

Answer» D. All of them

discuss

124.
Right to visit branches has been given to the auditor under which section?
A. Section 222(3)

B. Section 228(2)

C. Section 228(4)

D. Section 228(3)
124.
Right to visit branches has been given to the auditor under which section?

Answer» D. Section 228(3)

discuss

125. Which of the following statements with regard to rules regarding exemption from bran
is not true?
A. A branch office of a company can be granted exemption on the basis of quantum of activity criterion

If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a manufacturing compa
B.
made, it can be exempted from branch audit

C. Cost consideration should be considered as an important factor/ground for exemption from branch audit

D. The auditor should state in his audit report that branch office is exempted by virtue of quantum of activity or any o

Answer» B. If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a manufacturing c
been made, it can be exempted from branch audit

126.
The branch auditor is appointed by –
A. Shareholders in an annual general meeting

B. Shareholders in general meeting

C. Board of directors in board meeting

D. Any of the above

Answer» B. Shareholders in general meeting

discuss

127. Special audit is conducted at the order of the Central Government. Which section gives
powers?
A. Section 233(A)

B. Section 233A

C. Section 242(A)

D. Section 242A
127. Special audit is conducted at the order of the Central Government. Which section gives
powers?

Answer» C. Section 242(A)

discuss

128. Who among the following can be appointed as special auditor by the Central Governme

A. The statutory auditor

B. chartered accountant in practice

C. Any chartered accounted who is not in practice

D. Both (a) and (b)

Answer» D. Both (a) and (b)

discuss

129. The scope of the audit including reference to the pronouncements of the ICAI, which th
adheres to, generally is communicated to the client in the ____
i) auditor’s report
ii) engagement letter
iii) representation letter
A. i) only

B. Both (i) and (ii)

C. Both (i) and (iii)

D. All the above

Answer» B. Both (i) and (ii)

discuss

130. If any director is disqualified from being appointed under section 274(1) (g), the audit
mention this fact in his audit report. For this purpose, how does he determine their elig
A. He obtains a representation from each director
130. If any director is disqualified from being appointed under section 274(1) (g), the audit
mention this fact in his audit report. For this purpose, how does he determine their elig
B. He obtains a management representation

C. He enquiries from Registrar of Companies

D. Any one of the above

Answer» A. He obtains a representation from each director

discuss

131. As per the ‘Statement on Qualification in Auditor’s Report’s issued by the ICAI, the audi
Under section 227(3) has to gave a statement of fact on_
A. Proper books of account

B. Accounting standards

C. Cess payable under section 441A

D. None of the above

Answer» C. Cess payable under section 441A

discuss

132. The date on auditor’s report should not be__

A. The data of AGM

B. Later than the date on which the accounts are approved in board’s meeting

C. Earlier than the date on which the accounts are approved by the management

D. Both (a) and (b)

Answer» C. Earlier than the date on which the accounts are approved by the management

discuss

133. Section 227(2) of the Companies Act, requires the auditor to give his report to the mem
the company on certain matters. Which of the following is not included in the above?
A. Accounts examined by him
133. Section 227(2) of the Companies Act, requires the auditor to give his report to the mem
the company on certain matters. Which of the following is not included in the above?
B. Every balance sheet and profit and loss account laid before a general meeting during his tenure

C. Every document that is a part of or ‘annexed to’ the balance sheet

D. Every document which is attached to the profit and loss account

Answer» D. Every document which is attached to the profit and loss account

discuss

134. When restrictions that significantly affect the scope of the audit are imposed by the clie
auditor generally should issue which of the following opinion?
A. Qualified opinion

B. Disclaimer of opinion

C. Adverse opinion

D. Unqualified report with ‘an emphasis of matter’ paragraph;

Answer» A. Qualified opinion

discuss

135. Which of the following report not result in qualification of the auditor’s opinion due to
limitation?
A. Restrictions the client imposed

B. Reliance on the report of other auditor

C. Inability to obtain sufficient appropriate evidential matter

D. Inadequacy of accounting records

Answer» B. Reliance on the report of other auditor

discuss
136. The inventory consists of about one per cent of all assets. The client has imposed restri
auditor to prohibit observation of stock take. The auditor cannot apply alternate audit
procedures.
A. Unqualified opinion

B. Qualified opinion

C. Disclaimer of opinion

D. Adverse opinion

Answer» C. Disclaimer of opinion

discuss

137. The auditor has serious concern about the going concern of the company. It is depende
company’s obtaining a working capital loan from a bank which has been applied for. Th
management of the company has made full disclosure of these facts in the notes to the b
sheet. The auditor is satisfied with the level of disclosure. He should issue_
A. Unqualified opinion

B. Unqualified opinion with reference to notes to the accounts

C. Qualified opinion

D. Disclaimer of opinion

Answer» B. Unqualified opinion with reference to notes to the accounts

discuss

138.
Which of the following is true about explanatory notes?
A. These are given by the directors of the company

B. These are given to adhere to requirements of section 211.

C. These are given by auditors of the company in auditor’s report

D. All of the above

Answer» B. These are given to adhere to requirements of section 211.

discuss
139. The client changed method of depreciation from straight line to written down value me
This has been disclosed as a note to the financial statements. It has an immaterial effec
current financial statements. It is expected, however, that the change will have a signifi
effect on future periods. Which of the following option should the auditor express?
A. Unqualified opinion

B. Qualified opinion

C. Disclaimer of opinion

D. Adverse opinion

Answer» A. Unqualified opinion

discuss

140. Which of the following is not true regarding requirements under section 227(3) (f) of t
Companies Act, 1956?
The auditor has to satisfy himself whether any of the directors of the company, whether public or private, are disqu
A.
being appointed as directors as per section 274(1) (g).

Section 274(1) (g) is applicable to appointment of directors both in public and private companies but reporting is lim
B.
those directors of a company who are also directors of a public company

The auditor requires every director to submit a written representation in respect of each Public company, of which
C.
director, as to whether such company has defaulted in terms of provisions of sections 274(1) (g)

D. The disqualification should be considered on the date of audit report.

Answer» D. The disqualification should be considered on the date of audit report.

discuss

141. The management of a company, to which AS3 is not applicable, does not include statem
cash flows in its annual report. The auditor should express
A. Unqualified opinion

B. Qualified opinion

C. Adverse opinion

D. Any of these depending upon materiality and pervasiveness and adequacy of disclosure
141. The management of a company, to which AS3 is not applicable, does not include statem
cash flows in its annual report. The auditor should express
Answer» A. Unqualified opinion

discuss

142. In case the auditor gives a disclaimer of opinion in the audit report which of the followi
paragraph(s) of a standard unqualified audit report are modified?
A. Scope paragraph

B. Opinion paragraph

C. Scope and opinion paragraphs

D. Introductory, scope and opinion paragraph

Answer» C. Scope and opinion paragraphs

discuss

143. A departure from recognized accounting principle is disclosed in a note to the financial
statements. The auditor should
A. Issue a standard unqualified audit report

B. Issue a qualified report

C. Issue an unqualified report with ‘emphasis of matter’ paragraph

D. Disclaim opinion

Answer» B. Issue a qualified report

discuss

144. The auditor should state the reasons for his reservations in audit report and should try
quantify the effect on them. This should be done in case he has expressed _
i) A qualified opinion
ii) an unqualified opinion with emphasis of matter paragraph
iii) An adverse opinion
IV) a disclaimer of opinion
A. i) only
144. The auditor should state the reasons for his reservations in audit report and should try
quantify the effect on them. This should be done in case he has expressed _
i) A qualified opinion
ii) an unqualified opinion with emphasis of matter paragraph
iii) An adverse opinion
IV) a disclaimer of opinion
B. i) and (iv) only

C. i), iii) and (iv) only

D. All of the above

Answer» A. i) only

discuss

145. Which of the following documents is not relevant for vouching cash sales?

A. Daily cash sales summary

B. Salesmen’s summary

C. Monthly statements sent to customers

D. Bank statement

Answer» C. Monthly statements sent to customers

discuss

146. The auditor should examine subsequent realization of revenue such as dividends, inter
commission, etc to
A. Identify cases of unrecorded revenue

B. Ensure proper disclosure in the balance sheet

C. Recomputed accrued income on the data of balance sheet

D. Any of these

Answer» A. Identify cases of unrecorded revenue

discuss
147.
To test whether sales have been recorded, the auditor should draw a sample from a file
A. Purchase orders

B. Sales orders

C. Sales invoices

D. Bill of loading

Answer» C. Sales invoices

discuss

148. For vouching of which item, the auditor is most likely to examine cost records?

A. Commission earned

B. Bad debts recorded

C. Credit sales

D. Sale of scrap

Answer» D. Sale of scrap

discuss

149.
The “Guidance Note on Revenue” issued by the ICAI does not deal with
A. Sales revenue

B. Revenue rendering service

C. Revenue from sale of fixed assets

D. Income from interest, dividend

Answer» C. Revenue from sale of fixed assets

discuss

150. An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries ar
The primary purpose of this audit procedure is
A. To ensure that there are no ghost workers
150. An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries ar
The primary purpose of this audit procedure is
B. To ensure the casual workers employed are authorized by the supervisor

C. To test procedures for distributing pay cheques

D. To obtain understanding of internal control system

Answer» C. To test procedures for distributing pay cheques

151.
Which of the following would prevent double payment of the same voucher?
A. The person signing the cheque should cancel the supporting documents

B. Cheques should be signed by at best two persons

C. The data of payment of vouchers of similar nature should be the same or close to each other

D. All of the above

Answer» A. The person signing the cheque should cancel the supporting documents

discuss

152. In case of unclaimed wages, the auditor should examine whether

A. The amount has been deposited in a separate bank account

B. Deposited with the cashier

C. Held in a safe deposit box

D. All of these

Answer» A. The amount has been deposited in a separate bank account

discuss

153. While vouching wages, auditor should examine whether there is proper segregation of
Which of the following activities should not be done by same department?
A. Maintaining personnel records and approving changing in wages rates

B. Proposing pay roll summary and disbursement of wages

C. Making salary statements and filing tax returns

153. While vouching wages, auditor should examine whether there is proper segregation of
Which of the following activities should not be done by same department?

Comparing time clock records with time reports prepared by supervisors and preparing list of workers employed alo
D.
units of production for each one of them

Answer» B. Proposing pay roll summary and disbursement of wages

discuss

154. In order to vouch, which of the expenses, the auditor will examine Bill of Entry?

A. Custom

B. Excise duties

C. Sales tax

D. Income tax

Answer» A. Custom

discuss

155. While vouching, how will the auditor ensure himself that all credit sales transactions h
recorded by the entity?
A. Examining cut-off points

B. Matching entries in the sales book against renumbered sales invoices and goods outward notes

C. Counting the number of invoices and matching the number with entries on sales book

D. Both (a) and (b)

Answer» D. Both (a) and (b)

discuss

156.
In case of sales return, the auditor should examine which documents?
A. Credit notes, advice notes and inward return notes

B. Debit notes, advice notes and inward return notes

156.
In case of sales return, the auditor should examine which documents?
C. Purchase invoices, advice notes and inward return notes

D. Credit notes, inspection report and inward return notes

Answer» D. Credit notes, inspection report and inward return notes

discuss

157. An internal auditor discovered that fictitious purchases have been recorded by the pur
clerk. This indicates absence of which control?
A. Purchase invoices are independently matched with purchase orders and goods received notes

B. Goods received notes requires the signature of individual who authorized the purchase

C. Routine checks are performed by internal auditor fortnightly.

D. Purchase function and production function are clubbed in one department

Answer» A. Purchase invoices are independently matched with purchase orders and goods received notes

discuss

158. Which of the following is most crucial to a purchase department?

A. Reducing the cost of acquisition

B. Selecting supplies

C. Authorizing the acquisition of goods

D. Assuring the quality of goods

Answer» C. Authorizing the acquisition of goods

discuss

159.
The auditor is most likely to examine related party transactions very carefully while vo
A. Credit sales

B. Sales returns

C. Credit purchases
159.
The auditor is most likely to examine related party transactions very carefully while vo
D. Cash purchases

Answer» C. Credit purchases

discuss

160. In order to vouch bought ledger, the auditor obtain confirmations from creditors. The p
reason for the auditor to examine suppliers statements at balance sheet date is to obta
evidence that
A. The supplier exist

B. There are no unrecorded liabilities

C. Recorded purchases actually occurred

D. To link creditors with cash book entries

Answer» B. There are no unrecorded liabilities

discuss

161.
The creditor’s accounts, generally, have credit balance. Debit balance may be due to
A. Advance paid against an order

B. Goods returned

C. Wrong debit to supplier account

D. Any of these

Answer» D. Any of these

discuss

162. In case of vouching, the auditor is least likely to examine authorization by appropriate
in case of –
A. Bad debts written off

B. Sales return

C. Purchase return
162. In case of vouching, the auditor is least likely to examine authorization by appropriate
in case of –
D. Discount allowed to customers as per organizational policy

Answer» D. Discount allowed to customers as per organizational policy

discuss

163. Vendors should be approved by Management before purchase department executes an

this is not done, then which of the following situations may arise?
A. Purchases could be made from vendors whose product quality may not be good

B. Purchases may be made from related parties without management’s knowledge

C. Purchases could be made from vendors who may have offered price to manager purchases

D. Any of these

Answer» D. Any of these

discuss

164. Which of the following is not true with regard to verification of assets?

A. It invoices substantiation of occurrence of transactions

B. Its objective is to establish existence, ownership, possession, valuation and disclosure of assets

C. The auditor has to form an opinion on different aspects

D. All are true

Answer» A. It invoices substantiation of occurrence of transactions

discuss

165.
Which of the following statements is not true?
A. Valuation of assets is the responsibility of management

B. The auditor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in the balance

C. The auditor should value the asset as per generally accepted accounting principle

D. Valuation is no part of auditor’s duty

165.
Which of the following statements is not true?

Answer» C. The auditor should value the asset as per generally accepted accounting principle

discuss

166. An auditor is verifying valuation of building which has been self constructed by the clie
Which of the following documents is least relevant to the auditor for verification purpo
A. Bills of contractor

B. Minutes of meeting of board of directors

C. Certificates of engineer and architect

D. Loan agreement

Answer» B. Minutes of meeting of board of directors

discuss

167.
Which of the following assets is least likely to be subjected to lien?
A. Freehold land

B. Plant and machinery

C. Leasehold property

D. Motor vehicles

Answer» C. Leasehold property

discuss

168. An analysis of fixed assets account has revealed possibility of unrecorded sale of plant
machinery. Which of the following audit procedures may be adopted to discover it?
A. Examination of property tax files

B. Inquiry of plant manager

C. Examination of debits to accumulated depreciation

D. All of the above

168. An analysis of fixed assets account has revealed possibility of unrecorded sale of plant
machinery. Which of the following audit procedures may be adopted to discover it?

Answer» D. All of the above

discuss

169. The auditor has noticed existence of recurring losses sale of fixed assets this indicates

A. Depreciation charges are insufficient

B. Policy of sale or disposal of fixed assets needs to be reviewed

C. The sale of assets have not been properly authorized

D. Accounting errors

Answer» A. Depreciation charges are insufficient

discuss

170. Which of the following financial statements assertions are addressed by testing the cut
plant asset addition?
A. Existence and ownership

B. Valuation and disclosure

C. Possession and ownership

D. Completeness and valuation

Answer» D. Completeness and valuation

discuss

171. The auditor while verifying prepaid insurance has concluded that there is inadequate i
of building, He should__
A. Modify his audit report

B. Insist it should be disclosed in the notes to financial statements

C. Write it in letter of weakness

171. The auditor while verifying prepaid insurance has concluded that there is inadequate i
of building, He should__
D. Both (b) and (c)

Answer» D. Both (b) and (c)

discuss

172. While verifying intangible assets, an auditor would recomputed amortization charges a
determines whether amortization period is reasonable. The auditor tries to establish …
doing it
A. Valuation

B. Existence

C. Disclosure

D. Possession

Answer» A. Valuation

discuss

173. When auditing prepaid insurance, an auditor discovers that the insurance policy bond
building is not available for inspection. This may indicate__
A. No insurance has been undertaken for building

B. Lien on building

C. Insurance premium has not been paid

D. Insurance premium paid but not recorded

Answer» B. Lien on building

discuss

174. Which of the following controls would ensure that securities are not lost, stolen or dive

A. Establish physical barriers over investment securities

B. Maintain files of authorized signatures

C. Segregate investment approval from accounting and from custody of securities

174.
Which of the following controls would ensure that securities are not lost, stolen or dive

D. All of the above

Answer» D. All of the above

discuss

175. Which of the following would give the assurance that debtors mentioned on the date of
sheet actually exist?
A. Sending debtor’s confirmation letters

B. Reviewing subsequent collection

C. Verify debtors against sales document

D. Both (a) and (b)

Answer» D. Both (a) and (b)

176.
Tests of control are not concerned with_
A. Existence of controls

B. Effectiveness of controls

C. Continuity of controls

D. Designing of controls

Answer» D. Designing of controls

discuss

177. The sequence of steps in the auditor’s consideration of internal control is as follows –

A. Obtain an understanding, design substantive test, perform tests of control, and make a preliminary assessment of c

B. Design substantive tests, obtain an understanding, perform tests of control, and make a preliminary assessment of

Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantiv
C.
procedures.

D. Perform tests of control, obtain and understanding, make a preliminary assessment of control risk, design
177.
The sequence of steps in the auditor’s consideration of internal control is as follows –

Answer» C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design subs
procedures.

discuss

178.
Which of the following is not an inherent limitation of internal control system?
A. Management override

B. Collusion among employees

C. Inefficiency of internal auditor

D. Abuse of authority

Answer» C. Inefficiency of internal auditor

discuss

179. An auditor should study and evaluate internal controls to

A. Determine whether assets are safeguarded

B. Suggest improvements in internal control

C. Plan audit procedures

D. Express and opinion

Answer» C. Plan audit procedures

discuss

180.
The primary purpose of performing tests of control is to provide reasonable assurance
A. There are no material misstatements due to fraud or error in financial statement

B. Accounting system is well documented

C. Written evidence is there to support transactions

D. if internal control is effective

180.
The primary purpose of performing tests of control is to provide reasonable assurance

Answer» D. if internal control is effective

discuss

181.
If the auditor assesses control risk as high….
A. Document the conclusions

B. Documents the reasons along with conclusions

C. Perform tests of control

D. Perform walk through tests

Answer» A. Document the conclusions

discuss

182. The overall attitude and awareness of an entity’s board of directors concerning the imp
of internal control is reflected in
A. Accounting controls

B. Control environment

C. Control procedures

D. Supervision

Answer» B. Control environment

discuss

183. Which of the following are included in test of control?

A. Reperformance and observation

B. Inquiry and analytical procedures

C. Comparison and conformation

D. Inspection and verification

183.
Which of the following are included in test of control?
Answer» A. Reperformance and observation

discuss

184. Control risk is assessed at

A. Overall financial statements level

B. Fraud risk factor level

C. Financial statement assertion level

D. Control environment level

Answer» C. Financial statement assertion level

discuss

185.
An auditor assesses control risk because it
A. Affects the audit risk

B. Affects the level of detection risk that auditor may accept

C. Helps him to fix materiality level for each financial assertion

D. Is directly related to inherent risk

Answer» B. Affects the level of detection risk that auditor may accept

discuss

186. A flow chart, made by the auditor, of an entity’s internal control system is a graphic
representation that depicts the auditor’s.
A. Understanding of the system

B. Understanding of fraud risk factors

C. Documentation of assessment of control risk

D. Both (a) and (c)

Answer» A. Understanding of the system

discuss

187.
The performance of tests of control is documented in
A. Audit programme

B. Flow charts

C. Working papers

D. Any of the above

Answer» C. Working papers

discuss

188. The independence of an internal auditor will most likely be assured if he reports to the

A. President Finance

B. President System

C. Managing Director

D. CEO

Answer» C. Managing Director

discuss

189. In comparison to the independent auditor, an internal auditor is more likely to be conc
with
A. Cost accounting system

B. Internal control system

C. Legal compliance

D. Accounting system

Answer» B. Internal control system

discuss
190.
When an independent auditor relies on the work of an internal auditor, he or she shou
A. Examine the scope of internal auditor’s work

B. Examine the system of supervising review and documentation of internal auditor’s work

C. Adequacy of related audit programme

D. all of the above

Answer» D. all of the above

discuss

191. Proper segregation of duties reduces the opportunities in which a person would both

A. Establish controls and executes them

B. Records cash receipts and cash payments

C. Perpetuate errors and frauds and conceals them

D. Record the transaction in journal and ledger

Answer» C. Perpetuate errors and frauds and conceals them

discuss

192.
Analytical procedures are least likely to be use in the audit of –
A. Cash balance

B. Investments

C. Bills receivables

D. Debtors

Answer» A. Cash balance

discuss

193. Which of the following statements is not true with regard to teeming and lading ?

A. It results in the deliberate misappropriation of cash receipts

193.
Which of the following statements is not true with regard to teeming and lading ?
B. It is associated with cash receipts

C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist

To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so that a ban
D.
reconciliation will not detect the irregularity.

Answer» C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist

discuss

194. The balance of cash in often between one to five percent of total assets. Tick the most
appropriate statement with regard to verification of cash in context of this
A. Cash in always material as materiality is qualitative concept

B. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a relative concept

C. The cash balance need only be audited if the balance is in overdraft

D. Cash is to be verified if control risk is assessed as high

Answer» A. Cash in always material as materiality is qualitative concept

discuss

195. When counting cash on hand the auditor should ___

A. Ensure presence of somebody from management

B. Obtain a receipt from custodian as to its return

C. Ensure postage and revenue stamps are not counted in physical count

D. Temporary advances to employees are counted to calculate balance of cash in hand

Answer» C. Ensure postage and revenue stamps are not counted in physical count

discuss

196.
Which of the following statement is not true regard to auditor’s attendance at stock tak
A. Auditor should attend physical stock taking only if inventory is material
196.
Which of the following statement is not true regard to auditor’s attendance at stock tak
B. Auditor may not attend physical verification of stock by management, if he does not find it appropriate to rely on it

If inventory is material, even when the auditor is not placing reliance on the physical verification by the managemen
C.
attend it

The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is to obtain dire
D.
knowledge that the stock and has been property counted

Answer» C. If inventory is material, even when the auditor is not placing reliance on the physical verification by the manag
should attend it

discuss

197. While observing a client’s annual physical inventory, an auditor conducted test counts
certain test counts were higher than the recorded quantities in the client’s perpetual re
This situation could be the result of the client’s failure to record –
A. Purchase returns

B. Sales returns

C. Goods with consignor

D. Purchase discounts

Answer» B. Sales returns

discuss

198.
Inspection report/receiving report supports entries in
A. Sales book and sales return book

B. Purchase book and sales return book

C. Cash book and purchase book

D. Sales book and purchase return book

Answer» B. Purchase book and sales return book

discuss
199.
……………….. Starts where …………….. Ends
A. Accounting, auditing

B. Auditing, accounting

C. Vouching, auditing

D. Accounting,vouching

Answer» B. Auditing, accounting

discuss

200. ............ means “proving the truth or confirmation”

A. Vouching

B. Verification

C. Inspection

D. Auditing

Answer» B. Verification

201. Civil liability of an auditor implies liability for

A. misappropriation of cash

B. misappropriation of goods

C. fraud

D. misfeasance

Answer» D. misfeasance

discuss

202.
An auditor is held criminally liable for
A. Loss to his client

B. Neglect of his duty

C. Offence against statutory provisions

202.
An auditor is held criminally liable for

D. Frauds

Answer» C. Offence against statutory provisions

discuss

203. An auditor is held liable under C.A Act 1949 for

A. negligence

B. misfeasance

C. Professional misconduct

D. breach of contract.

Answer» C. Professional misconduct

discuss

204.
__________ is a systematic examination of the books and records or a business.
A. Auditing

B. Vouching

C. Verification

D. Checking

Answer» A. Auditing

discuss

205. An audit which is compulsory by the law is __________.

A. Government Audit

B. Internal Audit

C. Cost Audit
205.
An audit which is compulsory by the law is __________.
D. Statutory Audit

Answer» D. Statutory Audit

discuss

206.
.Instruction of audit issued by controller and auditor general of India ________.
A. Statutory audit

B. Final Audit.

C. Management audit

D. Government audit

Answer» D. Government audit

discuss

207. Audit done by the employees of the business undertaking is called _______.

A. Final audit

B. Management Audit

C. Government Audit

D. Internal Audit

Answer» D. Internal Audit

discuss

208.
This kind of audit is conducted generally between two annual audit ______.
A. Internal Audit

B. Interim audit

C. Final Audit

D. Continuous Audit
208.
This kind of audit is conducted generally between two annual audit ______.
Answer» B. Interim audit

discuss

209. Management audit otherwise called as _______.

A. Final audit

B. Efficiency Audit

C. Cost Audit

D. Cash audit

Answer» B. Efficiency Audit

discuss

210. Before the work of audit is commenced, the auditor plans out the whole of audit work i
_________.
A. Audit Plan

B. Audit Note

C. Audit Programme

D. Audit Control

Answer» C. Audit Programme

discuss

211. A number of checks and controls exercised in a business to ensure its efficient working
known as ________.
A. Internal Check

B. Internal Control

C. Internal Audit

D. Interim Check

Answer» B. Internal Control

211. A number of checks and controls exercised in a business to ensure its efficient working
known as ________.

discuss

212.
A Voucher is a _______.
A. Document is support of an entry made in books of accounts

B. Invoice received from suppliers

C. Receipt issued to a customer for cash

D. Dispatch Receipt

Answer» A. Document is support of an entry made in books of accounts

discuss

213. Voucher relates to _________.

A. Cash receipt & payments, credit transactions

B. Cash payment only

C. Credit transactions only

D. Cash receipt only

Answer» A. Cash receipt & payments, credit transactions

discuss

214.
Internal check is meant for ___________.
A. Prevention of frauds

B. Detection of frauds

C. Helping audit is depth

D. Detection of errors

Answer» A. Prevention of frauds

discuss

215.
Purchase of machinery is a ____________.
A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

Answer» C. capital expenditure

discuss

216. Sale of land is a __________.

A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

Answer» B. capital receipt

discuss

217. When a transaction has not been recorded in the books of account either wholly or par
such errors are called as _________.
A. errors of commission

B. errors of omission

C. compensating error

D. error of principle

Answer» B. errors of omission

discuss
218. Verification of the value of assets, liabilities, the balance of reserves, provision and the
of profit earned or loss suffered a firm is called _________.
A. continuous audit

B. balance sheet audit.

C. interim audit

D. partial audit

Answer» B. balance sheet audit.

discuss

219.
A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of what?
A. Error of omission

B. Error of commission

C. Compensating error

D. Error of principle

Answer» B. Error of commission

discuss

220. Recording a transaction twice in the books of original entry is an error of __________.

A. principle

B. commission

C. duplication

D. omission

Answer» C. duplication

discuss

221.
Errors and frauds already committed can be discovered under the system of ________.
A. internal audit, internal check, internal control
221.
Errors and frauds already committed can be discovered under the system of ________.
B. external check

C. statutory audit

D. interim audit

Answer» A. internal audit, internal check, internal control

discuss

222.
Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud

B. misappropriation of cash

C. misappropriation of goods

D. manipulation of accounts

Answer» D. manipulation of accounts

discuss

223. /. Special audit is necessary for _________.

A. inefficient concern

B. processing concern

C. trading concern

D. manufacturing concern

Answer» A. inefficient concern

discuss

224.
The first auditors appointed by head office ____________.
A. for a period of one year

B. for a period of two years

224.
The first auditors appointed by head office ____________.
C. for a period of three years

D. till the conclusion of the first annual general meeting

Answer» D. till the conclusion of the first annual general meeting

discuss

225. Audit Note Book contains: ---------------------------------------------------------

A. Various dates of reference.

B. Details of work done.

C. Notes regarding item requiring clarification, explanations, etc.

D. All of the above.

Answer» D. All of the above.

226. Which of the following has a broader scope?

A. Internal Control.

B. Internal Audit.

C. Internal Checking.

D. None of the above.

Answer» D. None of the above.

discuss

227.
An internal auditor is :
A. Temporary Employee.

B. Permanent Employee.

C. Daily Wager.

D. None of the above.

227.
An internal auditor is :
Answer» B. Permanent Employee.

discuss

228. The main object of vouching is :

A. To prepare trial balance.

B. Conduct routine checking.

C. Verify authenticity & authority of transactions.

D. Checking of vouchers

Answer» D. Checking of vouchers

discuss

229.
Valuation is the base of:
A. Verification.

B. Marketing.

C. Internal checking.

D. Vouching.

Answer» A. Verification.

discuss

230. The first auditor or auditors are appointed by :

A. Central Government.

B. Company Law Board.

C. Board of Directors.

D. Shareholders.

Answer» C. Board of Directors.

discuss

231. A number of checks & controls exercised in a business to ensure its efficient working is
as :
A. Internal check.

B. Internal control.

C. Internal audit.

D. Interim check.

Answer» A. Internal check.

discuss

232.
Voucher relates to :
A. Cash receipt.

B. Cash payment.

C. Credit transactions.

D. All the above.

Answer» D. All the above.

discuss

233. Internal check is meant for :

A. Prevention of frauds.

B. Detection of frauds.

C. Helping audit in depth.

D. Detection of errors.

Answer» C. Helping audit in depth.

discuss
234.
Internal auditor is appointed by :
A. The management.

B. The shareholders.

C. The government.

D. The statutory body.

Answer» A. The management.

discuss

235. Auditing begins where -------- ends.

A. Selling.

B. Inventory valuation.

C. Accounting.

D. Purchases.

Answer» C. Accounting.

discuss

236.
A good audit report must at least meet one of the following qualifications:
A. It should offer constructive and timely suggestions to the management.

B. It should not point out mistakes.

C. It should not be based on factual information.

D. It should not be based on balance sheet.

Answer» A. It should offer constructive and timely suggestions to the management.

discuss

237. The work of one clerk is automatically check by another clerk is called :

A. Internal control.
237.
The work of one clerk is automatically check by another clerk is called :
B. Internal check.

C. Internal audit.

D. None of the above.

Answer» B. Internal check.

discuss

238.
The owners of the company are called:
A. Debenture holders.

B. Debtors.

C. Shareholders.

D. None of the above.

Answer» C. Shareholders.

discuss

239. Verification is :

A. The art of recording the business transactions.

B. An examination of the books of accounts.

C. The act of establishing the accuracy of entries in the books of accounts.

D. none

Answer» C. The act of establishing the accuracy of entries in the books of accounts.

discuss

240.
The main object of investigation is :
A. To discover errors and frauds.

B. To prevent errors and frauds.

240.
The main object of investigation is :
C. To verify statements.

D. All the above.

Answer» D. All the above.

discuss

241. Internal controls and internal check are :

A. One and the same.

B. Different.

C. Internal control includes internal check.

D. None of the above.

Answer» C. Internal control includes internal check.

discuss

242.
An auditor is like a :
A. Watchman.

B. Foolish dog.

C. Mad dog.

D. Watch dog.

Answer» D. Watch dog.

discuss

243. Special audit is necessary for:

A. Inefficient concern.

B. Processing concern.

C. Trading concern.
243.
Special audit is necessary for:
D. Manufacturing concern.

Answer» A. Inefficient concern.

discuss

244.
The company’s auditor is expected to give:
A. His expert opinion about the accounts.

B. A factual position about the accounts.

C. A critical review of the accounts.

D. Financial assistance.

Answer» B. A factual position about the accounts.

discuss

245. Auditors of a joint stock company are appointed by :

A. Directors of the company.

B. Annual general meeting.

C. Election at the annual general meeting.

D. Debenture holders.

Answer» C. Election at the annual general meeting.

discuss

246.
A company auditor can be removed by :
A. Board of directors.

B. Managing director.

C. Any director.

D. General Meeting.
246.
A company auditor can be removed by :
Answer» D. General Meeting.

discuss

247. A vacancy caused by resignation of an auditor is filled by :

A. Board of directors.

B. Managing director.

C. General meeting.

D. Central government.

Answer» C. General meeting.

discuss

248.
Audit in depth means :
A. Audit of each and every item.

B. Intensive audit of each and every item.

C. Intensive audit of few items.

D. Audit of a few selected items.

Answer» B. Intensive audit of each and every item.

discuss

249. Concurrent audit is a part of :

A. Internal check system.

B. Continuous audit.

C. Internal audit system.

D. Final audit.

Answer» C. Internal audit system.

discuss

250.
Audit in depth is synonymous for:
A. Complete audit.

B. Completed audit.

C. Final audit.

D. Detailed audit.

Answer» D. Detailed audit.

251.
Balance sheet audit included verification of :
A. Assets.

B. Liabilities.

C. Income & expenditure accounts where appropriate.

D. All of the above.

Answer» D. All of the above.

discuss

252. 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.

Answer» C. It is needed when the organization has a good internal control system.

discuss

253.
Which of the following is not a fact of EPA ?
A. Economic audit.
253.
Which of the following is not a fact of EPA ?
B. Efficiency audit.

C. Expenditure audit.

D. Effectiveness audit.

Answer» C. Expenditure audit.

discuss

254.
Balance sheet does not include :
A. Verification of assets & liabilities.

B. Vouching of income & expense accounts related to assets and liabilities.

C. Examination of adjusting and auditing & closing entries.

D. Routine checks.

Answer» D. Routine checks.

discuss

255. When issuing unqualified opinion the auditor who evaluates the audit findings should
satisfied that the :
A. Amount of known miss-statement is documented in working papers.

B. Estimates of the total likely misstatement are less than materiality level.

C. Estimated of the total likely misstatement is more than materiality level.

D. Estimates of the total likely misstatement cannot be made.

Answer» B. Estimates of the total likely misstatement are less than materiality level.

discuss

256. Under check system principle of_________ is followed.

A. Division of labour

B. Division of work
256.
Under check system principle of_________ is followed.
C. Principle of scalar chain

D. Accountancy

Answer» A. Division of labour

discuss

257. This kind of audit is generally conducted between two annual audits.

A. Internal audit

B. Interim audit

C. Final audit

D. Continuous audit

Answer» B. Interim audit

discuss

258. Before the work of audit is commenced, the auditor plans out the whole of audit work i
as –
A. Audit plan

B. Audit note

C. Audit risk

D. Audit program

Answer» D. Audit program

discuss

259.
Internal auditor is appointed by –
A. The management

B. The shareholders

C. The government
259.
Internal auditor is appointed by –
D. statutory body

Answer» A. The management

discuss

260.
The audit that is made compulsory under the statute is called –
A. Statuary audit

B. Partial audit

C. Complete audit

D. Continues audit

Answer» A. Statuary audit

discuss

261. Who among the following can be appointed as the auditor of company?

A. A partner or the director of the company

B. A person of unsound mind

C. Mr. ‘Y’ who owes Rs.500 to company

D. Mr. ‘Z’ who holds the ‘CA’ Certificate

Answer» D. Mr. ‘Z’ who holds the ‘CA’ Certificate

discuss

262.
___ is documentary evidence by which the accuracy in the books of accounts may be pro
A. Cheque

B. Receipt

C. Voucher

D. Statement
262.
___ is documentary evidence by which the accuracy in the books of accounts may be pro
Answer» C. Voucher

discuss

263. Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –

A. Error of omission

B. Error of commission

C. Compensating error

D. Error of Principle.

Answer» B. Error of commission

discuss

264. In comparison to the independent auditor an internal auditor is more likely to be conc
with –
A. Cost accountancy system

B. Internal control system

C. Legal compliance

D. Accounting system

Answer» B. Internal control system

discuss

265.
The audit program is prepared by –
A. The auditor

B. The client

C. The audit assistants

D. Auditor & his assistants

Answer» D. Auditor & his assistants

discuss

266.
Interim audit refers to –
A. Examination of accounts continuously

B. Examination of accounts intermittently

C. Audit work to find out & check interim profits of a company

D. Carrying on audit for bonus purposes at the end of year

Answer» C. Audit work to find out & check interim profits of a company

discuss

267. A company auditor should see that the dividend is paid –

A. After charging depreciation

B. Without charging depreciation

C. Out of capital

D. None of the above.

Answer» A. After charging depreciation

discuss

268.
Errors of omission are –
A. Technical errors

B. Error of principle

C. Compensating error

D. none of these

Answer» A. Technical errors

discuss
269.
Vouching implies –
A. Inspection of receipts

B. Examination of vouchers to check authenticity of records

C. Surprise checking of accounting records

D. Examining the various assets

Answer» B. Examination of vouchers to check authenticity of records

discuss

270. Undervaluation of stock is –

A. Technical error

B. Compensatory error

C. Error of principle

D. none of these

Answer» C. Error of principle

discuss

271.
Verification refers to –
A. Examination of journal & ledger

B. Examination of vouchers related to assets

C. Examining the physical existence & valuation of assets

D. Calculation of valuation of assets

Answer» C. Examining the physical existence & valuation of assets

discuss

272. Valuation of fixed assets is based on the concept –

A. Going concern
272.
Valuation of fixed assets is based on the concept –
B. Money measurement

C. Dual aspect

D. Cost concept.

Answer» A. Going concern

discuss

273.
“Auditor is not valuer.” This statement was stated in –
A. Kingston Cotton Mill Case

B. London & General Bank Case

C. Lee VS Neuchatel Co. LTD Case

D. London Oil Storage Co.LTDCase

Answer» A. Kingston Cotton Mill Case

discuss

274. Floating assets are valued at –

A. Cost

B. Market price

C. Cost price or market price whichever is less

D. Cost less than depreciation

Answer» C. Cost price or market price whichever is less

discuss

275.
Outstanding expenses should be verified with the help of –
A. Cashbook

B. Balance book
275.
Outstanding expenses should be verified with the help of –
C. Journal proper

D. None of above.

Answer» C. Journal proper

276.
First auditor of the company is appointed by the –
A. Shareholders

B. Central government

C. Company law board

D. Board of directors

Answer» D. Board of directors

discuss

277. The vacancy caused by resignation at a auditor is filled by –

A. Board of directors

B. At the general meeting of shareholders

C. By the central government

D. By the company law board

Answer» B. At the general meeting of shareholders

discuss

278.
A special auditor is appointed by the –
A. Shareholders

B. Board of directors

C. Central government

D. CAG
278.
A special auditor is appointed by the –
Answer» C. Central government

discuss

279. A remuneration of a company auditor is fixed by the –

A. Shareholders

B. Board of directors

C. Central Government

D. Appointing authority

Answer» D. Appointing authority

discuss

280.
Internal auditor has to submit report to –
A. Shareholders

B. Government

C. Company law board

D. none of above

Answer» D. none of above

discuss

281. Auditor in general is –

A. Employee of the company

B. Agent of the company

C. Agent of the shareholders

D. None of the above

Answer» C. Agent of the shareholders

discuss

282.
Shares issued for consideration other than cash should be vouched with help of –
A. Directors minutes book

B. Shareholders minute’s book

C. Contract with the party concerned

D. Cash book

Answer» C. Contract with the party concerned

discuss

283. The term Standard Auditing Practices refers –

A. Auditing techniques adopted by auditor for collecting & vouching evidences

B. Test checking

C. Standards of auditing

D. True & fair view

Answer» A. Auditing techniques adopted by auditor for collecting & vouching evidences

discuss

284.
AAS refers to –
A. Audit evidence

B. Audit Planning

C. Risk assessments &Internal control

D. Knowledge of business

Answer» D. Knowledge of business

discuss
285.
The panel of Auditors of cooperative society is maintained by –
A. Charted Accountant

B. Central Government

C. Registrar

D. Shareholders

Answer» C. Registrar

discuss

286. Banking Regulation Act was passed in the year–

A. 1912

B. 1949

C. 1956

D. 1955.

Answer» B. 1949

discuss

287. Which of the following statements is not correct regarding removal of first auditor befo
the term?
A. He is removed at general meeting

B. Shareholders are authorized to do so

C. The approval of central government is required for such removal

D. The provision for such removal is contained in Section 224 (7)

Answer» C. The approval of central government is required for such removal

discuss

288.
Retiring auditor does not have right to –
A. Make written representations
288.
Retiring auditor does not have right to –
B. Get his representation circulated

C. Be heard at the meeting

D. Speak as member of company

Answer» A. Make written representations

discuss

289.
According to Section ___ Special Audit is conducted at the central government
A. Section 233(A)

B. Section 233(B)

C. Section 242(A)

D. Section 242(B)

Answer» C. Section 242(A)

discuss

290. Audit of Banks is an example of –

A. Statutory Audit

B. Balance Sheet Audit

C. Concurrent Audit

D. All of above

Answer» D. All of above

discuss

291.
Auditor of a _____ company does not have right to visit foreign branches of company.
A. Unlimited Company

B. Manufacturing Company
291.
Auditor of a _____ company does not have right to visit foreign branches of company.
C. Banking Company

D. Non-Profit making company

Answer» B. Manufacturing Company

discuss

292. Cost Audit under Section 233(B) of The Company Act is _____

A. Voluntary

B. Compulsory

C. Advisable.

D. Avoidable

Answer» C. Advisable.

discuss

293.
Internal Auditing Standards are issued by the –
A. International Accounting Standard Board

B. Financial Accounting Standard Board

C. International Audit & Assurance Standard Board

D. Auditing Practices Board

Answer» C. International Audit & Assurance Standard Board

discuss

294. Which of the following is not a duty of an auditor?

A. Duty to report company’s banker

B. Duty to report to the members

C. Duty to sign the audit report

294.
Which of the following is not a duty of an auditor?
D. Duty to report on any violation of law

Answer» A. Duty to report company’s banker

discuss

295.
The main object of vouching is :
A. To prepare trial balance.

B. Conduct routine checking.

C. Verify authenticity & authority of transactions.

D. Checking of vouchers.

Answer» C. Verify authenticity & authority of transactions.

discuss

296. Valuation is the basis of :

A. Verification.

B. Marketing.

C. Internal checking.

D. Vouching.

Answer» A. Verification.

discuss

297.
Voucher relates to:
A. Cash receipt.

B. Cash payment.

C. Credit transactions.

D. All the above.

297.
Voucher relates to:
Answer» A. Cash receipt.

discuss

298. Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –

A. Error of omission

B. Error of commission (

C. Compensating error

D. Error of Principle.

Answer» B. Error of commission (

discuss

299.
“Auditor is not valuer.” This statement was stated in –
A. Kingston Cotton Mill Case

B. London & General Bank Case

C. Lee VS Neuchatel Co. LTD Case

D. London Oil Storage Co.LTD Case

Answer» A. Kingston Cotton Mill Case

discuss

300. Thevacancy caused by resignation of an auditor is filled by –

A. Board of directors

B. At the general meeting of shareholders

C. By the central government

D. By the company law board

Answer» B. At the general meeting of shareholders

300.
Thevacancy caused by resignation of an auditor is filled by –
301
. Shares issued for consideration other than cash should be vouched with help of –

A. Directors minutes book

B. Shareholders minute’s book

C. Contract with the party concerned

D. Cash book

Answer» C. Contract with the party concerned

1.Auditing is compulsory for____________?

A. Small scale business
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns
2. Concealment of shortage by delaying the recording of cash receipts is known as_____________?
A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these
3. The fundamental objective of the audit of a company is to_____________?
A. Protect the interests of the minority shareholders
B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts
4. The concept of stewardship means that a company’s directors________________?
A. Are responsible for ensuring that the company complies with the law
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the shareholders
D. Report suspected fraud and money laundering to the authorities
5. Why do auditors concentrate their efforts on material items in accounts?
A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it
6. ____________ is a systematic examination of the books and records or a business?
A. Auditing
B. Vouching
C. Verification
D. Checking
7. The term ‘Audit’ is derived from a Latin word “audire” which means___________?
A. To inspect
B. To examine
C. To hear
D. To investigate
8. The main object of an audit is _____________?
A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.
9. An auditor is like a_______________?
A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these
10. Process of verifying the documentary evidences of transactions are known as___________?
A. Auditing
B. Testing
C. Vouching
D. Verification
11. Which one of the following is NOT a duty of the auditor?
A. Duty to report to the company’s bankers
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law
12. Assuming that it is not the first appointment of the auditor, who is responsible for the appointment
of the auditor?
A. The shareholders in a general meeting
B. The managing director
C. The board of directors in a board meeting
D. The audit committee
13. The independent auditor’s primary responsibility is to______________?
A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders
14. How long is the auditor’s term of office?
A. Until the audit is complete
B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them
15. Which of the following is correct in relation to materiality?
A. A matter is material only if it changes the audit report
B. A matter is material if the auditor and the directors both decide that further work needs to be done in the
area under question
C. A matter is material only if it affects directors’ emoluments
D. A matter is material if its omission or misstatement would reasonably influence the decisions of an
addressee of the auditors’ report
16. Which of the following is NOT the responsibility of a company’s directors?
A. Reporting to the shareholders on the accuracy of the accounts
B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor
17. International auditing standards are issued by the______________?
A. International Accounting Standards Board
B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board
18. Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial statements
D. He should examine whether recognised accounting principle have been consistently
19. A sale of Rs. 50.000 to A was entered as a sale to B. This is an example of____________?
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
20. When an auditor is proposed for removal from office, which one of the following is he NOT
permitted to do?
A. Circulate representations to members
B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed
21. Which of the following describes sampling risk?
A. The risk of the auditor carrying out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing
22. Which of the following is NOT an accepted method of selection in sampling?
A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection
23. Which of the following are you unlikely to see in the current file of auditors’ working papers?
A. Memorandum & articles of association
B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count
24. According to ISA 500, the strength of audit evidence is determined by which two qualities?
A. Appropriateness & competence
B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence
25. Which of the following is normally the most reliable source of audit evidence?
A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review
26. The degree of effectiveness of an internal control system depends on:
A. The design of the internal control system and the implementation of the controls
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting records
27. Which one of the following is NOT considered to be part of planning?
A. Background i.e. industry
B. Previous year’s audit i.e. any qualifications in the report
C. Considering the work to be done by the client staff e.g. internal audit
D. Considering whether the financial statements show a true and fair view
28. Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk
29. Which of the following should NOT be considered at the planning stage?
A. The timing of the audit
B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations
30. At the planning stage you would NOT consider____________?
A. the timing of the audit
B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit
31. The scope of internal audit is decided by the___________?
A. Shareholders
B. Management
C. Government
D. Law
32. Audit of banks is an example of____________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above
33. Concurrent audit is a part of____________?
A. Internal check system
B. Continuous audit
C. Internal audit system
D. None of these
34. Audit in depth is synonymous for____________?
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
35. According to ISA 315, which of the following is NOT an element of the control environment?
A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices
36. According to ISA 315, which of the following is NOT a control activity?
A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties
37. Lapping is also known as___________?
A. Teeming and lading
B. Looping
C. Embezzlement
D. Hacking
38. Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
of____________?
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
39. Which of the following statements is not true?
A. Management fraud is more difficult to detect than employee fraud
B. Internal control system reduces the possibility of occurrence of employee fraud and management
fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.
40. Internal audit is undertaken:
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
41. Errors of Omission are_____________?
A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above
42. Window dressing implies_______________?
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
43. Test Checking refers to___________?
A. Testing of accounts and records
B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded
44. 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
45. ______the audit risks_______the materiality and_________the audit effort.
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
46. 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
47. 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
48. Institute of Chartered Accountants of Pakistan was established in____________?
A. 1949
B. 1956
C. 1961
D. 1972
49. 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
50. Internal check is carried on by___________?
A. Staff specially appointed for the purpose
B. Internal auditor
C. Supervisor of the staff
D. Members of the staff
51. 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
52. Which of the following statements is most closely associated with analytical procedure applied at
substantive stage?
A. It helps to study relationship among balance sheet accounts
B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific account balance
53. Verification refers to_________?
A. Examining the physical existence and valuation of assets.
B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.
54. Stock should be valued at_________?
A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
55. Floating assets are valued at____________?
A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
56. Goods sold on the basis of ‘sales or return ‘ should:
A. Be included in the stock
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
57. Of the following, which is the least persuasive type of audit evidence?
A. Bank statements obtained from the client
B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor
58. Which of the following statements is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
59. In an audit of financial statements, substantive tests are audit procedures that __________?
A. May be eliminated for an account balance under certain conditions
B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures
60. The nature, timing and extent of substantive procedures is related to assessed level of control risk
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
61. Which of the following factors is most important in determining the appropriations of audit
evidence?
A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
62. When is evidential matter, generally, considered sufficient?
A. When it constitutes entire population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
63. Which of the following is not corroborative evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
64. What would most appropriately describe the risk of incorrect rejection in terms of substantive
testing?
A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
65. Which of the following affects audit effectiveness?
A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A and C
66. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit
testing?
A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
67. Audit programme is prepared by____________?
A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants
68. The working papers which auditor prepares for financial statements audit are___________?
A. Evidence for audit conclusions
B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors
69. The quantity of audit working papers complied on engagement would most be affected
by__________?
A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk
70. Which of the following best describes the primary purpose of audit programme preparation?
A. To detect errors or fraud
B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk
71. Which of the following is not an advantage of the preparation of working paper?
A. To provide a basis for review of audit work
B. To provide a basis for subsequent audits
C. To ensure audit work is being carried out as per programme
D. To provide a guide for advising another client on similar issues
72. The auditor’s permanent working paper file should not normally, include__________?
A. Extracts from client’s bank statements
B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements
73. For what minimum period should audit working papers be retained by audit firm?
A. For the time period the entity remains a client of the audit firm.
B. For a period of ten years
C. For a period auditor opines them to be useful in servicing the client
D. For the period the audit firm is in existence.
74. Which of the following factors would least likely affect the quantity and content of an auditor’s
working papers
A. The assessed level of control risk
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter
75. Which of the following statement is true regarding an auditor’s working papers?
A. They document the level of independence maintained by the auditor
B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control
76. Which of the following statement best describes the understanding with respect to ownership and
custody of working papers prepared by an auditor?
A. The working papers may be obtained by third parties when they appear to be relevant to issues
raised in litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is
not required.
77. The current file of the auditor’s working papers, generally, should include____________?
A. A flowchart of the internal controls
B. Organisation charts
C. A copy of financial statements
D. Copies of bond and debentures
78. Auditing is what?
A. Reporting the financial information
B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records
79. Audit of banks is an example of__________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above
80. In Pakistan, balance sheet audit is synonymous to___________?
A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
81. Interim audit is performed before the end of the accounting period, normally by the
(A) junior staff
(B) senior staff
(C) whole audit team
(D) board of directors
82 Fundamentally, the auditor report gives an opinion on whether the financial statements
(A) are in accordance with the national standards
(B) are in accordance with the international standards
(C) have errors, mistakes, or fraud
(D) present fairly the position and results of an entity
83. The _____ certify or guarantee that the financial statements are correct.
(A) management
(B) board of governors
(C) auditor
(D) auditor does not
84. IFAC is an abbreviation for
(A) International Federation of Accountants
(B) International Federation of Auditors
(C) International Framework for Accounting Concepts
(D) International Framework for Auditing Concepts
85. IAASB is an abbreviation for
(A) International Accounting and Auditing Standards Board
(B) International Accountants and Auditors Standards Board
(C) International Auditing and Assurance Standards Board
(D) International Accounting and Assurance Standards Board
86. What type of standard is applied in the audit of historical financial information?
(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISRSs
87. What type of standard is applied in the review of historical financial information?
(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISREs
88. What type of standard is applied in assurance engagements other than audits or reviews of historical
financial information?
(A) IFAs
(B) ISAs
(C) ISAEs
(D) ISREs
89. What type of standard is applied on compilation engagements, engagements to apply agreed upon
procedures to information and other related services engagements?
(A) ISRSs
(B) ISREs
(C) ISAEs
(D) ISQCs
90. ISQCs is an abbreviation for
(A) International Standards on Quantity Control
(B) International Standards on Quality Control
(C) International Society for Quantity Control
(D) International Society for Quality Control
91. When the account balance of “cash at bank” is verified, which from the following audit procedure(s)
has/have to be performed?
I. Confirmation from the relevant banks
II. Bank reconciliations
(A) I only
(B) II only
(C) I or II
(D) I and II
92. The outcome of an audit is a/an
(A) certificate
(B) report
(C) income and expenses
(D) profit or loss
93. Final audit is performed
(A) after the year ends
(B) near the year ends
(C) after 9 months of the year
(D) only if interim audit has problems
94. Scope of financial audit is__________?
A. Financial information
B. Non-financial information
C. Both (a) and (b)
D. None of these
95. IFRS 9 explains about?
A. Inventory
B. Accounts Payable
C. Accounts Receivable
D. Expenses
96. Audit fess is a part of__________.
A. works on cost.
B. selling overhead.
C. distribution overhead.
D. administration overhead
97. Which of the following statements is INCORRECT?
A. An auditor may serve on the board of directors of an audit client.
B. An auditor who is an immediate family member of the director of an audit client must not be assigned to the
audit team.
C. Purchasing goods from an audit client on normal commercial terms does not create a threat to the auditor’s
independence.
D. An auditor who was recently a director of an audit client must not be assigned to the audit team for that
client.
98. An auditor should not accept a loan on favorable commercial terms from an audit client because of
the threat to his or her independence. The threat would be a___________?
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
99. Which of the following are fundamental ethical principles for professional accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity
A. 1, 2 and 3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only
100. Which one of the following may auditors NOT perform for their client?
A. Taking management decisions
B. Preparation of accounting records
C. Preparing tax computations
D. Advising on weaknesses in the internal control systems
101. You have been proposed as auditor of a company. What is the first step that you should take?
A. Obtain the client’s permission to communicate with the existing auditor
B. Obtain the existing auditor’s working papers
C. Obtain a copy of the company’s most recent board minutes
D. Obtain a copy of the existing auditor’s letter of engagement
102. Which of these are types of Audit Report?
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion.
All of above
103. Pick the odd one:
A. Checking the vouchers
B. Preparation of vouchers
C. Evaluation of internal control
D. None of the above
104. Which of the following is not type of engagement standard?
A. Standards on Auditing
B. Standard on Quality Control
C. Standards on Review Engagement
D. Standards on Assurance Engagement
105. How many Standards on Auditing have been issued?
A. 32
B. 34
C. 36
D. 38
106. Auditing engagement can be performed w.r.t.
A. Profit making entity
B. Non-profit making entity
C. Corporate entity only
D. Any entity
107. The auditor should examine subsequent realization of revenue such as dividends,
interest,commission, etc to:_____________?
A. identify cases of unrecorded revenue
B. ensure proper disclosure in the balance sheet
C. recompute accrued income on the data of balance sheet
D. Any of these
108. What is meant by negative assurance?
A. The auditor cannot give an opinion due to lack of evidence.
B. The client’s financial statements were found to be materially misstated.
C. The auditor could not conduct any tests due to lack of controls.
D. The auditor did not find anything to indicate that a material misstatement exists.
109. For companies required to produce interim financial statements (IFI):
A. one audit firm should audit the IFI and a different firm should audit the financial statements for the year as a
whole.
B. one accountancy firm should review the IFI and a different firm should audit the financial statements for the
year as a whole.
C. the same firm should audit the IFI and the financial statements for the year as a whole.
D. the same firm should review the IFI and the financial statements for the year as a whole.
110. Which of the following statements is correct?
A. When a company negotiates a ‘friendly’ takeover, it usually appoints a firm of accountants to carry
out due diligence on the takeover target.
B. In an attestation engagement, the accountant is required to report on the quality of work performed.
C. In a review engagement, evidence is gathered mainly by means of computation and inspection.
D. In an engagement to review financial statements, the amount of work required is the same as for an audit
111. What sort of assurance is provided in a review engagement?
A. Positive assurance
B. Negative assurance
C. High level of assurance
D. No assurance
112. Which one of the following is part of the auditor’s function?
A. Conducting the inventory count
B. Obtaining and evaluating audit evidence on the financial statements
C. Calculating the year-end accruals figure for inclusion in the accounts
D. Providing representations to management
113. Which of the following does NOT belong in the auditors’ report?
A. Introductory paragraph specifying the pages to which the report relates and the accounting convention
adopted
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of directors and auditors
114. What is meant by the expression ‘expectation gap’?
A. The gap between how the directors of a company perform their duties and how the shareholders expect
them to perform
B. The gap between how the directors of a company perform their duties and how the general public expects
them to perform
C. The gap between the public perception of the role of company auditors and their statutory role and
responsibilities
D. The gap between the auditors’ own perception of their duties and how they are set out in the Companies Act
115. Which of the following would you not use as a benchmark for comparison when undertaking
analytical procedures?
A. Other audit clients
B. Previous years
C. Other companies in the same industry
D. Budget
116. Which of the following is true about written representations?
A. They are the best source of audit evidence
B. They should be used only when there is a lack of other substantive audit evidence
C. They should be used only when there is other substantive audit evidence to complement it
D. Shareholders receive a copy of all material written representations
117. The auditor has a right to___________?
A. Obtain information and explanation
B. Obtain information and explanation from the employees and officers
C. Obtain information and explanation necessary for the purpose of audit
D. Both B. and C.
118. The branch auditor is appointed by___________?
A. Shareholders in an annual general meeting
B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above
119. Auditor of a___________company does not have right to visit foreign branches of the company?
A. Unlimited liability
B. Manufacturing
C. Banking
D. Nonprofit making
120. The date on auditor’s report should not be____________?
A. the data of AGM
B. later than the date on which the accounts are approved in board’s meeting
C. earlier than the date on which the accounts are approved by the management
D. Both A. and B.
121. When restrictions that significantly affect the scope of the audit are imposed by the client, the
auditor generally should issue which of the following opinion?
A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph;
122. The auditor has serious concern about the going concern of the company. It is dependent on
company’s obtaining a working capital loan from a bank which has been applied for. The management
of the company has made full disclosure of these facts in the notes to the balance sheet. The auditor is
satisfied with the level of disclosure. He should issue___________?
A. unqualified opinion
B. unqualified opinion with reference to notes to the accounts
C. qualified opinion
D. disclaimer of opinion
123. Which of the following is true about explanatory notes?
A. These are given by the directors of the company
B. These are given to adhere to requirements of section 211.
C. These are given by auditors of the company in auditor’s report
D. All of the above
124. The client changed method of depreciation from straight line to written down value method. This
has been disclosed as a note to the financial statements. It has an immaterial effect on the current
financial statements. It is expected, however, that the change will have a significant effect on future
periods. Which of the following option should the auditor express?
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
125. Which of the following documents is not relevant for vouching cash sales?
A. Daily cash sales summary
B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement
126. To test whether sales have been recorded, the auditor should draw a sample from a file
of__________?
A. purchase orders
B. sales orders
C. sales invoices
D. bill of loading
127. If the book value of an asset stands at________per cent of the original cost, a company need not
provide depreciation on it.
A. two
B. fifteen
C. five
D. ten
128. Which of the following expenses should not be treated as capital expenditure?
A. Expenses paid on installation of a plant.
B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent.
D. The fees paid to engineer who constructed the plant.
129. Who is responsible for the appointment of statutory auditor of a limited company ?
A. Directors of the company
B. Members of the company
C. The Central Government
D. All of the above
130. The board of directors shall appoint first auditor of a company
A. With in one month of completion of capital subscription state of the company
B. With in one month of the promotion of the company
C. With in one month of the commencement of the business of the company
D. With in one month of incorporation of the company
131. The term of the auditor ship of first auditor would be from the date of appointment till________?
A. the conclusion of statutory meeting
B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal
132. In case the directions fail to appoint first auditor (s), the shareholders shall appoint them
at_________by passing a resolution.
A. a general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting
133. If a casual vacancy in the office of auditor arises by his resignation it should only be filled by the
company in a_________?
A. Board meeting
B. extraordinary general meeting
C. General meeting
D. annual general meeting
134. The authority to remove the first auditor before the expiry of term is with__________?
A. the shareholders in a general meeting
B. the shareholders in the first annual General meeting
C. the board of directors
D. the Central Government
135. Who out of the following cannot be appointed as a statutory auditor of the company?
A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.
136. A statutory auditor has a right of access at all times to___________?
A. Books and accounts of a company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company
137. Which of the following is not a corroborative evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
138. Which of the following affects audit effectiveness?
A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A. and C.
139. Which of the following statements is not true with respect to management representations obtained
as per AAS11?
A. Authenticated copy of relevant minutes of meetings may be regarded as management representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor
140. What would most appropriately describe the risk of incorrect rejection in terms of substantive
testing?
A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
141. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit
testing?
A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
142. Which of the following factors is most important in determining the appropriations of audit
evidence?
A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
143. Which of the following is not a revenue expense?
A. Cost of raising a loan
B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship
144. Depreciation does not arise form _______
A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation
145. Which of the following will not lead to creation of secret reserve?
A. Undervaluation of closing stock
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required
146. Which of the following is a revenue reserve?
A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
147. The basic assumption underlying the use of analytical procedures is:____________?
A. It helps the auditor to study relationship among elements of financial information
B. Relationship among data exist and continue in the absence of known condition to the contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.
148. What are analytical procedures?
A. Substantive tests designed to assess control risk
B. Substantive tests designed to evaluate the validity of management’s representation letter
C. Substantive tests designed to study relationships between financial and nonfinancial
D. All of the above
149. 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
150. When applying analytical procedures, an auditor could develop independent estimate of an account
balance to compare it to___________?
A. client’s unedited account balance
B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry
151. 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
152. Of the following, which is the least persuasive type of audit evidence?
A. Bank statements obtained from the client
B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor
153. In an audit of financial statements, substantive tests are audit procedures that___________?
A. may be eliminated for an account balance under certain conditions
B. are designed to discover significant subsequent events
C. will increase proportionately when the auditor decreases the assessed level of control risk
D. may be test of transactions, test of balance and analytical procedures
154. The nature, timing and extent of substantive procedures is _________ related to assessed level of
control risk?
A. randomly
B. disproportionately
C. directly
D. inversely
155. Which of the following statements is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
156. When is evidential matter, generally, considered sufficient?
A. When it constitutes entire population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
 

157. Depreciation in spirit is similar to?

A. Depletion
B. Amortization
C. Depression
D. None of these
158. Funds Flow Statement and sources and application statement are
A. Synonymous
B. Antagonistic
C. Bookkeeping
D. None of these
159. Balance Sheet is always prepared
A. For the year ended
B. As on a specified date
C. Mid of year
D. None of these
160. Quick Ratio can be computed as under
A.Quick . Assets/Quick Liabilities
B.Quick . Liabilities/Current Assets
C. Current Assets/ Current Liabilities
D. None of these
161. Deferred Taxation is
A. Part of owners equity
B. Fixed asset
C. Fixed liabilities
D. None of these
162. Operating Profit is:
A. Profit after deducting financial costs
B. Profit after deducting normal operating expenses including depreciation
C. Profit after deducting taxes
D. None of these
163. A good Cost Accounting System is
A. If it enables management to increase productivity and rationalize cost structure
B. If it computes estimated cost only
C. If it cannot be reconciled with financial accounts
D. None of these
164. Stratified audit sample means
A. Purposively selected items for audit
B. Randomly selected items for audit
C. Items carefully selected from each group
D. None of these
165. Audit of a bank is generally conducted through
A. Routine checking
B. Couching
C. Balance sheet audit
D. None of these
166. An auditor is liable for his annual audit of accounts of
A. Creditors
B. Bankers
C. Debtors
D. Owners
167. Combination can be best described as
A. Restructuring of capital of a company
B. Reduction of capital of a company
C. Amount Receivable
D. Amalgamation of two different types of businesses
168. Books of original entry are called
A. Ledger
B. Work sheets
C. Journal
D. All of the above
169. For preparing balance sheets prepaid expenses are shown as part of
A. Liability
B. Equities
C. Assets
D. None of these
170. Unpaid and unrecorded expenses are called
A. Accrued expenses
B. Prepaid expenses
C. Additional expenses
D. None of these
171. Under the diminishing balance method, depreciation amount is
A. Payment
B. Receipt
C. Expenditure
D. None of these
172. Users of accounting information include
A. The tax authorities
B. Investors
C. Creditors
D. All of these
173. The business form(s) in which the owner(s) is (are) personally liable is (are) the:
A. Partnership
B. Proprietorship
C. Corporation
D. Partnership and proprietorship
174. The investment of personal assets by the owner
A. Increases total assets and increases owner’s equity
B. Increases total assets only
C. Has no effect on assets but increases owner’s equity
D. Increase assets and liabilities
175. Economic resources of a business that are expected to be of benefit in the future are referred to as
A. Liabilities
B. Owner’s equity
C. Assets
D. Withdrawals
176. An owner investment of land into the business would
A. Decrease withdrawals
B. Increase owner’s equity
C. Increase liabilities
D. Decrease assets
177. A cash purchase of supplies would
A. Decrease owner’s equity
B. Increase liabilities
C. Have no effect on total assets
D. None of these
178. Quick assets include which of the following
A. Cash
B. Accounts Receivable
C. Inventories
D. Only (a) and (b)
179. Net income plus operating expenses is equal to
A. Net sales
B. Cost of goods available for sale
C. Cost of goods sold
D. Gross profit
180. The measurable value of an alternative use of resources is referred to as
A. An opportunity cost
B. An imputed cost
C. A different cost
D. A sunk cost
181. A cost center is
A. A unit of production in relation to which costs are ascertained
B. A location which is responsible for controlling direct costs
C. Any location or department which incurs cost
D. Part of the factory overhead system by which costs are gathered
182. A fixed cost
A. May change in total when such change is not related to changes in production
B. Will not change in total because it is not related to changes in production
C. Is constant per unit for each unit of change in production
D. May change in total, depending on production with the relevant range
183. The time lag between indenting and receiving material is called
A. Lead time
B. Idle time
C. Stock out time
D. None of these
184. Depreciation is based on
A. Economic life of asset
B. Declared life of asset by supplier
C. Normal life of asset
D. None of these
185. Random sampling in auditing means
A. Selection through scientific sampling approach
B. Selection through convenience sampling
C. None of these
186. Acid test is the same as
A. Quick test
B. Liquid test
C. None of these
187. Acid Test Ratio is calculated as under
A. Current Assets/Current Liabilities
B. Fixed Assets/Current Liabilities
C. Liquid Assets/Current Liabilities
D. None of these
188. The stage under which transactions are recorded chronologically in the books of accounts is called
A. Summarizing
B. Classifying
C. Recording
D. None of these
189. Book-keeping is mainly concerned with
A. Recording of a financial data relating to business transactions
B. Designing the systems in recording, classifying, summarizing the recorded data
C. Interpreting the data for internal and external users
D. None of these
190. The discount account is a
A. Personal account
B. Real account
C. Asset account
D. Nominal account
191. Those liabilities which arise only on the happening of some event are called
A. Current liabilities
B. Outstanding liabilities
C. Contingent liabilities
D. Fixed liabilities
192. Marshalling of balance sheet means
A. The ordering of its assets and liabilities
B. The totaling of its assets and liabilities
C. Excess of assets over liabilities
D. None of these
193. Which one of the following is not considered the permanent part of the accounting record
A. Journal
B. Trial Balance
C. Balance sheet
D. Final accounts
194. The provision for discount on creditors is often not provided in keeping with the principle of
A. Materiality
B. Consistency
C. Conservatism
D. Realization
195. The capital receipts are shown in the balance sheet on the
A.Liability
B. Asset side
C. Debit side
D. None of these
196. Error due to wrong allocation as expenditure between capital and revenue is regarded as
A. Error of omission
B. Error of principle
C. Compensation errors
D. None of these
197. Which of the following is least important as a measure of short term liquidity
A.Debtor ratio
B. Current ratio
C. Cash flow from operating activities
D. Quick ratio
198. The cost of goods and services used up in the process of obtaining revenue are called
A. Net income
B. Revenue
C. Liabilities
D. Expenses
E. None of these
199. Which of the following is not an intangible asset?
A. An investment in marketable securities
B. A trademark
C. A patent
D. None of these
200. In projecting the future profitability of a trading company, investors will be least concerned with
changes in
A. The gross profit rate
B. The quick ratio
C. Sales volume
D. None of these
201. which of the following is ascertained by drawing up an income and expenditure account
A. Cash in hand
B.Surplus or Deficiency
C. Capital Fund
D. None of these
202. Identify the item that is likely to serve as source document
A. Trial balance
B. Income statement
C. Balance sheet
D. Invoice from supplier
203. Double entry book-keeping was fathered by:
A.F.W.Taylor
B. Henry Fayol
C. Lucas Pacioli.
204. Audit program is prepared by?
A. Auditor
B. Client
C. Auditor and his audit assistants
D. None of these
205. First auditor is appointed by which authority if directors could not appoint auditor within 120 days
of incorporation
A. Shareholders
B. SECP
C. Directors
D. None of these
206. Different activities that auditor performs to collect audit evidence on which to base auditor opinion
is called
A. Audit procedures
B. Audit sampling
C. Conformation
D. None of these
207. Audit of a bank is generally conducted thorugh
A. Routine checking
B. Couching
C. Balance sheet checking
D. None of these
208. Record of audit objections is maintained in?
A. Objections book
B. Audit inquiry book
C. Audit manual
D. None of these
209. Audit evidence obtains through a direct written response from a third party is called?
A. Inspection
B. Observation
C. Confirmation
D. None of these
210. Auditing is a branch of
A. Natural science
B. Social science
C. Abstract science
D. None of these
211. An auditor is liable for his annual audit of accounts to
A. Creditors
B. Bankers
C. Owners
D. None of these
212. In Insurance, the following Profit and Loss Accounts are prepared:
A. Separate for Fire, Marine, and Accidents etc.
B. Consolidated for Fire, Marine, and Accidents etc.
C. None of these.
213. Partners in Pakistan can today be fixed at the following numbers:
A. 20
B. 50
C. 75.
214. Flexible budget is a budget with the following features:
A. Changes with volume of production.
B. Changes with variable expenses
C. Changes in Direct material.
215. In straight line method of depreciation, the written down value of a fixed asset will be at the end of
the life of the asset as under:
A. Rupee one
B. Rupee zero
C. None of these.
216. Sales budget must be prepared:
A. Independently
B. Depending on production capacity
C. Based on Sales forecasts of market.
217. Consolidation of subsidiary accounts in the balance sheet of a unlisted Holding company is at
present in Pakistan:
A. Compulsory
B. Voluntary
C. Required.
218. Retained earning is synonymous to:
A. Accumulated profit and loss account
B. Profit for the year
C. None of these.
219. The requirements of an audit report for a Banking Company in Pakistan is under:
A. Under the Banking Companies Ordinance, 1962.
B. Under the Companies Ordinance, 1984.
C. Under (a) and (b) above.
220. Investment Corporation of Pakistan follows:
A. Open-end mutual funds
B. Closed-end mutual funds
C. None of these.
221. Directors Report is —- in respect of financial report constituent.
A. Mandatory for a limited Company
B. Voluntary for a limited Company
C. None of these.
222. Every limited Company in Pakistan is required by law to include the following along with financial
reports:
A. Ratio Analysis
B. Chairman’s Review
C. None of these.
223. Cash budget excludes the following:
A. Non-Cash items
B. Cash items
C. Purchase on Credit items.
224. NGOs are legally required to:
A. Prepare accounts in a prescribed manner under the law.
B. Prepare accounts as desired by donors.
C. None of these.
225. Fixed Cost:
A. Changes with production
B. Never changes even if production capacity is doubled
C. None of the above
226. Conversion cost is:
A. Material Cost + Overhead Cost
B. Direct Labour + Material Cost
C. Labour Cost + Overhead Cost
227. Process Costing is relevant to:
A. Cement industry
B. Job Order cost oriented Projects
C. None of the above
228. Verification includes:
A. Checking Vouchers
B. Examining audit report
C. None of the above
229. Internal Control is totally synonymous with:
A. Internal check
B. Internal audit
C. None of above
230. Income Tax is levied on:
A. Agricultural Income
B. Presumptive Income
C. None of above
231. If a firm has paid super-tax, its partners may follow any one of the following behaviours:
A. No need to pay income tax, even if the income exceeds the taxable limit.
B. Pay income tax, even if the income does not exceed the taxable income.
C. Pay income tax as required under the law.
232. A resident multinational company need not:
A. Pay income tax, if it s caused under Double Taxation agreement.
B. If it is not enjoying tax exemption under the Income Tax Ordinance, 1979 (Second Schedule).
C. None of above
233. Income Tax rates are the same for:
A. Limited Companies
B. Banking Companies
C. None of above
234. Super Tax on companies is:
A. In vogue in Pakistan
B. Not in vogue in Pakistan
C. None of above
235. Current Ratio is calculated as:
A. Fixed Assets/Current Liabilities
B. Current Liabilities/Current Assets
C. Current Assets/Current Liabilities
236. Short-term loan can be described as:
A. If the period is three years
B. If the period is less than one year
C. If the period is over one year
237. A partnership, in today’s Pakistan, under the current law can have the following number of
partners:
A. 50
B. 20
C. 100
238. Sources of funds can be increased by:
A. Describing selling prices
B. Increasing expenditure
C. None of above
239. Double Entry Book Keeping was fathered by:
A. Luca Paioli
B.YoyjiIjiri
C.Micheal Hammer
D. Ishikawa
240. Accumulated loss of a company is shown in the balance sheet as:
A. Liability
B. As an asset
C. As foot note to balance sheet
D. None of these
241. Under the Companies Ordinance 1984, disclosure of financial information is legally required for
listed companies under:
A. Schedule 6
B. Schedule 5
C. Schedule 4
D. Schedule 8
242. A company is considered sick under the Companies Ordinance 1984 where current ratio is:
A. Below 0.5 : 1
B. Below 3 : 1
C. Above 2.5 : 1
D. None of these
243. Banks are required to prepare their financial statements as per following legislation:
A. Free to prepare with no legislative requirements
B. Under Companies Ordinance 1984
C. Banking Ordinance 1962
D. State Bank Laws
244. Preparation of financial statement of listed insurance companies in Pakistan is governed by:
A. Insurance Act 1938
B. Insurance Ordinance 2000
C. Companies Act 1913
D. Companies Ordinance 1984
245. Trading loss occurs when:
A. Revenues exceed the matching relevant costs.
B. Revenue and matching costs are equal to each other.
C. When relevant matching cost exceeds revenues
D. None of these
246. Accounting requirements governing NGOs are prescribed in:
A. Partnership Act 1932
B. Cooperative societies legislation
C. Companies Ordinance 1984
D. None of these
247. Work sheet is equivalent to:
A. Balance sheet
B. Income statement
C. Trial Balance
D. None of these
248. Work sheet does include:
A. Fund flows statement
B. Cash gensation statement
C. Cash flow statement
D. None of these
249. Differed tax is shown in the balance sheet as:
A. Liability
B. Asset
C. An expenditure in income statement
D. None of these
250. The following represent tangible assets and are shown in the balance sheet as:
A. People
B. Expenses
C. Revenue
D. Goodwill
251. Under the Rule of thumb a good current ratio is:
A.6 : 1
B.10 : 1
C. .05 : 1
D.2 : 1
252. Financial analysis is a legislative requirement under:
A. Companies Ordinance 1984
B. Partnership Act 1932
C. Voluntary act
D. None of these
253. Pakistan follows the following budgeting system at Federal level:
A. Zero-Based Budgeting
B. Program Budgeting
C. Responsibility Budgeting
D. Incremental / decremental budgeting
254. Preparation of budget by a company is compulsory under:
A. No Law
B. Several laws
C. Securities & Exchange Ordinance 1969
D. Companies Ordinance 1984
255. Depreciation must be accounted for:
A. Revenues
B. Fixed Assets
C. Share Capital
D. None of these
256. Accelerated depreciation is allowed under:
A. Income Tax Ordinance 2001
B. Voluntary principals
C. Prudential Regulations
D. None of these
257. Partnerships are legally required to prepare their financial statements for distribution on wide
basis under:
A. Partnerships Act 1932
B. Securities & Exchange Rules 2000
C. Voluntary Act for Compliance
D. None of these
258. A company is considered sick if the market value compared to its par value is:
A.1 : 1
B.2 : 1
C.0.25 : 1
D. None of these
259. While vouching wages, auditor should examine whether there is proper segregation of duties.
Which of the following activities should not be done by same department?
A. Maintaining personnel records and approving changing in wages rates
B. Proposing pay roll summary and disbursement of wages
C. Making salary statements and filing tax returns
D. Comparing time clock records with time reports prepared by supervisors and preparing list of workers
employed along with the units of production for each one of them
260. A sale of ₹ 30.000 to A was entered as a sale to B. This is an example of _
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
261. ‘Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example of _
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
262. As per AAS4 if auditor detects an error then–
A. He should inform the management.
B. He should communicate it to the management if it is material
C. The auditor should ensure financial statements are adjusted for detected errors.
D. Both (b) and (c)
263. While vouching, how will the auditor ensure himself that all credit sales transactions have been
recorded by the entity?
A. Examining cutoff points
B. Matching entries in the sales book against renumbered sales invoices and goods outward notes
C. Counting the number of invoices and matching the number with entries on sales book
D. Both (a) and (b)
264. How many principles are listed in AAS1 which govern auditor’s professional obligation?
A. Nine
B. Fourteen
C. Seven
D. Eight
265. Both auditing and accounting are concerned with financial statements. Which of the following
A. Auditing uses the theory of evidence to verify the financial information made available by Accountancy
B. Auditing lends credibility dimension and quality dimension to the financial statements prepared by
the accountant.
C. Auditor should have through knowledge of accounting concepts and convention to enable him to express an
opinion on financial statements
D. All of the above.
266. The risk of management fraud increases in the presence of :
A. Frequent changes in supplies
B. Improved internal control system
C. Substantial increases in sales
D. Management incentive system based on sales done in a quarter
267. Auditing standards differ from audit procedures in that procedures relate to
A. Audit assumptions
B. acts to be performed
C. quality criterion
D. methods of work(d) Rs.19.00
268. Which of the following factors likely to be identified as a fraud factor by the auditor?
A. The company is planning a initial public offer of quality shares to raise additional capital for
expansion.
B. Bank reconciliation statement includes deposits in transit.
C. Plant and machinery is sold at a loss.
D. The company has made political contributions.
269. The most difficult type of misstatement to detect fraud is based on:
A. Related party purchases
B. Related party sales
C. The restatement of sales
D. Omission of a sales transaction from being recorded.
270.An auditor obtains knowledge about a new client’s business and its industry to
A. Make constructive suggestions concerning improvements to the client’s internal control system.
B. Evaluate the appropriateness of audit evidence obtained
C. Understand the events and transactions that may have an effect on client’s financial statements.
271. Which of the following statements is correct concerning the required documentation in working
papers of fraud risk assessment undertaken by the auditor?
A. All risk factors as mentioned in AAS4, should be considered and documented along with response to them.
B. Document the identification of fraud risk factors along with response to them.
C. Document material fraud, risk factors and response to them.
D. No documentation in required.
272. Which of the following is not a quality control consideration on accepting a new client?
A. Availability of audit assistants with necessary skill and competence.
B. Provision of other services to the client which may impair independence
C. Predecessor auditor’s advice as to whether audit fees were paid promptly
D. Review of audit work done by one partner by the other
273. The use of an audit engagement letter is the best method of assuring the auditor will have which of
the following?
A. Auditor will obtain sufficient appropriate audit evidence.
B. Management representation letter
C. Access to all books, accounts and vouchers required for audit purpose
D. Cooperation from other auditors
274. An auditor who accepts an audit but does not possess the industry expertise of the business entity
should
A. engage experts
B. obtain knowledge of matters that relate to the nature of entity’s business
C. inform management about it
D. take help of other auditors
275. The least important element in the evaluation of an audit firm’s system of quality control would
relate to
A. assignment of audit assistants
B. The system of determining audit fees
C. consultation with experts
D. confidentiality of client’s information
276. The primary purpose of establishing quality control policies and procedures for deciding on client
evaluation is to
A. ensure adherence to generally accepted auditing standards
B. acceptance or retention of clients whose management does not lack integrity
C. ensure audit fees is charged according to the type of audit work assigned
D. all of the above
277. Which of the following is the most appropriate potential reaction of the auditor to his assessment
that the risk of material misstatement due to fraud is high in relation to existence of inventory?
A. Visit location on surprise basis to observe test counts
B. Request inventory count at a date close to yearend
C. Vouch goods sent on approval very carefully
D. Perform analytical procedures.
278. Which of the following is not likely to be a fraud risk factor relating to management’s
characteristics
A. Tax evasion
B. Failure to correct known weakness in internal control system
C. Adoption of conservative accounting principles
D. High management turnover
279. Professional skepticism requires that the auditor assume that management is
A. reasonably honest
B. Neither honest nor dishonest
C. Not necessarily honest
D. Dishonest unless proved otherwise
280. The audit engagement letter, generally, should include a reference to each of the following except
A. limitations of auditing
B. responsibilities of management with respect to audit work
C. expectation of receiving a written management representation letter.
D. a description of the auditor’s method of sample selection.
281. Which of the following is not a limitation of audit as per AAS4?
A. Objectivity of auditor’s judgment
B. Selective testing
C. Persuasiveness of evidence
D. Limitations of internal control system.
282. Which of the title of AAS2 issued by Council of ICAI ___
A. Objective and Scope of the Financial Statements
B. Objective and Scope of the Audit of Financial Statements
C. Objective and Scope of Business of an Entity
D. Objective and Scope of Financial Statements Audit
283. Management auditor should have a thorough knowledge of
A. Financial Accounting
B. Production techniques
C. Costing systems
D. All of the above
284. A management auditor can recommend the most suitable system of flow of information _______.
A. Internally
B. Externally
C. Internally and externally
D. None of the above
285. Management auditor should be conversant with the nature of production activities in organization.
A. True
B. False
286. Management auditor should be well versed with
A. Management by exception
B. Management by objectives
C. Principles of delegation of authority
D. All of the above
287. Which of the following statements are true about management audit?
A. The management audit is made compulsory and statutory
B. Management audit is a programme of one year
C. Management audit cannot be conducted by an independent person
D. No time limit can be fixed for submission of the report under management audit
288. Cost audit is a verification of cost records to estimate the ________ efficiency of a business.
A. External
B. Internal
C. Both internal and external
D. None of the above
289. The management auditor’s work begins
A. After the work of a statutory auditor ends
B. Before the work of a statutory auditor begins
C. Varies from firm to firm
D. None of the above
290. Management auditing is a part of statutory auditing.
A. True
B. False
291. Management audit is useful for
A. Suggestion for targets
B. Assistance to management
C. Good staff relationship
D. All of the above
292. As per Leslie R. Howard, Management audit is an investigation of a business from the __________
in order to ascertain whether sound management prevails throughout.
A. Highest level downwards
B. Lowest level upwards
C. Either a or b
D. None of the above
293. Which of the following is not a kind of audit?
A. Statutory and private audit.
B. Government and continuous audit.
C. Continuous, final, Interim, Cash, Cost and Management audit.
D. None of these.
294. An audit which is compulsory by the law __________.
A. Government audit.
B. Internal audit.
C. Cost audit.
D. Statutory audit.
295. Audit done by the employees of the business undertaking is called _______.
A. final audit.
B. management audit.
C. government audit.
D. government audit.
296. Which one is not correct regarding Performance Audit?
A. These guidelines are prescriptive in nature.
B. These are intended to supersede the professional judgement of the Accountant General, relevant to
the individual sectors of entity operations and within each sector, to the individual subjects.
C. The Accountant General is expected to make situation or subject specific adjustments to the provisions set
out in these guidelines.
D. However, Accountants General will be expected to document the rationale of all significant departures from
the guidelines and obtain authorisation from the competent authority.
297. Performance audit is an independent assessment or examination of the extent to which an
organisation, programme or scheme operates economically, efficiently and effectively.
Which Regulation of Regulations on Audit and Accounts, 2007 is quoted above?
A. 48
B. 58
C. 68
D. 78 [SAS Mains 2018]
298. Which is not among the 3 Es in Performance Audit?
A. economy
B. enthusiasm
C. efficiency
D. effectiveness
299. Minimising the cost of resources used by acquiring them in due time, appropriate quantity and
quality and at the best price is _
A. economy
B. efficiency
C. effectiveness
D. None of the above
300. What determines the relationship between resources employed and outputs delivered; in terms of
quantity, quality and timing?
A. economy
B. efficiency
C. effectiveness
D. None of the above
301. _ is meeting the objectives set and achieving the intended results.
A. economy
B. efficiency
C. effectiveness
D. None of the above
302. Find the incorrect.
A. Effectiveness is essentially a goal-attainment concept.
B. When focusing on effectiveness, it is important to distinguish between the immediate outputs or products
and the ultimate impacts or outcomes.
C. Outcomes will often be influenced by external factors and may require short-term rather than long
term assessment.
D. Performance Audit assess and establish with evidence whether the observed direct or indirect social and
economic impacts of a policy are due to the policy or to other causes.
E. Performance Audit assess whether the programme complements, duplicates, overlaps or counteracts other
related programmes.
303. By imposing the question- ‘Are things being done in the right way?’, performance auditing is
mainly concerned with aspects of-
A. economy
B. efficiency
C. effectiveness
D. A or B
304. By imposing the question- ‘Are the right things being done?’, performance auditing is mainly
concerned with aspects of-
A. economy
B. efficiency
C. effectiveness
D. A or B
305. Which one is not correct?
A. The performance auditor needs to examine whether the means chosen represent the most or at least a
reasonable economical use of public funds.
B. It questions the intentions and decisions of the legislature, but examines whether any shortcomings in
the laws and regulations or their way of implementation have prevented the specified objectives from
being achieved.
C. The performance auditor is not normally expected to provide an overall opinion on the achievement of
economy, efficiency and effectiveness on the level of the audited entity in the same way as the opinion on
financial statements.
D. Performance auditing is a means to an end and not an end by itself.
E. Performance audit should be aimed at adding value to the Management by way of reliable, objective and
independent information, highlighting the shortcomings in programme planning, implementation, information
systems affecting the outputs and outcome specifically and quality of expenditure or management generally.
306. Audit objectives could be-
A. descriptive (How are the things?)
B. normative (are things as they ought to be?)
C. analytical (why are things not as they ought to be?)
D. All of the above
307. Performance auditing generally follows one of three approaches-
A. system-oriented approach
B. result-oriented approach
C. problem-oriented approach
D. All of the above
308. What examines the proper functioning of management systems, e.g. financial management systems?
A. system-oriented approach
B. result-oriented approach
C. problem-oriented approach
D. All of the above
309. Which assesses whether outcome or output objectives have been achieved as intended or
programmes and services are operating as intended?
A. system-oriented approach
B. result-oriented approach
C. problem-oriented approach
D. All of the above
310. Which examines, verifies and analyses the causes of particular problems or deviations from
criteria?
A. system-oriented approach
B. result-oriented approach
C. problem-oriented approach
D. All of the above
311. In a __ performance audit, the starting point is a known or suspected deviation from what should
or could be.
A. system-oriented approach
B. result-oriented approach
C. problem-oriented approach
D. All of the above
312. Find the incorrect one.
A. Audits can be pursued from a top-down or bottom-up perspective.
B. Top-down audits concentrate mainly on the requirements, intentions, objectives and expectations of the
legislature and central government.
C. A bottom-up perspective focuses on problems of significance to people and the community.
D. None of the above
313. What are the reasons why a regular communication is of particular importance in performance
audit?
A. As performance audits are not normally conducted on a regular (e.g. annual) basis on the same audited
entities, channels of communication may not already exist. While there may be contacts with the legislature
and government bodies, other groups (such as academic and business communities or civil society
organisations) may not have been engaged with previously.
B. Often there are no predefined criteria (such as a financial reporting framework), and therefore an intensive
exchange of views with the audited entity is necessary.
C. An active effort is required to obtain insight into the points of view of the various stakeholders to bring out
a balanced report.
D. All of the above
314. Which is not correct about Strategic Audit planning?
A. Strategic Audit planning is the process of determining the goals for the Department and the best approach
for attaining them.
B. The goals should be long term.
C. The goals may be long as well as short term.
D. The field audit offices are also required to prepare their audit plans with reference to the Department’s
strategic audit plan.
315. The Department’s Senior Management may conduct brainstorming meetings with Accountants
General from time to time in respect of strategic audit and annual audit plans to select the subjects
which address the Department’s concerns for high risk programmes and activities. Senior Management
comprises-
A. C&AG of India, Deputy C&AG and Additional Deputy C&AG.
B. C&AG of India and Deputy C&AG.
C. Deputy C&AG and Additional Deputy C&AG.
D. C&AG
316. _ of a subject is an assessment of the interest it generates in the general public and the legislature.
A. Materiality
B. Significance
C. Visibility
D. Scope
317. Before implementing the performance audit, it is important to identify the audit objectives, the
scope and the methodology to achieve the objectives of a particular performance audit. This is often
done in the form of-
A. Pilot study
B. Preparation of Audit Design Matrix
C. Determining audit criteria
D. Planning individual performance audits
318. Find the incorrect one regarding Pilot Study?
A. The purpose of this study is to establish whether the conditions for carrying out a performance audit exist
and, if they do exist, to produce an audit proposal.
B. It provides background knowledge and information needed to understand the entity, program, or function.
C. At the end of the study, it may be clearly stated whether performance audit is feasible or not.
D. Pilot study should normally be carried out in a fairly long period.
319. The most important stage in the performance audit process is-
A. Defining the audit objectives
B. Determining audit criteria
C. Deciding audit approach
D. Developing audit questions
320. Which criteria are free from any bias of the auditor or management?
A. Reliability
B. Objectivity
C. Comparability
D. Completeness
321. Find the correct one about Audit Design Matrix (ADM).
A. The Audit Design Matrix is prepared on the basis of information and knowledge obtained in the planning
phase during the course of pilot study.
B. Audit teams are encouraged to update the Audit Design Matrix as and when it acquires more in-depth
knowledge of the audit subject matter.
C. A well-designed Audit Design Matrix leads to efficient planning and resultant effective audits thereby
providing highest assurances to the audited entities and those charged with governance.
D. It is desirable to prepare ADM for each of the audit objectives.
E. All of the above.
322. Find the correct one about Audit Findings Matrix (AFM).
A. The audit teams are encouraged to prepare an Audit Findings Matrix indicating the audit findings vis-à-vis
good practices and the potential audit recommendation along with the expected benefits in case the
recommendation is implemented.
B. It is meant to provide a link between the audit objectives, criteria, the audit observation and the
recommendations emerging there from.
C. The audit teams should link the Audit Findings Matrix with Audit Design Matrix and highlight the Para
number as well as chapter number of the draft report against each of the audit objective where the observations
are reported.
D. All of the above.
323. Audit findings are the specific evidence gathered by the auditor to satisfy the audit objectives. Audit
findings contain four elements.
A. criteria (‘what should be’)
B. condition (‘what is’)
C. effect (‘what are the consequences’ – observed as well as ‘reasonable and logical future impact’)
D. cause (‘why is there a deviation from norms or criteria’)
E. All of the above.
324. Evidence should be obtained to support the auditor’s judgment and conclusions regarding the
organisation, programme, activity or function under audit. Which one is not a basic evidence?
A. Competence
B. Reliable
C. Relevant
D. Reasonable
325. Evidence is _ when it is valid and reliable and actually represents what it purports to represent.
A. Competent
B. Reliable
C. Relevant
D. Reasonable
326. _ is measure of quality of audit evidence.
A. Competence
B. Reliability
C. Relevance
D. Reasonableness
327. The minutes of exit conference should be recorded and endorsed to the entity with a request to
acknowledge the minutes within stating that in case of non receipt of acknowledgement with in
stipulated period, it will be presumed that audited entity concurs with the minutes.
A. two weeks
B. three weeks
C. four weeks
D. six weeks
328. Find the incorrect statement.
A. While third parties may not generally be the audited entities, their activities affect the program and service
delivery, and audit reports often include commentary about their responsibilities and performance.
B. Auditors should not communicate to third parties, neither in writing nor orally any information they obtain
in the course of audit work, except where doing so is necessary to discharge the statutory or otherwise
prescribed responsibilities.
C. In case any information is required from third parties, audited entity would requisition the same from the
third party and provide to Audit. Further, where role of identified third parties is considered very significant to
the audit conclusions and recommendations, the audited entities may be encouraged to bring out the concerns
of those parties in their replies to audit.
D. None of the above.
329. The audit report is __ if the results of audit are presented persuasively and the conclusions and
recommendations follow logically from the facts presented.
A. Objective
B. Convincing
C. Consistent
D. Constructive
330. _______of audit report is ensured through fair conclusions and balanced content and tone.
A. Objectivity
B. Convincing ability
C. Consistency
D. Constructiveness
331. __ of the report is secured by ensuring that it does not contain contradictory findings or conclusions
in similar contexts or the conclusions on the same segment in different sections or parts of the report are
not incompatible.
A. Objectivity
B. Convincing ability
C. Consistency
D. Constructiveness
332. The report is __ if it manifests a remedial approach rather than a critical approach and includes
appropriate recommendations.
A. Objective
B. Convincing
C. Consistent
D. Constructive
333. A report is __ if it does not focus on criticism alone but contains fair assessment or evaluation,
which would mean that good performance should also be reported.
A. Objective
B. Balanced
C. Consistent
D. Convincing
334. All the performance Audits should ideally be completed within a period of __. 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.
A. 6 months
B. 9 months
C. 10 months
D. 12 months
335. The follow up or evaluation of Performance audits can be performed by-
A. carrying out a desk review, which involves more detailed review of the implementation of the
recommendations, including meeting, discussions and presentations, but does not necessarily comprise
extensive field work
B. detailed follow-up review consisting of comprehensive field work in relation to the action taken by the
entity on Audit’s recommendations with the objective of preparing a report to the legislature.
C. A & B
D. None of A & B
336. What is desk review?
A. detailed follow-up review consisting of comprehensive field work in relation to the action taken by the
entity on Audit’s recommendations with the objective of preparing a report to the legislature.
B. more detailed review of the implementation of the recommendations, including meeting, discussions
and presentations, but does not necessarily comprise extensive field work.
C. Only a sample of completed audit engagements should be selected for review by the group. Once the audits
are selected, the quality review team may review the audit documentation and meet some of the staff members
who worked on those engagements.
D. performed by an independent team which may be internal or external to the Department to evaluate whether
an organization’s internal quality control system is suitably designed and operating effectively to provide the
entity with reasonable assurance that established policies, procedures and applicable government auditing
standards were being followed.
337. This kind of audit is conducted generally between two annual audit ______.
A. internal audit.
B. interim audit.
C. final audit.
D. continuous audit.
338. Management audit otherwise called as _______.
A. final audit.
B. efficiency audit.
C. cost audit.
D. cash audit.
339. Before the work of audit is commenced, the auditor plans out the whole of audit work is called
_________.
A. Audit plan.
B. Audit note.
C. Audit programme.
D. Audit programme.
340. A number of checks and controls exercised in a business to ensure its efficient working is known
as________.
A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
341. A Voucher is a _______.
A. document is support of an entry made in books of accounts.
B. invoice received from suppliers.
C. receipt issued to a customer for cash.
D. despatch receipt.
342. Voucher relates to _________.
A. cash receipt.
B. cash payment.
C. credit transactions.
D. all the above.
343. Internal check is meant for ___________.
A. prevention of frauds.
B. detection of frauds.
C. helping audit is depth.
D. detection of errors.
344. Internal auditor is appointed by ________.
A. the management.
B. the shareholders
C. the government.
D. he statutory body.
345. Auditing begins where ______ ends.
A. Selling.
B. inventory valuation.
C. Accounting.
D. Purchases.
346. A kind of audit conducted for a part of the accounting year is called _______.
A. Periodical audit.
B. Partial audit.
C. Cost audit.
D. Interim audit.
347. For which of the following, Audit is optional?
A. Trusts.
B. Joint stock companies.
C. Proprietorship concern.
D. None of the above.
348. Providing more or less depreciation on assets is an example of ______.
A. Misappropriation of cash.
B. Misappropriation of goods.
C. Misappropriation of accounts.
D. None of the above.
349. The audit that is made compulsory under statute is called _________.
A. Statutory audit.
B. Partial audit.
C. Complete audit.
D. Continuous audit.
350. The receipt of goods must be entered in _________.
A. goods inward book.
B. goods outward book
C. receipt of Stores.
D. receipt issue and balance of stores
351. Who among the following can be appointed as auditor of a company?
A. A partner or a director of the company.
B. A person of unsound mind.
C. Mr. Y who owes Rs. 500 to the company.
D. Mr. Z the holder of C.A certificate.
352. Auditing standards differ from auditing procedures in that procedures relate to ________.
A. Measure of performance.
B. Audit principles.
C. Acts to be performed.
D. Audit judgments.
353. Confirmation of the court is necessary for __________.
A. increasing the share capital.
B. reduction of share capital.
C. conversion of shares into stock.
D. issue of new shares.
354. Profit prior to incorporation may be utilized to ___________.
A. write of goodwill
B. pay interest on purchase consideration
C. writing off fixed assets.
D. all the above.
355. Audit means ___________.
A. recording business transactions.
B. preparing the final accounts.
C. examination of books, accounts, vouchers etc.
D. preparing final accounts.
356. Auditor shall report on the accounts examined by him __________.
A. to the shareholders.
B. to the court.
C. to the bank.
D. to the general public.
357. Purchase of machinery is a ____________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
358. Sale of land is a __________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
359. Shares are forfeited on the non-payment of ____________.
A. share calls amount.
B. calls in advance.
C. minimum share capital.
D. debenture amount.
360. Prospectus is a document _________.
A. containing the rules and regulations of the company.
B. containing details about the manufacturing process of the company.
C. containing details about the share capital of the company.
D. containing the information of the sales.
361. Secret reserve can be created by _______________.
A. public limited company only.
B. banking and financial companies only.
C. private limited company only.
D. co-operative societies
362. General reserve is __________.
A. an appropriation from the profit.
B. a must item in the debit side of the P&L account.
C. an appropriation from the share capital.
D. important item in the balance sheet.
363. When a transaction has not been recorded in the books of account either wholly or partially such
errors are
called as _________.
A. Error of commission.
B. Error of omission.
C. Compensating error.
D. Error of principle.
364. Verification of the value of assets, liabilities, the balance of reserves, provision and the amount of
profit earned or loss suffered a firm is called _________.
A. Continuous audit.
B. Balance sheet audit.
C. Interim audit.
D. Partial audit.
365. Alterations and heavy repairs to plant etc., is _____________.
A. Deferred revenue expenditure.
B. Capital expenditure.
C. Revenue expenditure.
D. Petty expenses.
366. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example of:
A. Error of omission.
B. Error of commission.
C. Compensating error.
D. Error of principle.
367. Recording a transaction twice in the books of original entry is an error of __________.
A. Principle.
B. Commission.
C. Duplication.
D. Omission.
368. Errors and frauds already committed can be discovered under the system of ________.
A. Internal audit.
B. Internal check.
C. Internal control.
D. All of the above.
369. Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud
B. misappropriation of cash.
C. misappropriation of goods.
D. manipulation of accounts.
370. Vouching of the balances of all incomes and expenses account is known as vouching of ______.
A. Personal ledger.
B. Impersonal ledger.
C. Cash.
D. Sales.
371. Stock in trade is valued _________.
A. at cost price.
B. at market price.
C. at cost price or market price whichever is less.
D. at cost price less depreciation.
372. Goods sent on an approval basis have been recorded as credit sales. This is an example of:
A. Error of principle.
B. Error of commission.
C. Error of omission.
D. Error of duplication.
373. Preliminary expenses are the best example for _________.
A. fictitious asset.
B. intangible asset.
C. wasting asset.
D. floating asset.
374. The profits that can be legally distributed to shareholders are called _________.
A. Revenue profits.
B. Capital profits.
C. Divisible profits.
D. Profits prior to incorporation.
375. Errors of principle are due to ___________.
A. Wrong entry of the transaction in the books of original entry.
B. Wrong allocation of expenditure between capital and revenue.
C. Mistake in the payment of a commission.
D. Mistake in the payment of salary.
376. Periodical audit is also called as _________.
A. Final audit.
B. Interim audit.
C. Balance sheet audit.
D. Income statement audit.
377. An audit programme is ___________.
A. a description, memorandum or an outline of the work to be done in a business.
B. the rules and regulations prescribed for writing up the books of accounts.
C. to gain knowledge of clients accounting system.
D. a trial work.
378. The auditor of a government company shall be appointed by ________.
A. the government company itself.
B. the central government.
C. the share holders.
D. the debenture holders.
379. An auditor of a company will be held liable under the companies act _________.
A. if the destroys, mutilates, secrets etc., any documents, vouchers, books etc., with a view to deceive any
person.
B. if he has examined all the documents of the company.
C. if he has not contravened the provisions of sec.227.
D. if he is an auditor of the company.
380. The main object of the audit of the cash book may be ________.
A. to verify the assets and liabilities.
B. to know that all receipts and payments have been properly recorded.
C. to check the internal control system in business.
D. to check the bank balance.
381. The purpose of the audit of wage payment is to determine that __________.
A. the work is executed completely for which the workers are paid wages.
B. the workers are paid the correct amount of wages under proper authorization.
C. the workers are working regularly.
D. none of the above.
382. One of the audit procedures to check the issue of share capital of the newly formed company
is__________.
A. the memorandum of association and articles of association.
B. the share transfer register.
C. the issue of debenture.
D. none of the above.
383. Capital reserves are created out of profits of __________.
A. a revenue nature.
B. a capital nature.
C. a secret reserve.
D. contingency reserve.
384. A good audit report must at least meet one of the following qualifications __________.
A. it should offer constructive and timely suggestions to the management.
B. it should not point out mistakes.
C. it should not be based on factual information.
D. it should not be based on balance sheet.
385. The work of one clerk is automatically check by another clerk is called _________.
A. Internal control.
B. Internal check.
C. Internal audit.
D. None of the above.
386. The owners of the company are called __________.
A. Debenture holders.
B. Debtors.
C. Shareholders.
D. None of the above.
387. Verification is __________.
A. the art of recording the business transaction.
B. an examination of the books of accounts.
C. the act of establishing the accuracy of entries in the books of accounts.
D. none of the above.
388. Depreciation is _________.
A. the decrease in the value of an asset.
B. the increase in the value of an asset.
C. an appreciation to the company.
D. a credit to shareholders.
389. The main objects of investigation is _________.
A. to discover errors and frauds.
B. to prevent errors and frauds.
C. to verify statements.
D. all the above.
390. Internal controls and internal check are ____________.
A. one and the same.
B. different.
C. internal control includes internal check.
D. None of the above.
391. Share may be issued _____________.
A. at par.
B. at premium.
C. at discount.
D. all the above.
392. The liabilities of an auditor can be _________.
A. Civil.
B. Criminal.
C. Civil and Criminal.
D. Official.
393. Balance sheet audit included verification of ________.
A. assets.
B. liabilities.
C. income and expenditure accounts where appropriate.
D. all of the above.
394. Special audit is necessary for _________.
A. inefficient concern.
B. processing concern.
C. trading concern.
D. manufacturing concern.
395. The first auditors appointed hold office ____________.
A. for a period of one year.
B. for a period of two years.
C. for a period of three years.
D. till the conclusion of the first annual general meeting.
396.Audit of company account is _____________.
A. compulsory.
B. unnecessary.
C. avoidable.
D. depends upon directors.
397. The companys auditor is expected to give _____________.
A. his expert opinion about the accounts.
B. a factual position about the accounts.
C. a critical review of the accounts.
D. financial assistance.
398. Internal auditor of a company must be _______________.
A. Cost accountant.
B. Chartered accountant.
C. ICWA.
D. need not possess any professional qualification.
399. Auditors of a joint stock company are appointed by ______________.
A. directors of the company.
B. annual general meeting.
C. election at the annual general meeting.
D. debenture holders.
400. A company auditor can be removed by _________________.
A. board of directors.
B. managing director.
C. any director.
D. general meeting.
401. A vacancy caused by resignation of an auditor is filled by _________.
A. board of directors.
B. managing director.
C. general meeting.
D. central government.
402. Cost audit under section 233(b) of the companies act is ___________.
A. voluntary.
B. compulsory.
C. advisable.
D. avoidable.
403. Duties of a company auditor are defined by __________.
A. Memorandum of Association.
B. Articles of Association.
C. Companies Act 1956.
D. Agreement between company and the auditor.
404. When at an annual general meeting of a company no auditor is appointed or reappointed. In that
case________.
A. the central government appoints a person to fill the vacancy.
B. the board of directors appoints a person to fill the vacancy.C. the managing director of the company
appoints a person to fill the vacancy.
D. none of these can appoint a person to fill the vacancy.
405. Audit in depth means __________.
A. audit of each and every item.
B. intensive audit of each and every item.
C. intensive audit of a few items.
D. audit of a few selected items.
406. When a company engages a Chartered Accountant as its internal auditor, the external
auditor_____________.
A. need not check the areas covered by internal audit.
B. should ignore the existence of internal audit.
C. should incorporate the internal auditors report with his own.
D. should examine the system and efficiency of internal audit and devise a suitable audit programme.
407. Which of the following statements is not true about the 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.
408. Which of the following is not a fact of EPA?
A. Economic audit.
B. Efficiency audit.
C. Expenditure audit.
D. Effectiveness audit.
409. Which of the following is not likely to be a fraud risk factor relating to management
characteristics?
A. Tax evasion.
B. Failure to correct known weakness in internal control system.
C. Adoption of conservative accounting principles.
D. High management turnover.
410. Balance sheet does not include ___________.
A. verification of assets and liabilities.
B. vouching of income and expense accounts related to assets and liabilities.
C. examination of adjusting and closing entries.
D. routine checks.
411. Which of the following information should a successor auditor obtain during the inquiry of the
predecessor auditor before accepting engagement?
A. Information about integrity of management.
B. Disagreement with management concerning auditing procedures.
C. Review of internal control system.
D. Organization structure.
412. The audit engagement letter generally should include a reference to each of the following
except___________.
A. limitations of auditing
B. responsibilities of management with respect to audit work.
C. expectation of receiving a written management representation letter.
D. a description of the auditors method of sample selection.
413. When issuing an unqualified opinion the auditor who evaluated 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 are less than the materiality level.
C. estimated of the total likely misstatement is more than the materiality level.
D. estimates of the total likely misstatement cannot be made.
414. The use of an audit engagement letter is the best method of documenting ________.
A. The required communication of significant deficiencies in internal control.
B. Significantly higher control risk than that assessed in prior audit.
C. Objective and scope of auditors work.
D. Notification of any changes in the original arrangements of the audit.
415. An auditor who accepts an audit but does not posses the industry expertise of the business entity
should______________.
A. engage experts.
B. obtain knowledge of matters that relate to the nature of entity business.
C. inform management about it.
D. take help of other auditors.
416. The least import element in the evaluation of an audit firm system of quality control would relate
to___________.
A. assignment of audit assistants.
B. system of determining audit fees.
C. consultation with experts.
D. confidentiality of clients information.
417. In determining the level of materiality for an audit what should not be considered?
A. Prior years errors.
B. The auditor remuneration.
C. Adjusted interim financial statement.
D. Prior year financial statements.
418. Which of the following statement is most closely associated with analytical procedure applied at
substantive stage?
A. It helps to study relationship among balance sheet accounts.
B. It helps to discover material misstatements in the financial statements.
C. It helps to identify possible oversights.
D. It helps to accumulate evidence supporting the validity of a specific account balance.
419. Which of the following statement is generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive.
B. Effective internal control system provides reliable audit evidence.
C. Evidence obtained from outside sources routed through the client.
D. All are correct.
420. Which of the following Auditing Assurance Standard deals with Audit planning?
A. AAS-7.
B. AAS-8.
C. AAS-9.
D. AAS-3.
421. Which of the following best describes the primary purpose of audit programmed preparation?
A. To detect errors or fraud.
B. To comply with GAAP.
C. To gather sufficient appropriate evidence.
D. To assess audit risk.
422. The auditor permanent working paper file should not normally, include ________
A. extracts from clients bank statements.
B. past years financial statements.
C. attorney letters.
D. debt agreements.
423. Which of the following sections deals with qualification of the auditor?
A. Section 226(1) and Section 226(2).
B. Section 224(1) and Section 224(2).
C. Section 226(3) and Section 226(4).
D. Section 224(3) and Section 224(4).
424. In case the directions fail to appoint first auditors, the shareholders shall appoint them at _______
by passing a resolution.
A. a general meeting.
B. first annual general meeting.
C. statutory meeting.
D. annual general meeting.
425. Which of the following statement is not true regarding appointment of statutory auditor by the
central government?
A. Such powers have been conferred upon it by section 224(3).
B. If a company fails to appoint an auditor at a general meeting.
C. If an auditor refuses to accept appointment, the powers of the central government can be exercised.
D. Lay man can be appointed as an auditor.
426. The auditor of a government company is appointed by the C & AG. His remuneration is fixed
by_____________.
A. the C & AG.
B. the shareholders.
C. the shareholders at an annual general meeting.
D. the board of directors.
427. The section which contains provisions regarding remuneration of the auditor is _____.
A. Section 224(9).
B. Section 224(7).
C. Section 224(8).
D. Section 224(6).
428. Which of the following statement is not correct regarding removal of first auditor before expiry of
theterm?
A. He is removed at a general meeting.
B. The shareholders are authorized to do so.
C. The approval of the central government is required for such removal.
D. The provision for such removal are contained in section 224(7).
429. The retiring auditor does not have a right to _________.
A. make written representations.
B. get his representation circulated.
C. be heard at the meeting.
D. speak as a member of the company.
430. Auditor of a _______ company does not have right to visit foreign branches of the company.
A. unlimited liability.
B. manufacturing.
C. banking.
D. non-profit making.

431. Special audit is conducted at the order of the central government. Which section givers such
powers?
A. Section 233(A).
B. section 233(B)
C. Section 242(A).
D. Section 242(B).
432. Who among the following can be appointed as special auditor by the central government?
A. The statutory auditor.
B. Chartered accountant in practice.
C. Any chartered accounted who is not in practice.
D. Both (1) and (2).
433. As per C & AG Act, 1971 the tenure of the comptroller and Auditor General is ______ a. four
years.
A. four years.
B. five years.
C. six years.
D. seven years.
434. The part of Government Audit which is concerned with examining whether the money has been
spent for the purpose specified in Appropriation Act is called _____________.
A. audit of sanctions
B. audit of provisions of funds.
C. audit of rules and orders.
D. audit of financial property.
435. Audit of transactions does not include __________.
A. propriety audit.
B. efficiency cum performance audit.
C. audit of receipts.
D. audit of expenditure.
436. The income tax department has sent MR. X refund of Advance tax. The government Auditor
detected this while conducting ____________.
A. audit of expenditure.
B. performance audit.
C. audit of stores and stock.
D. audit of receipts.
437. Audit of rent, deposits and remittances does not cover ____________.
A. audit of borrowings.
B. audit of amortization of debt.
C. Audit of sanctions.
D. remittance audit.
438. Audit reports on PSU are ____________.
A. submitted to the president/governor for being laid before the parliament
B. sent to concerned ministries/departments.
C. submitted to bod of concerned psu.
D. submitted to pwd department.
439. Who among the following is eligible to be appointed as an audit of Government Company?
A. A chartered accountant in practice.
B. A chartered accountant whether in practice or not.
C. An auditor appointed by the A & AG.
D. An unsound mind person.
440. The statutory auditor of a Government Company submits his report to _________.
A. the BOD of the company
B. the C & AG.
C. the legislature.
D. the company secretary.
441. Which of the following statement is not distinguishing feature for computer based processing and
manual processing?
A. Errors in a CIS environment are less systematic as compared to error in manual processing.
B. The potential for human error in the CIS environment is greater as compared to manual system.
C. In a computer based accounting system, audit trail is in electronic form.
D. Computer processing offers management a variety of analytical tools.
442. To avoid invalid data input, a bank added an extra number at the end of each account number and
subjected the new number to an algorithm. This technique is known as _______.
A. Dual read.
B. Test for reasonableness.
C. Check digit.
D. Occurrence of correction.
443. When computer programmed or files can be accessed from terminals, access can be limited to
authorized individuals by __________.
A. appointing a librarian.
B. controlling passwords.
C. appointing EEP auditor.
D. Both (a) and (b).
444. Erroneous data has been detected by computer program controls. It has been excluded from
processing and printed separately Error Report. Who should most probability by review and follow up
on this report?
A. System analyst.
B. Data control group.
C. Programmer.
D. Computer operator.
445. General Controls will be ineffective when EDP Department ___________.
A. participates in computer software acquisition decisions.
B. design documentations for computerized operations.
C. originate changes in master files.
D. provide physical security for programme files.
446. Which of the following activities would most likely be performed by EDP department?
A. Authorizing transactions.
B. Parity checks.
C. Distributing output.
D. Correction of transaction errors.
447. The completeness of wages figure can be tested by comparing the number of time cards to be
processed with transaction on wages sheet. This type of control techniques is called ___________.
A. Check total.
B. Control total.
C. Occurrence correction.
D. Check digit.
448. Which of the following will not affect audit in a CIS environment?
A. The objective of expression of opinion on financial statements.
B. Compliance procedures adopted by the auditor.
C. Performance of substantive procedures.
D. Evaluation of inherent risk and control risk.
449. Which of the following statement is not true of the test data approach in a test of computerized
accounting system?
A. Test data tests only those controls which the auditor wished to rely.
B. Test data should consist of data related to all controls prevalent in the organisation.
C. The result of test data indicates that all the application and general controls are functioning properly.
D. Test data processed by the client computer programmed under the auditors control.
450. who is the custodian authority for audit working papers?
A. Shareholders
B. Auditor
C. Auditee
D. Managing director
451. Working papers are the property of the auditor
A. AAS5
B. AAS4
C. AAS1
D. AAS3
452. In accordance with SA –330, the auditor shall design and perform further audit procedures whose
nature, timing and extent are responsive to the assessed risks of material misstatement due to fraud at.
A .Management Level
B.Assertion level
C.Finalization level
D.All of theabove
453. If we assume in entity under audit that there is no internal control, the risk of fraud or error for
each item of the balance sheet and profit and loss account is known as at assertion level.
A.Control Risk
B.Detection Risk
C.Inherent Risk
D.All of theabove
454.Thereis a relationship between Detection Risk and the combined level of Inherent and control risk
A.Proportionate
B.Inverse
C.Direct
D.Positive
455.Based on the audit procedures performed and the audit evidence obtained, the auditor shall
evaluate before the conclusion of the audit whether the assessments of the risk so fat assertion level
remains appropriate.
A.Detection
B.Control
C.Materialmisstatement
D.Fraud
456.Internal control is a process which is often modified on the basis of suggestions given by Internal
Auditor time to time.
A.Management
B.Continuous
C.Audit
D.Haphazard
457.Surprise checks help the auditor to as certain if the is operating effectively.
A.Internal controlsystem
B.Deficiency controlsystem
C.External controlsystem
D.All of theabove
458.As per sa330 , external confirmation may be used as substantive procedure. Area in which external
confirmation may be obtained are.
A.Amount due to lenders including terms of repayment.
B.Salary paid to employes.
C.Amount transfered to reserve.
D.All of above
459.Substantive procedure comprise of..
A.Test of control and test of details.
B.Risk assessment procedures and test of details
C.Test of details and substantive analytical procedure.
D.None ofabove
460. 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
461. Of the following, which is the least persuasive type of audit evidence?
A. Bank statements obtained from the client
B. Documents obtained by auditor from third parties directly
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor
462. Which of the following statement best describes the understanding with respect to ownership and
custody of working papers prepared by an auditor?
A. The working papers may be obtained by third parties when they appear to be relevant to issues raised in
litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors. The approval of client is
not required
463. Which of the following methods of sample selection is least suitable for extrapolating results to the
population?
A. Systematic sampling
B. Random sampling
C. Haphazard sampling
D. None
464. Risk of under reliance is the risk that the sample selected to test controls___
A. Does not support the auditor’s planned assessed level of control risk when the true operating effectiveness
of the control structure justifies such an assessment
B. Supports the auditor’s planned assessed level of control risk when the actual position does not warrant such
reliance
C. Is not supported by adequate documents
D. both (a) & (c)
465. n case the directions fail to appoint first auditor (s), the shareholders shall appoint them at…..by
passing a resolution
A. a general meeting
B.first annual general meeting
C. statutory meeting
D. annual general meeting
466. ICICI prudential, a life insurance company, holds thirty two percent of subscribed share capital of
Delta Ltd. The statutory auditor of Delta Ltd. would be appointed by__
A. ordinary resolution
B. Special resolution
C. either of the above
D. none
467. The S & AG, some years ago, gave adverse comments on expenditure incurred on buying coffins for
soldiers killed in a war. In his opinion, the coffins cases imported could have been replace with less
expensive, domestically produced ones. This is an aspect of –
A. Audit of sanctions
B. Audit of stores and stocks
C. Propriety audit
D. Both (b) and (c)
468. An auditor is verifying valuation of building which has been self constructed by the client. Which of
the following documents is least relevant to the auditor for verification purposes?
A. Bills of contractor
B. Minutes of meeting of board of directors
C. Certificates of engineer and architect
D. Loan agreement
469. Which of the following assets is least likely to be subjected to lien?
A. Freehold land
B. Plant and machinery
C. Leasehold property
D. Motor vehicles
470. An analysis of fixed assets account has revealed possibility of unrecorded sale of plant and
machinery. Which of the following audit procedures may be adopted to discover it?
A. Examination of property tax files
B. Inquiry of plant manager
C. Examination of debits to accumulated depreciation
D. All of the above
471. The auditor has noticed existence of recurring losses sale of fixed assets this indicates
A. Depreciation charges are insufficient
B. Policy of sale or disposal of fixed assets needs to be reviewed
C. The sale of assets have not been properly authorized
D. Accounting errors
472. Which of the following financial statements assertions are addressed by testing the cut off for plant
asset addition
A. Existence and ownership
B. Valuation and disclosure
C. Possession and ownership
D. Completeness and valuation
473. While verifying intangible assets, an auditor would re compute amortization charges and determine
whether amortization period is reasonable. The auditor tries to establish ….by doing it
A. valuation
B. existence
C. disclosure
D. possession
474. When auditing prepaid insurance, an auditor discovers that the insurance policy bond on building
is not available for inspection. This may indicate__
A. No insurance has been undertaken for building
B. Lien on building
C. Insurance premium has not been paid
D. Insurance premium paid but not recorded
475. Which of the following controls would ensure that securities are not lost, stolen or diverted?
A. Establish physical barriers over investment securities
B. Maintain files of authorized signatures
C. Segregate investment approval form accounting and from custody of securities
D. All of the above
476. The sequence of steps in the auditor’s consideration of internal control is as follows –
A. Obtain an understanding, design substantive test, perform tests of control, make a preliminary assessment of
control risk
B. Design substantive tests, obtain an understanding, perform tests of control, make a preliminary assessment
of control risk
C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design
substantive procedures.
477. The primary purpose of performing tests of control is to provide reasonable assurance that_
A. there are no material misstatements due to fraud or error in financial statement
B. accounting system is well documented
C. Written evidence is there to support transactions
D. if internal control is effective
478. Control risk is assessed at
A. Overall financial statements level
B. Fraud risk factor level
C. Financial statement assertion level
D. Control environment level
479. Which of the following is not an example of a circumstance, in which additional tests of control will
not be performed after obtaining an understanding to plan the audit?
A. Controls are known to be cost ineffective
B. Controls are effective but auditor opines that performing tests of control and reduced substantive tests
would not be cost effective
C. Controls are effective and evidence already obtained is adequate to support a planned assessed level of
control risk which is less than high
D. Performing extensive substantive testing would not lead to efficiency
480. An auditor assesses control risk because it
A. affects the audit risk
B. affects the level of detection risk that auditor may accept
C. helps him to fix materiality level for each financial assertion
D. is directly related to inherent risk
481. A flow chart, made by the auditor, of an entity’s internal control system is a graphic representation
that depicts the auditor’s.
A. understanding of the system
B. understanding of fraud risk factors
C. documentation of assessment of control risk
D. Both (a) and (c)
482. Which of the following statements is not correct?
A. Internal risk and control risk cannot be controlled by the management i.e are uncontrollable
B. Detection risk is related directly to they effectiveness of the auditor prosecutor
C. Detection risk related inversely to control risk
D. Internet risk and control risk are highly interrelated
483. The independence of an internal auditor will most likely be assured if he reports to the
A. President Finance
B. President System
C. Managing Director
D. CEO
484. In comparison to the independent auditor  ,an internal auditor is more likely to be concerned with
A. cost accounting system
B. internal control system
C. legal compliance
D. accounting system
485. When an independent auditor decides that the work performed by internal auditors may have
bearing on the nature, timing and extent of planned audit procedures, the independent auditor should
evaluate objectivity of the internal auditor. The most important factor influencing it would be
A. organizational level to which he reports
B. qualification of internal auditor
C. system of quality control of his work
D. all of the above
486. When an independent auditor relies on the work of an internal auditor, he or she should
A. examine the scope of internal auditor’s work
B. examine the system of supervising review and documentation of internal auditor’s work
C. adequacy of related audit program
D. all of the above
487. Proper segregation of duties reduces the opportunities in which a person would both
A. establish controls and executes them
B. records cash receipts and cash payments
C. perpetuate errors and frauds and conceals them
D. record the transaction in journal and ledger.
488. Which of following will not affect audit in a CIS environment?
A. The objective of expression of opinion on financial statements
B. Compliance procedures adopted by the auditor
C. Performance of substantive procedures
D. Evaluation of inherent risk and control risk
489. Which of the following statements is not true of the test data approach in a test of computerised
accounting system?
A. Test data tests only those controls which the auditor wishes to rely
B. Test data should consist of data related to all controls prevalent in the organization
490. An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries are paid. The
primary purpose of this audit procedures is
A. to ensure that there are no ghost workers
B. to ensure the casual workers employed are authorized by the supervisor
C. to test procedures for distributing pay cheques
D. to obtain understanding of internal control system
491. Which of the following would prevent double payment of the same voucher?
A. The person signing the cheque should cancel the supporting documents
B.Cheques should be signed by at best two persons
C. The data of payment of vouchers of similar nature should be the same or close to each other
D. All of the above
492.TheFinancialstatementsofABCLimitedarenotreadyforapprovalbytheDirectorsintheBoardMeetingas
auditorwasunabletotrackthedifferenceofRs.50,00,000inthefinancialstatements.ThemanagementofABCLi
mitedisoftheopinionthattheauditorshallbeheldresponsibleforthedelay.CanthemanagementofABCLimited
doso?
A. Yes, as the responsibility of audit is of the auditor and hence is liable for the delay
B.ABCLimitedshouldrequesttheirauditorstosuomottowithdrawfromtheauditengagementexpressingtheirinability
toauditfinancialstatementsoftheclient.
C. No, the responsibility for preparation and presentation of financial statement is that of management and the
audit of financial statements does not relieve management of its responsibilities.
D. Yes, but the responsibility lies between both management and the auditor.
493. When the auditor is unable to obtain reasonable assurance and qualified opinion in the auditor’s
report is insufficient in the circumstances for purposes of reporting to the intended users of the financial
statements, what does SA 200 require
A. Disclaim the opinion
B. Withdraw from the engagement
C. either (a) or (b)
D. none of the above
494. Professional judgment means a judgment taken by the auditor out of his ______ in an audit
situation
A. Past experience
B. Relation with the management
C. Professional experience
D. Work experience
495. Whether sufficient appropriate audit evidence has been obtained to reduce audit risk to an
acceptable low level, and thereby enable the auditor to draw reasonable conclusion on which to base the
auditor’s opinion, is a matter of ________.
A. Audit guidelines
B. Professional judgment
C. Experience
D. Requirement from management
496. _________ means limitations which cannot be overcome and which are with the subject since the
inception or evolution of the subject.
A. Management limitation
B. Time constraints
C. Scope limitation
D. Inherent limitation
497.An auditor is required to determine the________of audit procedures according to the requirements
of Standards on Auditing.
A.strategy
B.Nature,timing and extent
C.performance and monitoring
D.Planning
498. If there is a conflict between the laws with which the auditee is subject to and Standards of
Auditing, the _____ shall prevail.
A. Notification from the central government
B. Applicable Laws and Regulations
C. Standard of Auditing
D. Guidance note
499. X and Co., Chartered Accountants firm were appointed as Joint Auditor where Y and Co.,
Chartered Accountants were the existing statutory auditor in order to expedite the audit process. This
condition may lead the Y and Co. to
A. revise the terms of audit engagement
B. withdraw the audit assignment
C. continue the audit assignment without new Engagement Letter
D. give a modified report
500. SA 210 deals with the key considerations that Independent Auditor needs to keep in mind on the
_______ with Management or those charged with governance.
A. Terms of audit engagement
B. Requirements
C. Road map designed
D. Precondition of audit
501. It is not mandatory to send a new engagement letter in recurring audit, but sometimes it becomes
mandatory to send a new letter.
A. True
B. False
C. Partially true and partially false
D. Can’t form an opinion
502. When auditee requests the auditor to change the terms of engagement, auditor should consider
whether changed terms provide _________ of assurance.
A. Higher Level
B. Optimal Level
C. Acceptable Level
D. None of the above
503. It is the responsibility of _________ to use acceptable financial reporting framework in preparation
of financial statements.
A. Management
B. Internal Auditor/Concurrent Auditor
C. Statutory Auditor
D. Audit committee
504. MNO & Associates was appointed as Statutory Auditors by the members of XYZ Ltd. During the
F. Y 2017-18., there was a significant change in senior management. This may lead to
A. Revision in terms of audit engagements
B. Withdraw the audit assignment
C. Continue the same audit engagement
D. Give a modified report
505. Circumstances that may warrant the revision in terms of engagement as per SA 210.
A. Significant change in ownership
B. Change in nature, size of the entity’s business.
C. Change in legal or regulatory requirement.
D. All of above
506. As per SQC 1, for listed entities, engagement partner should be rotated after a pre-defined period,
normally not more than _______ years.
A. 5
B. 8
C. 7
D. 10
507. As per SA 230 read with ______, working papers should be preserved for minimum period of 7
years from the date of auditor’s report or the date of the group auditor’s report, whichever is later.
A. SA 500
B. SA 200
C. SA 210
D. SQC 1
508. The firm’s _____ should assume ultimate responsibility for the firm’s system of quality control.
A. Article assistant
B. Engagement Partner
C. Engagement Quality Control Reviewer
D. Qualified Assistant
509. The complaints and allegations against the firm as regards to the non-compliance of professional
standards or allegation of non-compliance of firm’s system of quality control shall be dealt with
_______.
A. Legal regulations
B. By taking appropriate disciplinary actions
C. Both a and b or either of a or b
D. None of the above
510. The audit firm should implement _________ policies to ensure all audits are conducted in
accordance with Audit and Assurance Standards.
A. Detection Control
B. Quality Control
C. Management Control
D. Internal Control
511. The firm’s quality control ________ should be effectively communicated to its personnel.
A. Standards
B. Policies and procedures
C. Requirements
D. All of the above
512. Which of the following is not function of engagement partner ?
A. Design and implementing internal control in the entity
B. Compliance with professional standards
C. Whether to accept the client or not
D. Monitoring of quality control system of firm
513. Engagement Team means all personnel performing ______.
A. Audit
B. Accounting
C. Engagement
D. All of the above
514. The auditor shall assemble the audit documentation in an audit file within ____ days of completion
of audit.
A. 60 days
B. 90 days
C. 180 days
D. 30 days
515. Where joint auditors are appointed they should by _______, divide the work among themselves.
A. Terms of engagement
B. Mutual discussion
C. Choice
D. All of the above
516. CA. Lucky and CA. Subhash were appointed as Joint auditors at Reliance Industries Limited.
Some work was not dividend to them and therefore the same was not covered in their audit. Before
preparing the audit report CA. Krishna was at the opinion that it would to performed by CA.
Subhashand CA. Subhash thought vice versa. What is the treatment of work not dividend between
them?
A. Jointly and severally responsible
B. Responsibility will be taken by CA. Krishna or CA. Subhash
C. Management will be responsible for not paying attention to the division of work
D. All of the above
517. If a joint auditor comes across matters which are significant and relevant to the other joint auditors
and which deserve other auditor’s attention, he should communicate the same to all other joint auditors
________
A. Orally
B. By those charged with governance
C. Article clerk
D. In writing
518. Each joint auditor is entitle to assume that the other joint auditors have carried out their part of the
audit work is in accordance with the _______.
A. Accounting Standard
B. Standards of Auditing
C. Generally acceptable Audit Procedure
D. All of the above
519. Normally the joint auditors are able to arrive at an agreed report. However where the joint
auditors are in disagreement with the regard to any matters to be covered in the report, each one of
them should ___________.
A. Express his opinion through a separate report
B. Consult with the management
C. Express his opinion through an agreed report
D. None of the above
520. Mr.Ramesh and Mr.Suresh were appointed as a chartered accountant of RST Ltd. A special audit
was conducted u/s 233A of the companies Act, 2013 and it was observed that the expenses of the
company were overstated. The revenue aspects was taken care by Mr.Ramesh, but there was no
documentation for the division of work between the joint auditors. Who should be held responsible?
A. The management should be held responsible as they did not took care of the documentation of the joint
auditors
B. Mr.Ramesh should be held responsible as expenses was taken care by him
C. Mr.Suresh should be held responsible because of the negligence
D. Both the auditor will be held responsible and will be guilty of negligence
521. Which of the following can be basis of division of work among the joint auditor?
A. Items of asset or liabilities
B. Periodically
C. on the basis of identifiable units or specified areas
D. All of the above
522. Mr.Sachin and Mr.Kunalwere joint auditors of a company. On an audit point Mr.Kunalwas of the
view that it will attract qualification however Mr.Sachin disagreed with his opinion. How audit report
should be made in such circumstance?
A. Auditors should come at a common point and give report accordingly
B. The view of Mr.Kunalwill prevail because of prudence
C. They will issue separate audit reports
D. None of the above
523. In which of the following case joint auditor shall not be jointly and severally liable?
A. Divided work
B. Disclosure requirements in Financial statements
C. Compliance of audit report with statutory requirement
D. For matters brought to knowledge of all by any one of them and on which they all agreed
524. The outcome of an audit is normally a/an
A. certificate
B. report
C. income and expenses
D. profit or loss
525. The audit conducted for the purpose of investigation into possible fraud, mismanagement, or
negligence is termed as
A. performance audit
B. statutory audit
C. operational audit
D. forensic audit
526. What type of auditing standard is applied in the audit of historical financial information?
A. ISAs
B. IFAs
C. ISRSs
D. ISAEs
527. The title of AAS-2 issued by Council of ICAI is ___
A. Objective and Scope of the Financial Statements
B. Objective and Scope of the Audit of Financial Statements
C. Objective and Scope of Business of an Entity
D. Objective and Scope of Financial Statements Audit
528. As per AAS-4 if auditor detects an error then –
A. He should inform the management.
B. He should communicate it to the management if it is material
C. The auditor should ensure financial statements are adjusted for detected errors.
D. Both (b) and (c)
529. Which of the following is not a limitation of audit as per AAS-4?
A. Objectivity of auditor’s judgment
B. Selective testing
C. Persuasiveness of evidence
D. Limitations of internal control system.
530. How many principles are listed in AAS1 which govern auditor’s professional obligation?
A. Nine
B. Fourteen
C. Seven
D. Eight
531. Auditing standards differ from audit procedures in that procedures relate to
A. Audit assumptions
B. acts to be performed
C. quality criterion
D. methods of work
532. Financial auditor is not concerned with propriety of business transactions. However, the exceptions
to this rule are contained for audit of limited companies in_
A. Section 227 (IA) of the Companies Act, 1956
B. Section 227 (IA) and section 227(4A) of the Act
C. CARO, 2003
D. Section 227 (IA) and CARO, 2003
533. …..the audit risk,….. the materiality and ……the audit effort
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
534. For all audits of financial statements made in accordance with AAS-14, the use of analytical
procedures is at the discretion of the auditor in which stage?
A. Substantive testing
B. Planning stage
C. Overall review stage
D. All of the above
535. 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)
536. Tolerable error, is the maximum monetary error that the auditor is prepared to accept in the
population and still conclude that audit objective has been achieved, is directly related to
A. Sample size
B. Audit risk
C. Materiality
D. Expected error
537. Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
A. Schedule XIV
B. Schedule V
C. Schedule XIII
D. Schedule X
538. Schedule XIV has prescribed rates of depreciation for double shift and triple shift working for
which one of the following assets?
A. Building
B. Plant and Machinery
C. Furniture and fittings
D. Ships
539. If the book value of an asset stands at ……..per cent of the original cost, a company need not
provide depreciation on it.
A. two
B. fifteen
C. five
D. ten
540. A company has bought patents. Which of the following methods is most suitable for providing
depreciation on them?
A. SLM
B. WDV
C. Sum-of year digits
D. Any of the above
541. Which of the following sections deal with qualifications of the auditor ?
A. Section 226 (1) and section 226(2)
B. Section 224 (1) and section 224 (2)
C. Section 226 (3) and section 226(4)
D. Section 224(3) & Sec.224
542. Which of the following statement is not true?
A. A partnership firm can be appointed as a statutory auditor of limited company
B. Appointment can be made in the name of the firm
C. Majority of the partners should be practicing in India
D. All partners should be chartered accountants
543. As per the requirements of section 226(3) and 226(4) a person is disqualified from being appointed
as a statutory auditor if he holds
A. Equity shares or debentures of the company
B. Equity shares carrying voting of the company
C. Shares carrying voting rights of the company
D. Security carrying voting rights of the company
544. In case the directions fail to appoint first auditor (s), the shareholders shall appoint them at…..by
passing a resolution
A. a general meeting
B.first annual general meeting
C. statutory meeting
D. annual general meeting
545. Life Insurance Corporation of India holds twenty five percent of subscribed capital of XYZ Ltd.
The appointment of statutory auditor in XYZ Ltd. Would be by__
A. ordinary resolution
B. special resolution
C. (a) or (b)
D. none of the above
546. ICICI prudential, a life insurance company, holds thirty-two percent of subscribed share capital of
Delta Ltd. The statutory auditor of Delta Ltd. would be appointed by__
A. ordinary resolution
B. Special resolution
C. either of the above
D. none
547. For the purposes of section 224(IB) the number of partners of a firm which shall be taken into
account would be as on the date of _
A. completion of audit
B. auditor’s report
C. acceptance of audit
D. Starting of audit work
548. Which of the following is counted for the purposes of section 224(IB) the number of partners of a
firm which shall be taken into account would be as on the data of ___
A. Joint audit
B. Audit to non-profit companies
C. Audit of unlimited companies
D. All of the above
E. (a) and (b) only
549. Mr. Narayan, a Charted Accountant, has nineteen audits, Out of following audits which audits
should he accept to ensure he doesn’t violate provisions of section 224(IB) __
A. Audit of Zeba Ltd. a private company
B. Audit of branch of Pointec Ltd. a foreign company
C. Audit of two branches of Virtue Ltd. an Indian company
D. All of them
550. Which audit out of the following would not be regarded as one audit for the purposes of section
224(IB)?
A. Audit of one branch each of two different companies
B. Joint audit
C. Audit head office & branches
D. Audit of one or more branches of a company
551. Which of the following statements is not correct regarding removal of first auditor before expiry of
the term?
A. He is removed at a general meeting
B. The shareholders are authorized to do so
C. The approval of the Central Government is required for such removal
D. The provisions for such removal are contained in section 224(7)
552. The principal auditor, as per clarification issued by the ICAI, does not have any right to
A. Inspect working papers of the branch auditor
B. Visit branches
C. Seek information necessary for audit purposes
D. Incorporate the branch audit report in his audit report
553. Under which of the following section auditor has a duty to enquire into six specified matters and
report by exception?
A. Section 227(4A)
B. Section 227 (IA)
C. Section 227 (2)
D. Section 227(3)
554. The auditor has to enquire, under section 227 (IA) into different aspects, related to shares allotted
for cash for the purpose of auditor include
A. Shares against whose allotment cash has actually been received
B. Shares allotted for consideration other than cash
C. Shares allotted against a debt payable
D. All of them
555. Right to visit branches has been given to the auditor under which section?
A. Section 222(3)
B. Section 228(2)
C. Section 228(4)
D. Section 228(3)
556. Which of the following statements with regard to rules regarding exemption from branch audit is
not true?
A. A branch office of a company can be granted exemption on the basis of quantum of activity criterion
B. If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a
manufacturing company has been made, it can be exempted form branch audit
C. Cost consideration should be considered as an important factor/ground for exemption from branch audit
D. The auditor should state in his audit report that branch office is exempted by virtue of quantum of activity
or any other basis
557. Auditor of a ……company does not have right to visit foreign branches of the company
A. Unlimited liability
B. Manufacturing
C. Banking
D. Non-profit making
558. Special audit is conducted at the order of the Central Government. Which section gives such
powers?
A. Section 233(A)
B. Section 233A
C. Section 242(A)
D. Section 242A
559. If any director is disqualified from being appointed under section 274(1) (g), the auditor should
mention this fact in his audit report. For this purpose, how does he determine their eligibility :
A. He obtains a representation from each director
B. He obtains a management representation
C. He enquiries from Registrar of Companies
D. Any one of the above
560. As per the ‘Statement on Qualification in Auditor’s Report’s issued by the ICAI, the auditor,
Under section 227(3) has to gave a statement of fact on_
A. proper books of account
B. accounting standards
C.cess payable under section 441A
D. None of the above
561. Section 227(2) of the Companies Act, requires the auditor to give his report to the members of the
company on certain matters. Which of the following is not included in the above?
A. Accounts examined by him
B. Every balance sheet and profit and loss account laid before a general meeting during his
tenure
C. Every document that is a part of or ‘annexed to’ the balance sheet
D. Every document which is attached to the profit and loss account
562. Which of the following report not result in qualification of the auditor’s opinion due to a scope
limitation?
A. Restrictions the client imposed
B. Reliance on the report of other auditor
C. Inability to obtain sufficient appropriate evidential matter
D. Inadequacy of accounting records
563. The inventory consists of about one per cent of all assets. The client has imposed restriction
on auditor to prohibit observation of stock take. The auditor cannot apply alternate audit procedures.
A. unqualified opinion
B. qualified opinion
C. disclaimer of opinion
D. adverse opinion
564. If in the above question, the inventory consisted of about ten per cent of total assets, other
conditions remaining same, the auditor should issue __
A. unqualified opinion
B. qualified opinion
C. disclaimer of opinion
D. adverse opinion
565. Which of the following is not true regarding requirements under section 227(3) (f) of the
Companies Act, 1956?
A. The auditor has to satisfy himself whether any of the directors of the company, whether
public or private, are disqualified from being appointed as directors as per section 274(1) (g).
B. Section 274(1) (g) is applicable to appointment of directors both in public and private
companies but reporting is limited to only those directors of a company who are also
directors of a public company
C. The auditor requires every director to submit a written representation in respect of each
public company, of which the is a director, as to whether such company has defaulted in
terms of provisions of sections 274(1) (g)
D. The disqualification should be considered on the date of audit report.
566. The management of a company, to which AS-3. is not applicable, does not include statement of cash
flows in its annual report. The auditor should express
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Any of these depending upon materiality and pervasiveness and adequacy of disclosure
567. In case the auditor gives a disclaimer of opinion in the audit report which of the following
paragraph(s) of a standard unqualified audit report are modified?
A. Scope paragraph
B. Opinion paragraph
C. Scope and opinion paragraphs
D. Introductory, scope and opinion paragraph
568. A departure from recognized accounting principle is disclosed in a note to the financial statements.
The auditor should
A. issue a standard unqualified audit report
B. issue a qualified report
C. issue an unqualified report with ‘emphasis of matter’ paragraph
D. disclaim opinion
569. AB & Co, chartered accountant, have been requested by their client XYZ Ltd. not to confirm
accounts receivables because of concerns about creasing conflicts with customers over amounts owed.
The auditors were satisfied concerning receivables after applying alternative audit procedures AB &
Co.’s auditors report likely contained
A. Qualified opinion
B. Disclaimer of opinion
C. Unqualified I opinion with an explanatory paragraph
D. Unqualified opinion
570. Companies exempted from application of CARO, 2003 does not include_
A. a banking company
B. an insurance company
C. a private limited company with paid up capital and reserves not more than fifty five lakh
D. a licensed company
571. Under CARO, 2003, the auditor’s report should include report about maintenance of proper
recording relating to____
A. Fixed assets and cost
B. Fixed assets, cost and investments
C. Fixed assets , cost investments and inventories
D. Fixed assets, cost and inventory
572. Under CARO, 2003 the auditor is required to report on __
A. arrears of cumulative preference dividends
B. Preferential allotment of shares to related party
C. disposal of fixed assets and its effect on going concern.
D. unsecured loans granted to related party.
573. As per C & AG Act, 1971 the tenure of the Comptroller and Auditor General is …….Years
A. Four
B. five
C. six
D. seven
574. Audit of transaction does not include –
A. Propriety audit
B. efficiency –cum performance audit
C. audit of receipts
D. audit of expenditure
575. The income Tax Department has sent Mr. X double refund of advance tax. The Government
Auditor detected this while conducting
A. audit of expenditure
B. performance audit
C. audit of stores and stock
D. audit of receipts
576. Audit of debt, deposits and remittances does not cover
A. audit of borrowings
B. audit of amortization of debt
C. audit of sanctions
D. remittance audit
577. A state Government spent rupees fifty lakhs on renovation of Raj Bhavan’ for its Governor. In the
C & AG’s opinion, this expenditure was more than what occasion demanded? It is an exampled of –
A. Propriety audit
B. Performance audit
C. Audit against provision of funds
D. None of the above
578. The C & AG, some years ago, gave adverse comments on expenditure incurred on buying coffins
for soldiers killed in a war. In his opinion, the coffins cases imported could have been replace with less
expensive, domestically produced ones. This is an aspect of –
A. Audit of sanctions
B. Audit of stores and stocks
C. Propriety audit
D. Both (b) and (c)
579. To avoid invalid data input, a bank added an extra number at the end of each account number and
subjected the new number to an algorithm. This techniques is known as
A. Dual read
B. Test for reasonableness
C. Check digit
D. Occurrence correction
580. When computer programme or files can be accessed from terminals, access can be limited to
authorized individuals by__
A. appointing a librarian
B. controlling passwords
C. appointing EDP auditor
D. Both (a) and (b)
581. Erroneous data has been detected by computer program controls. It has been excluded from
processing and printed separately “Error Report”. Who should most probability by review and follow
up on this report?
A. system, analyst
B. Data control group
C. Programmer
D. Computer operator
582. The completeness of “wages” figure can be tested by comparing the number of time cards to be
processed with transaction on wages sheet. This type of control technique is called
A. check total
B. control total
C. occurrence correction
D. check digit
583. Which of the following statements is not true of the test data approach in a test of computerised
accounting system?
A. Test data tests only those controls which the auditor wishes to rely
B. Test data should consist of data related to all controls prevalent in the organization
C. The result of test data indicates that all the application and general controls are
functioning properly
D. Test data processed by the client’s computer programme under the auditor’s control
584. Which of the following CAATs allow fictitious transactions planted by the auditor to be processed
along with real ones on client’s system?
A. Integrated test facility
B. Test data approach
C.Generalised audit software
D. Parallel simulation
585. An auditor is least likely to use computer software to
A. access client data files
B. assess control risk
C. performing analytical producers
D. None of the above
586. The auditor should examine subsequent realization of revenue such as dividends, interest,
commission, etc to
A. identify cases of unrecorded revenue
B. ensure proper disclosure in the balance sheet
C.recompute accrued income on the data of balance sheet
D. Any of these
587. For vouching of which item, the auditor is most likely to examine cost records?
A. Commission earned
B. Bad debts recorded
C. Credit sales
D. Sale of scrap
588. The “Guidance Note on Revenue” issued by the ICAI does not deal with
A. Sales revenue
B. Revenue rendering service
C. Revenue from sale of fixed assets
D. Income from interest, dividend
589. In case of unclaimed wages, the auditor should examine whether
A. the amount has been deposited in a separate bank account
B. deposited with the cashier
C. held in a safe deposit box
D. All of these
590. In order to vouch, which of the expenses, the auditor will examine Bill of Entry?
A. Custom
B. Excise duties
C. Sales tax
D. Income tax
591. In case of sales return, the auditor should examine which documents?
A. Credit notes, advice notes and inward return notes
B. Debit notes, advice notes and inward return notes
C. Purchase invoices, advice notes and inward return notes
D. Credit notes, inspection report and inward return notes
592. An internal auditor discovered that fictitious purchases have been recorded by the purchase clerk.
This indicates absence of which control?
A. Purchase invoices are independently matched with purchase orders and goods received notes
B. Goods received notes requires the signature of individual who authorized the purchase
C. Routine checks are performed by internal auditor fortnightly.
D. Purchase function and production function are clubbed in one department
593. Which of the following is most crucial to a purchase department?
A. Reducing the cost of acquisition
B. Selecting supplies
C. Authorizing the acquisition of goods
D. Assuring the quality of goods
594. The auditor is most likely to examine related party transactions very carefully while vouching
A. credit sales
B. sales returns
C. credit purchases
D. cash purchases
595. In order to vouch bought ledger, the auditor obtain confirmations from creditors. The principal
reason for the auditor to examine suppliers statements at balance sheet date is to obtain evidence that
A. the supplier exist
B. there are no unrecorded liabilities
C. recorded purchases actually occurred
D. to link creditors with cash book entries
596. The creditors accounts, generally, have credit balance. Debit balance may be due to
A. advance paid against an order
B. goods returned
C. wrong debit to supplier account
D. Any of these
597. In case of vouching, the auditor is least likely to examine authorization by appropriate authority in
case of –
A. bad bads written off
B. sales return
C. purchase return
D. discount allowed to customers as per organizational policy
598. Vendors should be approved by Management before purchase department executes an order. If this is not
done, then which of the following situations may arise
A. purchases could be made from vendors whose product quality may not be good
B. Purchases may be made from related parties without management’s knowledge
C. Purchases could be made from vendors who may have offered price to vice-president purchases
D. Any of these
599. Which of the following is not true with regard to verification of assets?
A. It invoices substantiation of occurrence of transactions
B. Its objective is to establish existence, ownership, possession, valuation and disclosure of assets
C. The auditor has to form an opinion on different aspects
D. All are true
600. An auditor is verifying valuation of building which has been self-constructed by the client. Which of
the following documents is least relevant to the auditor for verification purposes?
A. Bills of contractor
B. Minutes of meeting of board of directors
C. Certificates of engineer and architect
D. Loan agreement
601. The auditor while verifying prepaid insurance has concluded that there is inadequate insurance of
building He should__
A. Modify his audit report
B. Insist it should be disclosed in the notes to financial statements
C. Write it in letter of weakness
D. Both (b) and (c)
602. While verifying intangible assets, an auditor would recompute amortization charges and determine
whether amortization period is reasonable. The auditor tries to establish ….by doing it
A. valuation
B. existence
C. disclosure
D. possession
603. When auditing prepaid insurance, an auditor discovers that the insurance policy bond on building
is not available for inspection. This may indicate__
A. No insurance has been undertaken for building
B. Lien on building
C. Insurance premium has not been paid
D. Insurance premium paid but not recorded
604. Which of the following would give the assurance that debtors mentioned on the date of balance
sheet actually exist?
A. Sending debtor’s confirmation letters
B. Reviewing subsequent collection
C. Verify debtors against sales document
D. Both (a) and (b)
605. Analytical procedures are least likely to be use in the audit of –
A. cash balance
B. investments
C. bills receivables
D. debtors
606. Which of the following statements is not true with regard to teeming and lading ?
A. It results in the deliberate misappropriation of cash receipts
B. It is associated with cash receipts
C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
D. To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily agreement so
that a bank reconciliation will not detect the irregularity.
607. The balance of cash in often between one to five percent of total assets. Tick the most appropriate
statement with regard to verification of cash in context of this
A. Cash in always material as materiality is qualitative concept
B. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a
relative concept
C. The cash balance need only be audited if the balance is in overdraft
D. Cash is to be verified if control risk is assessed as high
608. When counting cash on hand the auditor should ___
A. ensure presence of somebody from management
B. obtain a receipt from custodian as to its return
C. ensure postage and revenue stamps are not counted in physical count
D. temporary advances to employees are counted to calculate balance of cash in hand
609. Which of the following statement is not true regard to auditor’s attendance at stock taking?
A. Auditor should attend physical stock taking only if inventory is material
B. Auditor may not attend physical verification of stock by management, if he does not find it
appropriate to rely on it
C. If inventory is material, even when the auditor is not placing reliance on the physical verification by
the management, he should attend it
D. The primary objective of an auditor’s observation of an entity’s observation of an entity’s
stock take is to obtain direct knowledge that the stock and has been property counted
610. While observing a client’s annual physical inventory, an auditor conducted test counts for certain
test counts were higher than the recorded quantities in the client’s perpetual records. This situation
could be the result of the client’s failure to record –
A. purchase returns
B. sales returns
C. goods with consignor
D. purchase discounts
611. Inspection report/receiving report supports entries in
A. sales book and sales return book
B. purchase book and sales return book
C. cash book and purchase book
D. Sales book and purchase return book
612. Tests of control are not concerned with_
A. Existence of controls
B. Effectiveness of controls
C. Continuity of controls
D. Designing of controls
613. Which of the following is not an inherent limitation of internal control system?
A. Management override
B. Collusion among employees
C. Inefficiency of internal auditor
D. Abuse of authority
614. An auditor should study and evaluate internal controls to
A. determine whether assets are safeguarded
B. Suggest improvements in internal control
C. Plan audit procedures
D. express and opinion
615. XYZ Ltd. Conducts quarterly review of operations. It discovers that unrest in a south east Asian
country may affect the supply of raw materials to it the next quarter. This is an example of :
A. risk assessment
B. control procedure
C. supervision
D. control environment
616. If the auditor assesses control risk as high….
A. Document the conclusions
B. documents the reasons along with conclusions
C. perform tests of control
D. perform walk through tests
617. The overall attitude and awareness of an entity’s board of directors concerning the importance of
internal control is reflected in
A. accounting controls
B. control environment
C. control procedures
D. supervision
618. Which of the following are included in test of control?
A.Reperformance and observation
B. Inquiry and analytical procedures
C. Comparison and conformation
D. Inspection and verification
619. In comparison to the independent auditor, an internal auditor is more likely to be concerned with
A. cost accounting system
B. internal control system
C. legal compliance
D. accounting system
620. When an independent auditor decides that the work performed by internal auditors may have
bearing on the nature, timing and extent of planned audit procedures, the independent auditor should
evaluate objectivity of the internal auditor. The most important factor influencing it would be
A. organizational level to which he reports
B. system of quality control of his work
C. qualification of internal auditor
D. all of the above
621.Auditing refers to
A.Preparation and checking of account
B.Examination of accounts of business units only
C.Examination of accounts of professional accountants
D.Checking of vouchers
622.Main object of auditing is
A.Detection of errors
B.To find out whether P&L a/c & B/S show true and fair state affairs
C.Detection of frauds
D.Detection and prevention of frauds and errors.
623.Auditing is luxury for a
A.Joint stock company
B.Partnership firm
C.Small shop-keeper
D. Government company
624.Propriety audit refers to
A.Verification of accounts
B.Examination accounts of propriety concerns
C.Enquiry against justification and necessity of expresses
D.Audit of Govt. companies
625.Propriety is normally undertaken in case of
A.Joint stock company
B.Government company
C.Statutory corporation
D.Govt. departments
626.Interim audit refers to
A.Examination of accounts continuously
B.Examination of accounts intermittently
C.Audit work to find out and check interim profits of a company
D.Carrying on audit for bonus purposes at the end of the year
627.Final audit implies
A.Audit of accounts at the end of the year
B.Finally checking of accounts to reveal frauds
C.Audit for submitting report immediately at the end of the year
D.Audit of banking companies
628.A continuous audit is specially needed for
A.Any trading concern
B.Smaller concerns
C.Banking companies
D.Any manufacturing companies
629.Joint audit implies
A.Audit of two concerns together
B.Audit of joint stock companies
C.Audit of joint sector companies
D.Audit by two firms of C.A
630.Management audit means
A.Audit undertaken on behalf of the management
B.Evaluating performance of various management processes and functions
C.Audit undertaken on behalf of Govt. to punish management
D.Compulsory audit
631.Systems audit implies
A.Systematic examination of accounts
B.Audit undertaken to improve auditing systems
C.Enquiring accounting and control systems
D.Checking the performance of management
632.Internal audit means
A.Audit undertaken to ascertain truth and fairness of state of affairs
B.Audit undertaken internally to evaluate management functions
C.Audit undertaken by employees of the organization to check financial irregularities
D.Audit by independent auditor to improve internal affairs
633.Internal audit is
A.Compulsory for a company with paid-up capital of Rs. 25 lakh and above
B.Voluntary for a company
C.Not necessary for a company
D.Necessary for a company
634.Internal auditor is appointed by the
A.Management
B.Shareholders
C.Government
D.C & A-G
635.The object of internal check is to
A.Control wastage of resources
B.Prevent errors and frauds
C.Verify the cash receipts and payments
D.Facilitate quick decision by the management
636.Effective internal check system reduces
A.The liability of auditor
B.Work of auditor
C.Both work as well as auditor
D.Responsibilities of an auditor
637.Internal check is a part of
A.Internal audit
B.Internal accounting
C.External audit
D.Internal control
638.Internal check is suitable for
A.Larger concerns
B.Smaller concerns
C.Petty shop- keepers
D.None of the above
639.Internal check is essential for
A.Petty traders
B.Cash transactions in a large concern
C.A concern using automatic equipments
D.None of the above
640.Misappropriation of goods may be checked by
A.Proper supervision over stock
B.Checking of employees
C.Punishment of employ

641.Falsification of accounts is undertaken by

A.Auditors
B.Clerks
C.Accountants
D.Responsible officials
642.Test checking should not be applied to
A.Sales book
B.Purchase book
C.Bank reconciliation statement
D.Bills book
643.Test checking should not be applied to
A.Purchase book
B.Sales book
C.Stock book
D.Cash book
644.Vouching implies
A.Inspection of receipts
B.Examination of vouchers to check authenticity of records
C.Surprise checking of accounting records
D.Examining the various assets
645.Payment for goods purchased should be vouched with the help of
A.Creditors statement
B.Correspondence with suppliers
C.Cash memos
D.Ledger accounts
646.Payment for wages should be vouched with the help of
A.Piece work statement
B.Wage sheets
C.Minute book
D.Bank pass book
647.Payment for building purchased should be vouched with the help of
A.Title deed
B.Correspondence with Brokers
C.Building account
D.Cash book
648.Investment should be vouched with the help of
A.Commission book
B.Brokers book
C.Sales deeds
D.Minute book
649.Receipt from debtors should be vouched with the help of
A.Counterfoil Receipts cash book
B.Suppliers statement
C.Sales Deeds
D.General Ledger
650.Receipt from sale of investment should be vouched with the help of
A.Brokers Budget Notes
B.Brokers Sold Notes
C.Minute Book
D.Inventory of investment
651.Purchases returns should be vouched with the help of
A.Bought Notes
B.Credit Notes
C.Goods inward Book
D.Cash Book
652.Object of verification of assets
A.Physical verification of assets
B.Checking value of assets
C.Examining the authority of their acquisition
D.All of the above
653.Valuation of Fixed Assets is based on the concept
A.Going concern
B.Conservation
C.Money measurement
D.Dual aspect
654.Valuation means
A.Calculating value of assets
B.Checking the value of assets
C.Checking the physical existence of assets
D.Examining the authenticity of assets
655. Auditor is not valuer” was stated in
A.Kingston Cotton Mills case
B.London & General Bank case
C.Lee .V . Neuchatel Co. Ltd case
D.London oil Storage Co. case
656.Fixed assets are valued at
A.Cost
B.Market price
C.Cost price or market price whichever is less
D.Cost less depreciation
657.The scope of work of internal audit is decided by the
A.Share holders
B.Management
C.To improve financial control
D.All of the above
658.Outstanding expenses should be verified with the help of
A.Cash book
B.Balance book
C.Journal proper
D.None of the above
659.Book debts should be verified with the help of
A.Balance sheet
B.Amount received from Debtors
C.Debtors schedule
D.Certificate from the management
660.Investments in hand should be verified with the help of
A.Schedule of investments
B.Balance sheet
C.Inspection of securities
D.Certificate from the bank
661.First auditor of a company is appointed by the
A.Shareholders
B.Central Govt.
C.Company Law Board
D.Board of Directors
662.Which of the following persons is qualified to be a company auditor?
A.An employee of the company
B.A body corporate
C.A person who is indebted to the company for an amount exceeding Rs. 1000
D.A practicing chartered accountant
663.The first auditor of a company will hold office
A.For a period of one year
B.Till holding of statutory meeting
C.Till the conclusion of first annual general meeting
D.Till a new auditor is appointed
664.Normally, a company auditor is appointed by the
A.Central Government
B.Shareholders
C.Board of Directors
D.Company Law board
665.An auditor in a casual vacancy is appointed by the
A.Board of Directors
B.Shareholders
C.Central Government
D.Company Law board
666.If an auditor is not appointed at annual general meeting, he is appointed by the
A.The Central Government
B.Board of Directors
C.Shareholders
D.Company Law board
667.A vacancy caused by resignation of the auditor is filled by
A.Board of Directors
B.At the general meeting of shareholders
C.By the Central Government
D.By the Company Law board
668.A special auditor is appointed by the
A.Shareholders
B.Board of Directors
C.Central Government
D.C & A – G
669.A government Co. auditor may be appointed by the
A.C & A – G
B.Shareholders
C.Central Government
D.None of the above
670.A company auditor can be removed before expiry of his term by
A.Shareholders
B.Board of Directors
C.Central Government
D.State Government
671.Remuneration of a company auditor is fixed by the
A.Shareholders
B.Board of Directors
C.Central Government
D.Appointing authority
672.A company auditor, in general has to submit his report to
A.Shareholders
B.Board of Directors
C.Central Government
D.C & A – G
673.An auditor of Government company has to submit his report to the
A.Shareholders
B.Central Government
C.C & A – G
D.Ministry concerned
674.Internal auditor has to submit report to
A.Shareholders
B.Government
C.Company Law board
D.None of the above
675.Auditor should be dutiful like a
A.A watch dog
B.A blood hound
C.A detective
D.An insurer
676.Auditor, in general is an
A.Employee of the company
B.Agent of the company
C.Agent of the shareholders
D.None of the above
677.While checking allotment of shares the auditor should see that it is made within
A.100 days of issue of prospectus
B.120 days of issue of prospectus
C.150 days of issue of prospectus
D.80 days of issue of prospectus
678.Which of the following percentage of nominal amount of shares should be received with application
A.10
B.15
C. 5
D. 6
679.While checking allotment, auditor should see that amount
A.Equal to estimated fixed capital is received
B.Equal to estimated working capital is received
C.Necessary for purchase of land & building has been received
D.None of the above
680.For restriction regarding allotment of shares, the auditor should refer to section
A.25
B. 75
C. 64
D. 69
681.For checking that allotment of shares has been properly made, an auditor should refer to
A.Cash Book
B.Shares Ledger
C.Directors minutes book
D.Shareholders minutes Book
682.Auditor should see that the return of allotment has been sent to Registrar within
A.1 month
B. 2 months
C. 3 months
D. 40 days
683.Application money should not be withdrawn unless
A.Allotment is made
B.Cash book has been prepared
C.Certificate to commence business obtained
D.Certificate of incorporation obtained
684.Shares issued for consideration other than cash should be vouched with the help of
A.Directors minutes book
B.Shareholders minutes book
C.Contract with the party concerned
D.Cash book
685.A company can issue Redeemable Preference shares, if authorized by
A.Memorandum of association
B.Articles of association
C.Companies Act, 1956
D.None of the above
686.Auditor should see that amount received for premium on issue of shares should be shown in
A.Subscribed capital
B.Capital Reserve Account
C.Share Premium account
D.Paid- up capital account
687.Share premium account should be shown in the Balance sheet under
A.Paid-up capital
B.Subscribed capital
C.Reserves & surplus
D.Reserved capital
688.Amount of share premium may be utilized for
A.Payment of dividend
B.Writing of preliminary expenses
C.Routine expenses
D.Purchase of fixed assets
689.Shares can be issued at discount under section
A.76
B. 75
C. 79
D. 89
690.Interest on calls paid in advance, according to Table A, should not exceed
A.6%
B. 5%
C. 10%
D. 14%
691.Shares can be issued at premium, under section
A.76
B. 75
C. 78
D. 79
692.A company can accept calls in advance from its shareholders under section
A.82
B. 79
C. 92
D. 78
693.Shares can be issued at discount only after
A.2 years of the commencement of the business
B.1 year of the commencement of the business
C.3 years of the commencement of the business
D.5 years of the commencement of the business
694.With regard to issue of share warrants to the bearers, the auditor should see that is it
A.Permitted by Memorandum of Association
B.Sanctioned by the Central Government
C.Permitted by the Board of Directors
D.None of the above
695.For the for festure of shares, the auditor should check that it is permitted
A.by Memorandum of Association
B.by articles of association
C.under Companies Act, 1956
D.None of the above
696.Premium received on issue of shares, later forfeited, should be transferred to
A.Capital reserve
B.Shares forfeited Account
C.Capital Account
D.None of the above
697.With regard to issue of share certificates, the auditor should refer to section
A.110
B. 113
C. 114
D. 123
698.Increase in share capital is permitted by
A.Memorandum of Association
B.Articles of association
C.Court
D.Companies Act, 1956
699.Divisible profit should not include
A.Interest on capital
B.Capital
C.Depreciation
D.None of the above
700.Dividend can not be paid out of
A.Capital profit
B.Capital receipts
C.Revenue receipts
D.None of the above
701.Capital profit imply profit earned
A.Through business transaction
B.From capital
C.From sale of fixed assets
D.From sale of current assets
702.Capital profits
A.Can be paid by way of dividends
B.Cannot paid by way of dividends
C.Can be paid by way of dividend under certain conditions
D.None of the above
703.If there is capital loss, the auditor should
A.Not allow payment of dividend
B.Allow payment of dividends
C.Allow payment of dividends after making such losses good
D.None of the above
704.A company auditor should see that the dividend should be paid
A.After charging depreciation
B.Without charging depreciation
C.Out of capital
D.None of the above
705.In his report, the auditor gives his
A.Judgment
B.Opinion
C.Guarantee to correctness of accounts
D.True state of affairs
706.Civil liability of an auditor implies liability for
A.Misappropriation of cash
B.Misappropriation of goods
C. Fraud
D.Misfeasance
707.An auditor can be held liable under companies Act 1949 for
A.Negligence
B.Criminal offence
C.Professional misconduct
D.Breach of contract
708.Investigation of books of accounts and records is :
A.Not legally compulsory
B.Compulsory
C.Compulsory as per companies act
D.Compulsory as Income Tax Act
709.Investigation is carries on behalf of
A.Manager
B.Employee
C.Client
D.On behalf of owner and third parties
710.Examination of accounting records undertaken for a special purpose is called
A.Auditing
B.Internal check
C.Investigation
D. Internal control
711.The prime importance of investigation on behalf of an individual or firm intending to purchase an
existing business is to
A.Ascertain value of asset
B.Ascertain the earning capacity of the concern
C.Estimation of value of good will
D. Extend of liabilities
712. Inflation of closing stock results is :-
A.Inflation of loss
B.Deflation of loss
C.Inflation of profit
D. Deflation of profit
713.Inflation of profit is possible due to :
A.Overvaluation of closing stock
B.Overstating purchase
C.Overstating opening stock
D. Overstating expenses
714. Charging excessive provision for depreciation results in
A.Less profit
B.More profit
C.No change in profit
D. No change in loss
715.The main purpose of management audit is to
A.Review the management operations
B.Check arithmetical accuracy
C.Prevent travel
D. Prevent error
716.Management audit is
A.Compulsory
B.Not compulsory
C.Compulsory under Income Tax Act
D.Compulsory under Indian Contract Act.
717.Special resolution means ——————-
A.1/3 majority
B.2/3 majority
C.½ majority
718.Ordinary resolution means ———————–
A.1/3 majority
B.2/3 majority
C.More than 1/2
719.The chartered Accountants Act is in —————–
A.1956
B.1959
C.1949
720.Section 633 of the companies Act deals with
A.Liability of auditor
B.Relief to the auditor
C. Punishment to the auditor
721.Auditor is an ————— of a shareholder
A.Owner
B.Agent
C.Employer
722.Cost audit means audit of ————— records
A.Financial
B.Cost
C. Tax
723.Financial auditor submits reports to the —————–
A.Shareholder
B.Board of director
C. Employees
724.Cost auditor submits reports to the —————
A.Share holder
B.Board of directors
C. Employees
725.————— audit is forward looking –
A.Financial
B.Cost
C. Tax
726.Cost auditor of a company is ———–
A.Chartered Accountant
B.Cost Accountant
C. Tax Accountant
727.Auditor finds that there is change in the method of valuation of stock whether he should
A.Allow it
B.Disallow it
C.Allow it with a note to this effect
728.Audit under any statute in a country is called ——————
A.Final audit
B.Internal audit
C. Statutory audit
729.Books of Accounts are prepared and audited as per the provisions of the —————
A.Income Tax Act,1961
B.Companies Act 1956
C.Chartered Accountants Act 1949
730.CAATTS is also known as ———–
A.Cost And Accounts Treatments
B.Computer Assisted Audit Tools and Techniques
C.Classification and Accounting of Tax Tools
731.Auditor has got no lien on ————-
A.Audit Note Nook
B.Audit working papers
C. Books to Accounts of Client
732.Statutory Report should be sent to registrar before ——————- days of statutory meeting
A.30 days
B.14 days
C.21 days
733.The meeting held by the company with in a period of not less than one month and not more than 6
months is called ————-
A.Statutory
B.Annual
C. General
734.——————– audit is not a statuary requirement
A.Management
B.Financial
C.Tax Audit
735.—————– audit refers to the evaluation of company’s performance against planned goals in the
areas of social responsibility.
A.Cost audit
B.Social audit
C. Management audit
736.Bonus shares are issued to —————-
A.New members
B.Existing share holders
C.Employees
737.——– Section of the Companies Act deals with Appointment of Company auditor.
A.Sec-226
B.Sec-224
C.Sec-227
738.——– Section of the Companies Act deals with qualification of Company auditor.
A.Sec-226
B.Sec-224
C.Sec-227
739.Amount of Share premium may be utilized for
A.Payment of dividend
B.Writing of preliminary expenses
C. Routine expense
740.Share Premium Account should be shown in Balance sheet under
A.Paid-up capital
B.Subscribed capital
C. Reserves and surpluses
741.Auditor should see that amount received for premium on issue of shares should be shown in
A.Subscribed capital
B.Capital Reserve Account
C. Share Premium Account
742.A company can issue redeemable preference shares if authorized by
A.Memorandum of Association
B.Articles of Association
C.Companies Act-1956
743.A company can issue bonus shares if authorized by
A.Memorandum of Association
B.Articles of Association
C. Companies Act-1956
744.Interest on calls paid in advance according to table A, should not exceed
A.6%
B.5%
C.10%
745.For the forfeiture of shares, the auditor should check that it is permitted
A.Memorandum of Association
B.By articles of association
C. Under Companies Act 1956
746.Profits on reissue of forfeited Shares should be transferred to
A.Share forfeited Account
B.Capital Reserve Account
C.Profit and Loss Account
747.Shares issued for consideration other than cash should be vouched with the help of
A.Director’s minute Book
B.Shareholder’s minute Book
C.Contact with the party concerned
748.While checking the allotment of shares, the auditor should see that it is made within
A.100 days of issue of prospectus
B.120 days of issue of prospectus
C.150 days of issue of prospectus
749.Which of the following percentage of nominal amount of shares should be received with application
A.10
B.15
C.5
750.Accounting standards are prepared by
A.SEBI
B.RBI
C.ICAI
D.ITA
751.Which of the following is referred to confirm the allotment of shares to the vendor
A.Cash book
B.Pass book
C. Director’s minute
752.Share premium Account is shown on the _______________
A.Asset side of Balance sheet
B.Liability side of Balance sheet
C.Credit side of profit and loss Account
753.Issue of shares at discount should be sanctioned by the ________________
A.Board of directors
B.Share holders
C.Company Law Board
754.The maximum rate of discount on shares shall not exceed________________
A.20%
B.15%
C.10%
755.Discount on issue of shares not written of is shown separately in Balance sheet under the
head_____________
A.Miscellaneous expenditure
B.Preliminary expanses
C. Current assets
756.__________________section of Companies Act deals with share Capital
A.69
B.60
C.50
757.Which among the following is not a function of the author
A.Checking errors and frauds
B.Vouching with original documents
C. Preparing final Accounts
758.Audit conducted as per the provisions of law is _____________
A.Statutory Audit
B.Continuous Audit
C. Social Audit
759.The scope of auditing does not cover.
A.Vouching
B.Checking arithmetical accuracy
C.Ledger posting
760.Internal audit is conducted
A.Periodically
B.Throughout the year
C. Once in a year
761.The amount of application money received shall be deposited in a scheduled bank until________
A.Annual general meeting
B.General meeting
C.Certificate to commencement obtained
762.Amount received as premium can be used to ___________
A.Purchase Assets
B.Pay of liabilities
C. Issue bonus shares
763.The auditors are liable under
A.Companies Act Only
B.Income Tax Act Only
C. All above
764.The maximum number of audit assignment an auditor can accept is limited to ————– companies
A.10
B.15
C.20
765.Auditors can be appointed by ————– when the shareholders fail to appoint auditors at the
general meeting
A.Board of directors
B.Central government
C.Company Low board
766. The examinations of financial transactions with supporting evidences is called
A.Verification
B.Vouching
C.Auditing
767.Which among the following is an example of intangible asset?
A.Goodwill
B.Patents
C.All of these
768.Which of the following is not an item current asset?
A.Stock
B.Sundry debtors
C.Furniture
769.The term inventories stands for
A.Raw materials
B.Work in progress
C.All of these
770.Sales day book is used for recording
A.Credit sales
B.Cash sales
C.All sales
771.————— audit is more suitable for small business houses
A.Continuous
B.Annual
C.Partial
772.Vouching is an examination of ———– to ascertain the accuracy and authenticity of transactions in
the book of accounts
A.Audit files
B.Audit note book
C. Documents
773.————— is a written plan containing details with regard to the conduct of a particular audit
A.Audit Note book
B.Audit programme
C. Audit files
774.————— is the verification of books of accounts from Income tax point of view
A.Cost audit
B.Tax audit
C. Management audit
775.Investigation is conducted
A.Regularly
B.Quarterly
C. As and when required
776.Investigation is required when
A.Fraud is suspected in business
B.On acquisition of running business
C.All of them
777.Which among the following is not a right of company auditors
A.Right to access the book accounts
B.Right to seek explanations
C.Right to lies on books of accounts
778.Test checking is done when there is an effective system of ————–
A.Internal control
B.Internal audit
C. Internal check
779.Test checking means
A.Checking of all transactions
B.Checking of half of the transactions
C. Checking of selected items
780.Audit working papers are ————————–
A.Important information about audit
B.Appointment letters regarding audit
C.Letter of notice
781.Current audit file consists of
A.Matters of future importance
B.Matters relations to post years
C.Matters relating to the year of audit
782.——————- begins where accounting ends
A.Bookkeeping
B.Auditing
C. Internal check
783.—————- audit is compulsory for joint stock companies
A.Statutory
B.Final
C.Continuous
783.Treating revenue expenditure as capital expenditure is an example of error of ——————-
A.Principle
B.Compensating
C. Clerical
785.Financial statements are prepared by
A.The accountant
B.The auditor
C. Managing director
786.Preliminary expanses not written off are treated as
A.Fixed assets
B.Intangible assets
C. Fictitious assets
787.Verification of assets involves a critical examination of
A.Ownership
B.Existence
C.All of these
788.Finished goods are valued for a balance sheet purpose
A.At cost price
B.At market price
C.At lower of cost or market price
789.—————- includes financial and non-financial control
A.Internal check
B.Internal control
C. Internal audit
790.—————- is concerned with the allocation of work among employees
A.Internal control
B.Internal check
C. Internal audit
791.The duties of internal auditor is prescribed by
A.Companies act
B.Company law board
C. Management
792.Internal audit is considered as a service to ——————-
A.Share holders
B.Board of directories
C. Management
793.Pre-arranging and coordinating the audit work is called ——————
A.Audit planning
B.Vouching
C.Verification
794.A fixed audit programme is also called a ——— programme
A.Tailor made
B.Man made
C. Auditor made
795.Share holders minute book should be vouched for
A.Payment to vendors
B.Payment to promoters
C.Issue of bonus shares
796.—————- is deducted from called up capital to get paid up capital
A.Subscribed capital
B.Issued capital
C. Calls in arrears
797.Discount on issue of shares is shown under the ————— lead
A.Current asset
B.Preliminary expanses
C.Miscellaneous expanses
798.To forfeit shares ————— days notice to the share holder’s given
A.40
B.14
C.24
799.————– of the companies Act 1956 prescribes the duty of preparing a report by an auditor
A.Sec-227(2)
B.Sec-273(1)
C.Sec-224(2)
800.A ————— report is one which contains the opinion of the auditor subject to certain conditions
A.Unqualified
B.Qualified
C. Clean
801.————— is made out of reserves or share premium
A.Preference shares
B.Bonus shares
C. Debentures
802.—————- shares cannot be issued if the company makes any default in the payment of its
obligation
A.Preference
B.Equity
C. Bonus
803.Capitalization of reserves means ————————-
A.Creation of provision
B.Declaration of dividend
C.Issue of bonus shares
804.Provisions regarding bonus issue should be given in ——————– document
A.Memorandum of association
B.Articles of association
C. Prospectus
805.Balance remaining in the forfeited Account after reissue is transferred to ————— account
A.General reserve
B.Capital reserve
C. Premium account
806.If reissue of shares are more than face value of shares, the excess amount is transferred to ———-
account.
A.General reserve
B.Capital reserve
C. Premium account
807.Share call amount due is credited to —————— account
A.Share application account
B.Share allotment account
C. Share capital account
808.When excess applications money is refunded to applicants it is vouched with cash book and ——-
A.Letter of allotment
B.Letter of call
C. Letter of regret
809.Partial auditing is usually done by
A.Sole trading concern
B.Joint stock company
C. Govt. department
810. The measurable value of an alternative use of resources is referred to as:
A. An opportunity cost
B. An imputed cost
C. A different cost
D. A sunk cost
E. None of these
811. A quantitative expression of management objectives is an:
A. Organizational chart
B.Management chart
C. Budget
D. Procedural chart
E. None of these
812. At break-even point of 400 units sold the variable costs were Rs. 400 and the fixed costs were
Rs.200. What will be the 401 units sold contributing to profit before income tax?
A.Rs. 0.00
B.Rs. 0.50
C.Rs. 1.00
D.Rs. 1.50
E. None of these
813. In considering a special order situation that will enable a company to make use of currently idle
capacity, which of the following cost will be irrelevant:
A. Materials
B. Depreciation
C. Direct labour
D. Variable factory overhead
E. None of these
814. Completion of a job is result in:
A. DR finished goods …….. CR WIP
B. DR Cost of goods ……… CR finished goods
C. DR WIP …………………….. CR FOH control
D. DR FOH control ………… CR FOH applied
E. None of these
815. As per Section 139 of the Companies Act 2013,Company can appoint____________as an auditor.
A.individual Chartered Accountant
B.Chartered Accountant Firm
C.Either of the above
D.individual Cost Accountant
816. As per section 141 of the Companies Act,2013,apersonshallb eligible for appointment as an auditor
of a company if he is a ___________.
A.Chartered Accountant whether having Certificate of Practice or not
B.Chartered Accountant having Certificate of Practice
C.Chartered Accountant or Cost Accountant having Certificate of Practice
817. Where a limited liability partnership is appointed as an auditor of accompany ,who shall be
authorised to act and sign on behalf of the firm?
A.Any of the partners of the Firm.
B.Only the partners who are Chartered Accountants.
C.LLP cannot be appointed as an Auditor of a company.
D.Only the Managing Partner of the Firm.
818. Who among the following shall not bed is qualified 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 an officer or employee of the company.
D.None of the above
819. The term “business relationship” shall be construed as any transaction entered into for a
commercial purpose, except commercial transactions which are in the nature of?
A.Professional services
B.Arm’s Length Price transactions
C.Both of the above
D. Related services
820. A person whose________isadirectorinthecompanyshallbedisqualifiedtobeappointed as auditor of
that company.
A.Step – Father
B.Spouse
C.Step – Brother
D.Any one of the above
821. Secret reserve strengthens financial position, hence they are allowed.
A.Right
B.Wrong
C.Cannot say
822. Operating cost in often named as:
A. Manufacturing cost plus commercial expenses
B. Prime cost plus factory overheads
C. Direct material plus direct labour
D. Selling plus administrative expenses
E. None of these
823. Expenses such as rent and depreciation of a building are shared by several departments these are:
A. Indirect expenses
B. Direct expenses
C. Joint expenses
D. All of the above
E. None of these
824. If under applied FOH is closed to cost of goods sold, the journal entry is:
A. DR Cost of goods sold …….. CR FOH control
B. DR FOH control ………………. CR Cost of goods sold
C. DR FOH control ………………. CR Profit % loss account
D. None of these
825. Re-order quantity …… 3600 units Maximum consumption …… 900 units per week Minimum
consumption …….300 units per week Re-order period ………………..5 weeks Based on this data Re-
order level is:
A. 4500 units
B. 3900 units
C. 1200 units
D. 400 units
E. None of these
826. A credit balance remaining in FOH Control account is called:
A. Over-applied overhead
B. Under-applied overhead
C. Actual overhead
D. None of these
827. Direct material cost plus direct labour cost is called:
A. Prime cost
B. Conversion cost
C. Product cost
D. All of these
E. None of these
828. Productivity means:
A. The ability to produce
B. All units produced
C. Good units produced
D. None of these
829. A segment of the business that generates both revenue and cost is called:
A. Profit Center
B. Cost Center
C. Cost driver
D. All of these
E. None of these
830. Economics resources of a business that are expected to be of benefit in the future are referred to as:
A. Liabilities
B. Owner’s equity
C. Withdrawals
D. Assets
E. None of these
831. Maximum number of partners in a partnership firm set up in Pakistan under Partnership Act,
1932 is:
A. 5
B. 25
C. 20
D. None of these
832. Preparation of final financial reports is governed in Pakistan under:
A. No law
B. Companies Ordinance 1984
C. None of these
833. Inventory turnover is calculated as under:
A.Cost of Goods sold/Closing Inventory
B. Gross profit/Closing Inventory
C. Sales/Opening Inventory
D. None of these
834. Deferred Revenue is:
A. Liability
B. Asset
C. None of these
835. Preparation of annual report of a firm is governed under:
A. Partnership Act 1932
B. Under partnership Deed
C. None of these
836. Deferred Taxation amount be treated as:
A. Foot note
B. An item in the Balance Sheet on asset side
C. None of these
837. Return of Equity will be calculated as under:
A. Operating Profit x 100/Equity
B. Net profit x 100/Paid up Capital only
C. None of these
838. Current maturity of long term loan is:
A. Current Liability
B. Long Term Liability
C. None of these
839. Prime cost is calculated as under:
A. Manufacturing Cost/Cost of Goods Sold
B. Direct Method plus factory overheads
C. Direct labour + Direct Material
D. None of these
840. Process Cost is very much applicable in:
A. Construction Industry
B. Pharmaceutical Industry
C.Air line company
D. None of these
841. Increase in income constitutes:
A. Inflows
B. Outflows
C. None of these
842. An endowment insurance policy can be taken in respect of:
A. Fire insurance
B. Accident insurance
C. Life insurance
D. None of these
843. Deferred cost is a:
A. Liability
B.Asset
C. None of these
844. Banks, for the preparation of financial statements, are governed under:
A. Banking Companies Ordinance, 1962
B. State Bank of Pakistan Act
C. None of these
845. Return on investment is computed:
A. Investment/Profit x 100
B. Profit x 100/Investment
C. None of these
846. Rent of the premises constitutes variable expenses for cost allocation:
A. True
B. False
847. Sugar used in a sugarcane company is:
A. Variable cost
B. Fixed cost
C. None of these
848. An auditor is liable under the following circumstances:
A. Third Party Liabilities
B. Fraud perpetrated in highly sophisticated circumstances
C. None of these
849. Agricultural income is taxable under the Income Tax Laws of Pakistan:
A. True
B. False
850. Principal and markup payment within one year constitutes long term liability for disclosure in the
balance sheet of a company.
A. True
B. False
851. Ordinarily one can have the following partners in a partnership in Pakistan under the Partnership
Act 1932.
A. 10
B. 20
C. 30
852. Working Capital finance can be termed as “Running Finance” in a limited company.
A. True
B. False
853. Income from Capital gains arising out of trading on a stock strange in Pakistan is taxable these
days:
A. True
B. False
854. Conversion Cost is calculated as under:
A.LabourPlus Materials
B.Labour plus overheads
C. None of these
855. Current Ratio can be calculated as under:
A. Current Liabilities/Current Assets
B. Current Assets/Current Liabilities
C. None of these
856.The term “Audit” originated from the Latin word-
A.Audire
B. Adhere
C.Adihere
D. None of the above
857.The basis for decision making by the management is-
A. Accounting statements
B. Financial Statement
C. Bank statements
D. None of the above
858.The management takes so many decisions on the basis of-
A. Accounting statement
B. Financial statements
C. Bank statements
D. None of the above
859.The authenticity of financial statements is very essential and such authenticity of accounts can be
assured with the help of an-
A. Internal Audit
B. Performance Audit
C.Independant Audit
D. None of the above
860. Examination of books of accounts with supporting vouchers and documents in order to detect and
prevent error and fraud is the main function of-
A. Accountant
B. Management
C. Company Director
D. Auditing
861. Express an opinion on the financial or non financial areas is the goal of-
A. Accounting
B. Managing
C. Auditing
D. None of the above
862. In the case of financial audit, a set of financial statements are said to be true and fair when they are
free of-
A. Error
B. Fraud
C. Material Misstatements
D. None of the above
863. Audit deals with checking, verification and examination of-
A. Accounts
B. Finance
C. Management
D. None of the above
864. Time, extent and nature of audit depend upon effectiveness of-
A. Environmental Control System
B. Management Control System
C.Both(a) and (b)above
D. Internal Control System
865. ________ is responsible for ‘Maintenance of accounts”
A. Auditing
B.Accountong
C. Both (a) and (b)above
D. Management
866. Auditor has to report that accounts have been prepared as per GAAP and presents a ____
A. Correct view of business operations
B. Authentic view of business operations
C.Both(a) and (b)above
D. true and fair view of business operation
867. Auditing can be defined as an independent examination of –
A. Financial records
B.Non financial records
C.Both(a) and (b)above
D. None of the above
868. The objective of an audit of financial statements is to enable an auditor to …………. on financial
statements
A.Complition of an audit
B. Express on opinion
C. Check the transaction
D. Check frauds
869. Accounts maintenance is the function of …….
A. Auditor
B. Accountant
C. Auditor staff
D. Practicing Professionals
870. Review of system and procedure is the primary function of-
A. Accounting
B. management
C. Auditing
D. None of the above
871. Review of internal control system is very important for the auditor as the effectives of internal
control system will determine the extent of checking to be done by the -\
A. Accountant
B. Management
C. Both accountant and management
D. Auditor
872. The compliance test and substantive procedures performed by the auditor will determine the
effectiveness of –
A. Management Accounting System
B. Cost Accounting system
C. Internal Audit system
D. Internal Control system
873. Auditor has to compare the balance sheet and Profit and liss account or other statement with the-
A. Bank statement
B. Cash Book
C. Both (a) and (b) above
D. Books of Accounts and supporting vouchers
874. The auditor has to give its opinion whether the financial statements depicts
A. Correct view of the accounts
B. Acceptable view of the accounts
C. True and fair view of the state of affairs of organization
D. None of the above
875. It is because of audit the the owner will be satisfied about the
A. Profits of the organisation
B. Employees, customers and suppliers of the organization
C. Business operations and working of its various departments
D. None of the above
876. No one will try to commit an error or fraud as the accounts are subject to-
A. Scrutiny
B. Internal control
C. Audit
D. None of the above
877. Auditing is very useful in obtaining the independent opinion of the auditor about-
A. Financial condition
B. business condition
C. Profits/losses
D. Business condition
878. Audit helps in protecting the interests of-
A. Employees
B. Government
C. Management
D. Shareholders in case of joint stock company
879. Money can be borrowed easily on the basis of audited balance sheet from-
A. Private sources
B. Creditors
C. Financial institutions
D. Government
880. Generally auditing exercise on is based on test checking, Inferring a result on the basis of test check
always need not to be-
A. Fair
B. Apparently correct
C. True
D. None of the above
881. Generally an auditor needs to release the report up to-
A. A specified timeline
B. Unspecified timeline
C. Infinite timeline
D. End of the next accounting period
882. The evidences obtained by an auditor are persuasive rather than-
A. Correct
B. Reliable
C. Conclusive
D. All of the above
883. An audit cannot add exactness and certainty to financial statements when these factors ______
A. Do not exist
B. Exists
C. Are not known
D. None of the above
884. The audit opinion is based on the information provided by the –
A. Employees
B. Government
C. Management
D. All of the above
885. The investigation is related to critical checking of-
A. Internal records
B. Particular records
C. Accounting records
D. External records
886. Which of the following is not the objective of Internal audit-
A. To keep proper control over business activities
B. To evaluate accounting system
C. To report to the owner and outsiders
D. To evaluate the internal check system
887. Primary responsibility for the adequacy of financial statement disclosures rest with the ______
A. Auditor
B. Management
C. Auditor’s Staff
D. Central Government One of the
888. following not an advantage of audit
A. It provides satisfaction for owner
B. It helps in getting loans
C. It reduces cost burden
D. It detects errors and frauds
889. The purpose of audit and investigation is
A. Same
B. Different
C. Sometimes same and sometimes different
D. None of the above
890. Investigation implies systematic, critical and special examination of the records of a business for a-
A. General purpose
B. Unspecified purpose
 D. None of the above
891. Investigation is conducted by-
A. Cost Accountant
B. Company Secretary
C. Chartered Accountant
D. Any person
892. Audit is conducted by-
A. Cost Accountant
B. Company Secretary
C. Chartered Accountant
D. Any person
893. Investigation seeks-
A. Conclusive evidence
B. Corroborative evidence
C. Both (a) and (b) above
D. Persuasive evidence
894.Auditing seeks-
A. Conclusive evidence
B. Corroborative evidence
C. Both (a) and (b) above
D. Persuasive evidence
895. Audit can be divided into two categories-
A. Internal audit and external audit
B. Audit required under law and voluntary audit
C. Financial audit and cost audit
D. None of the above
896. Internal audit is an evaluation and analysis of the business operation conducted by the-
A. Accounting staff
B.Managemene
C. Internal audit staff
D. External audit staff
897. In big organization an internal audit is carried out by the team of professionals-
A. in the organization
B. outside the organization
C. As outsourcing function
D. as retailers
898. The purpose of internal Audit is to keep proper control-
A. over accounting activities
B. over audit activities
C. over management activities
D. over business activities
899. The purpose of internal audit is to evaluate the-
A. Accounting system
B. Internal audit system
C. Management accounting system
D. Statutory audit system
900. The purpose of internal audit is to review the-
A. Accounting aspects
B. Auditing aspects
C. working of employees
D. Working of business
901. The purpose of internal audit is to protect the
A.Accounting staff
B. Audit staff
C. Management
D. Assets
902. The purpose of internal audit is to evaluate the-
A. Internal control system
B. Internal audit system
C. Internal check system
D. All of the above
903. The purpose of Internal audit is to detect the error in the-
A. Bank records
B. Cash records
C. Accounting records
D. Employees records
904. The purpose of Internal audit is to detect frauds in the-
A. bank accounts
B. Cash accounts
C. Cost accounts
D. Books of account
905. The purpose of internal audit is to determine liabilities of –
A. Accountant
B. Internal auditor
C. External auditor
D. Employees
906. The internal audit can pin point the person responsible for-
A. Errors
B. Frauds
C. Both errors and frauds
D. Carelessness
907. The purpose of internal audit is to help an-
A. Internal audit
B. External audit
C. Management audit
D. Independent audit
908. The external auditor can rely on Internal auditor and there is no need of –
A.Stautory audit
B. Cost audit
C. Management audit
D. Cent percent checking
909. The purpose of internal audit is to check the-
A. Internal appraisal
B. Government appraisal
C. External appraisal
D. Performance appraisal
910. The purpose of Internal audit is to provide suggestions for improvement of-
A. Accounting activities
B. Audit activities
C. Employees activities
D. Business activities
911 .The internal auditor cannot compel the management to-
A. Implement suggestions
B. Discontinue certain activities
C. Replace employees
D. None of the above
912. The internal audit staff can provide new ideas about-
A. Accounting matters
B. Auditing matters
C. Legal matters
D. Various business matters
913. The purpose of internal audit is to determine the proper use of-
A.Accouning staff
B. Audit staff
C.Leegal staff
D. Resources
914. The purpose of internal audit is to exminetge-
A. Auditing policies
B. Recruitment policies
C. Accounting policies
D. Production and sale policies
915. The benefit of internal audit is that proper accounting system is-
A. Already being used
B. Not being used
C. Introduced
D. Not required
916. The benefit of internal audit is that there is better management of-
A. Accounting concern
B. Auditing concern
C.Legal concern
D. Business concern
917. The goals of business can be achieved if there is proper –
A. Internal control
B.Internal check
C. Internal audit
D. All of the above
918. Management could rely on internal audit for-
A. Good results
B. Better results
C. Best results
D. All of the above
919. The management can review progress through-
A. Internal check
B. Internal conrrol
C. Internal audit
D. External audit
920. The internal audit is helpful to have effective control over-
A. Accounting activities
B. Auditing activities
C. Business activities
D. All of the above
921. The assets protection is possible through –
A. Internal control
B. Internal check
C. Internal audit
D. All of the above
922. The internal audit is helpful to apply-
A. Division of labour
B. Integration of labour
C. Refinement of labour
D. Concentration of labour
923. The auditor can suggest the way and means to improve the-
A. Accounting performance
B. Auditing performance
C. Management performance
D. Business performance
924. The internal audit is used to protect accounting records from-
A. Errors
B. frauds
C. Both errors and frauds
D. None of the above
925 .The internal auditor can evaluate the result of-
A. Accountant
B. Employees
C. Management
D. All persons
926. The auditor can go through the internal audit report at the time of-
A. Starting audit work
B. Finishing audit work
C. Starting accounting work
D. Finishing accounting work
927. External auditor is responsible for-
A.Internal audit
B.External audit
C.Both internal as well as external audit
D.Mangement audit
928.Internal auditor is helpful to improve the performance of the-
A.Internal audit department
B.Statutory audit department
C.Accounting department
D.Organisation
929. Internal audit improves performance of-
A.Accounts department
B.Audit department
C.Both account and audit department
D.Business and employees
930.Internal audit is used to check the proper use of-
A.Accounts
B.Finanace
C.Employees
D.resources
931.Internal audit is a tool to use the resources in the best interest of the-
A.Accounting staff
B.Audit staff
C.Bothe accounts and audit staff
D.Business
932. Internal audit is of help to investigate in to the-
A.Accounting matters
B.Business matters
C.Financial matters
D.Employees matters
933.The limitation of internal audit is-
A.Shortage of time
B.Shortage of finance
C.Shortage of time and finance
D.Shortage of staff
934.The shortage of staff is a hurdle to get benefit of-
A.Internal audit
B.External audit
C.Performance audit
D.Efficiency audit
935.The limitation of internal audit is that it starts when-
A.Errors are detected
B.Errors are suspected
C.Errors remains undetected
D.Accounting ends
936.If audit staff is competent there is less chance of errors being-
A.Detected
B.Suspected
C.Located
D.Undetected
937.In case of poor audit staff there is no guarantee that audited accounts are-
A.Full of errors
B.Free from errors
C.Free from frauds
D.Full of frauds
938.The limitation of internal audit is that management may not feel their responsibility in completing
the-
A.Accounts formalities
B.Legal formalities
C.Audit formalities
D.Compliance formalities
939.The owners(shareholders)need assurance that the financial Statements prepares by the management
are-
A.As per norms
B.Fair
C.Reliable
D.Reasonable
940.Other users of financial statements ,e.g.tradecreditors,banks.financial institutions. Tax
authorities,other government authorities,labourunions.etc,also place greater reliance-
A.Computerised accounts
B.Internally audited accounts
C.Externally audited accounts
D.None of the above
941.Section 224 of the Companies Act 1956 contains provisions regarding the appointment of the –
A.Accountant
B.Internal auditor
C.External auditor
D.All of the above
942.Secretarial Audit is a ———- and it is a part of total compliance management in an organisation-
A.Company audit
B.Management audit
C.Legal audit
D.Compliance audit
943.The secretarial audit is an effective tool for corporate compliance management. It helps to detect
non-compliance and to take-
A.Appropriate action
B.Legal action
C.Corrective measures
D.All of the above
944.Secretarial audit is essentially a mechanism to monitor compliance with the requirements of-
A.Company laws
B.Mercantile laws
C.Stated laws
D.Corporate laws
945.A compny secretary In Practice has been assigned the role of——– under section2(2)(c)(v) of the
Company Secretaries Act,1980-
A.Internal auditor
B.Company auditor
C.Statutory auditor
D.Secretarial auditor
946.It is recommended that the ——– be carried out periodically(quarterly/half yearly)and adverse
findings if any, be communicated to the Board for corrective action-
A.Internal audit
B.Statutory audit
C.Financial audit
D. Secretarial audit
947.As of now—- is not mandatory on the companies-
A.Secretarial audit
B.Statutory audit
C.Cost and management audit
D.Internal audit
948.Secretarial audit is optionally undertaken by the companie for maintaining-
A.Proper accounting
B.Proper records,documents& supervision
C.Good compliance management system
D.Good corporate Governance practice
949.Ministary of Corporate Affairs has issed mandatory——- on Companies engaged in Bulk
drugs,fertiliation,sugar ,telecommunications,industrial alcohol and electricity &petroleum-
A.Secretarial audit records
B.Financial audit records
C.Statutory audit records
D.Cost audit records
950.Cost audit is mandatory if in immediate previous year aggregate value of——- exceeds the specified
limits-
A.Total turnover
B.Paid up capital
C.Net worth
951.The cost auditor has to judge, whether the planned expenditure is designed to give-
A.Good results
B.Appropriate results
C.Targeted results
D.Optimum results
952.The cost auditor has to judge ,whether the size and channels of expenditure were designed to
produce the-
A.Good results
B.Better results
C.Best results
D.optimum and targeted results
953.The cost auditor has to judge, whether the return from expenditure on capital as well as current
operations could be improved by-
A.New methods and techniques
B.Scientific plans and a actions
C.Innovative skills
D.Some other alternative plan of action
954.Cost audit is useful for the purpose of ——– and proper utilization of scarce resources-
A.Incresing profit
B.Reducing cost
C.Cost control and cost reduction
D.Optimum utilization
955. The objective of tax audit is to assist the —— in making the correct income tax assessment of the
assessee concerned
A.Government
B.Commissioner of income tax
C.CBDT
D.Income tax authorities
956.The tax auditor has to specifically report on certain transactions which have an effect on the ———
of the assessee concerned and are,thus important to the tax authorities.
A.Income
B.Profits
C.Income tax liability
D.All of the above
957.Therre are certain features of co-operative which are similar to those of-
A.Sole proprietorships
B.Partnership
C.Companies
D.All of the above
958.As in the case of companies , in co-operative socitiesalso,there is a ——–of ownership from management
A.Integration
B.Seperation
C.Coordination
D.None of the above
959.———of trusts assures the creators of trust and /or those for whose benefit the trust is created.
(i.e.benificiaries)the financial statements of the trust are reliable.
A.Independent accounting
B.Independent financial audit
C.Independent appraisal
D.Independent internal audit
960.In many cases, it is specifically provided in the relevant law and/or in the trust deed that the ——–
shall get the financial statements of the trust audited.
A.Owners
B.Management
C.Members
D.Trustees
961.————-is an examination of the operations,records and books of account of the insurance
company.
A.Internal audit
B.Extenal audit
C.Insurance audit
D.Tax audit
962.Auditor performs an audit to ensure that the customer has paid the appropriate premium for
————- provided to him.
A.Benifit
B.Assurance
C.Risk cover
D.All of the above
963. At present ,partnership firms in India are ——- to get their financial statements audited.
A.Legally required
B.Not legally required
C.Compulsorily
D.None of the above
964. Still, many firms get their financial statements audited as auditied accounts helps in proper-
A.Maintainance of accounts
B.Maintainance of assets and properties
C.Valuation of goowill,distribution of share of the deceased Partner to their legal heirs etc.
D.All of the above.
965. Sole proprietary concerns are——- to get their financial statements audited by independent
financial auditors.
A.Legally required
B.Not legally required
C.Ethically required
D.Not ethically required.
966.Generally management audit /operational audit is –
A.Mandatory
B.Compulsory
C.Not mandatory
D.Not mandatory but it recommendatory certainly
967.After the function audit, proper systems are put in place and gaps as identified are filled by way of –
A.Legal actions
B.Corrective actions
C.Corroborative actions
D.Compensatory actions
968. A performance audit can be a review of a program to assure that it is-
A.Complete
B.Satisfactory
C.Foolproof
D.Satisfying its objectives
969.——–may take into account the anticipated benefits of program relative to the actual performance-
A.Targeted performance
B.The performance audit
C.Planned performance
D.Achieveable and standard performance
970.The performance audit may be initiated by the organisation or by-
A. Government
B.Employees and management
C.Shareholders
D.External interested parties
971.Balance sheet audit does not include-
A.Vouching of income, expense, accounts related to assets and liabilities
B.Examination of adjusting and closing enthes
C.Verification of assets and liabilities
D.Routine checks.
972.Cost audit is related to
A.Cost accounting records
B.Compliance
C.Financial statements
D.Balance and Profit Loss account
973. Secretarial audit is also termed as
A.Financial audit
B.Compliance audit
C.operational audit
D.Tax audit
974.Cost audit i compulsory for-
A.Specified entities
B.Specified industries
C.All companies
D.All manufacturing companies
975.A Company Secretary in Practice has been authorized under Section 2(2)(c)(v) of the Company
Secretaries Act 1980, to conduct:
A.VAT Audit
B.Secretarial Audit
C.Cost Audit
D.Bank Audit
976.Which types of audit is conducted by the internal audit staff:
A.Cost Audit
B.Secretarial Audit
C.Internal audit
D.Tax audit
977.Balance sheet audit is also known as:
A.Continues Audit
B.Annual audit
C.Internal audit
D.Financial audit
978.Secretarial audit is conducted by:
A.Chartered Accountant in Practice
B.Lawyer
C.Internal auditor
D.Company Secretary in practice
979.Which type of audit is conducted by the Internal audit staff:
A.Cost Audit
B.Secretarial Audit
C.Internal Audit
D.Tax Audit
980. In comparison to the independent auditors, an internal auditor is more likely to be concerned with:
A.Cost accounting system
B.Internal control system
C.Legal compliance
D.Accounting system
981. Broadly defined, the subject matter of any audit consist of
A.Financial statements
B.Economic data
C.Assertions
D.Operating data
982. An audit of financial statements is conducted to determine if the
A.Organization is operating efficiency and effectively
B.Auditee is following specific procedures or rules set down by some higher authority
C.Overall financial statement statements are stated in accordance with the applicable financial
reporting framework
D.Client’s internal control is functioning as intended
983. Most of the independent auditor’s work in formulating an opinion on financial statement consist of
A.Studying and evaluating internal control
B.Obtaining and examining evidential matter
C.Examining cash transaction
D.Comparing recorded accountability with assets
984. In financial statement audits, the audit process should be conducted in accordance with
A.The audit program
B.Philippine standard on auditing
C.Philippine accounting standards
D.Philippine Financial Reporting Standards
985. ——-lays out the strategies to be followed to conduct an audit.
A.An action plan
B.An audit plan
C.An audit programme
D.All of the above
986.The objective of the auditor is to plan the audit so that it will be performed in-
A.planned way and manner
B.timely manner
C.Both(a)and(b) above
D.an effective manner
987.While framing an audit plan auditor should ascertain his—— cast by various legislations on him.
A.Limitations
B.Duties and obligations
C.Rights and powers
D.Terms of appointment and responsibilities
988.Auditor should determine the ——and the timing of the report.
A.Nature
B.Actual
C.Nature and actual
D.Form
989.——–followed by the enterprise affect the audit plan.
A. Accounting policies
B.Audit policies
C.Accounting and audit policies
D.Management policies
990.While preparing an audit plan due consideration may be given to the areas where there is any
change in-
A.Legal policies
B.Audit policies
C.Accounting policies
D. Management policies
991.It is important for the auditor to identify the areas which involves—–, so that the audit can be
planned in such a way that overall audit risk will be less.
A.Lesser audit risk
B.Great audit risk
C.Inherent audit risk
D.Zero percent audit risk
992.While laying down an audit plan the auditor shall assess the effectiveness of-
A.Accounting system
B.System of internal controls
C.Both (a)and (b) above
D.External controls on the operations of the entity
993.The nature and extend of audit evidence will vary-
A.in different auditing situations
B.In different accounting situations
C.Indifferent managing situations
D.from one organisation to another organisation
994.An audit programme is a set of ——— which are to be followed for proper execution of audit.
A.Orders
B.Directions
C.Instructions
D.Rules
995.The prepared audit program may be——— if needed in accordance with the prevailing
circumstances.
A.Reviewed
B.Revised
C.Rechecked
D.Reconsidered
996.An audit program largely depends on the-
A.Size of the business activities
B. Size of the documents and record
C. Size of the auditing staff
D. Size of the organization and other relevant factors.
997. Minimum essential work to be done is ———and rest is according to circumstances.
A.Standard programme
B.General programme
C.Essential programme
D.Relevant programme
998.There is no——– applicable for all situations.
A.Relevant audit programme
B.Actual audit programme
C.Written audit programme
D.Standard audit programme
999.Audit programme is documented in the ——–,which are the official rrecord that contains the
planning and execution of the audit agreement.
A.Audit plan
B.Action plan
C.Audit and action plan
D.Audit working papers
1000.Audit programmes helps in ensuring that all important areas are appropriately covered during.
A.Accounting
B.Recording
C.Auditing
D.Accounting and auditing
1001.Audit programme helps in distributing the work among the assistants in accordance with the level
of their.
A.Qualifications
B.Past knowledge
C.Expertise
D.Competence and experience
1002.Audit programme provides instructions to the audit staff and reduces scope for-
A.Understanding
B.Misunderstanding
C.Negligence
D.Liabilities
1003.Audit programme helps in fixing the ——- for the work done among the audit staff as work done
may be traced back to the individual staff members.
A.Remuneration
B.Liabilities
C.Ngligencies
D.Responsibility
1004.Audit programme serves as evidence against charge of-
A.Liabilities
B.Qualifications.Responsibilities
D.Negligence
1005.On completion of an audit————– serves the purpose of audit record which may be useful for
future reference.
A.Audit programme
B.Audit working papers
C.Audit plan
D.Audit notes
1006.Each business has separate problems. So a single/same audit programmecan not be laid down for-
A. Each type of CA firms
B. Each type of work
C. Each type of method
D. Each type of business
1007.Audit programme kills the ——– of capable persons. Assistant can not suggest any improvement in
the plan.
A.Qualities
B.Qualification
C.Efficiency
D.initiative
1008.The audit programme is ——- that it ignores many other aspects like internal control.
A.Automational
B.Mechanical
C.Professional
D.Emotional
1009.With the passage of time new problems arises during the audit may be ——- in the audit
Programme.
A.Looked
B.Over looked
C.Under looked
D.Ignored
1010. Which of the following best describe the operational audit?
A.It requires the constant review by internal auditors of the administrative controls as they relate to operations
of the company.
B.It concentrates on implementing financial and accounting control in a newly organized company.
C.In attempts and is designed to verify the fair presentation of a company’s results of operations.
D.It concentrates on seeking out aspects of operations in which waste would be reduced by the
introduction of controls.
1011. The auditor communicates the results of his or her work through the medium if the
A.Engagement letter
B.Audit report
C.Management letter
D.Financial statement
1012. Independent auditing can best be describe as a
A.Professional activity that measures and communicates financial accounting data
B.subset accounting
C.Professional activity that attest to the fair presentation of financial statement
D.Regulatory activity that prevents the issuance of improper financial information
1013. Which of the following statements is not a distinction between independent auditors and internal
auditors?
A.Independent auditors represent third party users external to the auditee entity, whereas internal auditors
report directly to management.
B.Although independent auditors strive for both validity and relevance of evidence, internal auditors
are concerned almost exclusively with validity.
C.Internal auditors are employees of the auditee, whereas independent auditors are independent contractors.
D.The internal auditor’s span of coverage goes beyond financial auditing to encompass operational and
performance auditing.
1014. Which of the following has the primary responsibility for the fairness of the representations made
in the financial statements?
A.Client’s management
B.Audit Committee
C.Independent auditor
D.Board of Accountancy
1015. An audit of the financial statements of KIA Corporation is being conducted by an external
auditor. The external auditor is expected to
A.express an opinion as to the fairness of KIA’s financial statements.
B.express an opinion as to the attractiveness of KIA for investment purposes.
C.certify the correctness of KIA’s Financial Statements.
D.examine all evidence supporting KIA’s financial statements.
1016. Which of the following statements about independent financial statements audit is correct?
A.The audit of financial statements relieves management of its responsibilities for the financial statement
B.An audit is designed to provide limited assurance that the financial statements taken as a whole are free from
material misstatement
C.The procedures required to conduct an audit in accordance with PSAs should be determined by the client
who engaged the services of the auditor.
D.The auditor’s opinion is not an assurance as to the future viability of the entity as well as the
effectiveness and efficiency with which management has conducted the affairs of the entity.
1017. The reason an independent auditor gathers evidence is to
A.Form an opinion on the financial statements
B.Detect fraud
C.Evaluate management
D.Evaluate internal controls
1018. An attitude that includes a questioning mind and critical assessment of audit evidence is referred
to as
A.Due professional care
B.Professional skepticism
C.Reasonable assurance
D.Supervision
1019. Jack has been retained as auditor of EVC Company. The function of Jack’s opinion on financial
statements of EVC Company is to
A.Improve financial decisions of company management
B.Lend Credibility to management’s representation
C.Detect fraud and abuse in management operations
D.Serve requirements of BIR, SEC, or Central Bank
1020. Which of the following is not one of the limitations of an audit?
A.The use of testing
B.Limitations imposed by client
C.Human error
D.Nature of evidence that the auditor obtains
1021. Which of the following statements does not properly describe a limitation of an audit?
A.Many audit conclusions are made on the basis of examining a sample of evidence.
B.Some evidence supporting peso representation in the financial statement must be obtained by oral or written
representation of management.
C.Fatigue can cause auditors to overlook pertinent evidence.
D.Many financial statement assertions cannot be audited.
1022. Which of the following is not one of the general principles governing the audit of financial
statements?
A.The auditor should plan and perform the audit with an attitude of professional skepticism.
B.The auditor should obtain sufficient appropriate evidence primarily through inquiry and analytical
procedure to be able to draw reasonable conclusions.
C.The auditor should conduct the audit in accordance with PSA.
D.The auditor should comply with the Philippine Code of Professional Ethics.
1023. Which of the following statements does not describe a condition that creates a demand for
auditing?
A.Conflict between an information preparer and a user can result in biased information.
B.Information can have substantial economic consequence for a decision-maker.
C.Expertise is often required for information preparation and verification.
D.Users can directly assess the quality of information.
1024. Which of the following statements does not properly describe an element of theoretical framework
of auditing?
A.The data to be audited can be verified.
B.Short-term conflicts may exist between mangers who prepare the data and auditors who examine the data.
C.Auditors act on behalf of the management.
D.An audit benefits the public
1025. An intentional act by one more individuals among management, employees, or third parties which
results in misrepresentation of financial statement refers to
A.Error
B.Noncompliance
C.Fraud
D.Illegal acts
1026. The auditor’s best defense when material misstatements in the financial statements are not
uncovered in the audit is that
A.The audit was conducted in accordance with generally accepted accounting principles
B.Client is guilty of contributory negligence
C.The audit was conducted in accordance with PSAs
D.Issuing a representation letter to the auditor
1027. What primarily differentiates fraud from an error
A.Materiality
B.Effect on misstatements
C.Intent
D.Frequency of occurrence
1028. Which of the following best identifies the two types of fraud?
A.Theft of assets and employee fraud.
B.Misappropriation of asset and defalcation.
C.Management fraud and employee fraud.
D.Fraudulent financial reporting and management fraud.
1029. Which of the following statements best describe an auditor’s responsibility to detect errors and
fraud?
A.An auditor should assess the risk that errors and fraud may cause the financial statements to contain
material misstatements and should design the audit to provide reasonable assurance of detecting errors
and fraud that are material to the financial statements.
B.An auditor is responsible to detect material errors, but has no responsibility to detect material fraud that are
concealed through employee collusion or management override of the internal control structure.
C.An auditor has no responsibility to detect errors and fraud unless analytical procedures or tests of
transactions identify conditions causing a reasonably prudent auditor to suspect that the financial statements
were materially misstated.
D.An auditor has no responsibility to detect errors and fraud because an auditor is not an insurer and an audit
does not constitute a guarantee.
1030. “The auditor would ordinarily expect to find evidence to support management representations
and not assume that they necessarily correct”. This is an example of
A.Unprofessional behavior
B.An attitude of professional skepticism
C.Due diligence
D.A rule in code of professional conduct.
1031. Books or original entry are called :
A. Ledger
B. Work sheets
C. Journal *
D. None of these
1032. For preparing balance sheets prepaid expenses are shown as part of :
A. Liability
B. Equities
C. Assets *
D. None of these
1033. Unrecorded and unpaid expenses are referred to as:
A. Prepaid expenses
B. Accrued expenses *
C. Additional expenses
D. None of these
1034. Amount, cash or other assets removed from business by owner is :
A. Capital
B. Drawings *
C. Assets
D. None of these
1035. Under the diminishing balance method,depreciation amount is :
A. Payment
B. Receipts
C. Expenditure *
D. None of these
1036. Users of accounting information include :
A. The tax authorities
B. Investors *
C. Creditors
D. All of these
1037. The business form(S) in which the owner(S) is (are) personally able is (are) the :
A. Partnership only
B. Proprietorship only *
C. Corporation only
D. Partnership and proprietorship
E. None of these
1038. The investment of personal assets by the owner :
A. Increase total assets and increases owners equity *
B. Increases total assets only
C. Increases total assets only
D. Increases assets and liabilities
1039. All of the following are forms of business organization except :
A. Proprietorship
B. Corporation
C. Retailer *
D. Partnership
1040. Economic resources of a business that are expected to be benefit in the future are referred to as :
A. Liabilities
B. Owner’s equity
C. Withdrawals
D. Assets *
1041. An owner investment of land into the business would:
A. Decrease withdrawals
B. Increase Liabilities
C. Increase owner’s equity
D. Decrease assets
E. None of these *
1042. A cash purchase of supplies would :
A. Decrease owner’s equity
B. Increase liabilities
C. Have no effect on total assets
D. None of these *
1043. An owner investment of cash into the business would :
A. Increase assets *
B. Decrease liabilities
C. Increase withdrawals
D. Decrease owner’s equity
E. None of these
1044. The payment of rent each month for office space would :
A. Decrease total assets
B. Increase Liabilities
C. Increase owner’s equity
D. None of these *
1045. Which one of the following accounts would usually have a debit balance ?
A. Cash
B. Creditors
C. Accounts Payable
D. Salaries expense *
E. None of these
1046. Quick assets include, which of the following ?
A. Cash
B. Account receivable
C. Inventories
D. Only A and B *
1047. Overall gain in addition to working costs is equivalent to :
A. Net sales
B. Cost of goods available for sale
C. Cost of goods sold
D. Gross profit *
1048. The Maximum number of partners in pakistan can be fixed at the following :
A. 20
B. 50 *
C. 75
D. None of these
1049. Balance sheet is always prepared :
A. For the year ended
B. As on a specific date *
C. None of these
D. All of these
1050. During the Audit of meat packer ltd . You are assigned to cover the audit of the payrolls of 800
employees numerate the test, you would carry out to ensure that :
A. All employees are genuine
B. Payment are only made for work done
C. Statutory documents are properly effected in accordance
D. Proper allocation of wage is made to various departments
1051. The measurable value of an alternative use of resources is referred to as :
A. An oppotunity cost *
B. An imputed Cost
C. A differential cost
D. A sunk cost
E. None of these
1052. A cost center is :
A. unit of production from which costs are calculated
B. A location which is responsible for controlling directs costs
C. Part of the processing plant above framework by which expenses are accumulated *
D. Any location of department which incurs cost
1053. A fixed cost :
A. May change is total when it is unrelated to production change.
B. It won’t change at all because it has nothing to do with changes in production *
C. Production stays the same per unit for every unit of change.
D. May change altogether ,contingent upon creation with the pertinent reach
1054. Completing of a job is a result in :
A. DR Finished goods CRWIP *
B. CR finished goods DR cost of goods
C. DR WIP CR FOH applied
1055. Operating cost is often named as :
A. Manufacturing cost plus commercial expenses
B. Prime cost plus factory overheads
C. Direct Materials plus direct labour
D. Selling plus administrative expenses *
1056. Several departments share costs like rent and building depreciation, including:
A. Indirect expenses
B. Direct expenses
C. Joint expenses *
D. All of the above
1057. If under-applied FOH is closed to cost of goods sold, the Journal entry is :
A. Control CR FOH cost of goods sold
B. Control DR FOH CR the cost of goods sold *
C. Control DR FOH CR profit and loss account
D. None of these
1058. Based on this data Re-order level is :
A. 4500 Units *
B. 3900 Units
C. 1200 Units
D. 400 Units
1059. A credit balance remaining in FOH control is called :
A. Over applied overhead *
B. Under-applied over head
C. Actual Overhead
D. None of these
1060. Direct material cost plus direct labour cost is called :
A. Prime Cost *
B. Conversion Cost
C. Product Cost
D. All of these
1061. Auditing refers to :
A. Preparation and checking of accounts
B. Only the accounts of business units are examined
C. Professional accountants only examine the accounts *
D. Check of vouchers
1062. Main object of auditing is :
A. Detection of errors
B. To find out whether P and L A/C and B/S show true and fair state of affairs
C. Detection of frauds *
D. Finding and avoiding errors and frauds
1063. Auditing is luxury for a :
A. Joint stock company
B. Partnership firm
C. Small shop-keeper *
D. Government company
1064. Limitation of audit is :
A. That is does not reveal complete picture
B. That is does not guarantee accuracy of accounts
C. That auditor may be biased
D. All of the above *
1065. Auditor, in general, is an :
A. Employee of the company
B. Agent of the company
C. Agent of the shareholders *
D. None of the above
1066. Auditing is compulsory for :
A. Small-scale business enterprises
B. All partnership firms
C. All joint stock companies *
D. All proprietary concerns
1067. Propriety audit refers to :
A. Verification of accounts
B. Examination of accounts of proprietary concerns
C. Questioning regarding the necessity and justification of expenditures *
D. Audit of government companies
1068. Propriety audit is normally undertake in case of :
A. Joint stock company
B. Government company
C. Statutory corporation
D. Government departments *
1069.Test checking should not be applied to :
A. Purchase book
B. Sales Book
C. Stock book
D. Cash book *
1070. Special audit is necessary for :
A. Manufacturing concern
B. Processing concern
C. Inefficient concern *
D. Trading concern
1071. Cost of removal of business to a more convenient place is a :
A. Capital expenditure
B. Revenue expenditure
C. Differed revenue expenses *
D. None of the above
1072. Expenses on experiments are :
A. Revenue expenses
B. Capital expenses
C. Differed revenue expenses *
D. None of the above
1073. Interim audit refers to :
A. Examination of accounts continuously
B. Examination of account intermittently
C. Auditing a company’s interim profits *
D. Conducting an audit for the purpose of giving bonuses at the end of the year
1074. Find audit implies:
A. Accounts audit at year’s end *
B. Last but not least, checking accounts to find frauds
C. Audit for submitting the report at the end of the year right away
D. Audit of banking companies
1075. A continuous audit is specially needed for :
A. Any trading concern
B. Smaller concerns
C. Banking companies *
D. Any manufacturing concern
1076. Alteration of figures after audit is a limitation of :
A. Final Audit
B. Continuous audit *
C. Interim Audit
D. None of the above
1077. Joint audit implies :
A. Audit of two concern together
B. Audit of joint stock companies
C. Audit of Joint sector Companies
D. Audit of two firms C.A *
1078. Management audit means :
A. An audit carried out on behalf of management;
B. An evaluation of the performance of various management processes and functions*
C. An audit carried out on behalf of management of government publications.
D. Compulsory audit of company management
1079. Systems audit implies :
A. Systematic examination of accounts
B. Audit undertaken to improve auditing systems
C. Enquiring accounting and control systems *
D. Checking the performance of management
1080. Internal audit means :
A. Audit conducted to verify the truth and fairness of the situation.
B. Internal audit carried out to evaluate management functions
C. Audit undertaken by employees for the organization to check financial irregularities *
D. Internal affairs improvement audit by independent auditor
1081. Internal audit is :
A. Requires a company with at least Rs 25 lakh in paid-up capital
B. Voluntary for a company *
C. Not necessary for a company
D. Necessary for a company
1082. Institute of chartered accountants of pakistan was established in :
A. 1956
B. 1949
C. 1956
D. 1961 *
1083. The audit is an examination of :
A. Balance sheet
B. Profit and loss account
C. Profit and loss account and balance sheet *
D. None of the above
1084. The audit of accounts of a company shall be :
A. Independent *
B. Comprehensive
C. Moral
D. All above
1085. Primary objective of carrying audit is to :
A. Impose more checks and employees
B. Submit report to share holders
C. Share your thoughts on the financial statements *
D. All above
1086. The audit shall be organized in such a manner to cover :
A. Capital expenditure and receipts
B. Revenue expenditure and receipts
C. All aspects *
D. None of the above
1087. The audit which is conducted after the close of financial year is called :
A. Continuous Audit
B. Final Audit *
C. Preparation and examination of the accounts
D. None of the above
1088. Auditor is responsible for :
A. Preparation of the accounts
B. Expression of an opinion *
C. Preparation and examination of the accounts
D. None of the above
1089. Examine of books of accounts is known as examination :
A. Accounting
B. Auditing *
C. Investigation
D. Book Keeping
1090. Continuous audit is compulsory for a :
A. Private limited company
B. Public limited company ( Listed )
C. Public limited company ( Unlisted )
D. None of the above
1091. The classes of audit are :
A. Final audit
B. Continuous audit
C. Interim audit
D. All of the above *
1092. The main objective of an audit is to :

A. Examine the books of accounts

B. Make your decision regarding the financial statement*
C. Report to the shareholder
D. Investigate the books of accounts
1093. Which of the following statements accurately explains the primary objective of an external audit
of a Pakistani business?
A. To highlight internal control system flaws
B. To assist management in the preparation of the enterprise’s periodic financial statements
C. To examine and express and opinion on the enterprise’s periodic financial statements *
D. To help management keep the company’s accounting records up to date.
1094. To which on of the following does the auditor formally report when conducting his annual audit in
accordance with companies ordinance 1984?
A. The directors
B. Regulatory bodies
C. The shareholders /Members *
D. The secretary
1095. Interim audit lies between :
A. Final audit and continuous audit *
B. Between statutory audit and continuous audit
C. Both
D. None of the above
1096. Depth tests are also called :
A. Substantive test
B. Compliance test
C. Cradle to glave test *
D. None of the above
1097. Objective of depth test are :
A. To test the accuracy of the record of the client’s accounting system
B. To perform Compliance test
C. In order to provide substantial evidence
D. All of the above *
1098. Audits starts where :
A. Accountancy’s work ends *
B. Book keeping ends
C. None of the above
D. All of the above
1099. A final Audit is also called :
A. Interim Audit
B. Complete Audit *
C. Statutory Audit
D. None of the above
1100. A final audit is started :
A. After the close of the accounting years *
B. Following the completion of the bookkeeping work
C. Both
D. None of the above
1101. Internal check refer to :
A. Checking of record by cashier
B. The internal auditor checks the accounts.
C. A person’s work is automatically checked by another *
D. Management control internally over sub ordinates
1102. The object of internal check is to :
A. Control wastages of resources
B. Prevent errors and frauds *
C. Verify the cash receipts and payments
D. Facilitate quick decision by the management.
1103. Effective internal check system reduces :
A. The liability of auditor
B. Work of auditor *
C. The auditor’s work as well as his or her liability
D. Responsibilities of an auditor
1104. Internal check is a part of :
A. Internal Audit
B. Internal accounting
C. External audit
D. Internal control *
1105. Internal check is carried on by :
A. Special staff
B. Internal auditor
C. Accountant
D. None of the above *
1106.Internal check is suitable for :
A. Larger concerns *
B. Smaller concerns
C. Petty shop-keepers
D. None of the above
1107. Internal check involves :
A. Reduction of work of cashier
B. The division of duties among staff members *
C. Verification of inventory
D. Collusion among the members of staff
1108. Internal audit is undertaken :
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management *
D. By a government auditor
1109. Internal auditor is appointed by the :
A. Management *
B. Shareholders
C. Government
D. None of the above
1110. The following factors determine the internal audit’s scope of work:
A. Shareholders
B. Management *
C. Government
D. Law
1111. The scope of work of statutory audit for a company is decided by the :
A. Shareholders
B. Management
C. Government
D. Company law *
1112. The object of internal audit is :
A. To prevent errors and frauds
B. To detect errors and frauds
C. To improve financial control
D. All of the above *
1113. Internal auditor can be removed by the :
A. Government
B. Shareholders
C. Management *
D. None of the above
1114. Control and management of audit profession is in the hands of :
A. Government
B. Regulatory bodies
C. The Chartered Accountants’ Association of Pakistan
D. The Pakistani Institute of Cost and Management Accountants
1115. Internal check is carried on by :
A. Staff specially appointed for the purpose
B. Internal auditor
C. The members of the staff among themselves *
D. Supervisor of the staff
1116. Internal check is essential for :
A. Petty traders
B. Cash transactions in a significant business
C. A concern using automatic equipments
D. None of the above
1117. The risk that material errors may occur in the preparation of financial statements is known as :
A. Audit risk
B. Control risk
C. Inherent risk *
D. Detection risk
1118. The auditors main objective in making a preliminary evaluation of internal control is to :
A. Assess whether the management has met its responsibility to establish an effective system
B. Determine the extent to which internal controls will be relied upon *
C. Determine which internal controls he might want to rely on.
D. Determine which system flaws should be reported to management.
1119. The nature , timing and extent of substantive procedure are influenced by the level of :
A. Inherent risk
B. Control risk
C. Both A and B *
D. None of the above
1120. Internal control system includes :
A. Financial controls
B. Administrative controls
C. Both A and B *
D. None of the above
1121. The auditor of public company will be :
A. Cost and management accountant
B. Chartered accountant *
C. Any individual
D. All of the above
1122. To become an internal auditor person must be :
A. A chartered accountant
B. A cost and management accountant
C. M-Com
D. No qualification is required *
1123. Internal auditor is responsible to report:
A. Shareholders
B. Creditors
C. Management *
D. None of the above
1124. An audit technique reviewing the internal control system is known as :
A. Verification
B. Substantive test
C. Compliance test *
D. Physical check
1125. A simple control which an enterprise can usefully employ is referred to as the imprest system. To
which of the following accounting areas is this control applicable ?
A. Wages control and reconciliation
B. Petty cash control and reimbursement *
C. Debtor Control
D. Stock control
1126. Substantive tests are designed to obtain evidence as to :
A. The effectiveness of the design of the accounting and internal control system
B. Completeness, accuracy and validity of data produced by accounting system *
C. Both
D. None of the above
1127. Test of control are performed to obtain evidence as to :
A. The effectiveness of the design of the accounting and internal control system *
B. Completeness accuracy and validity of data produced by account system
C. Both
D. None of the above
1128. Another name of test of control is :
A. Compliance test *
B. Substantive test
C. Walk through test
D. None of the above
1129. Vouching implies :
A. Inspection of receipts
B. Examining vouchers to verify the records’ authenticity
C. Surprise checking of accounting records
D. Examining the various assets
1130. Payment for good purchased should be vouched with the help of :
A. Creditor’s statement
B. Correspondence with the suppliers
C. Cash Memos *
D. Ledger accounts
1131. Payment for wages should be vouched with the help of :
A. Piece work statement
B. Wages sheet *
C. Minute book
D. Bank pass book
1132. Commission paid should be vouched with the help of :
A. Salary Book
B. Wages sheet
C. Creditors’s statement
D. Commission book and related agreement *
1133. The most reliable voucher is one which originates :
A. In the concern
B. Outside the concern
C. Sent outside of the issue and directly to the auditor *
D. Sent inside the issue and directly to the auditor
1134. Sales proceeds from machine should be vouched with the help of
A. Cash Books
B. Sale contract *
C. Broker’s statement
D. None of the above
1135. Payment for building purchased should be vouched with the help of :
A. Title deed *
B. Correspondence with the brokers
C. Building account
D. Cash book
1136. Partners drawings should be vouched with the help of :
A. Stock book
B. Cash book
C. Memorandum drawings book *
D. Agreement deed
1137. Investment should be vouched with the help of :
A. Commission Book
B. Sales deeds
C. Broker’s book *
D. Minute book
1138. Receipts from debtors should be vouched with the help of :
A. Counterfoil receipts and cash book *
B. Sales deeds
C. General ledger
D. Suppliers statement
1139. Dividend received should be vouched with the help of :
A. Debtors statement
B. General ledger
C. Dividends book
D. Counterfoils of dividend warrants *
1140. Receipts from sale of investment should be vouched with the help of :
A. Broker’s budget notes
B. Broker’s sold notes *
C. Minute Book
D. Inventory of investment
1141. The following should be used to support purchase returns:
A. Bought notes
B. Credit notes *
C. Goods inwards book
D. Cash book
1142. Payment for bills should be vouched with the help of :
A. Debtor’s statement
B. Creditor’s statement
C. Bills Returned *
D. Bills with the suppliers
1143. Verification refers to :
A. Examination of journal and ledger
B. Examination of vouchers related to assets
C. Examining the assets’ physical existence and value
D. Calculation of value of assets
1144. Object of verification is :
A. Physical verification of assets
B. Checking value of assets
C. Examining the authority of their acquisition
D. All of the above *
1145. Which one of the following assertions is true?
A. Verification involves valuation *
B. Verification is a part of valuation
C. Auditor is a valuer
D. Valuation is unrelated to verification.
1146. Stock should be valued at :
A. Cost
B. Market Price
C. Cost or market price, whichever is lower *
1147. Valuation means:
A. Calculating value of assets *
B. Checking the value of assets
C. Checking the physical existence of assets
D. Examining the authenticity of assets
1148. ” A valuer is not an auditor, as stated in:
A. Kingston cotton mills case *
B. London and General bank case
C. Les V. Neuchatel co ltd case
D. London oil storage co case
1149. Fixed assets are valued at :
A. Cost
B. Market price
C. Cost or the lower of the market price or both
D. Cost less depreciation *
1150. Plantation products are valued at :
A. Cost
B. Market Price
C. The cost or the lowest price on the market
D. Net amount subsequently realised *
1151. Incomplete contracts should be valued on the basis of ?
A. Net profit of the period
B. Two-thirds of the period’s net profit
C. Two-thirds of the period’s anticipated profit *
D. None of the above
1152. Motor cars should be valued on the basis of :
A. Cost
B. Market price
C. Market price or cost, whichever is lower
D. Depreciated value *
1153. Floating assets are valued at :
A. Cost
B. Market Price
C. The lower of the cost or the market price *
D. Cost less depreciation
1154. Livestock should be valued with the help of :
A. Actual counting
B. Cost
C. Market Value
D. Schedule o livestock 
1155. Timber should be valued at :
A. Cost
B. Market price
C. Cost or Market price whichever is lower
D. Original cost plus maintenance cost *
1156. Wine should be valued at
A. Cost
B. Above cost *
C. Market value
D. Cost or market value which ever is lower
1157. Goods on consignment should be valued at :
A. Cost
B. Market price
C. Cost or market value which ever is lower
D. Original cost plus maintenance cost *
1158. Goods sold on the basis of “Sales or return” should :
A. Be included in the stock *
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
1159. Contingent liability for bills discounted should be verified by :
A. Balance sheet
B. Note by management
C. Bills receivables book *
D. None of the above
1160. The following resources should be used to confirm any outstanding costs:
A. Cash book
B. Balance sheet
C. None of the above
D. Journal Proper *
1161. Loose tools should be valued at :
A. Cost
B. Cost less depreciation
C. Market price *
D. Original cost plus maintenance cost.
1162. Loans given shoud be verified with the help of :
A. Statement of loans
B. Schedule of book debts *
C. Inspection of agreements
D. Certificate from the bank
1163. The following should be used to verify book debts:
A. Balance sheet
B. Amount received from debtors
C. Debtor’s schedule *
D. Certificate from the management
1164. To verify good will, the auditor should check :
A. Sales deed
B. Purchase agreement *
C. Balance sheet
D. Certificate from the management
1165. Investments in hand should be verified with the help of :
A. Schedule of investments
B. Balance sheet
C. Inspection of securities *
D. Certificate from the bank
1166. Inspection of securities for verifying investment was emphasized in :
A. London and general bank case
B. Case involving City Ethical Insurance Co. Ltd. *
C. Armitage v brewer and knott
D. Farrows bank ltd
1167. With regard to issue of share warrants to the bearers , the auditor should see that it is :
A. Permitted by Memorandum of association *
B. Sanctioned by the central government
C. Permitted by the board of directors
D. None of the above
1168. for the shares being forfeited. It should be verified by the auditor that it is allowed.
A. By memorandum of association
B. By Articles of Association *
C. Under companies ordinance 1984
D. None of these
1169. iF balance confirmed by the doctor is in agreement with the book balance .It provides the audit
evidence as to :
A. Collectibility of balance
B. The accuracy and presence of the recorded balance
C. Absence of unrecorded balance
D. None of the above
1170. Another name of teeming and lading is :
A. Substantive test
B. Compliance test
C. Lapping *
D. All of the above
1171. First auditor of a company is appointed by the :
A. Shareholder
B. Central Government
C. Corporate law authority
D. Board of directors *
1172. Which of the following persons is qualified to be a company auditor ?
A. Chartered accountant *
B. An employee of the company
C. A body corporate
D. A person who is indebted to company of 800 Dollars
1173. Which of the following persons is not qualified to be a company auditor?
A. A body corporate
B. An employee of the company
C. A person who is indebted to the company for an amount exceeding 100 dollars
D. All of the above
1174. The following cannot be appointed as an auditor of the company?
A. A chartered accountant
B. A firm of CA
C. A body corporate *
D. None of the above
1175. The first auditor of company will hold office :
A. For a period of one year
B. Till holding of statutory meeting
C. Until the first annual general meeting is over *
D. Till a new auditor is appointed
1176. Normally, a company auditor is appointed by the :
A. Central government
B. Shareholders *
C. Board of directors
D. Corporate law authority
1177. An auditor in a casual vacancy is appointed by the :
A. Baoard of directors *
B. Shareholders
C. Central Government
D. Corporate law authority
1178. If an auditor , not appointed at annual general meeting is appointed by the :
A. The central government
B. Board of directors
C. Shareholders
D. Corporate law authority *
1179. A vacancy caused by resignation of the auditor is filled only:
A. BY Board of directors *
B. At the general meeting of shareholders
C. By the centeral government
D. Bye the corporate law authority
1180. A special auditor is appointed by the :
A. Shareholders
B. Board of directors
C. Central government *
D. None of the above
1181. A company auditor can be removed before expiry of his term by :
A. Shareholders *
B. Board of directors
C. Central government
D. State government
1182. The first auditors of a company shall be appointed :
A. No later than sixty days after the incorporation date *
B. Within sixty days of business establishment
C. During first annual general meeting
D. None of the above
1183. A notice for appointment as auditor of a person other than a retiring auditor shall be given:
A. At least 14 days before the previous auditor’s retirement;
B. At least 14 days before the meeting of the board of directors;
C. At least 14 days before the Annual General Meeting *
D. None of the above
1184. Auditor is appointed by:
A. Chief executive of the company
B. Finance manager of the company
C. Any individual
D. None of the above *
1185. First auditor is appointed by :
A. Chief executive of the company
B. Finance manager of the company
C. Shareholders of the company
D. None of the above *
1186. Following can be appointed as an auditor of a public company
A. Director of the company
B. Body Corporate
C. Chartered accountant *
D. D A AND B
1187. Remuneraton of a company auditor is fixed by the :
A. Shareholders
B. Board of directors
C. Appointing authority *
D. Central government
1188. An organization inspector. all around. must provide his report to:
A. Shareholders *
B. Central government
C. Corporate law authority
D. Board of directors
1189. A special auditor has to submit his report to the :
A. Shareholders
B. Central government *
C. Corporate law authority
D. Board of directors
1190. Internal auditor has to submit report to :
A. A watch dog *
B. A blood bound
C. A detective
D. An insurer
1191. Auditor should be dutiful like a :
A. A watch dog *
B. A blood hound
C. A detective
D. An insurer
1192. An audit report is addressed to :
A. Chairman of the board of directors
B. Chief executive of the company
C. Board of directors
D. Members *
1193. The date of the auditor’s report should be :
A. The date immediately after completion of examination
B. After approval of financial statements by the bord of directors *
C. After approval of accounts by the shareholders
D. None of the above
1194. If detection risk cannot be reduced to an acceptable level, auditor should :
A. Quality or disclaim his opinion *
B. With draw from the engagement
C. Do Either A an B
D. None of the above
1195. Auditor’s report is signed by :
A. One director
B. Two directors
C. Directors and Chief executive
D. None of the above
1196. Which of the following terms represents the form of qualification arising from limitation of scope
which the auditor considers to be of fundamental importance ?
A. Disclaimer of opinions *
B. Unqualified opinion
C. Except for opinion
D. Subject to opinion
1197. Which of the following is not a necessary component of the audit report for a limited company ?
A. The identify of the auditor
B. A declaration stating that the auditor has adhered to international auditing standards *
C. Terms of engagement
D. Identification of the financial statements audited
1198. When annual general meeting of a listed company is held ?
A. The auditor is entitled to attend
B. The auditor must personally attend the AGM.
C. The auditor or someone else he has authorized in writing must attend the AGM *
D. None of the above
1199. During the course of audit , and auditor finds that fictitious sales have been undertaken to inflate
profits. whether he should.
A. Ignore it
B. Allow it
C. Qualify his report for it *
D. none of the above
1200. During the course of a company audit an auditor finds that its machinery has been shown at 40000
$ after charging depreciation , though its market value is only 20000 $ whether he should.
A. Ignore it
B. Allow it *
C. Not allow it
D. Qualify his report
1201. A bank can declare dividends :
A. Without making capital losses goods
B. After making capital losses goods *
C. None of the above
1202. A company auditor should see that the dividend should be paid :
A. After charging depreciation *
B. Without charging depreciation
C. Out of capital
D. None of the above
1203. Auditor should see that if past revenue losses exist, Current profits :
A. May be used for payment of dividends
B. Postpone payment of dividends
C. May not be used for payment of dividends 
D. None of the above
1204. Profits prior to incorporation of company :
A. Can be paid as dividends
B. Cannot be paid as dividends *
C. Can be used for revenue expenses
D. None of the above
1205. If profits are overstated due to revenue expenses being charged to capital, it will amount to
payment of divident :
A. Out of capital *
B. Out of capital profit
C. Out of revenue profits
D. None of the above
1206. Which one of the following assertions is true?
A. Dividend can be paid out of sale proceeds of fixed assets
B. Capital cannot be used to pay dividends.
C. Dividend cannot be paid out of accumulated reserves
D. Dividend cannot be paid without charging depreciation
1207. In his report, the auditor gives his :
A. Judgement
B. Opinion *
C. Guarantee to correctness of accounts
D. True state of affairs
1208. In his report, the company auditor states :
A. Correct state of affairs
B. True state of affairs
C. True and fair states of affairs *
D. Fair state of affairs
1209. The company has earned profits on sale of its machinery and wants to pay divident out of it . As
auditor , you should :
A. Allow it
B. Not allow it
C. Allow it with certain conditions *
D. None of the above
1210. There is a large accumulation of unclaimed dividend and the company directors want to pay
dividend out of it, As auditor , you should :
A. Allow it
B. Not allow it
C. Permit many its becomes time banned *
D. None of the above
1211. A company has resorted to heavy sale of stock with a view to pay dividends to shareholders.As an
auditor, you should :
A. Justify it
B. Not justify it
C. Ignore it *
D. Report it
1212. A company has earned profits and declared dividends, but does not want to pay dividend due to
shortage of cash. If asked, as an auditor, you should suggest that
A. Dividend should be paid
B. Dividend need to be paid
C. After dividends are declared, they must be paid out within 42 days.
D. The dividend must be paid in forty-five days *
1213. You find that company has given loan to its shareholders for purchasing of its shares . would you ,
as auditor
A. Allow it
B. Not allow it *
C. Ignore it
D. None of the above
1214. Auditor finds that there is a change in the method of valuation of stock; whether he should :
A. Allow it
B. Disallow it
C. Allow it with a note to this effect *
D. Ignore it
1215. In the annual general meeting of a company, the auditor is questioned as why he has signed he
balance sheet when assets would not realise the value shown in it . Which of the auditor’s
aforementioned arguments is true?
A. Market value of assets has nothing to do with assets
B. Market worth of resources can’t be found out
C. Assets are shown treating it as a going concern *
D. None of the above
1216. The auditor finds that a company has paid interest out of capital .Whether he should :
A. Allow it
B. Not Allow it *
C. Ignore it
D. None of the above
1217. The auditor did not care to check adequacy of provision for bad and doubtful debts whether he
can be held :
A. Liable for it *
B. Not liable for it
C. Liable criminally for it
D. None of the above
1218. The auditor resorted to test checking and with the result , he could not disclose certain frauds.
whether he can be added:
A. Liable for it *
B. Not liable for it
C. Liable criminally for it
D. None of the above
1219. During the course of an audit , an auditor finds that no vouchers are available fo certain
payments. whether he should :
A. Seek proper explanation for it
B. Demand vouchers for it *
C. Ignore it
D. Accept certificate for it
1220. Premium received on issue of shares , later forfeited ,should be transferred to :
A. Capital reserve
B. Shares forfeited account
C. Capital account
D. None of the above
1221. Profits on reissue of forfeited shares should be transferred to :
A. Shares Forfeited account *
B. Capital reserve account
C. Profit and loss account
D. Profit and loss appropriation account
1222. with regard to issue of share certificates the auditor should refer to section :
A. 110
B. 113 *
C. 114
D. 109
1223. Increase in share capital is permitted by :
A. Memorandum of association
B. Articles of association *
C. Court
D. Comapanies ordinance 1984
1224. For sub-division of shares in smaller amount, the auditor should refer to :
A. Court’s sanction *
B. Director’s Minute book
C. Shareholder’s Minute book
D. Companies ordinance 1984
1225. Share capital can be increased by :
A. Increasing face value of shares
B. Issuing shares at premium
C. Issue of fresh shares *
D. None of the above
1226. For reduction in share capital, the auditor should see that :
A. The Memorandum of Association grants permission.
B. It is permitted by articles of association
C. There is prior sanction of federal government
D. The court has already imposed sanctions *
1227. Divisible profits should not include :
A. Interest on capital
B. Depreciation
C. Capital
D. None of the above
1228. dividends cannot be paid out of :
A. Capital profits *
B. Capital receipts
C. Revenue receipts
D. None of the above
1229. Issue of payment of dividend out of capital was raised in :
A. First V black white publishing co
B. Lubbock v. the South American British bank *
C. Mckesson and Robbins case
D. London and general bank case
1230. Capital profits :
A. Can be paid by way of dividends
B. Cannot be paid by way of dividends
C. Can be paid by way of dividend under certain condition *
D. None of the above
1231. Capital profits imply profits earned :
A. Through business transactions
B. From Capital
C. From sale of fixed assets *
D. From sale of current assets
1232. The auditor should ensure that the allotment of shares is made within:
A. 100 Days of issue of prospectus
B. 120 Days of issue of prospectus
C. 150 days of issue of prospectus
D. None of the above *
1233. While checking allotments auditor should see the amount :
A. Amount received equal to estimated fixed capital *
B. Amount received equal to estimated working capital
C. Necessary for purchase of land and building has been received
D. None of the above
1234. Auditor should see the return of allotment has be sent to registrar within :
A. One month *
B. Two Months
C. Three Months
D. Four Months
1235. Application money should not be with drawn unless :
A. Allotment is made
B. Cash book has been prepared
C. Certificate to commence business obtained *
D. Certificate to commence business obtained
1236. Shares issued for consideration other cash should be vouched with the help of :
A. Director’s Minute book
B. Shareholder’s Minute book
C. Contract with the party concerned *
D. Cash book
1237. A company can issue redeemable preference shares , If authorised by :
A. Memorandum of association
B. Articles of Association *
C. Companies ordinance 1984
D. None of the above
1238. Auditor should see that amount received for premium on issue of shares should be shown on :
A. Subscribed capital
B. Capital reserve fund
C. Share premium account *
D. Paid-up capital account
1239. Share premium account should be shown in the balance sheet under :
A. Paid up capital
B. Subscribed capital
C. Reserves and surplus *
D. Reserved Capital
1240. Amount of share premium may be utilised for :
A. Payment of dividend
B. Writing off of preliminary expenses *
C. Routine expenses
D. Purchase of fixed assets
1241. Share can be issued at discount under section :
A. 76
B. 75
C. 79
D. 84 *
1242. The contents of statutory report are governed by :
A. Sec 157 *
B. Sec 160
C. Sec 165
D. Sec 175
1243. When auditor is not appointed within 120 days of incorporation of the company then he will be
appointed by :
A. Directors
B. Shareholders
C. Corporate law authority *
D. None of the above
1244. Legal provision as to distribution of dividend are contained in:
A. Sec 248 to 251 *
B. Sec 260 to 265
C. Sec 270 to 272
D. All of the above
1245. Following section deals with the treatment of surplus arising out of revaluation of fixed assets :
A. Sec 231
B. Sec 235 *
C. Sec 240
D. None of the above
1246. The auditor of private company will be :
A. Chartered accountant
B. Cost and Management accountant
C. Master of commerce
D. No Qualification is mentioned *
1247. Scope of Audit of other than public company will be defined by :
A. Statute
B. By management
C. By agreement between client and auditor *
D. All of the above
1248. Company can issue shares at discount if it is permitted by :
A. Memorandum of association
B. Articles of association *
C. Prospectus
D. Statement in liew of prospectus
1249. Auditor is liable for :
A. Not verifying petty cash
B. Not determining stock
C. Not checking accounts properly
D. All of the above *
1250. An auditor is held criminally liable for :
A. Loss to his client
B. Neglect of his duty
C. Offences against statutory provisions *
D. Fruads
1251. If an auditor allows publication of annual reports knowing them to the materially false to deceive
shareholders, he incurs :
A. Contractual liability
B. Criminal liability *
C. Civil liability
D. None of the above
1252. An auditor can be held liable under C.A ord. 1961 for :
A. Negligence
B. Criminal offence
C. Professional misconduct *
D. Breach of contract
1253. If a company auditor gives false evidence intentionally , he can be held for :
A. Negligence
B. Misfeasance *
C. Breach of contract
D. Criminal liability
1254. If a company auditor has misapplied money of a company, he may be held liable for :
A. Negligence
B. Misfeasance
C. Criminal liability
D. Contractual liability *
1255. If an auditor is found guilty of falsification of company books , he will incur:
A. Criminal Liability *
B. Civil liability
C. Contractual liability
D. None of the above
1256. Civil liability of an auditor implies liability for :
A. Misappropriation of cash
B. Misappropriation of goods
C. Fraud
D. Misfeasance *
1257. In which of the following cases, it was decided that ” it is not the duty of an auditor to take stock”?
A. London and general bank case
B. London and general bank case
C. Kingston cotton mil case *
D. None of the above
1258. An auditor, working in honorary capacity is :
A. Liable *
B. Not Liable
C. Criminally liable
D. None of the above
1259. For misstatement in a company prospectus,the auditor incurs :
A. Civil liability *
B. Criminal liability
C. Contractural liability
D. None of the above
1260. If an auditor fails to satisfy himself that the transactions are ultra virus the directors , he incurs :
A. Criminal liability
B. Civil liability *
C. Contractual liability
D. None of the above
1261. A chartered accountant sent circular letters soliciting work . Can he be held liable :
A. For misfeasance
B. For negligence
C. Criminally
D. For professional misconduct *
1262. Duty of Auditor is to :
A. Form an opinion *
B. Report
C. Examine books of accounts
D. Attend annual general meeting
1263. Auditors has right to :
A. Obtain information *
B. Give information
C. Prepare accounts
D. None of the above
1264. With whom does the auditor of a limited company have a contractual relationship ?
A. The company
B. The directors
C. Chief Executive
D. THe company and the shareholders *
1265. The auditor should plan to :
A. Conduct an effective audit *
B. Disclose fraud
C. Examine production/ manufacturing techniques
D. Issue unqualified report
1266. Audit plan is prepared :
A. Before the start of audit *
B. During audit
C. After audit
D. At any time
1267. Audit programme is a written document which includes :
A. Audit procedures to be carried out *
B. Relevant accounting ratio
C. Appointment confirmation of auditor
D. All of the above
1268. For planning auditor must have knowledge of clients business which can be obtained from :
A. Clients annual report
B. Previous year working papers
C. Trade journal and magazines
D. All of the above
1269. The international standards on auditing 4 planning observes that adequate audit planning helps to
ensure that attention is directed to critical aspects of the audit what audit working paper will normally
provide satisfactory evidence of this aspect of audit planning ?
A. Client’s timetable for accounts preparation
B. System flowcharts
C. The planning memorandum *
D. Points brought forward schedule
1270. Engagement letter is written by :
A. Director
B. Auditors *
C. Creditors
D. Chief executive
1271. Before the commencement of his audit work letter sent by the auditor is known as :
A. Management letter
B. Representation letter
C. Engagement letter *
D. None of the above
1272. Which of the following statements describes most accurately the principal purpose of the
engagement letter in respect of a limited company audit assignment ?
A. To establish the scope of the auditor’s duties *
B. Course of action with respect to the making arrangements for a review
C. To determine the current year’s audit fee
D. To draw the consideration of the chiefs to the scope of administrations that the firm can offer
1273. Auditor sends engagement letter:
A. Before commencement of audit *
B. During the course of the audit
C. At the end of the audit
D. All of the above
1274. Working papers are property of :
A. Client
B. Registrar
C. Auditor *
D. Corporate law authority
1275. Which one of the following working papers would normally be retained on the permanent file
maintained for a limited company audit client ?
A. Extracts of shareholders and management meetings
B. Entity policy regarding provident fund
C. Engagement letter
D. A copy of the Memorandum and the Association’s Bylaws *
1276. Which one of the following working papers would normally be retained on the current file
maintained for a limited company audit client ?
A. An organization chart summarising management functions and the division of responsibilities
within the company
B. A copy of the bank’s response to the standard audit request letter *
C. Analysis of transaction and balances
D. A description of the business and its operations
1277. Misappropriation of goods may be checked by :
A. Proper supervision over stock *
B. Checking of employees
C. Punishment of employees
D. None of the above
1278. Window dressing implies
A. Curtailment of expenses
B. Checking wastages
C. Under-valuation of assets
D. Over-valuation of assets *
1279. Falsification of accounts is undertaken by :
A. Auditors
B. Clerks
C. Accountants
D. Responsible officials *
1280. Errors of omission are :
A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above
1281. Valuation of assets on wrong basis is :
A. Technical error
B. Clerical error
C. Error of principle *
D. Compensation error
1282. Test checking refers to :
A. Testing of accounting records
B. Testing of honesty of employees
C. Intensive checking of a selected number of transaction *
D. Checking of all transactions recorded
1283. Which of the following procedures would be the most appropriate to identify the fraud of teeming
and lading ?
A. Reviewing aged-debtor’s listings
B. Debtor’s circularisation *
C. Reviewing bank reconciliation
D. Checking subsequent clearance of debtors
1284. Detection and prevention of error and fraud is the responsibility :
A. Auditor( External)
B. Internal Auditor
C. Management *
D. None of the above
1285. The date of representation letter is normally the date on which :
A. Audit is started
B. The Board of Directors approves the accounts.
C. Review report is endorsed by the examiners *
D. Audit field work is completed
1286. One reason why an auditor uses analytical procedures that focus on the client’s operation is to
identify
A lack of proper division of accounting and other financial responsibilities
B. A material weakness in the internal accounting control system
C. Unusual transaction *
D. Non compliance with prescribed control procedure
1287. During the planning phase of the audit, the following methods are likely to be used to identify an
abnormal fluctuation in gross profit that suggests the need for extended audit procedures for sales and
inventories:
A. A preliminary review of internal accounting control
B. Specialized audit programs
C. Analytical procedures *
D. Tests of transactions and balances
1288. The comparison of the following is an illustration of an analytical procedure:
A. Financial data that includes comparable information about the company’s industry *
B. Accurate invoices and a record of the major expenditures
C. Results of a statistical sample the expected characteristics of the actual population
D. Produced information with comparable information created by manual bookkeeping framework
1289. An auditor ordinarily examines invoice from lawyers primarily in order to :
A. Substantiate accruals
B. Asses the legal ramifications of litigation in progress
C. Gauge how much contingent liabilities *
D. Identify possible unassorted litigation ,claims, and assessments
1290. The letter issued by the auditor to his client describing the weakness in the system observed during
his audit is referred to as :
A. Representation letter
B. Management letter *
C. Audit engagement letter
D. None of the above
1291. Which of the following CAATs may provide a continuous review ofa client’s programmed controls
?
A. Test Data
B. A utility programme
C. Am Embedded facility *
D, A purpose written program
1292. Law of contract is :
A. Neither the entire law of obligations nor the law of agreements*
B. The whole law of agreements
C. The whole law of obligations
D. None of the above
1293. A contract creates :
A. Rights in personam *
B. Right in Rem
C. Only rights and no obligations
D. Only obligations and no rights
1294. An agreement is avoidable contract when it is :
A. Enforceable if certain conditions are fulfilled
B. The aggrieved party may choose to have the law enforced against them *
C. Enforceable by both the parties
D. Not enforceable at at all
1295. A contract :
A. Might be void as initially went into
B. May become null after being formed *
C. Cannot become void under any circumstances
D. May become void at the desire of a party
1296. The transaction collateral to an illegal agreement are :
A. Not affected in any manner
B. Also tainted with illegality *
C. Voidable at the choice of the offended party
D. Void
1297. An agreement is :
A. Offer
B. Offer + acceptance *
C. Offer + acceptance + consideration
D. Contract
1298.A contract is :
A. A legal obligation
B. An understanding in addition to a legitimate commitment *
C. Consensus ad idem
D. An agreement plus a legal object
1299. An inability to contract can result from:
A. Lack of free consent
B. Lack of consideration
C. Minority *
D. Absence of legal formalities
1300. An understanding not enforceable by regulation is supposed to be:
A. Void *
B. Voidable
C. Valid
D. Illegal
1301. Which of the following result/results in an offer ?
A. A declaration of intention
B. An invitation to offer
C. An advertisement promising a reward to anyone who locates the advertiser’s lost dog *
D. An offer made in a joke
1302. A specific offer can be accepted by :
A. Any person
B. Any friend of offerer
C. The person to whom it is made *
D. Any friend of offeree
1303. During transmission, a letter of acceptance with the proper stamp and address is sent.. There is :
A. A contract voidable at the options of acceptor
B. A contract voidable at the options of offerer
C. No contract at all
D. A valid contract *
1304. An ad to sell a thing by closeout is :
A. An offer
B. An invitation to offer *
C. No offer at all
D. A contract
1305. The words “for condition seek back” are printed in small print on the face of the travel ticket. The
traveler :
A. Does not have to follow the condition *
B. May not take into account the circumstances
C. Is bound by the condition whether he takes care to read them or not
D. None of the above
1306. In a crowd, someone makes Mani an offer that:
A. Can be accepted only by him*
B. It can be accepted by anyone who likes it.
C. May be accepted by any person who hearts it
D. May be accepted by his friend
1307. The offeror decides to remain silent, not in accordance with the prescribed manner, when an
acceptance is made. In such a situation, there are:
A. A contract *
B. No contract
C. A voidable contract
D. An unenforceable contract
1308. There is a counter -offer when :
A. The offeree accepts the offer with conditions or adds a new acceptance term *
B. The offeree makes a fresh offer
C. The offeree makes some query
D. The offeree accepts it
1309. A makes a proposal to B on tenth by a letter which arrived at B on twelfth .B posts letter of
acknowledgment on fourteenth which comes to An on fifteenth .The correspondence of acknowledgment
is finished against An on :
A. 12th
B. 14th
C. 6th *
D. None of them
1310. Consideration must moves at the desire of :
A. The promisor *
B. The promisee
C. Promisor or any third party
D. Both the promisor and promisee
1311. Consideration :
A. Must move from the promise
B. May leave the promisee or any other individual *
C. Must move from the third party
D. May move from the promisor
1312. Consideration :
A. Should be sufficient to the commitment made
B. Does not have to fulfill the promise *
C. Must be of reasonable value
D. Must be more value than the value of promise made
1313. Consideration must be something which the promisor:
A. Is already bound to do
B. Is not already bound to do *
C. May voluntarily do
D. Must not do
1314. Compromise of disputed claims :
A. Is a decent thought for an agreement *
B. Is definitely not a decent thought for an agreement
C. Results in a void agreement
D. Is not permitted by law
1315. A promise to fully or partially compensate someone who has already done something voluntarily
for the promisor is:
A. Enforceable *
B. Not enforceable because it is without consideration
C. Void
D. Voidable
1316. A person who does not sign a contract:
A. Cannot sue
B. Can sue
C. Can sue just in very much perceived cases *
D. None of them
1317. Consideration in a contract :
A. Could be previously, present, or future *
B. May be present or future only
C. Must be present only
D. Must be future only
1318. An agreement made without consideration is :
A. Valid
B. Illegal
C. Voidable
D. Void *
1319. A promise to subscribe to a charity . The promise is a :
A. Valid contract
B. Voidable contract
C. Void agreement
D. Void contract
1320. An agreement with or by a minor is :
A. Void *
B. Cancelable at the minor’s choice
C. Cancelable at the other party’s option
D. Valid
1321. On attaining the age of majority a minor’s agreement :
A. Can be ratified
B. Cannot be ratified *
C. Becomes void
D. Becomes valid
1322. A minor borrows money by misrepresenting his age:
A. He can be sue for fraud
B. He is immune from fraud claims *
C. The money will be returned to him.
D. None of the above
1323. A contract is signed by a minor to buy certain necessities. In such a case :
A. He is not responsible for paying
B. He is liable to pay *
C. His estate is liable to pay
D. His guardian is liable to pay
1324. A person is usually of unsound min, but occasionally of sound mind :
A. He can sign a contract if he is in good mind *
B. He can’t even sign a contract if he is in good mind
C. He can’t sign a contract at all
D. None of the above
1325. A contract by an idiot is :
A. Voidable
B. Enforceable
C. Invalid
D. Void ab initio *
1326. Contracts that were made prior to war with an alien foe are against public policy:
A. Reappear after the war has ended and suspend
B. Dissolved *
C. Not affected at all
D. Void ab initio
1327. The contractual capacity of a company is regulated by :
A. The terms of its articles of association and the Companies Act *
B. The conditions of a contract with a third party
C. Its Articles of Association
D. Its prospectus
1328. An agreement with a minor is :
A. Absolutely void *
B. A voidable contract
C. A contract which is valid
D. None of these
1329. Mohiri Bibi V Bharmodas Ghose, (1903) 301 Cal. 539 case deals with :
A. Communication of offer
B. Communication of acceptance
C. A minor’s agreement *
D. Fraud
1330. An inability to contract can result from:
A. Want of consideration
B. Unsoundness of mind *
C. Illegality of object
D. Uncertainty of object
____________ is a systematic examination of the books and records or a
business?

A. Auditing
B. Vouching
C. Verification
D. Checking

The term ‘Audit’ is derived from a Latin word “audire” which

means___________?

A. To inspect
B. To examine
C. To hear
D. To investigate

The main object of an audit is _____________?

A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.

An auditor is like a_______________?

A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these

Process of verifying the documentary evidences of transactions are known

as___________?
A. Auditing
B. Testing
C. Vouching
D. Verification

Auditing is compulsory for____________?

A. Small scale business

B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns

Concealment of shortage by delaying the recording of cash receipts is known

as_____________?

A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these

The fundamental objective of the audit of a company is to_____________?

A. Protect the interests of the minority shareholders

B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts

The concept of stewardship means that a company’s

directors________________?
A. Are responsible for ensuring that the company complies with the law
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the
shareholders
D. Report suspected fraud and money laundering to the authorities

Why do auditors concentrate their efforts on material items in accounts?

A. Because they are easier to audit

B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it

Which of the following is NOT the responsibility of a company’s directors?

A. Reporting to the shareholders on the accuracy of the accounts

B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor

International auditing standards are issued by the______________?

A. International Accounting Standards Board

B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board

Which of the following is not true about opinion on financial statements?

A. The auditor should express an opinion on financial statements.
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in
financial statements
D. He should examine whether recognised accounting principle have been consistently

A sale of Rs. 50.000 to A was entered as a sale to B. This is an example

of____________?

A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle

When an auditor is proposed for removal from office, which one of the
following is he NOT permitted to do?

A. Circulate representations to members

B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed

Which one of the following is NOT a duty of the auditor?

A. Duty to report to the company’s bankers

B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law

Assuming that it is not the first appointment of the auditor, who is responsible
for the appointment of the auditor?
A. The shareholders in a general meeting
B. The managing director
C. The board of directors in a board meeting
D. The audit committee

The independent auditor’s primary responsibility is to______________?

A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders

How long is the auditor’s term of office?

A. Until the audit is complete

B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them

Which of the following is correct in relation to materiality?

A. A matter is material only if it changes the audit report

B. A matter is material if the auditor and the directors both decide that further work
needs to be done in the area under question
C. A matter is material only if it affects directors’ emoluments
D. A matter is material if its omission or misstatement would reasonably
influence the decisions of an addressee of the auditors’ report

Which one of the following is NOT considered to be part of planning?

A. Background i.e. industry
B. Previous year’s audit i.e. any qualifications in the report
C. Considering the work to be done by the client staff e.g. internal audit
D. Considering whether the financial statements show a true and fair view

Audit risk is composed of 3 factors. Which of the following is NOT one of those
factors?

A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk

Which of the following should NOT be considered at the planning stage?

A. The timing of the audit

B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations

At the planning stage you would NOT consider____________?

A. the timing of the audit

B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit

Which of the following describes sampling risk?

A. The risk of the auditor carrying out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing

Which of the following is NOT an accepted method of selection in sampling?

A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection

Which of the following are you unlikely to see in the current file of auditors’
working papers?

A. Memorandum & articles of association

B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count

According to ISA 500, the strength of audit evidence is determined by which

two qualities?

A. Appropriateness & competence

B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence

Which of the following is normally the most reliable source of audit evidence?
A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review

The degree of effectiveness of an internal control system depends on:

A. The design of the internal control system and the implementation of the
controls
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting
records

According to ISA 315, which of the following is NOT an element of the control
environment?

A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices

According to ISA 315, which of the following is NOT a control activity?

A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties

Lapping is also known as___________?

A. Teeming and lading
B. Looping
C. Embezzlement
D. Hacking

Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an
example of____________?

A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication

Which of the following statements is not true?

A. Management fraud is more difficult to detect than employee fraud

B. Internal control system reduces the possibility of occurrence of employee
fraud and management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is
similar.
D. All statements are correct.

Internal audit is undertaken:

A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor

The scope of internal audit is decided by the___________?

A. Shareholders
B. Management
C. Government
D. Law

Audit of banks is an example of_____________?

A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above

Concurrent audit is a part of____________?

A. Internal check system

B. Continuous audit
C. Internal audit system
D. None of these

Audit in depth is synonymous for____________?

A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit

Institute of Chartered Accountants of Pakistan was established

in____________?
A. 1949
B. 1956
C. 1961
D. 1972

Which of the following statements is not true about continuous audit?

A. It is conducted at regular interval

B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive

Internal check is carried on by___________?

A. Staff specially appointed for the purpose

B. Internal auditor
C. Supervisor of the staff
D. Members of the staff

Errors of Omission are_____________?

A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above

Window dressing implies_______________?

A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
Test Checking refers to___________?

A. Testing of accounts and records

B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded

Which of the following statements is not correct about materiality?

A. Materiality is a relative concept

B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the
needs of an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial
statement level only

______the audit risks_______the materiality and_________the audit effort.

A. Lower, Higher, Lower

B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher

When issuing unqualified opinion, the auditor who evaluates the audit
findings should be satisfied that the___________?

A. Amount of known misstatement is documented in working papers

B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
In determining the level of materiality for an audit, what should not be
considered?

A. Prior year’s errors

B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements

Analytical procedures issued in the planning stage of an audit, generally

A. Helps to determine the nature, timing and extent of other audit procedures
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above

Which of the following statements is most closely associated with analytical

procedure applied at substantive stage?

A. It helps to study relationship among balance sheet accounts

B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific
account balance

Verification refers to_________?

A. Examining the physical existence and valuation of assets.

B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.

Stock should be valued at_________?

A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.

Floating assets are valued at____________?

A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation

Goods sold on the basis of ‘sales or return ‘ should:

A. Be included in the stock

B. Not be included in the stock
C. Not be checked by auditor
D. None of the above

Of the following, which is the least persuasive type of audit evidence?

A. Bank statements obtained from the client

B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor

Which of the following statements is, generally, correct about the reliability of
audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.

In an audit of financial statements, substantive tests are audit procedures

that __________?

A. May be eliminated for an account balance under certain conditions

B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of
control risk
D. May be test of transactions, test of balance and analytical procedures

The nature, timing and extent of substantive procedures is related to assessed

level of control risk

A. Randomly
B. Disproportionately
C. Directly
D. Inversely

Which of the following factors is most important in determining the

appropriations of audit evidence?

A. The reliability of audit evidence and its relevance in meeting the audit
objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence

When is evidential matter, generally, considered sufficient?

A. When it constitutes entire population
B. When it is enough to provide a basis for giving reasonable assurance
regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently

Which of the following is not corroborative evidence?

A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements

What would most appropriately describe the risk of incorrect rejection in

terms of substantive testing?

A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in
actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above

Which of the following affects audit effectiveness?

A. Risk of over reliance

B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A and C

What would most effectively describe the risk of incorrect acceptance in terms
of substantive audit testing?
A. The auditor has ascertained that the balance is materially correct when in
actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by
documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent

Audit programme is prepared by____________?

A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants

The working papers which auditor prepares for financial statements audit
are___________?

A. Evidence for audit conclusions

B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors

The quantity of audit working papers complied on engagement would most be

affected by__________?

A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk

Which of the following best describes the primary purpose of audit

programme preparation?
A. To detect errors or fraud
B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk

Which of the following is not an advantage of the preparation of working

paper?

A. To provide a basis for review of audit work

B. To provide a basis for subsequent audits
C. To ensure audit work is being carried out as per programme
D. To provide a guide for advising another client on similar issues

The auditor’s permanent working paper file should not normally,

include__________?

A. Extracts from client’s bank statements

B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements

For what minimum period should audit working papers be retained by audit
firm?

A. For the time period the entity remains a client of the audit firm.
B. For a period of ten years
C. For a period auditor opines them to be useful in servicing the client
D. For the period the audit firm is in existence.

Which of the following factors would least likely affect the quantity and
content of an auditor’s working papers
A. The assessed level of control risk
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter

Which of the following statement is true regarding an auditor’s working

papers?

A. They document the level of independence maintained by the auditor

B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control

Which of the following statement best describes the understanding with

respect to ownership and custody of working papers prepared by an auditor?

A. The working papers may be obtained by third parties when they appear to
be relevant to issues raised in litigation
B. The safe custody of working papers is the responsibility of client, if kept at his
premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors.
The approval of client is not required.

The current file of the auditor’s working papers, generally, should

include____________?

A. A flowchart of the internal controls

B. Organisation charts
C. A copy of financial statements
D. Copies of bond and debentures
Auditing is what?

A. Reporting the financial information

B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records

Audit of banks is an example of__________?

A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above

In Pakistan, balance sheet audit is synonymous to___________?

A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit

Audit in depth is synonymous for_____________?

A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit

Balance sheet audit includes verification of____________?

A. Assets
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above

Which of the following statements is not true about continuous audit?

A. It is conducted at regular interval

B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive

Balance sheet does not include:_____________?

A. Verification of assets and liabilities

B. Vouching of income and expense accounts related to assets and liabilities
C. Examination of adjusting and closing entries
D. Routine checks

Which of the following statements is not correct about materiality?

A. Materiality is a relative concept

B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the
needs of an informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial
statement level
only

_______the audit risk,_______the materiality and _______the audit effort?

A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher

When issuing unqualified opinion, the auditor who evaluates the audit
findings should be satisfied that the_____________?

A. Amount of known misstatement is documented in working papers

B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made

In determining the level of materiality for an audit, what should not be

considered?

A. Prior year’s errors

B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements

Analytical procedures issued in the planning stage of an audit, generally?

A. helps to determine the nature, timing and extent of other audit procedures
B. directs attention to potential risk areas
C. indicates important aspects of business
D. All of the above

Which of the following statements is most closely associated with analytical

procedure applied at substantive stage?
A. It helps to study relationship among balance sheet accounts
B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific
account balance

The basic assumption underlying the use of analytical procedures

is:____________?

A. It helps the auditor to study relationship among elements of financial information

B. Relationship among data exist and continue in the absence of known
condition to the contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.

What are analytical procedures?

A. Substantive tests designed to assess control risk

B. Substantive tests designed to evaluate the validity of management’s representation
letter
C. Substantive tests designed to study relationships between financial and
nonfinancial
D. All of the above

Which of the following is not an analytical procedure?

A. Tracing of purchases recurred in the purchase book to purchase invoices.

B. Comparing aggregate wages paid to number of employees
C. Comparing the actual costs with standard costs
D. All of them are analytical procedure
When applying analytical procedures, an auditor could develop independent
estimate of an account balance to compare it to___________?

A. client’s unedited account balance

B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry

What is the primary objective of analytical procedures used in the overall

review stage of an audit?

A. To help to corroborate the conclusions drawn from individual components

of financial statements
B. To reduce specific detection risk
C. To direct attention to potential risk areas
D. To satisfy doubts when questions arise about a client’s ability to continue

Of the following, which is the least persuasive type of audit evidence?

A. Bank statements obtained from the client

B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. Computations made by the auditor

In an audit of financial statements, substantive tests are audit procedures

that___________?

A. may be eliminated for an account balance under certain conditions

B. are designed to discover significant subsequent events
C. will increase proportionately when the auditor decreases the assessed level of
control risk
D. may be test of transactions, test of balance and analytical procedures
The nature, timing and extent of substantive procedures is _________ related
to assessed level of control risk?

A. randomly
B. disproportionately
C. directly
D. inversely

Which of the following statements is, generally, correct about the reliability of
auditevidence?

A. To be reliable, evidence should conclusive rather than persuasive

B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.

When is evidential matter, generally, considered sufficient?

A. When it constitutes entire population

B. When it is enough to provide a basis for giving reasonable assurance
regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently

Which of the following is not a corroborative evidence?

A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements

Which of the following affects audit effectiveness?

A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A. and C.

Which of the following statements is not true with respect to management

representations obtained as per AAS11?

A. Authenticated copy of relevant minutes of meetings may be regarded as

management representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor

What would most appropriately describe the risk of incorrect rejection in

terms of substantive testing?

A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in
actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above

What would most effectively describe the risk of incorrect acceptance in terms
of substantive audit testing?

A. The auditor has ascertained that the balance is materially correct when in
actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by
documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
Which of the following factors is most important in determining the
appropriations of audit evidence?

A. The reliability of audit evidence and its relevance in meeting the audit
objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence

Which of the following is not a revenue expense?

A. Cost of raising a loan

B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship

Depreciation does not arise form _______

A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation

Which of the following will not lead to creation of secret reserve?

A. Undervaluation of closing stock

B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required

Which of the following is a revenue reserve?

A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve

If the book value of an asset stands at________per cent of the original cost, a
company need not provide depreciation on it.

A. two
B. fifteen
C. five
D. ten

Which of the following expenses should not be treated as capital expenditure?

A. Expenses paid on installation of a plant.

B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent.
D. The fees paid to engineer who constructed the plant.

Who is responsible for the appointment of statutory auditor of a limited

company ?

A. Directors of the company

B. Members of the company
C. The Central Government
D. All of the above

The board of directors shall appoint first auditor of a company

A. With in one month of completion of capital subscription state of the company
B. With in one month of the promotion of the company
C. With in one month of the commencement of the business of the company
D. With in one month of incorporation of the company

The term of the auditor ship of first auditor would be from the date of
appointment till________?

A. the conclusion of statutory meeting

B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal

In case the directions fail to appoint first auditor (s), the shareholders shall
appoint them at_________by passing a resolution.

A. a general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting

If a casual vacancy in the office of auditor arises by his resignation it should

only be filled by the company in a_________?

A. Board meeting
B. extraordinary general meeting
C. General meeting
D. annual general meeting

The authority to remove the first auditor before the expiry of term is
with__________?
A. the shareholders in a general meeting
B. the shareholders in the first annual General meeting
C. the board of directors
D. the Central Government

Who out of the following cannot be appointed as a statutory auditor of the

company?

A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.

A statutory auditor has a right of access at all times to___________?

A. Books and accounts of a company

B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company

The auditor has a right to___________?

A. Obtain information and explanation

B. Obtain information and explanation from the employees and officers
C. Obtain information and explanation necessary for the purpose of audit
D. Both B. and C.

The branch auditor is appointed by___________?

A. Shareholders in an annual general meeting
B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above

Auditor of a___________company does not have right to visit foreign

branches of the company?

A. Unlimited liability
B. Manufacturing
C. Banking
D. Nonprofit making

The date on auditor’s report should not be____________?

A. the data of AGM

B. later than the date on which the accounts are approved in board’s meeting
C. earlier than the date on which the accounts are approved by the
management
D. Both A. and B.

When restrictions that significantly affect the scope of the audit are imposed
by the client, the auditor generally should issue which of the following
opinion?

A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph;
The auditor has serious concern about the going concern of the company. It is
dependent on company’s obtaining a working capital loan from a bank which
has been applied for. The management of the company has made full
disclosure of these facts in the notes to the balance sheet. The auditor is
satisfied with the level of disclosure. He should issue___________?

A. unqualified opinion
B. unqualified opinion with reference to notes to the accounts
C. qualified opinion
D. disclaimer of opinion

Which of the following is true about explanatory notes?

A. These are given by the directors of the company

B. These are given to adhere to requirements of section 211.
C. These are given by auditors of the company in auditor’s report
D. All of the above

The client changed method of depreciation from straight line to written down
value method. This has been disclosed as a note to the financial statements. It
has an immaterial effect on the current financial statements. It is expected,
however, that the change will have a significant effect on future periods.
Which of the following option should the auditor express?

A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion

Which of the following documents is not relevant for vouching cash sales?
A. Daily cash sales summary
B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement

To test whether sales have been recorded, the auditor should draw a sample
from a file of__________?

A. purchase orders
B. sales orders
C. sales invoices
D. bill of loading

The auditor should examine subsequent realization of revenue such as

dividends, interest,commission, etc to:_____________?

A. identify cases of unrecorded revenue

B. ensure proper disclosure in the balance sheet
C. recompute accrued income on the data of balance sheet
D. Any of these

What is meant by negative assurance?

A. The auditor cannot give an opinion due to lack of evidence.

B. The client’s financial statements were found to be materially misstated.
C. The auditor could not conduct any tests due to lack of controls.
D. The auditor did not find anything to indicate that a material misstatement
exists.

For companies required to produce interim financial statements (IFI):

A. one audit firm should audit the IFI and a different firm should audit the financial
statements for the year as a whole.
B. one accountancy firm should review the IFI and a different firm should audit the
financial statements for the year as a whole.
C. the same firm should audit the IFI and the financial statements for the year as a
whole.
D. the same firm should review the IFI and the financial statements for the
year as a whole.

Which of the following statements is correct?

A. When a company negotiates a ‘friendly’ takeover, it usually appoints a firm

of accountants to carry out due diligence on the takeover target.
B. In an attestation engagement, the accountant is required to report on the quality of
work performed.
C. In a review engagement, evidence is gathered mainly by means of computation and
inspection.
D. In an engagement to review financial statements, the amount of work required is
the same as for an audit

What sort of assurance is provided in a review engagement?

A. Positive assurance
B. Negative assurance
C. High level of assurance
D. No assurance

Which one of the following is part of the auditor’s function?

A. Conducting the inventory count
B. Obtaining and evaluating audit evidence on the financial statements
C. Calculating the year-end accruals figure for inclusion in the accounts
D. Providing representations to management

Which of the following does NOT belong in the auditors’ report?

A. Introductory paragraph specifying the pages to which the report relates and the
accounting convention adopted
B. Basis of the opinion
C. Involvement of any specialist
D. Statement of responsibilities of directors and auditors

What is meant by the expression ‘expectation gap’?

A. The gap between how the directors of a company perform their duties and how the
shareholders expect them to perform
B. The gap between how the directors of a company perform their duties and how the
general public expects them to perform
C. The gap between the public perception of the role of company auditors and
their statutory role and responsibilities
D. The gap between the auditors’ own perception of their duties and how they are set
out in the Companies Act

Which of the following would you not use as a benchmark for comparison
when undertaking analytical procedures?

A. Other audit clients

B. Previous years
C. Other companies in the same industry
D. Budget
Which of the following is true about written representations?

A. They are the best source of audit evidence

B. They should be used only when there is a lack of other substantive audit
evidence
C. They should be used only when there is other substantive audit evidence to
complement it
D. Shareholders receive a copy of all material written representations

Which of the following statements is INCORRECT?

A. An auditor may serve on the board of directors of an audit client.

B. An auditor who is an immediate family member of the director of an audit client
must not be assigned to the audit team.
C. Purchasing goods from an audit client on normal commercial terms does not create
a threat to the auditor’s independence.
D. An auditor who was recently a director of an audit client must not be assigned to the
audit team for that client.

An auditor should not accept a loan on favourable commercial terms from an

audit client because of the threat to his or her independence. The threat
would be a___________?

A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat
Which of the following are fundamental ethical principles for professional
accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity

A. 1, 2 and 3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only

Which one of the following may auditors NOT perform for their client?

A. Taking management decisions

B. Preparation of accounting records
C. Preparing tax computations
D. Advising on weaknesses in the internal control systems

You have been proposed as auditor of a company. What is the first step that
you should take?

A. Obtain the client’s permission to communicate with the existing auditor

B. Obtain the existing auditor’s working papers
C. Obtain a copy of the company’s most recent board minutes
D. Obtain a copy of the existing auditor’s letter of engagement

Which of these are types of Audit Report?

A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Disclaimer of opinion.
All of above

Pick the odd one:

A. Checking the vouchers

B. Preparation of vouchers
C. Evaluation of internal control
D. None of the above

Which of the following is not type of engagement standard?

A. Standards on Auditing
B. Standard on Quality Control
C. Standards on Review Engagement
D. Standards on Assurance Engagement

How many Standards on Auditing have been issued?

A. 32
B. 34
C. 36
D. 38

Auditing engagement can be performed w.r.t.

A. Profit making entity
B. Non-profit making entity
C. Corporate entity only
D. Any entity

Scope of financial audit is__________?

A. Financial information
B. Non-financial information
C. Both (a) and (b)
D. None of these

IFRS 9 explains about?

A. Inventory
B. Accounts Payable
C. Accounts Receivable
D. Expenses

Audit fess is a part of__________.

A. works on cost.
B. selling overhead.
C. distribution overhead.
D. administration overhead

1. __________ is a systematic examination of the books and records or a business.

A. Auditing.
B. Vouching.
C. Verification.
D. Checking.
ANSWER: A
2. Which of the following are not objectives of auditing?
A. Ascertain the profit and preparation of P/L Account, Balance sheet.
B. Detection and prevention of frauds and errors.
C. Give a true and fair view of financial amount.
D. To submits the accounts to Government of India.
ANSWER: D
3. Which of the following is not a kind of audit?
A. Statutory and private audit.
B. Government and continuous audit.
C. Continuous, final, Interim, Cash, Cost and Management audit.
D. None of these.
ANSWER: D
4. An audit which is compulsory by the law __________.
A. Government audit.
B. Internal audit.
C. Cost audit.
D. Statutory audit.
ANSWER: D
5. Instruction of audit issued by controller and auditor general of India ________.
A. statutory audit.
B. final audit.
C. management audit.
D. government audit.
ANSWER: D
6. Audit done by the employees of the business undertaking is called _______.
A. final audit.
B. management audit.
C. government audit.
D. government audit.
ANSWER: B
7. This kind of audit is conducted generally between two annual audit ______.
A. internal audit.
B. interim audit.
C. final audit.
D. continuous audit.
ANSWER: B
8. Management audit otherwise called as _______.
A. final audit.
B. efficiency audit.
C. cost audit.
D. cash audit.
ANSWER: B
9. Before the work of audit is commenced, the auditor plans out the whole of audit
work is called _________.
A. Audit plan.
B. Audit note.
C. Audit programme.
D. Audit programme.
ANSWER: D
10. A number of checks and controls exercised in a business to ensure its efficient
working is known as
________.
A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
ANSWER: B
11. A Voucher is a _______.
A. document is support of an entry made in books of accounts.
B. invoice received from suppliers.
C. receipt issued to a customer for cash.
D. despatch receipt.
ANSWER: A
12. Voucher relates to _________.
A. cash receipt.
B. cash payment.
C. credit transactions.
D. all the above.
ANSWER: D
13. Internal check is meant for ___________.
A. prevention of frauds.
B. detection of frauds.
C. helping audit is depth.
D. detection of errors.
ANSWER: A
14. Internal auditor is appointed by ________.
A. the management.
B. the shareholders
C. the government.
D. he statutory body.
ANSWER: A
15. Auditing begins where ______ ends.
A. Selling.
B. inventory valuation.
C. Accounting.
D. Purchases.
ANSWER: C
16. A kind of audit conducted for a part of the accounting year is called _______.
A. Periodical audit.
B. Partial audit.
C. Cost audit.
D. Interim audit.
ANSWER: A
17. For which of the following, Audit is optional?
A. Trusts.
B. Joint stock companies.
C. Proprietorship concern.
D. None of the above.
ANSWER: C
18. Providing more or less depreciation on assets is an example of ______.
A. Misappropriation of cash.
B. Misappropriation of goods.
C. Misappropriation of accounts.
D. None of the above.
ANSWER: D
19. The audit that is made compulsory under statute is called _________.
A. Statutory audit.
B. Partial audit.
C. Complete audit.
D. Continuous audit.
ANSWER: A
20. The receipt of goods must be entered in _________.
A. goods inward book.
B. goods outward book
C. receipt of Stores.
D. ceipt issue and balance of stores
ANSWER: A
21. Who among the following can be appointed as auditor of a company?
A. A partner or a director of the company.
B. A person of unsound mind.
C. Mr. Y who owes Rs. 500 to the company.
D. Mr. Z the holder of C.A certificate.
ANSWER: D
22. Auditing standards differ from auditing procedures in that procedures relate to
________.
A. Measure of performance.
B. Audit principles.
C. Acts to be performed.
D. Audit judgments.
ANSWER: C
23. Confirmation of the court is necessary for __________.
A. increasing the share capital.
B. . reduction of share capital.
C. conversion of shares into stock.
D. issue of new shares.
ANSWER: B
24. Profit prior to incorporation may be utilized to ___________.
A. write of goodwill
B. pay interest on purchase consideration
C. writing off fixed assets.
D. all the above.
ANSWER: A
25. Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.

B. His opinion is no guarantee to the future viability of the business.

C. He is responsible for the detection and prevention of frauds and errors in
financial statements.
D. He should examine whether recognized accounting principles have been
consistent.
ANSWER: A
26. Audit means ___________.
A. recording business transactions.
B. preparing the final accounts.
C. examination of books, accounts, vouchers etc.
D. preparing final accounts.
ANSWER: C
27. Audit programme is prepared ______________.
A. to help the auditor and his staff about the work to be done while auditing.
B. to help the accountant to prepare the balance sheet.
C. to help the company to submit its accounts.
D. to help the shareholders to file the returns.
ANSWER: A
28. Audit is ________.
A. a member of the company.
B. the agent of the members of the company
C. the agent of the central government.
D. an assistant to accountant.
ANSWER: B
29. Auditor shall report on the accounts examined by him __________.
A. to the shareholders.
B. to the court.
C. to the bank.
D. to the general public.
ANSWER: A
30. Purchase of machinery is a ____________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: C
31. Sale of land is a __________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: B
32. Shares are forfeited on the non-payment of ____________.
A. share calls amount.
B. calls in advance.
C. minimum share capital.
D. debenture amount.
ANSWER: A
33. Prospectus is a document _________.
A. containing the rules and regulations of the company.
B. containing details about the manufacturing process of the company.
C. containing details about the share capital of the company.
D. containing the information of the sales.
ANSWER: C
34. Secret reserve can be created by _______________.
A. public limited company only.
B. banking and financial companies only.
C. private limited company only.
D. co-operative societies
ANSWER: B
35. General reserve is __________.
A. an appropriation from the profit.
B. a must item in the debit side of the P&L account.
C. an appropriation from the share capital.
D. important item in the balance sheet.
ANSWER: A
36. When a transaction has not been recorded in the books of account either
wholly or partially such errors are
called as _________.
A. Error of commission.
B. Error of omission.
C. Compensating error.
D. Error of principle.
ANSWER: B
37. Verification of the value of assets, liabilities, the balance of reserves, provision
and the amount of profit
earned or loss suffered a firm is called _________.
A. Continuous audit.
B. Balance sheet audit.
C. Interim audit.
D. Partial audit.
ANSWER: B
38. Alterations and heavy repairs to plant etc., is _____________.
A. Deferred revenue expenditure.
B. Capital expenditure.
C. Revenue expenditure.
D. Petty expenses.
ANSWER: C
39. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example
of:
A. Error of omission.
B. Error of commission.
C. Compensating error.
D. Error of principle.
ANSWER: B
40. Recording a transaction twice in the books of original entry is an error of
__________.
A. Principle.
B. Commission.
C. Duplication.
D. Omission.
ANSWER: C
41. Errors and frauds already committed can be discovered under the system of
________.
A. Internal audit.
B. Internal check.
C. Internal control.
D. All of the above.
ANSWER: D
42. Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud
B. misappropriation of cash.
C. misappropriation of goods.
D. manipulation of accounts.
ANSWER: D
43. Vouching of the balances of all incomes and expenses account is known as
vouching of ______.
A. Personal ledger.
B. Impersonal ledger.
C. Cash.
D. Sales.
ANSWER: B
44. Stock in trade is valued _________.
A. at cost price.
B. at market price.
C. at cost price or market price whichever is less.
D. at cost price less depreciation.
ANSWER: B
45. Goods sent on an approval basis have been recorded as credit sales. This is an
example of:
A. Error of principle.
B. Error of commission.
C. Error of omission.
D. Error of duplication.
ANSWER: A
46. Preliminary expenses are the best example for _________.
A. fictitious asset.
B. intangible asset.
C. wasting asset.
D. floating asset.
ANSWER: A
47. The profits that can be legally distributed to shareholders are called _________.
A. Revenue profits.
B. Capital profits.
C. Divisible profits.
D. Profits prior to incorporation.
ANSWER: C
48. Errors of principle are due to ___________.
A. Wrong entry of the transaction in the books of original entry.
B. Wrong allocation of expenditure between capital and revenue.
C. Mistake in the payment of a commission.
D. Mistake in the payment of salary.
ANSWER: A
49. Periodical audit is also called as _________.
A. Final audit.
B. Interim audit.
C. Balance sheet audit.
D. Income statement audit.
ANSWER: C
50. An audit programme is ___________.
A. a description, memorandum or an outline of the work to be done in a business.
B. the rules and regulations prescribed for writing up the books of accounts.
C. to gain knowledge of clients accounting system.
D. a trial work.
ANSWER: B

1. __________ is a systematic examination of the books and records or a business.

A. Auditing.
B. Vouching.
C. Verification.
D. Checking.
ANSWER: A
2. Which of the following are not objectives of auditing?
A. Ascertain the profit and preparation of P/L Account, Balance sheet.
B. Detection and prevention of frauds and errors.
C. Give a true and fair view of financial amount.
D. To submits the accounts to Government of India.
ANSWER: D
3. Which of the following is not a kind of audit?
A. Statutory and private audit.
B. Government and continuous audit.
C. Continuous, final, Interim, Cash, Cost and Management audit.
D. None of these.
ANSWER: D
4. An audit which is compulsory by the law __________.
A. Government audit.
B. Internal audit.
C. Cost audit.
D. Statutory audit.
ANSWER: D
5. Instruction of audit issued by controller and auditor general of India ________.
A. statutory audit.
B. final audit.
C. management audit.
D. government audit.
ANSWER: D
6. Audit done by the employees of the business undertaking is called _______.
A. final audit.
B. management audit.
C. government audit.
D. government audit.
ANSWER: B
7. This kind of audit is conducted generally between two annual audit ______.
A. internal audit.
B. interim audit.
C. final audit.
D. continuous audit.
ANSWER: B
8. Management audit otherwise called as _______.
A. final audit.
B. efficiency audit.
C. cost audit.
D. cash audit.
ANSWER: B
9. Before the work of audit is commenced, the auditor plans out the whole of audit
work is called _________.
A. Audit plan.
B. Audit note.
C. Audit programme.
D. Audit programme.
ANSWER: D
10. A number of checks and controls exercised in a business to ensure its efficient
working is known as
________.
A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
ANSWER: B
11. A Voucher is a _______.
A. document is support of an entry made in books of accounts.
B. invoice received from suppliers.
C. receipt issued to a customer for cash.
D. despatch receipt.
ANSWER: A
12. Voucher relates to _________.
A. cash receipt.
B. cash payment.
C. credit transactions.
D. all the above.
ANSWER: D
13. Internal check is meant for ___________.
A. prevention of frauds.
B. detection of frauds.
C. helping audit is depth.
D. detection of errors.
ANSWER: A
14. Internal auditor is appointed by ________.
A. the management.
B. the shareholders
C. the government.
D. he statutory body.
ANSWER: A
15. Auditing begins where ______ ends.
A. Selling.
B. inventory valuation.
C. Accounting.
D. Purchases.
ANSWER: C
16. A kind of audit conducted for a part of the accounting year is called _______.
A. Periodical audit.
B. Partial audit.
C. Cost audit.
D. Interim audit.
ANSWER: A
17. For which of the following, Audit is optional?
A. Trusts.
B. Joint stock companies.
C. Proprietorship concern.
D. None of the above.
ANSWER: C
18. Providing more or less depreciation on assets is an example of ______.
A. Misappropriation of cash.
B. Misappropriation of goods.
C. Misappropriation of accounts.
D. None of the above.
ANSWER: D
19. The audit that is made compulsory under statute is called _________.
A. Statutory audit.
B. Partial audit.
C. Complete audit.
D. Continuous audit.
ANSWER: A
20. The receipt of goods must be entered in _________.
A. goods inward book.
B. goods outward book
C. receipt of Stores.
D. ceipt issue and balance of stores
ANSWER: A
21. Who among the following can be appointed as auditor of a company?
A. A partner or a director of the company.
B. A person of unsound mind.
C. Mr. Y who owes Rs. 500 to the company.
D. Mr. Z the holder of C.A certificate.
ANSWER: D
22. Auditing standards differ from auditing procedures in that procedures relate to
________.
A. Measure of performance.
B. Audit principles.
C. Acts to be performed.
D. Audit judgments.
ANSWER: C
23. Confirmation of the court is necessary for __________.
A. increasing the share capital.
B. . reduction of share capital.
C. conversion of shares into stock.
D. issue of new shares.
ANSWER: B
24. Profit prior to incorporation may be utilized to ___________.
A. write of goodwill
B. pay interest on purchase consideration
C. writing off fixed assets.
D. all the above.
ANSWER: A
25. Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements.

B. His opinion is no guarantee to the future viability of the business.

C. He is responsible for the detection and prevention of frauds and errors in
financial statements.
D. He should examine whether recognized accounting principles have been
consistent.
ANSWER: A
26. Audit means ___________.
A. recording business transactions.
B. preparing the final accounts.
C. examination of books, accounts, vouchers etc.
D. preparing final accounts.
ANSWER: C
27. Audit programme is prepared ______________.
A. to help the auditor and his staff about the work to be done while auditing.
B. to help the accountant to prepare the balance sheet.
C. to help the company to submit its accounts.
D. to help the shareholders to file the returns.
ANSWER: A
28. Audit is ________.
A. a member of the company.
B. the agent of the members of the company
C. the agent of the central government.
D. an assistant to accountant.
ANSWER: B
29. Auditor shall report on the accounts examined by him __________.
A. to the shareholders.
B. to the court.
C. to the bank.
D. to the general public.
ANSWER: A
30. Purchase of machinery is a ____________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: C
31. Sale of land is a __________.
A. revenue receipt.
B. capital receipt.
C. capital expenditure.
D. revenue expenditure.
ANSWER: B
32. Shares are forfeited on the non-payment of ____________.
A. share calls amount.
B. calls in advance.
C. minimum share capital.
D. debenture amount.
ANSWER: A
33. Prospectus is a document _________.
A. containing the rules and regulations of the company.
B. containing details about the manufacturing process of the company.

C. containing details about the share capital of the company.

D. containing the information of the sales.
ANSWER: C
34. Secret reserve can be created by _______________.
A. public limited company only.
B. banking and financial companies only.
C. private limited company only.
D. co-operative societies
ANSWER: B
35. General reserve is __________.
A. an appropriation from the profit.
B. a must item in the debit side of the P&L account.
C. an appropriation from the share capital.
D. important item in the balance sheet.
ANSWER: A
36. When a transaction has not been recorded in the books of account either
wholly or partially such errors are
called as _________.
A. Error of commission.
B. Error of omission.
C. Compensating error.
D. Error of principle.
ANSWER: B
37. Verification of the value of assets, liabilities, the balance of reserves, provision
and the amount of profit
earned or loss suffered a firm is called _________.
A. Continuous audit.
B. Balance sheet audit.
C. Interim audit.
D. Partial audit.
ANSWER: B
38. Alterations and heavy repairs to plant etc., is _____________.
A. Deferred revenue expenditure.
B. Capital expenditure.
C. Revenue expenditure.
D. Petty expenses.
ANSWER: C
39. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example
of:
A. Error of omission.
B. Error of commission.
C. Compensating error.
D. Error of principle.
ANSWER: B
40. Recording a transaction twice in the books of original entry is an error of
__________.
A. Principle.
B. Commission.
C. Duplication.
D. Omission.
ANSWER: C
41. Errors and frauds already committed can be discovered under the system of
________.
A. Internal audit.
B. Internal check.
C. Internal control.
D. All of the above.
ANSWER: D
42. Treating revenue expenditure as capital expenditure is a case of _________.
A. fraud
B. misappropriation of cash.
C. misappropriation of goods.
D. manipulation of accounts.
ANSWER: D
43. Vouching of the balances of all incomes and expenses account is known as
vouching of ______.
A. Personal ledger.
B. Impersonal ledger.
C. Cash.
D. Sales.
ANSWER: B
44. Stock in trade is valued _________.
A. at cost price.
B. at market price.
C. at cost price or market price whichever is less.
D. at cost price less depreciation.
ANSWER: B
45. Goods sent on an approval basis have been recorded as credit sales. This is an
example of:
A. Error of principle.
B. Error of commission.
C. Error of omission.
D. Error of duplication.
ANSWER: A
46. Preliminary expenses are the best example for _________.
A. fictitious asset.
B. intangible asset.
C. wasting asset.
D. floating asset.
ANSWER: A
47. The profits that can be legally distributed to shareholders are called _________.
A. Revenue profits.
B. Capital profits.
C. Divisible profits.
D. Profits prior to incorporation.
ANSWER: C
48. Errors of principle are due to ___________.
A. Wrong entry of the transaction in the books of original entry.
B. Wrong allocation of expenditure between capital and revenue.
C. Mistake in the payment of a commission.
D. Mistake in the payment of salary.
ANSWER: A
49. Periodical audit is also called as _________.
A. Final audit.
B. Interim audit.
C. Balance sheet audit.
D. Income statement audit.
ANSWER: C
50. An audit programme is ___________.
A. a description, memorandum or an outline of the work to be done in a business.
B. the rules and regulations prescribed for writing up the books of accounts.
C. to gain knowledge of clients accounting system.
D. a trial work.
ANSWER: B

51. The auditor of a government company shall be appointed by ________.

A. the government company itself.
B. the central government.
C. the share holders.
D. the debenture holders.
ANSWER: B
52. An auditor of a company will be held liable under the companies act _________.
A. if the destroys, mutilates, secrets etc., any documents, vouchers, books etc., with a view
to deceive any
person.
B. if he has examined all the documents of the company.
C. if he has not contravened the provisions of sec.227.
D. if he is an auditor of the company.
ANSWER: A
53. The main object of the audit of the cash book may be ________.
A. to verify the assets and liabilities.
B. to know that all receipts and payments have been properly recorded.
C. to check the internal control system in business.
D. to check the bank balance.
ANSWER: B
54. The purpose of the audit of wage payment is to determine that __________.
A. the work is executed completely for which the workers are paid wages.
B. the workers are paid the correct amount of wages under proper authorization.
C. the workers are working regularly.
D. none of the above.
ANSWER: B
55. One of the audit procedures to check the issue of share capital of the newly formed
company is
__________.
A. the memorandum of association and articles of association.
B. the share transfer register.
C. the issue of debenture.
D. none of the above.
ANSWER: A
56. Capital reserves are created out of profits of __________.
A. a revenue nature.
B. a capital nature.
C. a secret reserve.
D. contingency reserve.
ANSWER: B
57. A good audit report must at least meet one of the following qualifications __________.
A. it should offer constructive and timely suggestions to the management.
B. it should not point out mistakes.
C. it should not be based on factual information.
D. it should not be based on balance sheet.
ANSWER: A
58. The work of one clerk is automatically check by another clerk is called _________.
A. Internal control.
B. Internal check.
C. Internal audit.
D. None of the above.
ANSWER: B
59. The owners of the company are called __________.
A. Debenture holders.
B. Debtors.
C. Shareholders.
D. None of the above.
ANSWER: C
60. Verification is __________.
A. the art of recording the business transaction.
B. an examination of the books of accounts.
C. the act of establishing the accuracy of entries in the books of accounts.
D. none of the above.
ANSWER: C
61. Depreciation is _________.
A. the decrease in the value of an asset.
B. the increase in the value of an asset.
C. an appreciation to the company.
D. a credit to shareholders.
ANSWER: A
62. The main objects of investigation is _________.
A. to discover errors and frauds.
B. to prevent errors and frauds.
C. to verify statements.
D. all the above.
ANSWER: D
63. Internal controls and internal check are ____________.
A. one and the same.
B. different.
C. internal control includes internal check.
D. None of the above.
ANSWER: C
64. Share may be issued _____________.
A. at par.
B. at premium.
C. at discount.
D. all the above.
ANSWER: D
65. The liabilities of an auditor can be _________.
A. Civil.
B. Criminal.
C. Civil and Criminal.
D. Official.
ANSWER: C
66. An auditor is like a ______.
A. Watchman.
B. foolish dog.
C. mad dog.
D. watch dog.
ANSWER: B
67. Special audit is necessary for _________.
A. inefficient concern.
B. processing concern.
C. trading concern.
D. manufacturing concern.
ANSWER: A
68. The first auditors appointed hold office ____________.
A. for a period of one year.
B. for a period of two years.
C. for a period of three years.
D. till the conclusion of the first annual general meeting.
ANSWER: D
69. Audit of company account is _____________.
A. compulsory.
B. unnecessary.
C. avoidable.
D. depends upon directors.
ANSWER: A
70. The companys auditor is expected to give _____________.
A. his expert opinion about the accounts.
B. a factual position about the accounts.
C. a critical review of the accounts.
D. financial assistance.
ANSWER: A
71. Internal auditor of a company must be _______________.
A. Cost accountant.
B. Chartered accountant.
C. ICWA.
D. need not possess any professional qualification.
ANSWER: B
72. Auditors of a joint stock company are appointed by ______________.
A. directors of the company.
B. annual general meeting.
C. election at the annual general meeting.
D. debenture holders.
ANSWER: C
73. A company auditor can be removed by _________________.
A. board of directors.
B. managing director.
C. any director.
D. general meeting.
ANSWER: D
74. A vacancy caused by resignation of an auditor is filled by _________.
A. board of directors.
B. managing director.
C. general meeting.
D. central government.
ANSWER: C
75. Cost audit under section 233(b) of the companies act is ___________.
A. voluntary.
B. compulsory.
C. advisable.
D. avoidable.
ANSWER: C
76. Duties of a company auditor are defined by __________.
A. Memorandum of Association.
B. Articles of Association.
C. Companies Act 1956.
D. Agreement between company and the auditor.
ANSWER: C
77. When at an annual general meeting of a company no auditor is appointed or
reappointed. In that case
________.
A. the central government appoints a person to fill the vacancy.
B. the board of directors appoints a person to fill the vacancy.
C. the managing director of the company appoints a person to fill the vacancy.
D. none of these can appoint a person to fill the vacancy.
ANSWER: A
78. Audit in depth means __________.
A. audit of each and every item.
B. intensive audit of each and every item.
C. intensive audit of a few items.
D. audit of a few selected items.
ANSWER: C
79. When a company engages a Chartered Accountant as its internal auditor, the external
auditor
_____________.
A. need not check the areas covered by internal audit.
B. should ignore the existence of internal audit.
C. should incorporate the internal auditors report with his own.
D. should examine the system and efficiency of internal audit and devise a suitable audit
programme.
ANSWER: D
80. Which of the following factors likely to be identified as a fraud factor by the auditor?
A. initial public offer of quality shares to raise additional capital for expansion
B. Bank reconciliation statement includes deposits-in-transit.
C. Plant and machinery is sold at a loss.
D. The company has made political contributions.
ANSWER: A
81. The most difficult type of misstatement to detect fraud is based on __________.
A. related party purchases.
B. related party sales.
C. the restatement of sales.
D. omission of a sales transaction from being recorded.
ANSWER: D
82. Which of the following is not likely to be a fraud risk factor relating to management
characteristics?
A. Tax evasion.
B. Failure to correct known weakness in internal control system.
C. Adoption of conservative accounting principles.
D. High management turnover.
ANSWER: C
83. Professional skepticism requires that the auditor assume that management is _________.
A. reasonably honest.
B. neither honest nor dishonest.
C. not necessarily honest.
D. dishonest unless proved otherwise.
ANSWER: B
84. Which of the following information should a successor auditor obtain during the inquiry
of the
predecessor auditor before accepting engagement?
A. Information about integrity of management.
B. Disagreement with management concerning auditing procedures.
C. Review of internal control system.
D. Organization structure.
ANSWER: A
85. The audit engagement letter generally should include a reference to each of the
following except
___________.
A. limitations of auditing
B. responsibilities of management with respect to audit work.
C. expectation of receiving a written management representation letter.
D. a description of the auditors method of sample selection.
ANSWER: D
86. The use of an audit engagement letter is the best method of assuring the auditor will
have which of the
following?
A. Auditor will obtain sufficient appropriate audit evidence.
B. Management representation letter.
C. Access to all books, accounts and vouchers required for audit purpose.
D. Co-operation from other auditors.
ANSWER: C
87. The use of an audit engagement letter is the best method of documenting ________.
A. The required communication of significant deficiencies in internal control.
B. Significantly higher control risk than that assessed in prior audit.
C. Objective and scope of auditors work.
D. Notification of any changes in the original arrangements of the audit.
ANSWER: D
88. An auditor who accepts an audit but does not posses the industry expertise of the
business entity should
______________.
A. engage experts.
B. obtain knowledge of matters that relate to the nature of entity business.
C. inform management about it.
D. take help of other auditors.
ANSWER: B
89. The least import element in the evaluation of an audit firm system of quality control
would relate to
___________.
A. assignment of audit assistants.
B. system of determining audit fees.
C. consultation with experts.
D. confidentiality of clients information.
ANSWER: B
90. The primary purpose of establishing quality control policies and procedures for
deciding on client
evaluation to ___________.
A. ensure adherence to generally accepted auditing standards.
B. acceptance or retention of clients whose management does not lack integrity.
C. ensure audit fees is charged according to the type of audit work assigned.
D. medical policies.
ANSWER: B
91. Which of the following is not a quality control consideration on accepting a new client?
A. Availability of audit assistants with necessary skill and competence.
B. Provision of other services to the client which may impair independence.
C. Predecessor auditor advice as to whether audit fees were paid promptly.
D. Review of audit work done by one partner by the other.
ANSWER: C
92. Audit of banks is an example of __________.
A. Statutory audit.
B. Balance sheet audit.
C. Concurrent audit.
D. All of the above.
ANSWER: D
93. Concurrent audit is a part of ______________.
A. internal check system.
B. continuous audit.
C. internal audit system.
D. final audit.
ANSWER: C
94. In India balance sheet audit is synonymous to _______________.
A. Annual audit.
B. Continuous audit.
C. Detailed audit.
D. Statutory audit.
ANSWER: A
95. Audit in depth is synonymous for ____________.
A. complete audit.
B. completed audit.
C. final audit.
D. detailed audit.
ANSWER: D
96. Balance sheet audit included verification of ________.
A. assets.
B. liabilities.
C. income and expenditure accounts where appropriate.
D. all of the above.
ANSWER: D
97. Which of the following statements is not true about the continuous audit?
A. It is conducted at regular interval.
B. It may be carried out on daily basis.
C. It is needed when the organisation has a good internal control system.
D. It is expensive.
ANSWER: C
98. Which of the following is not a fact of EPA?
A. Economic audit.
B. Efficiency audit.
C. Expenditure audit.
D. Effectiveness audit.
ANSWER: C
99. Balance sheet does not include ___________.
A. verification of assets and liabilities.
B. vouching of income and expense accounts related to assets and liabilities.
C. examination of adjusting and closing entries.
D. routine checks.
ANSWER: D
100. When issuing an unqualified opinion the auditor who evaluated 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 are less than the materiality level.
C. estimated of the total likely misstatement is more than the materiality level.
D. estimates of the total likely misstatement cannot be made.
ANSWER: B

101. In determining the level of materiality for an audit what should not be considered?
A. Prior years errors.
B. The auditor remuneration.
C. Adjusted interim financial statement.
D. Prior year financial statements.
ANSWER: B
102. 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. indicate important aspects of business.
D. all of the above.
ANSWER: D
103. Which of the following statement is most closely associated with analytical procedure
applied at
substantive stage?
A. It helps to study relationship among balance sheet accounts.
B. It helps to discover material misstatements in the financial statements.
C. It helps to identify possible oversights.
D. It helps to accumulate evidence supporting the validity of a specific account balance.
ANSWER: D
104. 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 ability of continue.
ANSWER: A
105. Of the following, which is the least persuasive type of audit evidence?
A. Bank statements obtained from the client.
B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor.
D. Computations made by the auditor.
ANSWER: C
106. Which of the following statement is generally, correct about the reliability of audit
evidence?
A. To be reliable, evidence should conclusive rather than persuasive.
B. Effective internal control system provides reliable audit evidence.
C. Evidence obtained from outside sources routed through the client.
D. All are correct.
ANSWER: B
107. Which of the following Auditing Assurance Standard deals with Audit planning?
A. AAS-7.
B. AAS-8.
C. AAS-9.
D. AAS-3.
ANSWER: B
108. Audit Programme is prepared by ___________.
A. the auditor.
B. the client.
C. the audit assistants.
D. the auditor and his audit assistants.
ANSWER: D
109. The working papers which auditor prepares for financial statements audit are _______ .
A. evidence for audit conclusions.
B. owned by the client.
C. owned by the auditor.
D. retained in auditor office until a change in auditors.
ANSWER: C
110. The quantity of audit working papers complied on engagement would most be
affected by ___________.
A. management integrity.
B. auditor experience and professional judgement.
C. Auditor qualification.
D. control risk.
ANSWER: B
111. Which of the following best describes the primary purpose of audit programmed
preparation?
A. To detect errors or fraud.
B. To comply with GAAP.
C. To gather sufficient appropriate evidence.
D. To assess audit risk.
ANSWER: C
112. Which of the following is not an advantage of the preparation of working paper?
A. To provide a basis for review of audit work.
B. To provide a basis for subsequent audits.
C. To ensure audit work is being carried out as per Programme.
D. To provide a guide for advising another client on similar issues.
ANSWER: D
113. The auditor permanent working paper file should not normally, include ________
A. extracts from clients bank statements.
B. past years financial statements.
C. attorney letters.
D. debt agreements.
ANSWER: A
114. Who is responsible for the appointment of statutory auditor of a limited company?
A. Directors of the company.
B. Members of the company.
C. The central government.
D. The state government.
ANSWER: B
115. Which of the following sections deals with qualification of the auditor?
A. Section 226(1) and Section 226(2).
B. Section 224(1) and Section 224(2).
C. Section 226(3) and Section 226(4).
D. Section 224(3) and Section 224(4).
ANSWER: A
116. Which of the following statement is not true?
A. A partnership firm can be appointed as a statutory auditor of limited company.
B. Appointment can be made in the name of the firm.
C. Majority of the partners should be practicing in India.
D. All partners should be chartered account.
ANSWER: C
117. The board of directors shall appoint first auditor of a company ___________.
A. within one month of completion of capital subscription state of the company.
B. within one month of the promotion of the company.
C. within one month of the commencement of the business of the company.
D. within one month of incorporation of the company.
ANSWER: D
118. The term of the auditor ship of first auditor would be from the date of appointment till
_.
A. the conclusion of statutory meeting.
B. the conclusion of first general meeting.
C. the conclusion of next annual general meeting.
D. the date of removal.
ANSWER: B
119. In case the directions fail to appoint first auditors, the shareholders shall appoint them
at _______ by
passing a resolution.
A. a general meeting.
B. first annual general meeting.
C. statutory meeting.
D. annual general meeting.
ANSWER: A
120. Which of the following statement is not true regarding appointment of statutory
auditor by the central government?
A. Such powers have been conferred upon it by section 224(3).
B. If a company fails to appoint an auditor at a general meeting.
C. If an auditor refuses to accept appointment, the powers of the central government can
be exercised.
D. Lay man can be appointed as an auditor.
ANSWER: B
121. The auditor of a government company is appointed by the C & AG. His remuneration
is fixed by
_____________.
A. the C & AG.
B. the shareholders.
C. the shareholders at an annual general meeting.
D. the board of directors.
ANSWER: B
122. The section which contains provisions regarding remuneration of the auditor is _____.
A. Section 224(9).
B. Section 224(7).
C. Section 224(8).
D. Section 224(6).
ANSWER: C
123. The authority to remove the first auditor before the expiry of term is with ___________.
A. the shareholders in a general meeting.
B. the shareholders in the first annual general meeting.
C. the board of directors.
D. the central government.
ANSWER: A
124. Which of the following statement is not correct regarding removal of first auditor
before expiry of the
term?
A. He is removed at a general meeting.
B. The shareholders are authorized to do so.
C. The approval of the central government is required for such removal.
D. The provision for such removal are contained in section 224(7).
ANSWER: C
125. The retiring auditor does not have a right to _________.
A. make written representations.
B. get his representation circulated.
C. be heard at the meeting.
D. speak as a member of the company.
ANSWER: D
126. Who out of the following cannot be appointed as a statutory auditor of the company?
A. Erstwhile director.
B. Internal auditor.
C. Relative of a director.
D. Only (2) and (3).
ANSWER: B
127. A statutory auditor has a right of access at all times to ___________.
A. books and accounts of a company.
B. books, account and documents of the company.
C. books, accounts and vouchers of the company.
D. notices and documents of the company.
ANSWER: C
128. The auditor has a right to _________.
A. obtain information and explanation.
B. obtain information and explanation from the employees and officers.
C. obtain information and explanation necessary for the purpose of audit.
D. both (2) and (3).
ANSWER: A
129. The branch auditor is appointed by ____________.
A. shareholders in an annual general meeting.
B. shareholders in general meeting.
C. board of directors in board meeting.
D. any of the above.
ANSWER: B
130. Auditor of a _______ company does not have right to visit foreign branches of the
company.
A. unlimited liability.
B. manufacturing.
C. banking.
D. non-profit making.
ANSWER: B
131. Special audit is conducted at the order of the central government. Which section
givers such powers?
A. Section 233(A).
B. section 233(B)
C. Section 242(A).
D. Section 242(B).
ANSWER: C
132. Who among the following can be appointed as special auditor by the central
government?
A. The statutory auditor.
B. Chartered accountant in practice.
C. Any chartered accounted who is not in practice.
D. Both (1) and (2).
ANSWER: B
133. As per C & AG Act, 1971 the tenure of the comptroller and Auditor General is ______ a.
four years.
A. four years.
B. five years.
C. six years.
D. seven years.
ANSWER: C
134. The part of Government Audit which is concerned with examining whether the money
has been spent for the purpose specified in Appropriation Act is called _____________.
A. audit of sanctions
B. audit of provisions of funds.
C. audit of rules and orders.
D. audit of financial property.
ANSWER: B
135. Audit of transactions does not include __________.
A. propriety audit.
B. efficiency cum performance audit.
C. audit of receipts.
D. audit of expenditure.
ANSWER: B
136. The income tax department has sent MR. X refund of Advance tax. The government
Auditor detected
this while conducting ____________.
A. audit of expenditure.
B. performance audit.
C. audit of stores and stock.
D. audit of receipts.
ANSWER: A
137. Audit of rent, deposits and remittances does not cover ____________.
A. audit of borrowings.
B. audit of amortization of debt.
C. Audit of sanctions.
D. remittance audit.
ANSWER: C
138. Audit reports on PSU are ____________.
A. submitted to the president/governor for being laid before the parliament
B. sent to concerned ministries/departments.
C. submitted to bod of concerned psu.
D. submitted to pwd department.
ANSWER: B
139. Who among the following is eligible to be appointed as an audit of Government
Company?
A. A chartered accountant in practice.
B. A chartered accountant whether in practice or not.
C. An auditor appointed by the A & AG.
D. An unsound mind person.
ANSWER: A
140. The statutory auditor of a Government Company submits his report to _________.
A. the BOD of the company
B. the C & AG.
C. the legislature.
D. the company secretary.
ANSWER: B
141. Which of the following statement is not distinguishing feature for computer based
processing and manual processing?
A. Errors in a CIS environment are less systematic as compared to error in manual
processing.
B. The potential for human error in the CIS environment is greater as compared to manual
system.
C. In a computer based accounting system, audit trail is in electronic form.
D. Computer processing offers management a variety of analytical tools.
ANSWER: A
142. To avoid invalid data input, a bank added an extra number at the end of each account
number and subjected the new number to an algorithm. This technique is known as
_______.
A. Dual read.
B. Test for reasonableness.
C. Check digit.
D. Occurrence of correction.
ANSWER: C
143. When computer programmed or files can be accessed from terminals, access can be
limited to authorized individuals by __________.
A. appointing a librarian.
B. controlling passwords.
C. appointing EEP auditor.
D. Both (a) and (b).
ANSWER: D
144. Erroneous data has been detected by computer program controls. It has been
excluded from processing
and printed separately Error Report. Who should most probability by review and follow up
on this report?
A. System analyst.
B. Data control group.
C. Programmer.
D. Computer operator.
ANSWER: A
145. General Controls will be ineffective when EDP Department ___________.
A. participates in computer software acquisition decisions.
B. design documentations for computerized operations.
C. originate changes in master files.
D. provide physical security for programme files.
ANSWER: C
146. Which of the following activities would most likely be performed by EDP department?
A. Authorizing transactions.
B. Parity checks.
C. Distributing output.
D. Correction of transaction errors.
ANSWER: C
147. The completeness of wages figure can be tested by comparing the number of time
cards to be processed with transaction on wages sheet. This type of control techniques is
called ___________.
A. Check total.
B. Control total.
C. Occurrence correction.
D. Check digit.
ANSWER: D
148. Which of the following will not affect audit in a CIS environment?
A. The objective of expression of opinion on financial statements.
B. Compliance procedures adopted by the auditor.
C. Performance of substantive procedures.
D. Evaluation of inherent risk and control risk.
ANSWER: A
149. Which of the following statement is not true of the test data approach in a test of
computerized accounting system?
A. Test data tests only those controls which the auditor wished to rely.
B. Test data should consist of data related to all controls prevalent in the organisation.
C. The result of test data indicates that all the application and general controls are
functioning properly.
D. Test data processed by the client computer programmed under the auditors control.
ANSWER: B
150. Which of the following CAAT allow fictitious transactions planted by the auditor to be
processed along with real ones on client system?
A. Integrated test facility.
B. Test data approach.
C. Generalized audit software.
D. Parallel simulation.
ANSWER: A
151. who is the custodian authority for audit working papers?
A. Shareholders
B. Auditor
C. Auditee
D. Managing director
ANSWER: B
152. Working papers are the property of the auditor
 A. AAS5
B. AAS4
C. AAS1
D. AAS3
ANSWER: A

1. __________ is a systematic examination of the books and records or a

business

 [A] Auditing
 [B] Vouching
 [C] Verification
 [D] Checking

Answer: Option [A]

2. Which of the following is not a kind of audit?

 [A] Statutory and private audit.

 [B] Government and continuous audit.
 [C] Continuous, final, Interim, Cash, Cost and Management audit.
 [D] None of these.

Answer: Option [D]

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3. Instruction of audit issued by controller and auditor general of India ________.

 [A] statutory audit.

 [B] final audit.
 [C] management audit.
 [D] government audit.

Answer: Option [D]

4. This kind of audit is conducted generally between two annual audit ______.

 [A] internal audit.

 [B] interim audit.
 [C] final audit.
 [D] continuous audit.
 Answer: Option [B]

5. Before the work of audit is commenced, the auditor plans out the whole of
audit work is called _________.

 [A] Audit plan.

 [B] Audit note.
 [C] Audit risk.
 [D] Audit programme.

Answer: Option [D]

6. Voucher relates to _________.

 [A] cash receipt.

 [B] cash payment.
 [C] credit transactions.
 [D] all the above.

Answer: Option [D]

7. Internal auditor is appointed by ________.

 [A] the management.

 [B] the shareholders
 [C] the government.
 [D] he statutory body.

Answer: Option [A]

8. Auditing begins where ______ ends.

 [A] Selling
 [B] inventory valuation
 [C] Accounting
 [D] Purchases

Answer: Option [C]

9. For which of the following, Audit is optional?

 [A] Trusts
 [B] Joint stock companies.
 [C] Proprietorship concern.
 [D] None of the above

Answer: Option [C]

10. The audit that is made compulsory under statute is called _________.

 [A] Statutory audit.

 [B] Partial audit.
 [C] Complete audit.
 [D] Continuous audit.

Answer: Option [A]

11. Who among the following can be appointed as auditor of a company?

 [A] A partner or a director of the company.

 [B] A person of unsound mind.
 [C] Mr. Y who owes Rs. 500 to the company.
 [D] Mr. Z the holder of C.A certificate.

Answer: Option [D]

12. Confirmation of the court is necessary for __________.

 [A] increasing the share capital.

 [B] reduction of share capital.
 [C] conversion of shares into stock.
 [D] issue of new shares.

Answer: Option [B]

13. Audit means ___________.

 [A] recording business transactions.

 [B] preparing the final accounts.
 [C] examination of books, accounts, vouchers etc.
 [D] preparing final accounts.

Answer: Option [C]

14. Auditor shall report on the accounts examined by him __________.

 [A] to the shareholders.
 [B] to the court.
 [C] to the bank.
 [D] to the general public.

Answer: Option [A]

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15. Sale of land is a __________.

 [A] revenue receipt.

 [B] capital receipt.
 [C] capital expenditure.
 [D] revenue expenditure

Answer: Option [B]

16. Secret reserve can be created by _______________.

 [A] public limited company only

 [B] banking and financial companies only.
 [C] private limited company only.
 [D] co-operative societies

Answer: Option [B]

17. When a transaction has not been recorded in the books of account either
wholly or partially such errors are called as _________.

 [A] Error of commission

 [B] Error of omission.
 [C] Compensating error.
 [D] Error of principle.

Answer: Option [B]

18. Verification of the value of assets, liabilities, the balance of reserves,

provision and the amount of profit earned or loss suffered a firm is called
_________.

 [A] Continuous audit.

 [B] Balance sheet audit.
 [C] Interim audit.
 [D] Partial audit.

Answer: Option [B]

19. Vouching of the balances of all incomes and expenses account is known as
vouching of ______.

 [A] Personal ledger.

 [B] Impersonal ledger.
 [C] Cash
 [D] Sales

Answer: Option [B]

20. Preliminary expenses are the best example for _________.

 [A] fictitious asset.

 [B] intangible asset.
 [C] wasting asset.
 [D] floating asset.

Answer: Option [A]

21. Periodical audit is also called as _________.

 [A] Final audit.

 [B] Interim audit.
 [C] Balance sheet audit.
 [D] Income statement audit.

Answer: Option [C]

22. The auditor of a government company shall be appointed by ________.

 [A] the government company itself.

 [B] the central government.
 [C] the share holders.
 [D] the debenture holders.

Answer: Option [B]

23. The main object of the audit of the cash book may be ________.
 [A] to verify the assets and liabilities.
 [B] to know that all receipts and payments have been properly recorded.
 [C] to check the internal control system in business.
 [D] to check the bank balance.

Answer: Option [B]

24. One of the audit procedures to check the issue of share capital of the newly
formed company is __________.

 [A] the memorandum of association and articles of association.

 [B] the share transfer register.
 [C] the issue of debenture.
 [D] none of the above.

Answer: Option [A]

25. The work of one clerk is automatically check by another clerk is called
_________.

 [A] Internal control.

 [B] Internal check.
 [C] Internal audit.
 [D] None of the above.

Answer: Option [B]

26. The owners of the company are called __________.

 [A] Debenture holders.

 [B] Debtors
 [C] Shareholders
 [D] None of the above.

Answer: Option [C]

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27. The main objects of investigation is _________.

 [A] to discover errors and frauds.

 [B] to prevent errors and frauds.
 [C] to verify statements.
 [D] all the above
 Answer: Option [D]

28. Share may be issued _____________.

 [A] at par.
 [B] at premium.
 [C] at discount.
 [D] all the above.

Answer: Option [D]

29. The liabilities of an auditor can be _________.

 [A] Civil
 [B] Criminal
 [C] Civil and Criminal.
 [D] Official

Answer: Option [C]

30. Internal auditor of a company must be _______________.

 [A] Cost accountant.

 [B] Chartered accountant.
 [C] ICWA
 [D] need not possess any professional qualification.

Answer: Option [B]

31. A vacancy caused by resignation of an auditor is filled by _________.

 [A] board of directors.

 [B] managing director.
 [C] general meeting.
 [D] central government.

Answer: Option [C]

32. Cost audit under section 233(b) of the companies act is ___________.

 [A] voluntary
 [B] compulsory
 [C] advisable
 [D] avoidable

Answer: Option [C]

33. When at an annual general meeting of a company no auditor is appointed or

reappointed. In that case ________

 [A] the central government appoints a person to fill the vacancy

 [B] the board of directors appoints a person to fill the vacancy.
 [C] the managing director of the company appoints a person to fill the vacancy.
 [D] none of these can appoint a person to fill the vacancy.

Answer: Option [A]

34. The most difficult type of misstatement to detect fraud is based on

__________.

 [A] related party purchases.

 [B] related party sales.
 [C] the restatement of sales.
 [D] omission of a sales transaction from being recorded.

Answer: Option [D]

35. Professional skepticism requires that the auditor assume that management is
_________.

 [A] reasonably honest.

 [B] neither honest nor dishonest.
 [C] not necessarily honest.
 [D] dishonest unless proved otherwise.

Answer: Option [B]

36. The use of an audit engagement letter is the best method of assuring the
auditor will have which of the following?

 [A] Auditor will obtain sufficient appropriate audit evidence.

 [B] Management representation letter.
 [C] Access to all books, accounts and vouchers required for audit purpose.
 [D] Co-operation from other auditors
 Answer: Option [C]

37. An auditor who accepts an audit but does not posses the industry expertise
of the business entity should ______________.

 [A] engage experts.

 [B] obtain knowledge of matters that relate to the nature of entity business.
 [C] inform management about it.
 [D] take help of other auditors.

Answer: Option [B]

38. Audit of banks is an example of __________.

 [A] Statutory audit.

 [B] Balance sheet audit.
 [C] Concurrent audit.
 [D] All of the above.

Answer: Option [D]

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39. In India balance sheet audit is synonymous to _______________.

 [A] Annual audit.

 [B] Continuous audit.
 [C] Detailed audit.
 [D] Statutory audit.

Answer: Option [A]

40. Balance sheet audit included verification of ________.

 [A] assets
 [B] liabilities
 [C] income and expenditure accounts where appropriate.
 [D] all of the above.

Answer: Option [D]

41. Which of the following is not a fact of EPA?

 [A] Economic audit.

 [B] Efficiency audit.
 [C] Expenditure audit.
 [D] Effectiveness audit.

Answer: Option [C]

42. In determining the level of materiality for an audit what should not be
considered?

 [A] Prior years errors.

 [B] The auditor remuneration.
 [C] Adjusted interim financial statement.
 [D] Prior year financial statements.

Answer: Option [B]

43. Which of the following statement is most closely associated with analytical
procedure applied at substantive stage?

 [A] It helps to study relationship among balance sheet accounts.

 [B] It helps to discover material misstatements in the financial statements.
 [C] It helps to identify possible oversights.
 [D] It helps to accumulate evidence supporting the validity of a specific account
balance

Answer: Option [D]

44. Of the following, which is the least persuasive type of audit evidence?

 [A] Bank statements obtained from the client

 [B] Documents obtained by auditor from third parties directly.
 [C] Carbon copies of sales invoices inspected by the auditor
 [D] Computations made by the auditor.

Answer: Option [C]

45. Which of the following Auditing Assurance Standard deals with Audit
planning?

 [A] AAS-7.
 [B] AAS-8.
 [C] AAS-9.
 [D] AAS-3.

Answer: Option [B]

46. Audit Programme is prepared by ___________.

 [A] the auditor.

 [B] the client.
 [C] the audit assistants.
 [D] the auditor and his audit assistants.

Answer: Option [D]

47. The quantity of audit working papers complied on engagement would most
be affected by _________________.

 [A] management integrity.

 [B] auditor experience and professional judgement.
 [C] Auditor qualification.
 [D] control risk.

Answer: Option [A]

48. Which of the following is not an advantage of the preparation of working

paper?

 [A] To provide a basis for review of audit work.

 [B] To provide a basis for subsequent audits
 [C] To ensure audit work is being carried out as per Programme.
 [D] To provide a guide for advising another client on similar issues.

Answer: Option [D]

49. Which of the following sections deals with qualification of the auditor?

 [A] Section 226(1) and Section 226(2).

 [B] Section 224(1) and Section 224(2).
 [C] Section 226(3) and Section 226(4).
 [D] Section 224(3) and Section 224(4)

Answer: Option [A]

50. The board of directors shall appoint first auditor of a company ___________.
 [A] within one month of completion of capital subscription state of the company
 [B] within one month of the promotion of the company.
 [C] within one month of the commencement of the business of the company.
 [D] within one month of incorporation of the company.

Answer: Option [D]

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51. In case the directions fail to appoint first auditors, the shareholders shall
appoint them at _______ by passing a resolution.

 [A] a general meeting.

 [B] first annual general meeting.
 [C] statutory meeting.
 [D] annual general meeting

Answer: Option [A]

52. The auditor of a government company is appointed by the C & AG. His
remuneration is fixed by _____________.

 [A] the C & AG.

 [B] the shareholders.
 [C] the shareholders at an annual general meeting.
 [D] the board of directors.

Answer: Option [B]

53. Which of the following statement is not correct regarding removal of first
auditor before expiry of the term?

 [A] He is removed at a general meeting.

 [B] The shareholders are authorized to do so
 [C] The approval of the central government is required for such removal.
 [D] The provision for such removal are contained in section 224(7)

Answer: Option [C]

54. The retiring auditor does not have a right to _________.

 [A] make written representations.

 [B] get his representation circulated.
 [C] be heard at the meeting.
 [D] speak as a member of the company.

Answer: Option [D]

55. Auditor of a _______ company does not have right to visit foreign branches
of the company.

 [A] unlimited liability.

 [B] manufacturing
 [C] banking
 [D] non-profit making.

Answer: Option [B]

56. Special audit is conducted at the order of the central government. Which
section givers such powers?

 [A] Section 233(A).

 [B] section 233(B)
 [C] section 242(A)
 [D] Section 242(B).

Answer: Option [C]

57. As per C & AG Act, 1971 the tenure of the comptroller and Auditor General is
______ a. four years.

 [A] four years.

 [B] five years.
 [C] six years.
 [D] seven years.

Answer: Option [C]

58. Audit of transactions does not include __________.

 [A] propriety audit.

 [B] efficiency cum performance audit.
 [C] audit of receipts.
 [D] audit of expenditure.

Answer: Option [B]
 59. Audit of rent, deposits and remittances does not cover ____________.

 [A] audit of borrowings.

 [B] audit of amortization of debt.
 [C] audit of sanctions
 [D] remittance audit.

Answer: Option [C]

60. The statutory auditor of a Government Company submits his report to

_________

 [A] the BOD of the company

 [B] the C & AG.
 [C] the legislature.
 [D] the company secretary.

Answer: Option [B]

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1, Which country gave recognition to Auditing first in the Companies Act –

(a) America

(b) Britain

(c) India

(d) England (✓)

2, Auditing is derived from the Latin Word –

(a) Audire (✓)

(b) Auditor
(c) Order

(d) None of these

3, When the audit of Company Accounts was made compulsory in India.

(a) 1894

(b) 1914 (✓)

(c) 1947

(d) 1952

4, Which of the following governments in India followed the education of

Accountancy first –

(a) Government of Delhi

(b) Government of Bihar

(c) Government of Mumbai (✓)

(d) None of these

5, When the Chartered Accountant Act of India was made:

(a) 1947

(b) 1949 (✓)

(c) 1956

(d) 1965

6, When the audit of Company Accounts was made compulsory in England –

(a) 1802

(b) 1840

(c) 1844 (✓)

(d) 1850

7, When Institute of Chartered Accountant of India established?

(a) 1 July, 1949 (✓)

(b) 1 July, 1950

(c) 1 July, 1951

(d) 1 July, 1957

8, When Double Entry System was invented –

(a) 1444

(b) 1490

(c) 1494 (✓)

(d) 1949

9, The principle of double entry book-keeping system published by –

(a) Lucas Passioli (✓)

(b) Davar

(c) Wilson

(d) None of these

10, Auditing is –

(a) An art

(b) A science

(c) Above both (a) and (b) (✓)

(d) None of these

11, Who can be an Auditor

(a) Commerce Graduate

(b) Law Graduate

(c) Cost Accountant

(d) Chartered Accountant (✓)

 

12, The function of an Auditor is –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(c) To detect and prevent the frauds

(d) All the above (✓)

13, An auditor is like a ………. dog.

(a) Pet

(b) Watch (✓)

(c) Blood hand

(d) Thirsty

14, “Auditor is a watch dog and not a blood-hound.” decision was given in the case of
–

(a) London and General Bank, 1895

(b) Kingston Cotton Mills Company, 1896 (✓)

(c) Irish Woollen Co. Ltd. vs. Tyson and Others, 1900

(d) None of these.

 

15, Chartered Accountants are –

(a) Amateur auditor

(b) Government auditor

(c) Professional auditor (✓)

(d) None of these.

16, An auditor should be –

(a) Fearless

(b) Honest

(c) Tactful

(d) All of the above (✓)

17, An auditor should have –

(a) Tactfulness

(b) Honesty

(c) Morality

(d) All of the above (✓)

 
18, An auditor should not be

(a) Tactful

(b) Honest

(c) Suspicious (✓)

(d) Patient

19, Technical knowledge of Auditing is –

(a) Born

(b) Acquired (✓)

(c) Original

(d) None of these

20, High moral character of an auditor is –

(a) Born Qualities (✓)

(b) Acquired Knowledge

(c) General Qualities

(d) None of these

21, ‘Auditing Practice Committee’ is now renamed –

(a) Auditing and Assurance Standards Board (✓)

(b) Auditing Board

(c) Auditing Practices Standard Board

(d) None of these

22, Number of standards issued by Institute of Chartered Accountant of India is –

(a) 20

(b) 25

(c) 35 (✓)

(d) 40

23, Institute of Chartered Accountants of India (ICAI) is a…….

(a) Autonomous body (✓)

(b) Co-operative body

(c) Private body

(d) None of these

24, Head office of ICAI is situated at –

(a) Mumbai
(b) Chennai

(c) Delhi (✓)

(d) Kolkatta

25, International Federation of Accountants (IFAC) was set up in –

(a) 1978

(c) 1967

(b) 1977 (✓)

(d) 1957

26, Auditing Practising Committee (APC) was set-up in –

(a) 1992

(b) 1982 (✓)

(c) 1972

(d) 1974

27, Auditing Practising Committee (APC) was established by

(a) Central Government

(b) ICAI (✓)

(c) Chartered Accountants

(d) None of these

28, Basic principles governing an audit are described in –

(a) AAS-1 (✓)

(b) AAS-5

(c) AAS-18

(d) AAS-6

29, Standard Auditing Practice related by objective and scope of the Audit of Financial
Statement is –

(a) AAS-1

(b) AAS-2 (✓)

(c) AAS-3

(d) AAS-4

30, Which of the following Auditing Standard is related with the auditor’s
responsibility to consider Fraud and Error in an audit of Financial Statement –

(a) AAS-3

(b) AAS-4 (✓)

(c) AAS-5

(d) AAS-6

31, Fellow members of ICAI can write….. name –

(a) FCS

(b) MBA

(c) FCA (✓)

(d) None of these

32, Auditing is related with –

(a) Accountancy

(b) Economics

(c) Ethics

(d) All above (✓)

33, Auditing can be defined as –

(a) Preparation of books of accounts

(b) An independent examination of books of accounts (✓)

(c) Preparation of costing records

(d) None of these

34, Auditor examines and verifies the –

(a) Costing records and cost statements.

(b) Financial records (✓)

(c) Correspondence records

(d) Managers records

35, Under which Act Audit is compulsory

(a) Partnership Act, 1932

(b) Indian Companies Act, 1956 (✓)

(c) Both (a) and (b)

(d) None of the above

36, The principal object of auditing is –

(a) To exhibit a true and fair view of the state of affairs of the undertaking (✓)

(b) Detection of errors

(c) Prevention of frauds

(d) None of these

 

37, Which of the following is the function of Auditor –

(a) To examine the arithmetical accuracy of accounts

(b) To detect and prevent the errors

(c) To detect and prevent the frauds

(d) All of these (✓)

38, Prevention of fraud is……….. Object of auditing.

(a) Primacy

(b) Subsidiary (✓)

(c) Social

(d) None of these

39, Where Book-keeping ends, there……….

(a) Auditing begins

(b) Accountancy begins (✓)

(c) Investigation begins

(d) None of these

 
40, Accountancy begins where………..

(a) Book-keeping ends (✓)

(b) Auditing ends

(c) Investigation ends

(d) All the above

41, Auditing beings where……….

(a) Book-keeping ends

(b) Accountancy ends (✓)

(c) Investigation ends

(d) Vouching ends

42, Where Investigation begins, there………

(a) Auditing ends (✓)

(b) Book-keeping ends

(c) Accountancy ends

(d) None of these

43, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(c) Symbol of Prestige

(d) None of these.

44, In an Auditor the knowledge of Book-keeping and Accountancy is –

(a) Acquired Knowledge (✓)

(b) Born Qualities

(c) Original Qualities

(d) All the above

45, For a Retailer, Auditing is –

(a) Necessity

(b Luxury (✓)

(c) Economies

(d) None of these

46, To examine the books of accounts is the ………. object of auditing –

(a) Primary (✓)

(b) Social

(c) Subsidiary

(d) None of these

47, Verification of annual statement is………. object of auditing –

(a) Primary (✓)

(b) Social

(c) Subsidiary

(d) None of these

48, To render suggestions to the manager is ………. object of the auditor –

(a) Primary

(b) Secondary (✓)

(c) Social

(d) None of these

49, Protection from evasion of Tax is………. object of auditing:

(a) Primary

(b) Social (✓)

(c) Subsidiary

(d) None of these

50, Protection of investors is……….. object of auditing –

(a) Social (✓)

(b) Economic

(c) Primary

(d) Subsidiary

51, For Reliance Company Auditing is –

(a) Necessity (✓)

(b) Luxury

(c) Symbol of Prestige

(d) None of these

52, For every business Accountancy is –

(a) Luxury

(b) Necessity (✓)

(c) Symbol of Prestige

(d) None of these

53, For a betel shopkeeper, Auditing is –

(a) Necessity

(b) Luxury (✓)

(c) Compulsory

(d) None of these

54, Generally auditing is not necessary for small sole trading business because –

(a) Legally it is not necessary

(b) Its scope is limited

(c) Its proprietor has full control on it (✓)

(d) None of these

55, Audit of public company is –

(a) Compulsory (✓)

(b) Luxury

(c) Voluntary

(d) Optional
 

56, Auditing is mandatory for –

(a) Religious trusts

(b) Joint stock companies

(c) Co-operative societies

(d) All of the above (✓)

57, Audit for business of sole trading is -s

(a) Compulsory

(b) Essential

(c) Optional (✓)

(d) Not any of them

58, Audit is compulsory in –

(a) Sole trading concern

(b) Partnership firm

(c) Joint stock companies (✓)

(d) None of them.

 
59, If a partnership firm makes its audit, it is called –

(a) Statutory

(b) Compulsory audit

(c) Voluntary audit (✓)

(d) None of these

60, Audit of Trust is –

(a) Compulsory (✓)

(b) Voluntary

(c) Optional

(d) None of these

61, Audit of Co-operative Firm is –

(a) Voluntary

(b) Compulsory (✓)

(c) Optional

(d) None of these

62, Audit of Insurance Companies is –

(a) Compulsory (✓)

(b) Voluntary

(c) Optional

(d) None of these

63, The art of writing business transactions in books of accounts is termed as –

(a) Accountancy

(b) Book-keeping (✓)

(c) Auditing

(d) None of these

64, Which of the following is not a function of Book-keeping –

(a) Entry in main journal

(b) Posting in ledger

(c) Making Final Accounts (✓)

(d) All of these

65, Which of the following is not true in case of Book keeping?

(a) Simple training

(b) Mechanised work

(c) Special qualification (✓)

(d) None of these

66, Auditing is an examination of books of accounts

(a) General

(b) Specific

(c) Critical

(d) Both above (b) and (c) (✓)

67, Subsidiary object of Auditing is –

(a) Detection of Errors

(b) Detection of Frauds

(c) Prevention of Errors and Fraud

(d) All of these (✓)

68, Main types of errors are –

(a) 4

(b) 5 (✓)

(c) 3
(d) 2

69, Main cause of errors is –

(a) Negligence

(b) Ignorance of Accountant

(c) Willingness to pay least taxes

(d) Both above (a) and (b) (✓)

70, Entering capital expenses as revenue expenses in the books of accounts is –

(a) Error of principle (✓)

(b) Error of omission

(c) Error of commission

(d) Compensatory error

71, Errors arise due to ignorance of fundamental principles of accounting is termed as

–

(a) Errors of omission

(b) Errors of principle (✓)

(c) Compensatory errors

(d) Errors of commission

72, When there are two or more errors, which exactly counter balance each other, are
termed as –

(a) Errors of omission

(b) Errors of principle

(c) Compensatory errors (✓)

(d) Errors of commission

73, When incorrect entries are made in the books of accounts either wholly or
partially, the error is –

(a) Errors of omission

(b) Errors of principle

(c) Compensatory errors

(d) Errors of commission (✓)

74, When a transaction is recorded with a wrong amount in the books of accounts, it
is termed as-

(a) Errors of omission

(b) Errors of principle

(c) Compensatory errors

(d) Errors of commission (✓)

75, Errors which arise on account of transactions not being recorded in the books of
accounts, either wholly or partially are termed as –

(a) Errors of omission (✓)

(b) Errors of principle

(c) Compensatory errors

(d) Errors of commission books

76, Purchase of Rs. 4,100 is entered as Rs. 1,400 in of accounts is a –

(a) Error of commission (✓)

(b) Errors of principle

(c) Error of omission

(d) Compensatory error

77, Furniture purchased for 50,000 but Purchase Ale debited. The error committed
here is –

(a) Compensating error

(b) Clerical error

(c) Error of principle (✓)

(d) None of these

78, Received 800 from Vibhav but credited his account 8,000 is…………

(a) Error of Principle

(b) Clerical Error (✓)

(c) Compensating Error

(d) None of these

79, Ram’s account was excess debited by 500 where Shyam’s account was under
debited by 500 is……..

(a) Compensating Error ()

(b) Clerical Error

(c) Error of Principle

(d) None of these

80, Goods sold to Shyam of Rs. 600 and entry for sales is made in the sales book but is
omitted from the accounts of the Shyam, the error is –

(a) Error of commission

(b) Errors of principle

(c) Error of omission (✓)

(d) Compensatory error

81, The amount of Rs. 232 is entered as Rs. 322 in the bo of original entry, the error is
–

(a) Error of commission (✓)

(b) Errors of principle

(c) Error of omission

(d) Compensatory error

82, The error which affect both the sides of Trial Balan equally termed as –

(a) Error of commission

(b) Errors of principle

(c) Error of omission

(d) Compensatory error (✓)

83, The error which can be detected by the Trial Balance is –

(a) Error of commission (✓)

(b) Errors of principle

(c) Error of omission

(d) Compensatory error

84, Which of the following does not affect the agreement of Trial Balance –

(a) Error of principle

(b) Error of complete omission

(c) Compensating errors

(d) All above (✓)

85, Old machinery sold for Rs. 10,000 but credited to sales account is –

(a) Error of principle (✓)

(b) Error of commission

(c) Error of omission

(d) Compensating error

86, Hari’s account was credited by Rs. 900 instead of Rs 90 whereas Ram’s account
was over debited by Rs. 810. This is a –

(a) Error of principle

(b) Error of commission

(c) Error of omission

(d) Compensating error (✓)

87, Goods sold to Ram of Rs. 200 but no entry is made in the sales book. This is a –

(a) Error of principle

(b) Error of commission

(c) Error of omission (✓)

(d) Compensating error

88, Which of the following is a type of fraud?

(a) Misappropriation of cash

(b) Manipulation of accounts

(c) Misappropriation of

(d) All of these (✓)

89, Which of the following is a misappropriation of cash?

(a) Cash sales not being fully accounted for

1. b) Teaming and lading

(c) Omitting the entry of sale of scrap

(d) All of these (✓)

 

90, Which of the following is a misappropriation of Goods?

(a) Pilfer away goods from stock

(b) Using goods for personal purposes

(c) Use of commercial car for personal purposes

(d) Both above (a) and (b) (✓)

90, Generally manipulation of accounts is done by

(a) Accountant

(b) Clerks

(c) Higher management cadre persons (✓)

(d) Shareholders

91, Allocation of labourers in the construction of personal building engaged in the

construction of official building is………….

(a) Embezzlement of property

(b) Embezzlement of labour (✓)

(c) Embezzlement of facilities

(d) None of these.

 

92, Domestic use of official sopha is –

(a) Embezzlement of Goods

(b) Embezzlement of Labour

(c) Embezzlement of Property (✓)

(d) None of these.

93, Domestic use of official telephone is –

(a) Embezzlement of labour

(b) Embezzlement of property

(c) Embezzlement of facility (✓)

(d) None of these

94, Main object of manipulation in accounts by the owner or management is –

(a) To cover their errors

(b) To cover misappropriation of cash and goods

(c) To show increased/reduced profit in place of actual profit (✓)

(d) None of above

 
95, Which of the following is the object of investigation?

(a) For purchasing business

(b) For granting loan

(c) Making partner in a

(d) All above (✓)

96, Investigation is initiated by –

(a) Owner of the concern

(b) A person who wants to lend money to that concern

(c) A prospective shareholder

(d) All above (✓)

97, Auditing is done on the basis of –

(a) Entries of accounts

(b) Vouchers

(c) Information and clarifications

(d) All above (✓)

98, Auditing is compulsory for –

(a) Companies

(b) Trusts

(c) Co-operative societies

(d) All of these (✓)

99. Which one of the following is not an advantage of auditing?

(a) It provides satisfaction for owners

(b) It helps in getting loans

(c) It reduces cost burden (✓)

(d) It detects errors and frauds

100. In comparison to book-keeping, accountancy is a ……… concept.

(a) Broader (✓)

(b) Narrower

(c) Equal

(d) None of these

101. Auditing is useful –

(a) To detect fraud and errors

(b) To increase goodwill of the concern

(c) To increase efficiency of workers

(d) All of these (✓)

102. Basic principles which govern auditing is –

(a) Independence

(b) Secrecy

(c) Skill and competence

(d) All of these (✓)

103. Auditing safeguards the interests of the –

(a) Owners

(b) Creditors

(c) Investors

(d) All of these (✓)

104, Which of the following is objective of showing of profits more than actual –

(a) To show off their exaggerated efficiency

(b) To convert black money into white

(c) To enhance the prestige and status of the company

(d) All of these (✓)

 
105, Which of the following is objective of showing profit less than actual –

(a) To deceive the competitors

(b) To evade taxes

(c) To justify the low rate of dividend

(d) All of the above (✓)

106, Which of the following is a tactic of manipulation in accounts –

(a) Showing the liabilities and assets less or more than actual

(b) By not making essential provisions

(c) Not distinguishing between revenue and capital expenses/receipts

(d) All of these ()

107, Which of the following is not correct about fraud?

(a) It is backed by intention

(b) It can never be condoned

(c) It can be easily detected ()

(d) In it person is fully aware of his activity

108, Which of the following is a limitation of Auditing?

(a) Audit is not a guarantee of cent percent truth

(b) The auditor only expresses his opinion

(c) Auditing is not a conclusive proof of workers’ honesty

(d) All of these ()

109, Cost Audit is……… object of Auditing.

(a) Primary

(b) Subsidiary

(c) Specific (✓)

(d) None of these

110, Showing profits more than actual profits is termed as –

(a) Embezzlement of property

(b) Embezzlement of labour

(c) Embezzlement of facilities

(d) Manipulation of accounts (✓)

 2. Classification of Audit
 

111, Continuous Audit is carried on –

(a) At the end of the year

(b) At the mid of the year

(c) For the whole year (✓)

(d) None of these

112, Continuous audit is suitable –

(a) For big institutions (✓)

(b) For small institutions

(c) For general institutions

(d) None of these

113, Which of the following audit year?

(a) Final audit

(b) Continuous audit (✓)

(c) Complete audit

(d) Internal audit

 

114, In which of the following case, continuous audit becomes necessary –

(a) To make intensive check of accounts

(b) When internal check system is not followed organisation in the

(c) When there is need to publish audited accounts at the end of the year

(d) All of these (✓)

115, Which of the following proves helpful in declaration of Interim dividend –

(a) Periodical Audit

(b) Balance Sheet Audit

(c) Continuous Audit (✓)

(d) All above

116, Which of the following is not a advantage of continuous audit –

(a) Early detection of errors and frauds

(b) Intensive checking of books of accounts

(c) Economic (✓)

(d) All above

 
117, Which of the following is not a disadvantage of continuous audit?

(a) Possibility of alteration in figures

(b) Inconvenience of work

(c) Secret pact with employees

(d) Intensive check of accounts (✓)

118, In which of the following, there is more possibility of secret pact with employees
–

(a) Continuous Audit (✓)

(b) Periodical Audit

(c) Balance Sheet Audit.

(d) Interim Audit

119, The effect of auditor on employees by continuous audit –

(a) Increases

(b) Decreases (✓)

(c) Remain constant

(d) None of the above

 
120, Periodical Audit is carried on –

(a) At the mid of the financial year

(b) At the end of the financial year (✓)

(c) At any time

(d) None of these

121, Final Audit can also be termed as –

(a) Annual Audit

(b) Balance Sheet Audit

(c) Periodical Audit

(d) All of these (✓)

122, Periodical Audit is started –

(a) After preparing final accounts (✓)

(b) Before preparing final accounts

(c) Simultaneously with final accounts

(d) None of above Sonal

123, Which of the following type of audit is suitable for small concerns –

(a) Continuous Audit

(b) Periodical Audit

(e) Balance Sheet Audit

(d) Both above (b) and (c) (✓)

124, Which of the following is suitable form of audit when there exists strong internal
check system –

(a) Continuous Audit

(b) Periodical Audit (✓)

(c) Interim Audit

(d) Partial Audit

125, Advantage of periodical audit is –

(a) Helpful in declaration of Interim dividend

(b) Quick preparation of Final accounts

(c) Convenient (✓)

(d) All above

126, In which of the following there is more possibilities in alteration of figures –

(a) Continuous Audit (✓)

(b) Final Audit

(c) Interim Audit

(d) None of these

127, Periodical Audit is an audit in which –

(a) Balance sheet of number of years is audited

(b) Audit is done at the end of the financial year (✓)

(c) Verification of assets and liabilities is done

(d) None of these

128, Balance Sheet Audit is useful when –

(a) The concern is a big one

(b) The concern is a small one (✓)

(c) Internal check is weak

(d) None of these

129, The scope of interim audit falls within the purview –

(a) Partial Audit

(b) Final Audit (✓)

(c) Practical Audit

(d) None of these

130, Interim audit is get done –

(a) At the beginning of the year

(b) At the end of the year

(c) At the middle of the year (✓)

(d) None of the these

131, Management Audit is –

(a) Compulsory

(b) Voluntary (✓)

(c) Both (a) and (b)

(d) None of these

132, Under balance sheet audit examination is done –

(a) Fixed Assets only

(b) Fixed Liabilities only

(c) All fixed assets and liabilities (✓)

(d) None of these

133, Under Management audit examination is done of the –

(a) Work of the employees

(b) Work of auditor

(c) Work of top authorities (✓)

(d) None of these.

134, The Audit which is opted by a Insurance Company is –

(a) Annual audit (✓)

(b) Interim audit

(c) Continuous audit

(d) None of these

135, What is necessary to measure the efficiency of a manager?

(a) Social audit

(b) Cost audit

(c) Tax audit

(d) Management audit (✓)

136, Management Audit is a valuation of –

(a) Cost Accounts

(b) Financial Accounts.

(c) Management Policies and Working (✓)

(d) Assets and Liabilities

137, Which type of audit is followed by Banking Companies –

(a) Annual Audit (✓)

(b) Interim Audit

(c) Continuous Audit

(d) Partial Audit

138, Continuous Audit is beneficial for –

(a) Banks

(b) Railway

(c) Electric companies

(d) All of these (✓)

 

139, “The continuous audit is one which of commenced and carried on before the
close of the financial year to which it relates”. This is defined by –

(a) S.W. Rowland (✓)

(b) Spicer and Pegler

(c) Williams

(d) None of these

140, Which of the following is advantage of continuous audit –

(a) Early detection of errors and frauds

(b) Quick publication of final accounts

(c) Detailed and intensive check

(d) All of these (✓)

141, Which of the following is a feature of continuous audit –

(a) Highly expensive (✓)

(b) Uninterrupted work

(c) Test checking

(d) All above

 

142, Audit which is done at the time of admission of a new partner is called –

(a) Casual Audit (✓)

(b) Standard Audit

(c) Partial Audit

(d) Interim Audit

143, If only a part of the accounts of a business are examined, it is termed as –

(a) Casual Audit

(b) Standard Audit

(c) Partial Audit (✓)

(d) Interim Audit

144, Audit is not a guarantee of cent percent truth –

(a) This statement is correct (✓)

(b) This statement is incorrect

(c) Depends on circumstances

(d) None of these

 
145, Feature of Periodical Audit is –

(a) No fear of alternation of figures

(b) Economical

(c) Time save

(d) All of these (✓)

146, Which of the following type of audit make hurdle in routine works of enterprise –

(a) Continuous Audit (✓)

(b) Periodical Audit

(c) Interim Audit

(d) Partial Audit

147, In which of the following of Audit there remain no scope of alteration in figures –

(a) Continuous Audit

(b) Periodical Audit (✓)

(c) Interim Audit

(d) Partial Audit

148, In which of the following audit publishing of final accounts –

(a) Continuous Audit

(b) Periodical Audit (✓)

(c) Interim Audit

(d) Partial Audit

149, “A continuous audit is one where Auditor Staff is occupied continuously on the

accounts the whole year round”, this is defined by –

(a) Spicer and Pegler

(b) Rowland

(c) W.W. Bigg (✓)

(d) None of these

150, “A final or completed audit is that which is commenced after the end of financial
year of which it relates”. This is defined by –

(a) W.W. Bigg

(b) Rowland

(c) Lawrance Dicksi (✓)

(d) Spicer and Peglar

151, In which country Balance Sheet Audit means the audit of only Balance Sheet?
(a) In Japan

(b) In China

(c) In America (✓)

(d) In England

152, To sell the business which type of audit is carried on –

(a) Periodical Audit

(b) Continuous Audit

(c) Interim Audit (✓)

(d) None of these

153, Existence of internal audit system does not reduce the desirability of –

(a) Annual Audit (✓)

(b) Interim Audit

(c) Statutory Audit

(d) Continuous Audit

154, Comptroller and Auditor General of India is appointed by –

(a) Central Government

(b) ICAI

(c) President (✓)

(d) None of these

155, To make audit of Government Offices, auditor appointed by –

(a) ICAI

(b) President

(c) Comptroller and Auditor General of India (✓)

(d) None of these

156, Comptroller and Auditor General of India submits its audit report to –

(a) President (✓)

(b) Prime Minister

(c) Finance Minister

(d) None of these

157, Qualification of an Internal Auditor is –

(a) C.A.

(b) C.S.
(c) M.B.A.

(d) No qualification is determined (✓)

3. Audit Process
 

158, “An audit programme is flexibly planned procedure of examination”, this is

defined by –

(a) Kohlar

(b) Arthur W. Holmes (✓)

(c) W.W. Bigg

(d) None of above

159, Which is the essential quality of an audit programme –

(a) Division in

(b) Fixing responsibilities

(c) Review

(d) Flexibility (✓)

 
160, An audit programme must be –

(a) Flexible

(b) Detailed

(c) Clear-cut

(d) All of these (✓)

161, Which of the following is a merit of audit programme?

(a) Division of work according to capability

(b) Fixed responsibilities

(c) Clear-cut instructions

(d) All of these (✓)

162, Which of the following is disadvantage of audit programme?

(a) Mechanised work

(b) Lack of independent decisions

(c) Not reflect inefficiencies

(d) All above (✓)

163, Before the audit of a new institution –

(a) Scope is determined

(b) Nature of the institution is studied

(c) Methods of accounting are studied

(d) All of the above (✓)

164, Audit programme should be –

(A) Written (✓)

(b) Verbal

(c) Brief

(d) None of these

165, An audit programme is chalked out for the following purpose

(a) For incoming and outgoing of auditor

(b) For routine checking

(c) For outlining the whole procedure of audit (✓)

(d) For inspection of branches of company

166, In audit programme, audit work planning is done by –

(a) Accounts staff

(b) Audit staff (✓)

(c) Board of Directors

(d) Managing director

167, Audit programme should –

(a) Rigid

(b) Mechanised

(c) Rigid and mechanized

(d) Elastic (✓)

168, Use of working papers are necessary as it is –

(a) A statutory requirement

(b) Helps to inspect the work of assistants

(c) Essential for the owner of the concern

(d) Beneficial for auditor (✓)

169, Audit note book contains –

(a) Dates of reference

(b) Detail of work done

(c) List of unobtained and incomplete vouchers

(d) All above (✓)

170, The auditor obtains the working papers –

(a) In the course of the audit (✓)

(b) Before starting audit

(c) After completing audit

(d) None of these

171, Audit working papers are the property of –

(a) Owner of the business

(b) Auditor (✓)

(c) Managers

(d) None of these

172, For which of the following purpose, auditor keeps working papers –

(a) To use them as reference

(b) As a proof of his work

(c) For future guidance

(d) All of these (✓)

173, Which of the following case is related with ownership working papers –

(a) Ipswich Mills vs. Dillon, 1927 (✓)

(b) Kingston Cotton Mills

(c) London and General Bank

(d) Mackson and Robbins

174, Which is the advantage of Audit Note Book –

(a) Make auditor free from memorising the facts

(b) Helpful in audit work

(c) Evidence in the court of law

(d) All above (✓)

175, Which of the following work perview in routing checking?

(a) Checking of elementary books

(b) Rectification of errors

(c) Checking of posting

(d) All of these (✓)

 

176, Main objective of Routine checking is –

(a) To check mathematical accuracy of the entries of elementary books and accounts

(b) To check the follow-up of accounting principles

(c) To find the altered figures

(d) All above (✓)

177, By Routine checking –

(a) Expenses of business increase

(b) Expenses of business decrease

(c) Business expenses remain unaffected (✓)

(d) None of these

178, Routine checking is done by –

(a) Employees of the concern (✓)

(b) Auditors

(c) Management

(d) All of these

 
179, Test checking means –

(a) Detailed checking of some transactions/items

(b) Checking of each item

(c) Checking of sample transactions/items (✓)

(d) None of these

180, Test checking is beneficial when –

(a) Number of business transactions is less

(b) Internal check system is satisfactory (✓)

(c) Internal check system is unsatisfactory

(d) None of these

181, Test checking is appropriate –

(a) Large business concerns

(b) Huge number of transactions

(c) When internal check system is satisfactory

(d) All above (✓)

182, Test checking……….. the responsibility of auditor –

(a) Increases (✓)

(b) Decreases

(c) No effect

(d) None of these

183, If there arise loss to employer due to adopting test checking, then auditor
is………. for loss.

(a) Liable (✓)

(b) Not liable

(c) Negligence

(d) None of the above

184, Test checking refers to –

(a) Testing of accounting records

(b) Testing of honesty of employees

(c) Intensive checking of a selected number of transactions (✓)

(d) Checking of all transactions recorded

185, In a big organisation where number of transactions are numerous, auditor check

–
(a) All transactions

(b) Some transaction selected as sample (✓)

(c) All transactions of some months

(d) Some transactions of each month

186, Test checking is done to –

(a) Find out errors

(b) Detect frauds

(c) Save time (✓)

(d) None of these

187, Audit note book is a –

(a) Audit planning

(b) Audit programming

(c) Audit diary to record auditor’s observations (✓)

(d) Checking of arithmetical accuracy of accounting records

188, Routine checking discovers –

(a) Clerical errors and ordinary frauds (✓)

(b) Planned frauds

(c) Casting, sub-casting and carry forward

(d) None of the above

189, Test checking reduces the –

(a) Auditor’s work (✓)

(b) Auditor’s responsibility

(c) Auditor’s work and

(d) None of these

190, Under Intensive checking –

(a) All books of accounts are examined

(b) Specific books of accounts are examined (✓)

(c) None of these

(d) Both (a) and (b)

191, Under over all checking –

(a) All books of accounts are examined

(b) All methods of checking are used (✓)

(c) None of these

(d) Both (a) and (b)

192, Permanent file contains the abstract of –

(a) Regulations related to the organisation of institution

(b) Agreements related to long-term liabilities

(c) Description of the system of internal control

(d) Both above (a) and (c) (✓)

193, Materiality is a –

(a) Relative term (✓)

(b) Absolute term

(c) Important term

(d) None of these

194, Which of the following Auditing Standard is related with Audit Materiality –

(a) AAS-12

(b) AAS-4

(c) AAS-13 (✓)

(d) AAS-15

195, Which of the following is not a part of the process of auditing –

(a) Preparation of Balance Sheet and profit and loss account (✓)

(b) Examination of vouchers supporting various entries in the books of account

(c) Discussion of officers and staff of the enterprise to certain explanations

(d) Preparation of Audit Report

196, Test checking should not be applied to –

(a) Purchase book

(b) Sales book

(c) Stock book

(d) Cash book (✓)

4. Internal Check
 

197, Under the Internal Check System –

(a) Responsibilities of employees are determined

(b) Work of an employees is checked automatically by other employee

(c) Division of work among employees

(d) All above (✓)

198, Internal check is important for –

(a) Smali organisation

(b) Big organisation (✓)

(c) Small and big both organisations

(d) None of these

199, Object of internal check is –

(a) Early detection of frauds

(b) To enchance efficiency of employees

(c) To put moral pressure on employees

(d) All the above (✓)

200, Which of the following is based on the principle of division of work?

(a) Internal control

(b) Internal checking (✓)

(c) Internal audit

(d) None of these

201, The process of distribution of work among employees according to their ability is
known as –

(a) Internal audit

(b) Internal control

(c) Internal check (✓)

(d) None of these

202, An internal auditor is –

(a) Outsider person

(b) Insider person (✓)

(c) Outsider and insider person both

(d) None of these

203, The scope of work of Internal Audit is decided by the –

(a) Shareholders

(b) Management (✓)

(c) Government

(d) Law

204, Internal checking is –

(a) Synonymous of Internal Audit

(b)Work of one auditor is checked by other senior auditor

(C) A system where work of one employee is checked automatically by other

employee (✓)

(d) None of these done by

205, Internal audit of a business concern is –

(a) Employees of the organisation (✓)

(b) Registered auditors

(c) Elected persons among members of management

(d) Representative of directors

206, Who appoint Internal Auditor?

(a) Management (✓)

(b) Shareholders
(c) Government

(d) Stock Exchange.

207, Who will be responsible for errors in report if external auditor relies on the work
of internal auditor –

(a) External Auditor (✓)

(b) Internal auditor

(c) Management

(d) Shareholders

208, Internal check refers to –

(a) Checking of records by the cashier

(b) Checking of accounts by the internal auditor

(c) Checking of work of one person by another automatically (✓)

(d) Managerial control internally over the subordinates

209, The object of internal audit is –

(a) To prevent errors and frauds

(b) To detect errors and frauds

(c) To improve financial control

(d) All of the above (✓)

210, In comparison to the independent auditor, an internal auditor is more likely to be

concerned with –

(a) Cost accounting system

(b) Internal control system (✓)

(c) Legal compliance

(d) Accounting system

211, Internal auditing can best be described as –

(a) An accounting function

(b) A line management function

(c) A function which improved the credibility of financial statement (✓)

(d) An internal control function

212, Internal audit proves helpful in –

(a) Preventing errors and frauds (✓)

(b) Statutory audit

(c) Intensive audit

(d) Internal check

213, Internal audit is a –

(a) Part of internal control (✓)

(b) Broader than internal check

(c) Same as internal control

(d) Does not related with internal control

214, Meaning of Internal Audit is –

(a) A system of internal check

(b) Routine checking by Auditor

(c) Audit by management (✓)

(d) Initial audit by Auditor

215, Main object of Internal check is –

(a) Detecting errors and frauds (✓)

(b) Checking

(c) Verifying
(d) Division of work among employees

216, Which of the following is a feature of an efficient Internal Check System?

(a) Clear-cut demarcation of authorities and

(b) Changes in the work of employees

(c) An arrangement of staff duties whereby no one person is allowed to carry thorough and
to record every aspect of the transaction

(d) All above (✓)

217, “Internal check may be defined as such arrangement of Book-keeping routine

that errors and frauds are likely to be prevented or discovered by the very operation
the Book-keeping itself. This is defined by –

(a) Spicer and Pegler

(b) De Paula

(c) Dicksee (✓)

(d) None of these

218, Internal check system makes the auditor’s work –

(a) Easy

(b) Complicated

(c) In short time

(d) Both (a) and (c) (✓)

219, Internal check includes –

(a) Make entries

(b) Verification

(c) Both posting and verification (✓)

(d) None of above

220, Internal check starts –

(a) Simultaneously transactions (✓)

(b) After preparing accounts

(c) At the end of the year

(d) None of these

221, For big concerns internal check system is –

(a) Expensive

(b) Economie (✓)

(c) Not appropriate

(d) None of these

 

222, Internal audit is done by –

(a) Salaried employees of business concern (✓)

(b) Outsider person

(c) Chartered accountant

(d) None of these

223, “Internal check is a method of organising the entire operation of office, factory,
warehouse and the duties of the respective staff so that fraud and irregularities are
impossible without collusion.” This is defined by –

(a) De Paula

(b) Joseph Lancaster (✓)

(c) Dicksee

(d) None of these

124, Internal control is a broader term, generally used to encompass both internal
check and internal audit”. This is defined by –

(a) H. Stateler (✓)

(b) Spicer and Pegler

(c) Dicksee

(d) D. Paula
 

125, Which of the following is a broader term?

(a) Internal control (✓)

(b) Internal check

(c) Internal audit

(d) None of these

126, In which of the following detailed checking is done –

(a) Internal audit (✓)

(b) Interim audit

(c) Final audit

(d) All of these

227, Internal auditor is responsible for –

(a) Shareholders

(b) Management (✓)

(c) Government

(d) Creditors

 
228, Internal control includes –

(a) Internal check

(b) Internal audit

(c) Interim audit

(d) Both (a) and (b) (✓)

229, Internal control includes –

(a) Financial control

(b) Non-financial control

(c) Both (a) and (b) (✓)

(d) None of these

230, Which of the following is based on the principle of division of labour –

(a) Internal control

(b) Internal checking (✓)

(c) Internal audit

(d) None of these

231, For which of the following Internal check is most suitable –

(a) Big institutions (✓)

(b) Small institutions

(c) Both (a) and (b)

(d) None of these

232, An Internal Auditor is –

(a) Temporary employee

(b) Permanent employee (✓)

(c) Daily wager

(d) None of these

233, Internal Audit means –

(a) Maintaining accountability of assets

(b) Execution of transaction according to management’s general or specific authorisation

(c) A review of operation and record on continuous basis and is undertaken within the
enterprise by separate staff (✓)

(d) None of these

234, Which of the following wage method is suitable for accounting?

(a) Wages register

(b) Wages schedule

(c) Wages card (✓)

(d) None of these

235, Entry of received credit note is made in the –

(a) Sales Return Book

(b) Purchase Return Book (✓)

(c) Goods Outward Book

(d) None of these

5. Vouching
 

236, “Vouching means testing the truth of the items appearing in the books of
original entry”. This is defined by –

(a) D. Paula

(b) J.R. Batliboi (✓)

(c) Arthur Holmes

(d) R.G. Williams

237, “Vouching is the examination and authentication of underlying evidence which is

in support of the accuracy of a transaction”. This definition is given by –

(a) Arthur Holmes (✓)

(b) J.R. Batliboi

(c) Arnold A. Irish

(d) None of these

238, Vouching is –

(a) Examination of Assets

(b) Verification of Assets

(c) Examination of Entries (✓)

(d) None of these

239, Under vouching checking is done of –

(a) Books of original entry (✓)

(b) Final books of accounts

(c) Balance sheets

(d) None of the above

240, Vouching is related with –

(a) Cash receipts

(b) Cash payments

(c) Credit transactions

(d) All of the above (✓)

241, “Vouching is the essence of Auditing”. This statement of –

(a) Spicer and Peglar

(b) R.B. Bose (✓)

(c) R.A. Irish

(d) J.R. Batliboi

242, “Vouching is a technical term”. This statement is of –

(a) R.A. Irish (✓)

(b) Lankaster

(c) J.R. Batliboi

(d) De Paula
 

243, Back bone of auditing is said to –

(a) The vouching (✓)

(b) The valuation

(c) The verification

(d) The internal audit

244, Vouching includes –

(a) Routine check (✓)

(b) Test check

(c) Internal check

(d) All above

245, Main object of vouching is –

(a) To prove truthness of transactions

(b) To obtain information regarding the transactions related to business

(c) Authorisation of transactions

(d) All above (✓)

 
246, Work of vouching is done by –

(a) Junior clerks

(b) Senior clerks (✓)

(c) Management

(d) None of these

247, Routine check and vouching both are –

(a) Synonymous

(b) Complimentary to each other (✓)

(c) Opposite

(d) None of above

248, Vouching is –

(a) Essence of Auditing

(b) Soul of Auditing

(c) Backbone of Auditing

(d) All of these (✓)

249, Which of the following is correct –

(a) Auditing is the backbone of vouching

(b) Vouching is backbone of auditing (✓)

(c) Vouching is the backbone of accounting

(d) All above

250, Vouching implies –

(a) Inspection of receipts

(b) Examination of vouchers to check authenticity of record (✓)

(c) Surprise checking of accounting records

(d) Examination of various assets

251, “A voucher may be defined as any documentary evidence by which the accuracy
of book entries may be substantiated”. This is defined by –

(a) Joseph Lankaster (✓)

(b) R.A. Irish

(c) J.R. Batliboi

(d) Arthur Holmes

252, A voucher may be a receipt, an invoice, an agreement, a requisition slip, or in

short, any suitable written evidence which confirms a written transaction”. This
is defined by –
(a) Joseph Lankaster

(b) R.A. Irish (✓)

(c) J.R. Batliboi

(d) Arthur Holmes

253, Vouchers should be concerned with –

(a) Previous year

(b) Current year

(c) Audit period (✓)

(d) None of these

254, Amount should be written on voucher in –

(a) Words

(b) Digits

(c) Both (a) and (b) (✓)

(d) Secret words

255, Voucher is a –

(a) Receipt issued to a customer for cash received

(b) Invoice received from suppliers

(c) Document in support of an entry made in the books of accounts (✓)

(d) All above

256, Voucher related to payment should be signed by –

(a) Manager

(b) Accountant

(c) Responsible and authorised official (✓)

(d) All above

257, Which of the following should be in vouchers –

(a) Date

(b) Amount

(c) Signature

(d) All above (✓)

258, Which of the following is termed as backbone of Auditing?

(a) Vouching (✓)

(b) Verification
(c) Valuation

(d) Internal Audit

259, Which one of the following is true –

(a) Entry can be made without a voucher

(b) Comparing the voucher with entries is not essential

(c) There should be no entry without vouchers and no voucher without entry (✓)

(d) None of these

260, Under vouching checking is done of –

(a) Books of original entry (✓)

(b) Final books of accounts

(c) Balance sheet

(d) All above

261, Examination of vouchers come under the scope of……..

(a) Routine checking

(b) Vouching (✓)

(c) Auditing
(d) None of these

262, Addition of books come under the scope of……….

(a) Routine checking (✓)

(b) Vouching

(c) Auditing

(d) None of these

263, Best option of payment is –

(a) Cash

(b) Cheque (✓)

(c) Bill

(d) All above

264, “Vouching is the backbone of auditing”, this statement is related to the suit –

(a) London and General Bank, 1895

(b) Armitage vs. Brewar and Knott, 1932 (✓)

(c) Mackson and Robinson Incorporation, Marrie Land,

(d) None of these

 

265, The auditor should compare the Purchase Return Book with the –

(a) Cash Book

(b) Bank Book

(c) Credit Notes sent by Sellers (✓)

(d) None of these

266, The auditor should compare the sales return book with the –

(a) Invoices

(b) Cash Book

(c) Debit Notes sent by Purchaser (✓)

(d) None of the above

267, Various entries such as adjustment, transfer, rectification of errors, opening and
closing entries etc. are recorded in –

(a) Cash Book

(b) Purchase Register

(b) Sales Register

(d) Journal Proper (✓)

 

268, Youching of opening entries should be done from –

(a) Profit and Loss Account

(b) Balance sheet (✓)

(c) Assets Register

(d) All of above

269, A receipt is termed as capital receipt, if –

(a) It is credited to capital A/c

(b) Amount is large

(c) It is related to fixed assets (✓)

(d) None of these

270, A loss is termed as capital loss, if

(a) It is debited to capital A/c

(b) Amount of loss is huge

(c) It is related to fixed assets (✓)

(d) None of these

 
274, A receipt is a revenue receipts if –

(a) It is related to the routine activity of the business (✓)

(b) The amount is small

(c) It is received in the accounting year

(d) None of these

272, Goods returned by customers should be entered in –

(a) Sales Return Book

(b) Stock Account

(c) Both (a) and (b) (✓)

(d) None of these

273, What is the correct sequence of the following assignments –

(1) Internal control

(2) Test check

(3) Internal check

(4) Statutory audit

(a) 1, 2, 3 and 4

(b) 3, 1, 4 and 2
(c) 2, 1, 2 and 4

(d) 4, 3, 2 and 1 (✓)

274, An expenditure is capital expenditure if –

(a) The amount is paid in lump sum

(b) The amount is large

(c) It is related to the benefit of current year

(d) It is related to the benefit of future (✓)

275, An expenditure is a revenue expenditure if –

(a) It is related to the benefit of the current period (✓)

(b) The amount is small

(c) It is deducted from the gross sale proceed

(d) None of the above

276, Vouching related to –

(a) Cash receipts

(b) Cash payments

(c) Credit transactions

(d) All of these (✓)

277, Payment for goods purchased should be vouched the help of –

(a) Cash memos

(b) Creditors statements

(c) Correspondence with the suppliers

(d) Ledger accounts (✓)

278, Weakness in Internal Control System…….. the risk of fraud and errors –

(a) Increases (✓)

(b) Decreases

(c) Does not effect

(d) None of above

6. Verification and Valuation of Assets and Liabilities

 

279, Meaning of verification of assets is –

(a) Valuation of assets

(b) Checking of ownership of assets

(c) Checking of the title, existence and possession of assets

(d) All above (✓)

280, “The verification of Assets implies an enquiry into the value, ownership and title,
existence and possession and the presence of any charge on the assets”. This is
defined by –

(a) Spicer and Pegler (✓)

(b) J.R. Batliboi

(c) Luncaster

(d) None of these

281, Principle of verification is –

(a) Physical inspection

(b) Principle of review

(c) Confirmation

(d) All of these (✓)

282, Which of the following is not the object of verification –

(a) Checking of ownership of the institution on the assets

(b) Checking of possession, lien and charge on the assets

(c) Fulfilling statute (✓)

(d) Control over frauds

283, Object of verification of assets by an auditor is –

(a) Verifying the existence of assets

(b) Verifying the value on which these are shown in balance sheet

(c) Verifying their ownership

(d) All of above (✓)

284. Which of the following does not require physical verification?

(a) Stock

(b) Plant

(c) Goodwill (✓)

(d) Loose Tools

285, In verifying liabilities, an auditor see that –

(a) All liabilities are shown clearly in the balance sheet

(b) All liabilities are related with

(c) All liabilities are correct and authorised

(d) All above (✓)

286, “The valuation of assets is an attempt to ensure the equitable distribution of the
original outlay over the period of the assets usefulness.” This is defined by –

(a) Lancaster (✓)

(b) J.R. Batliboi

(c) Spicer and

(d) None of these

287, In how many parts generally assets are categorised –

(a) 2

(b) 3

(c) 4

(d) 5 (✓)

288, Which of the following is the object of valuation –

(a) Accurate knowledge of the financial position of the organisation

(b) Knowledge about the value of the assets

(c) Knowledge about the goodwill of the institution

(d) All above (✓)

289, Valuation is –

(a) An element of verification

(b) Essential part and element of verification ()

(c) Alternate of verification

(d) Verification is a part of valuation

290, When auditor has any doubt about the valuation of assets, he must disclose this
fact –

(a) To secretary

(b) To manager

(c) In his report (✓)

(d) None of the above

291, Auditor is –

(a) A valuer

(b) Not a valuer (✓)

(c) Expert

(d) None of above

292, “An Auditor is not a valuer”. This statement is of –

(a) Joseph Lancaster (✓)

(b) De Paula

(c) Spicer and Pegler

(d) J.R. Batliboi

293, The judgement that ‘an auditor is not a valuer’ in case of –

(a) Mackson and Robins (✓)

(b) Kingstom Cotton Mills

(c) Union Bank of Allahabad Ltd.

(d) London and General Bank

294, Verification and Valuation both are –

(a) the same things

(b) separate things

(c) complementary to each other (✓)

(d) None of these.

295, Valuation is a part of –

(a) Vouching

(b) Verification (✓)

(c) Internal control

(d) None of these

296, Verification is based on –

(a) Physical inspection

(b) Documentary evidence

(c) Above both (a) and (b) (✓)

(d) None of these

297, Case of London Oil Storage Co. Ltd. vs. Sear Hasluck Co. (1904) is related to –

(a) Verification of Assets (✓)

(b) Valuation of Assets

(c) Verification of Liabilities

(d) None of these

 

298, Stock should be valued at –

(a) Cost price

(b) Market price

(c) Cost or market price whichever is lower (✓)

(d) Cost price less depreciation

299, Which asset is valued on cost price or market price whichever is less –

(a) Furniture

(b) Building

(c) Machine

(d) Stock (✓)

300, Which reserve is useful to strength the financial position of a business?

(a) Specific reserve

(b) Secret reserve (✓)

(c) General reserve

(d) Redemption fund

 
301, Wasting assets means –

(a) Which decreases in value

(b) The value of which is decreases due to constant use (✓)

(c) Market price of which is reduced

(d) None of above

302, Which the following is a fixed asset –

(a) Furniture (✓)

(b) Book Debts

(c) Bills Receivables

(d) Stock

303, Current assets remain in business for –

(a) Long period

(b) Temporarily (✓)

(c) Short period

(d) All above

304, Which of the following is current asset?

(a) Stock-in-trade

(b) Book debts

(c) Raw material

(d) All above (✓)

305, Valuation of purchased goodwill is done on the basis of –

(a) Purchase agreement (✓)

(b) Market price

(c) Directions of management

(d) None of above

306, Registration from government for a name or mark of the produced goods is
termed as –

(a) Patent

(b) Trademark (✓)

(c) Copyright

(d) Registration

307, Which of the following is wasting asset –

(a) Mines

(b) Quarry

(c) Oil wells

(d) All above (✓)

308, Which of the following is intangible asset –

(a) Goodwill

(b) Patent

(c) License

(d) All above (✓)

309, Which of the following is fictitious asset –

(a) Preliminary expenses

(b) Deferred Revenue

(c) Discount on issue of

(d) All above (✓)

310, Which of the following is an intangible asset?

(a) Patents (✓)

(b) Prepaid expenses

(c) Preliminary

(d) None of these

311, Which of the following is fictitious asset –

(a) Goodwill

(b) Copyright

(c) Preliminary expenses (✓)

(d) None of these

312, Investments in hand should be verified with the help of –

(a) Schedule of investments

(b) Balance sheet

(c) Inspection of securities (✓)

(d) Certificate from the bank

313, Direct confirmation procedure can be applied to –

(a) Debtors only

(b) Creditors only

(c) Both (a) and (b) (✓)

(d) None of above

314, Preliminary expenses include –

(a) Cost of stamp

(b) Legal expenses

(c) Underwriting

(d) Both (a) and (b) (✓)

315, Verification refers to –

(a) Examination of journal and ledger

(b) Examination of vouchers related to

(c) Examination of physical existence and valuation of assets (✓)

(d) Computation of value of assets

316, Which of the following statement is correct –

(a) Valuation is a part of verification (✓)

(b) Verification is a part of valuation

(c) Valuation is not related with verification

(d) Auditor is a valuer

317, Which of the following statement is valuation of assets by an auditor –

(a) Auditor is not a valuer (✓)

(b) Auditor is a valuer

(c) Computing stock is the work of auditor

(d) None of these

318, Floating assets are valued at –

(a) Cost price

(b) Market price

(c) Cost or market price whichever is less (✓)

(d) Cost less depreciation

319, In case of unclaimed wages, the auditor should examine whether –

(a) The amount is deposited in a separate bank account (✓)

(b) Deposited with the cashier

(c) Held in a safe deposit box

(d) All of these

 

320, Land is valued at –

(a) Cost Price (✓)

(b) Market Price

(c) Cost or market price whichever is more

(d) None of the above

321, Which of the following is an intangible asset –

(a) Trade mark (✓)

(b) Preliminary

(c) Development expenses

(d) All above

322, Work of Valuation done by is –

(a) Secretary

(b) Auditor

(c) Manager (✓)

(d) Employee

 
323, Which of the following asset is valued at cost –

(a) Furniture

(b) Cash

(c) Stock

(d) Goodwill (✓)

324, “Generally stock is valued at cost price or market price whichever is less”, this
statement is given by –

(a) D. Paul (✓)

(b) Hanry Fayol

(c) Pigou

(d) Hanes

325, At which price raw material is valued –

(a) Cost Price (✓)

(b) Market Price

(c) Purchase Price

(d) All above

 
326, On which side Trade mark is shown in the Balance Sheet –

(a) Asset side (✓)

(b) Liability side

(c) Foot note

(d) Not Shown

327, Which of the following is wasting asset –

(a) Coal mines (✓)

(b) Furniture

(c) Goodwill

(d) Cash

328, Quoted Price is related with –

(a) Stock

(b) Shares (✓)

(c) Goodwill

(d) None of these

329, Highest in Price Out’ method of valuation is used –

(a) When the price of material is increasing

(b) When the price of material is decreasing (✓)

(c) When the price of material is constant

(d) None of these

330, In valuing livestock, auditor should take certificate of –

(a) Management

(b) Specialists (✓)

(c) Secretary

(d) All above

331, Valuation of Livestock should be made by –

(a) Expected age method

(b) Revaluation method (✓)

(c) Average age method

(d) None of these

332, Valuation of loose tools is made on the basis of –

(a) Revaluation (✓)

(b) Cost price

(c) Market price

(d) None of these

333, In the First in First Out Method’, stock is valued at –

(a) At the rate of latest consignment purchased (✓)

(b) At the rate of earliest consignment purchased

(c) On actual cost

(d) None of above

334, In the Last in Fist out Method’ stock is valued at –

(a) At the rate of latest consignment purchased

(b) At the rate of earliest consignment purchased (✓)

(c) On actual cost

(d) None of above

335, In the Balance Sheet contingent liabilities is shown –

(a) Assets side

(b) Liability side

(c) In form of footnote (✓)

(d) None of above

336, Which of the following is contingent liability –

(a) Liability on bills

(b) Liability for guarantee

(e) The liability for calls on partly paid shares in other company

(d) All above (✓)

337, Main cause of over and under valuation of assets and liabilities iss –

(a) Errors of principles

(b) Clerical errors

(c) Fraudulent manipulation of accounts (✓)

(d) None of the above

338, Incorrect valuation of stock affects –

(a) Profit and Loss A/e

(b) Balance Sheet

(c) Both (a) and (b) (✓)

(d) None of these

339, In which case decision is that physical verification of stock is the liability of
auditor –

(a) Mackson and Robbins (✓)

(b) Kingston cotton mills

(c) Union Bank Ltd. Allahabad

(d) None of these

340, Which of the following is the result of undervaluation of stock –

(a) Decrease in profit

(b) Creation of secret reserve

(c) Decrease in price of shares

(d) All above (✓)

341, In which possibilities of fraud and error are more –

(a) Cash

(b) Stock (✓)

(c) Debtors
(d) Bills Receivables

342, When profit is inflated by making wrong valuation of stock, then profit of
succeeding year will –

(a) Decrease (✓)

(b) Increase

(c) No effect

(d) None of above

343, Material includes –

(a) Raw material

(b) Loose Tools

(e) By-product

(d) All above (✓)

344, Average Profit Method is connected with –

(a) The valuation of stock

(b) The valuation of goodwill (✓)

(c) The valuation of shares

(d) None of these

345, Instrinsic value method of valuation is concerned with –

(a) Stock

(b) Fixed Assets

(c) Shares (✓)

(d) None of these

346, Capitalisation method is concerned with –

(a) The valuation of stock

(b) The valuation of goodwill (✓)

(c) The valuation of shares

(d) None of these

347, If average capital of business is Rs. 5,00,000; Average annual income Rs. 80,000
and normal rate of return 10% then amount of goodwill by capitalisation method will
be –

(a) Rs. 30,000

(b) Rs. 3,00,000 (✓)

(c) Rs. 50,000

(d) Rs. 8,00,000

348, Method of valuating stock is –

(a) Individual method

(b) Group method

(c) Both (a) and (b) (✓)

(d) None of these

7. Depreciation and Reserve

 

349, “Depreciation is gradual and permanent decrease in the value of assets from any
use.” This definition is given by –

(a) Carter (✓)

(b) Spicer and Pegler

(c) R.G. Williams

(d) None of these

350, “Depreciation may be defined as the measure of the exhaustion of the effective
life of an asset from any cause during given period”. This is defined by –
(a) Carter

(b) Spicer and Pegler (✓)

(c) R.G. Williams

(d) None of these

351, “Depreciation may be defined as a gradual deterioation in the value of the assets
due to use.” This is defined by –

(a) Carter

(b) Spicer and Pegler

(c) R.G. Williams (✓)

(d) None of these

352, Which fund is created for the replacement of assets?

(a) Reserve Fund

(b) Depreciation Fund (✓)

(c) Investment Fund

(d) None of these

353, The main cause of depreciation is –

(a) Use of Asset (✓)

(b) Sale of

(c) Theft of Asset

(d) None of these

354, Which is the main base of depreciation?

(a) Life of Asset (✓)

(b) Value of Asset

(c) Capacity of Asset

(d) None of these

355, Which of the following is objective of Depreciatio management?

(a) To ascertain the correct cost of production

(b) To ascertain the accurate profit/loss

(c) Replacement of asset

(d) All above (✓)

356, Depreciation is charged on –

(a) Fixed assets only (✓)

(b) Current assets only

(c) Both fixed and current assets

(d) None of these

357, Provision for depreciation is –

(a) Voluntary

(b) Compulsory (✓)

(c) Convention

(d) None of these

358, Arrangement for depreciation on fixed asset is a –

(a) Statutory requirement (✓)

(b) Voluntary

(c) Beneficial for business

(d) None of these

359, Cause of depreciation is –

(a) Continuous use of Assets

(b) Depletion
(c) Exffluxion of the time

(d) All above (✓)

360, Obsolescence of assets is –

(a) External cause of depreciation (✓)

(b) Internal cause of

(c) Both (a) and (b)

(d) None of these

361, Continuous use of assets is –

(a) External cause of depreciation

(b) Internal cause of depreciation (✓)

(c) Both (a) and (b)

(d) None of these

362, Base of depreciation is –

(a) Cost price of asset

(b) Life of asset

(c) Scrap value of assets

(d) All above (✓)

363, Which section of Companies Act is related with?

(a) Section 205

(b) Section 300

(c) Section 350

(d) All above (✓)

364, Depreciation reduced the –

(a) Book value of asset (✓)

(b) Market value of asset

(c) Replacement value of asset

(d) None of above

365, Appropriate method of depreciation for –

(a) Fixed instalment method (✓)

(b) Written down value method

(c) Annuity method

(d) Sinking fund method

 

366, Appropriate method of depreciation machinery is –

(a) Fixed instalment method

(b) Written down value method (✓)

(c) Annuity method

(d) Sinking

367, Appropriate method of depreciation on assets taken  on lease is –

(a) Fixed instalment method

(b) Written down value method

(c) Annuity method (✓)

(d) Sinking fund method

368, Appropriate method of depreciation for replacement of machinery is –

(a) Fixed instalment method

(b) Written down value method

(c) Annuity method

(d) Sinking fund method (✓)

 
369, Appropriate method of depreciation for Livestock is –

(a) Insurance policy method

(b) Revaluation method (✓)

(c) Depletion unit method

(d) Sinking fund method

370, Reserve is made for –

(a) General object (✓)

(b) Specific object

(c) Both (a) and (b)

(d) None of these

371, Sinking fund is made for –

(a) General object

(b) Specific object (✓)

(c) Both (a) and (b)

(d) None of these

 
372, If cost price of a machine is Rs. 15,000; Scarp value is of Rs 3,000 and expected
life is 4 years, then amount of depreciation will be –

(a) Rs. 3750

(b) Rs. 3,000 (✓)

(c) Rs. 8,000

(d) None of these

373, Which of the following fund is created for equalisation of dividend rate?

(a) Kevenue Reserve (✓)

(b) Capital Reserve

(c) Sinking Fund

(d) None of these

374, Which of the following is the object of creating reserve the company –

(a) To make financial position strong of the company

(b) Increase in working capital

(c) Replacement of assets

(d) Both (a) and (b) (✓)

 
375, Which of the following is the object provision?

(a) Arrangement of depreciation on fixed assets

(b) Arrangement for known liability

(c) Arrangement for bad debts

(d) All above (✓)

376, Which of the following is created for an unknown?

(a) Reserve (✓)

(b) Provision

(c) Secret Reserve

(d) All above

377, Which of the following can be utilised to distribute dividends among

shareholders?

(a) Capital Reserve

(b) Revenue Reserve (✓)

(c) Provision

(d) None of these

 
378, A reserve which is not apparent on the face of the balance sheet is –

(a) Secret reserve (✓)

(b) Capital reserve

(c) Revenue reserve

(d) Provision

379, Which of the following is the method of creating secret reserve –

(a) Overvaluation of liabilities

(b) Undervaluation of assets

(c) Treating capital expenses as revenue expenses

(d) All above (✓)

380, Which of the following statement is incorrect?

(a) Final accounts will become incorrect due to secret reserve

(b) Market price of shares falls down due to secret reserve

(c) Secret reserve might be used by dishonest directors for improper purposes

(d) Due to secret reserve, financial position of a company becomes weak (✓)

381, Capital profits can be utilised –

(a) To issue bonus shares

(b) To writing off preliminary expenses

(c) In distributing dividends

(d) Both above (a) and (b) (✓)

382, According to Companies Act, creating secret reserve is –

(a) Compulsory

(b) Voluntary

(c) Prohibited (✓)

(d) None of these

383, Which company can make secret reserve –

(a) Banking company

(b) Insurance company

(e) Finance company

(d) All above (✓)

384, Window dressing implies –

(a) Curtailment of expenses

(b) Checking wastages

(c) Undervaluation of assets

(d) Overvaluation of assets (✓)

385, “Secret reserves are also referred as hidden reserve or inner reserve”. This is
defined by –

(a) R.G. Williams (✓)

(b) De Paula

(c) Spicer and Peglar list

(d) None of these

386, A secret reserve is a reserve that is not disclosed in the Balance Sheet so that the
Financial position is, in fac better than appears from the balance sheet.” This
is defined by –

(a) R.G. Williams

(b) De Paula

(c) Spicer and Peglar (✓)

(d) None of these

8. Company Audit
 

387. Before commencing the audit work, a company auditor should –

(a) Examine the validity of appointment

(b) Examine the statutory documents

(c) Study the previous year’s report

(d) All the above (✓)

388. Which of the following is called the charter of the company?

(a) Memorandum of Association (✓)

(b) Articles of Association

(c) Prospectus

(d) None of these

389. For alteration in Memorandum of Association whose approval is

necessary –
(a) Court (✓)

(b) Central Government

(c) State Government

(d) None of these

390. Section 13 of Companies Act, 1956 is associated with –

(a) Memorandum of Association (✓)
(b) Articles of Association

(c) Prospectus

(d) None of these

391. Table ‘A’ is the substitute of –

(a) Memorandum of Association

(b) Articles of Association (✓)

(c) Prospectus

(d) None of these

392. Section 26 of Companies Act, 1956 is associated with –

(a) Memorandum of Association

(b) Articles of Association (✓)

(c) Prospectus

(d) None of these

393. Section 55 of Companies Act, 1956 is associated with –

(a) Memorandum of Association

(b) Articles of Association

(c) Prospectus (✓)

(d) None of these

 

394. Section 69 of Companies Act, is associated with –

(a) Prospectus

(b) Minute Book

(c) Minimum Subscription (✓)

(d) None of these

395. Section 78(2) of Companies Act, 1956 is associated with –

(a) Issue of shares at premium (✓)

(b) Issue of shares at discount

(c) Issue of shares at

(d) None of these

396. Section 79 of Companies Act, 1956 is associated with –

(a) Issue of shares at premium

(b) Issue of shares at discount (✓)

(c) Issue of shares at par

(d) None of these

397. Section 100 of Companies Act, 1956 is associated with –

(a) Reduction in Share Capital (✓)
(b) Reserve Capital

(c) Share Certificate

(d) Share Warrants

398. Section 113 of Companies Act, 1956 is associated with –

(a) Reduction in Share Capital

(b) Reserve Capital

(c) Share Certificate (✓)

(d) Share Warrants

399. Section 114-115 of Companies Act, 1956 are associated with –

(a) Reduction in Share Capital

(b) Reserve Capital

(c) Share Certificate Section 80 of Companies

(d) Share Warrants (✓)

400. Act is associated with –

(a) Issue and Redemption of Preference Shares (✓)

(b) Payment of Interest out of capital

(c) Debentures

(d) None of above

 

401. Section 208 of Companies Act, 1956 is associated with –

(a) Issue and Redemption of Preference Shares

(b) Payment of Interest out of capital (✓)

(c) Debentures

(d) None of above

402. Section 139 of Companies Act, 1956 is associated with –

(a) Minute Book (✓)

(b) Profit prior to incorporation

(c) Preliminary expenses

(d) Statutory report

403. Section 165 of Companies Act, 1956 is associated with –

(a) Minute Book

(b) Profit prior to incorporation

(c) Preliminary expenses

(d) Statutory report (✓)

404. In Public Companies at least what should be the minimum number of

directors –
(a) 2
(b) 3 (✓)

(c) 4

(d) 5

405. In private companies at least what should be the minimum number of

directors –
(a) 2 (✓)

(b) 3

(c) 4

(d) 5

406. For what period a managing director can be appointed –

(a) 2 years

(b) 3 years

(c) 4 years

(d) 5 years (✓)

9. Appointment, Remuneration, Rights and Duties of

an Auditor
 
 407. Under which section a company auditor is appointed –
(a) 224 (✓)

(b) 228

(c) 233

(d) 251

408. First auditor of a company is appointed by –

(a) Government

(b) Board of Directors (✓)

(c) Shareholders

(d) Company Secretary

409. By whom the special audit of a company is get done –

(a) Directors of the company

(b) Shareholders

(c) Central Government (✓)

(d) Creditors

410. Government may order for special audit under –

(a) Section 227

(b) Section 233A (✓)

(c) Section 233B

(d) Section 224

411, In annual general meeting, the auditor is appointed by –

(a) Board of directors

(b) Creditors

(c) Shareholders (✓)

(d) Central Government

412, Under which section of the Act, the branch auditor is appointed –

(a) Section 224

(b) Section 225

(c) Section 228 (✓)

(d) Section 231

413, An auditor of a company is appointed for a period of –

(a) One year (✓)

(b) Two years

(c) Three year

(d) Five years

414, The company shall intimate to the auditor appointed stating that he has been
appointed as auditor of the company within –

(a) 30 days

(b) 20 days

(c) 14 days

(d) 7 days (✓)

415, The auditor shall inform the Registrar of the company in writing about his
acceptance of appointment within –

(a) 7 days

(b) 14 days

(c) 20 days

(d) 30 days (✓)

416, Which section of the Companies Act state the qualifications and disqualifications
of company –

(a) Section 226 (✓)

(b) Section 225

(c) Section 224

(d) None of these

417, Which of the following is not eligible to become an auditor of a company –

(a) A body corporate

(b) An officer or employee of the company

(c) A person who is indebted to the company for an amount exceeding Rs. 1,000

(d) All above (✓)

418, Before commencing audit work of a company, the auditor should see –

(a) Legality of appointment

(b) Nature of business

(c) Statutory document

(d) All above (✓)

419, Tenure of appointment of an auditor is –

(a) Five years

(b) For indefinite period

(c) From the conclusion of one annual general meeting to the factual conclusion of
the next annual general meeting (✓)
(d) None of these

420, Generally who is appointed as an auditor in the annual general meeting of a

company –

(a) Retiring auditor (✓)

(b) New auditor

(c) A body corporate

(d) Officer of a company

421, Auditors in Government companies are appointed by –

(a) Government

(b) Comptroller and Auditor General of India (✓)

(c) President

(d) Prime Minister

422, Before commencing the audit work, a company auditor should –

(a) Examine the appointment

(b) Examine the statutory records

(c) Study the previous

(d) All the above (✓)

423, In how many companies an auditor can work having less than 25 lac as share
capital –

(a) 20 (✓)

(b) 10

(c) 15

(d) 30

424, In how many companies an auditor can work having 25 lac or more as share
capital,

(a) 20

(b) 10 (✓)

(c) 15

(d) 30

425, To remove an auditor before the expiry of his term, the necessary thing is –

(a) Prior permission of State Government

(b) Prior permission of Central Government

(c) Passing resolution in the General Meeting

(d) Both (b) and (c) above (✓)

426, Under which section of the Companies Act the remuneration of the auditor has
been discussed –

(a) 224

(b) 224 (✓)

(c) 225

(d) 226

427, The remuneration of an auditor is fixed by –

(a) Central Government

(b) Board of Directors

(c) General Meeting

(d) Appointing authority (✓)

428, In which form an auditor gets his remuneration –

(a) Salary

(b) Fees (✓)

(c) Fixed percentage of profit

(d) None of these

429, Which of the following is a disqualification for auditor?

(a) An officer of the company (✓)

(b) Relative of the director of the company

(c) Receiving remuneration for his services

(d) Have a lien on books of accounts

430, A chartered accountant is not disqualified as an auditor of a company if he is a –

(a) Employee of that company

(b) Managing director of that company

(c) Have 6% shareholding of that company

(d) Indebted to the company for an amount of Rs. 1,000 (✓)

431, If auditor is not appointed by the Company in its general meeting then –

(a) Audit will not take place in that year

(b) Retiring auditor automatically will continue his work

(c) Director will appoint the director

(d) Central Government will appoint the director (✓)

 

432, First auditor hold his office for –

(a) One year

(b) Any period until the appointment of new auditor is

(c) Until the conclusion of the first annual general meeting (✓)

(d) None of above

433, Central Government may appoint special auditor when –

(a) Sound business principles are not followed by a company

(b) Possibility of danger to the business by the management of the company

(c) Solvency position of company is suspectable

(d) All above (✓)

484, Which of the following may be appointed as a statutory auditor –

(a) A partner of company’s employee

(b) An employee of a company’s director

(c) A partner of the director of that company

(d) Non-related person with that company (✓)

 
435, By whom Internal Auditor can be removed from his post?

(a) Management (✓)

(b) Statutory Auditor

(c) Shareholders

(d) Debentureholders

436, Vacancy arises due to resignation of an auditor can be filled by –

(a) Board of Directors

(b) Shareholders in General Meeting (✓)

(c) Central Government

(d) Managing Director

437, In partnership business, the appointment of auditor’s made –

(a) On the basis of agreement (✓)

(b) On the basis of statutory provisions

(c) Under Partnership Act

(d) None of these

 
438, If an auditor is not appointed or reappointed in the annual general meeting then
vacancy is filled by –

(a) Board of directors of the company

(b) Central Government (✓)

(c) Managing Director

(d) President of the company

439, Company auditor is –

(a) A statutory consultant

(b) An agent

(c) An employee

(d) A professional specialist (✓)

440, An auditor has a right to –

(a) Access the books, accounts and vouchers of the company

(b) Receive notices and information regarding the general meeting

(c) Access the branch books

(d) All above (✓)

 
441, An auditor has a right to obtain information and explanations from the –

(a) Shareholders

(b) Auditors of the company

(c) Officers of the company (✓)

(d) Employees

442, Which section of the Company Act describes the duties of auditor –

(a) Section 227(1a) (✓)

(b) Section 228

(c) Section 226(4)

(d) Section 226(3)

443, In which of the following case decision is given that an auditor should work with
diligently, carefully and tactfully –

(a) Kingston Cotton Mills Ltd. 1869 (✓)

(b) London Oil Storage Co. Vs. Sheer Husluck and Co.

(c) C.I. Bill Fire Insurance Co. Ltd.

(d) None of above

 
444, It is the duty of company auditor that he should give his report to –

(a) Directors of the company

(b) Central Government

(c) Shareholders of the company (✓)

(d) Debentureholders

445, In which case it was held that ‘Auditor is not an insurer, he can not give
guarantee of accuracy of balance sheet”?

(a) London and General Bank Case, 1895 (✓)

(b) The Kingston Cotton Mills Co. Ltd. 1896

(c) Armitage vs. Brivar and Knott Case

(d) None of these

446, Duties and rights of an internal auditor is determined by –

(a) Company Act

(b) Management of Company (✓)

(c) Comptroller and Auditor General of India

(d) Shareholders

 
447, The company auditor has a right to be –

(a) Indemnified (✓)

(b) Consulted

(c) Re-appointed

(d) None of these

448, Joint Audit implies –

(a) Audit of two concerns together

(b) Audit of joint stock companies

(c) Audit by two firms of Chartered Accountant (✓)

(d) None of these

449, Special audit is necessary for –

(a) Inefficient concern (✓)

(b) Trading concern

(c) Manufacturing concern

(d) Processing concern

 
450, Where clause of Companies Act are violated, the auditor should give his report to
–

(a) Shareholders

(b) Managing director

(c) Board of directors (✓)

(d) Central government

451, It is the duty of auditor –

(a) To give report regarding his work

(b) To give information of the correctness of the profit and loss A/c and Balance sheet

(c) To use the Audit Report of Branches

(d) All above (✓)

452, An Auditor should see –

(a) Arithmetical accuracy

(b) Fraud irregularities

(c) Both (a) and (b) (✓)

(d) None of above

 
453, An auditor should have……. on company employees.

(a) Belief (✓)

(b) Disbelief

(c)  Suspicion

(d) None of above

454, An Auditor can –

(a) Give guarantee of truthness

(b) Not give guarantee of truthness (✓)

(c) Give fraudulent report

(d) None of above

455, An auditor should do his work with –

(a) Honestly

(b) Tactfully and censessly

(c) Both (a) and (b) (✓)

(d) Suspicion

456, A company auditor can attend General Meeting of a company as a matter of –

(a) Right

(b) Duty

(c) Both (a) and (b)’

(d) He can not attend general meeting (✓)

457, In which case it was held that an auditor should verify the existence of securities
–

(a) City Equitable Fire Insurance Co. 1925 (✓)

(b) London and General Bank Ltd. 1885

(c) Kingston Cotton Mills Ltd. 1896

(d) None of these

10. Liabilities of Auditor

 

458, Civil liability of an Auditor includes –

(a) Liability for negligence

(b) Liability for misfeasance

(c) Liability under Companies Act

(d) All above (✓)

459, When the auditor do not perform his work under his duty, it is termed as –

(a) Negligence

(b) Misfeasance (✓)

(c) Crime

(d) None of above

460, When an auditor do not perform his duty with reasonable care and prudently, it
is termed as –

(a) Negligence (✓)

(b) Misfeasance

(c) Crime Tmeany

(d) None of above

461, In which condition auditor is held liable when negligence of duty is proved –

(a) When there is a resultant loss to the employer (✓)

(b) When there arise no loss due to negligence

(c) In the above both cases

(d) No responsibility

462, Mere negligence of duty, unless there is a resultant loss, the auditor will be –

(a) Responsible for negligence

(b) Not responsible for negligence (✓)

(c) Responsible for compensation

(d) None of above

463, Auditor is held responsible for compensation if it is proved that –

(a) There is negligence in work

(b) There arise loss to employer due to negligence

(c) Both (a) and (b) (✓)

(d) None of above

464, Damage will be recovered from auditor for misfeasance only in case when it is
proved –

(a) It was the duty of the auditor for his client his

(b) Auditor has not performed his

(c) Client has suffered loss due to non-performance of duty

 1. d) All above (✓)
 

465, In which case auditor is held responsible for negligence for distributing dividend
out of capital –

(a) Irish Woollen Co. vs. Tison and others (✓)

(b) London Oil Storage Ltd. vs. Sear Husluck and Co.

(c) Armitage vs. Brewer Knot

(d) None of above

466, In which case auditor was held liable for negligence for not verifying the cash in
hand –

(a) Irish Woollen Co. vs. Tison and others

(b) London Oil Storage Ltd. vs. Sear Husluck and Co. (✓)

(c) Armitage vs. Brewer Knot

(d) None of above

467, In which case auditor was held liable for negligence checking the wage sheet –

(a) Irish Woollen Co. vs. Tison and others

(b) London Oil Storage Ltd. vs. Sear Husluck and Co.

(c) Armitage vs. Brewer Knot (✓)

(d) None of above

 

468, When an error takes place on believing the certificates of responsible officers,
then auditor –

(a) Will be held liable for negligence

(b) Will not be held liable for negligence (✓)

(c) Will not be held liable for misfeasance

(d) None of above

469, Not to disclosed true financial position of the company to the shareholders is
termed as –

(a) Negligence

(b) Misfeasance (✓)

(c) Criminal offense

(d) All above

470, When auditor not disclosed the misuse of funds by management, it is termed as –

(a) Negligence

(b) Misfeasance (✓)

(c) Criminal offense

(d) All above

 

471, When an auditor wilfully makes a false statement in report, it is termed as –

(a) Negligence

(b) Misfeasance

(c) Criminal offence (✓)

(d) All above

472, If an auditor has misapplied money of the company, he may be held liable for –

(a) Negligence

(b) Misfeasance

(c) Criminal liability (✓)

(d) Contractual liability

473, If an auditor is found guilty of falsification of a company books, he will incur –

(a) Criminal liability (✓)

(b) Civil liability

(c) Contractual liability

(d) None of above

 
474, An auditor of a company is held responsible for which type of liability when he
does not co-operate the appointing officer by the Central Government u/s 240 for the
investigation –

(a) Civil

(b) Criminal (✓)

(c) Both (a) and (b)

(d) None of above

475, An auditor may be penalised by an imprisonment falsification in accounts for a

maximum period of –

(a) 7 years (✓)

(b) 6 years

(c) 3 years

(d) 5 years

476, The liability of an auditor can be –

(a) Only civil

(b) Only criminal

(c) Either civil or criminal (✓)

(d) None of these

 
477, Not to detect errors and fraud is –

(a) Criminal liability

(b) Liability of breach of duty

(c) Above (a) and (b) both

(d) None of these (✓)

478, When an auditor is punishable by Penalty Imprisonment or both, such liability is

called –

(a) Liability for negligence

(b) Liability for misfeasance

(c) Liability for simple error

(d) Criminal liability (✓)

479, Not to perform the work carefully and efficiently is –

(a) Liability for negligence (✓)

(b) Liability for misfeasance

(c) Criminal liability

(d) None of these

 
480, Taking the bribe during the audit course is –

(a) Criminal liability (✓)

(b) Liability for misfeasance

(c) Liability for negligence

(d) None of these

481, Destruction of vouchers by Auditor is –

(a) Liability for misfeasance

(b) Liability for negligence

(c) Criminal liability (✓)

(d) None of these

482, To present doubtful report knowingly is –

(a) Criminal liability (✓)

(b) Liability for negligence

(c) Liability of misfeasance

(d) None of these

483, Disclosure of secret information by auditor is –

(a) Liability for negligence

(b) Criminal liability (✓)

(c) Liability for misfeasance

(d) None of these

484, If third party suffered any loss due to negligence auditor then he will be –

(a) Responsible for third party

(b) Not responsible for third party (✓)

(c) Responsible for compensation

(d) None of above

485, Liability of a honorary auditor is –

(a) Limited

(b) Unlimited

(c) As the liabilities of a general auditor (✓)

(d) None of these

486, The liabilities for assistants negligence is –

(a) Auditor’s liability (✓)

(b) Assistant’s liability

(c) Employer’s liability

(d) All above

487, Auditor is held liable for third party in case of –

(a) Negligence

(b) Misfeasance

(c) Fraud (✓)

(d) Mis-statement

488, When company auditor is held liable for civil liability –

(a) For negligence (✓)

(b) Mis-statement in prospectus

(c) For singing knowingly on false certificate

(d) Only (a) and (b)

489, Indian Penal Code (IPC) provides for punishment false certificate under section –

(a) 219

(b) 279
(c) 197 (✓)

(d) 185

490, The liability of a company auditor is determined by –

(a) Company Act

(b) Court decisions

(c) Chartered Accountant Act

(d) All of the above (✓)

11. Divisible Profit and Dividend

 

491, Divisible profit means –

(a) Total profit

(b) Profit before depreciation and reserve

(c) Profit after making arrangement for depreciation and reserve (✓)

(d) All above

492, Which of the following should be considered while determining divisible profit –
(a) Accounting principles

(b) Statutory provision

(c) Memorandum of Association and Articles

(d) All above (✓)

493, Which section of Companies Act is related with divisible profits –

(a) Section 205(1) (✓)

(b) Section 225

(c) Section 226(2)

(d) Section 228

494, According to which section of Companies Act, dividend can be distributed after
making provision for depreciation –

(a) Section 205(2) (✓)

(b) Section 144

(c) Section 228

(d) Section 226

495, Maximum amount that can be transferred to Reserve after making provision for
depreciation is –
(a) 20%

(b) 10% (✓)

(c) 5%

(d) 15%

496, Dividend can be paid in –

(a) Cash

(b) Fully paid bonus shares

(c) In the form of payment of outstanding amount on shares

(d) All above (✓)

497, Dividend can never be paid out of the –

(a) Capital (✓)

(b) Capital profits

(c) Revenue profit

(d) Accumulated profits

498, A company has earned profits and declared dividends, but does not want to pay
dividends due to shortage of cash, an auditor you should suggest, if asked that –
(a) Dividend should be paid

(b) Dividend need to be paid

(c) Dividend must be paid within 30 days of declaration of dividends (✓)

(d) Dividend must be paid within 60 days of declaration of dividend

499, Within how many days dividend must be paid after its declaration –

(a) 30 (✓)

(b) 40

(c) 42

(d) 15

500, What is the duration of punishment for an accused authority when dividend is
not paid within the prescribed time prescribed time –

(a) 30 days

(b) 6 months

(c) 3 year (✓)

(d) 1 year

501, Which of the following table should be followed regarding dividend –

(a) Table B

(b) Table (A) (✓)

(c) Table C

(d) None of above

502, Profit arises due to non-trading activities are termed as –

(a) Revenue Profit

(b) Capital Profit (✓)

(c) Interim Profit

(d) None of above

503, Profit arise due to trading activities are termed as –

(a) Revenue Profit (✓)

(b) Capital Profit

(c) Interim Profit

(d) None of above

504, Premium received issue of shares and debentures is –

(a) Revenue Profit

(b) Capital Profit (✓)

(c) Interim Profit

(d) None of above

505, Profit on sale of fixed assets is –

(a) Revenue Profit

(b) Capital Profit (✓)

(c) Interim Profit

(d) None of above

506, Capital profits can be utilised in –

(a) Issue of bonus shares

(b) Distributing dividends

(c) Writing of capital losses

(d). Both (a) and (c) (✓)

507, Profit prior to incorporation is treated as –

(a) Revenue Profit

(b) Capital Profit (✓)

(c) Interim Profit

(d) None of above

508, Which of the following can not be distributed as dividend –

(a) Premium received on issue of shares

(b) Profit on forfeiture of shares

(c) Profit prior to incorporation

(d) All above (✓)

509, After re-issuing of forfeited shares, balance amount of forfeited A/c is

transferred in –

(a) Capital Reserve Account (✓)

(b) General Reserve

(c) Dividend Equalisation Fund

(d) None of the above

510, Distribution of dividend by undisclosing the liabilities is termed as

(a) Distribution of dividend out of

(b) Distribution of dividend out of capital (✓)

(c) Distribution of dividend according to articles

(d) None of above

511, In which condition dividend assumed to be distributed out of capital –

(a) Distribution of dividend out of the amount of sale of fixed assets

(b) Distribution of dividend treating revenue expenses as capital expenses

(c) Distribution of dividend without writing off losses

(d) All above (✓)

512, Interest is paid on unpaid amount of dividend –

(a) 8%

(b) 12%

(c) 18% (✓)

(d) 24%

513, Dividend is given to –

(a) All shareholders

(b) Registered shareholders (✓)

(c) Only old shareholders

(d) None of these

514, Dividend –

(a) Can be paid out of capital

(b) Can never be paid out of capital (✓)

(c) Should always be paid out of capital

(d) None of the above.

515, The general rule is that no company can pay –

(a) Equity dividend

(b) Preference dividend

(c) Interest on capital (✓)

(d) Both (a) and (b)

516, Dividend cannot be paid out of –

(a) Capital profit

(b) Capital receipts (✓)

(c) Revenue profits

(d) None of the above.

 

517, Interim dividend is declared by –

(a) Shareholders

(b) Auditors

(c) Company secretary

(d) Directors (✓)

12. Audit Report

 

518, Auditor report is a statement in which –

(a) Examine the books of accounts

(b) Examine the final accounts an auditor

(c) Examine the other enclosed documents

(d) After examining all above present his report (✓)

519, Audit report is presented to –

(a) Secretary (✓)

(b) Managers
(c) Registrar

(d) Shareholders

520, How many types of auditing reports are there?

(a) 2  (✓)

(b) 31

(c) 4

(d) 5

521, According to which section of Company Act, an auditor should submit his report?

(a) 219

(b) 221

(c) 223

(d) 227(2)  (✓)

522, Under which section, contents of the Audit Report been provided –

(a) 227(2)

(b) 228

(c) 229
(d) 227(3) (✓)

523, A company auditor is required to sign his audit report under section –

(a) 229 (✓)

(b) 228

(c) 230

(d) None of these

524, A clean Auditor’s report is one in which auditor

(a) Describe some errors

(b) Describe only frauds

(c) Describe errors and frauds

(d) Does not describe any error, fraud and irregularity (✓)

525, A report bearing qualification is known as –

(a) Qualified report (✓)

(b) Unqualified report

(c) Clean report

(d) None of these

 

526, Benefit to shareholders from audit report is –

(a) Information about employee’s honesty

(b) Information about safety of their capital

(c) Helps in taxation

(d) Information about the efficiency of directors and financial position of the

company (✓)

527, Audit report provides information to directors about –

(a) Creditors

(b) Employee’s honesty (✓)

(c) Helps in taxation

(d) None of above

528, Audit report provides information to investor about –

(a) Employee’s honesty

(b) Taxation

(c) Dividend, safety of investment and continuity (✓)

(d) Efficiency of directors

 

529, An auditor gives qualified report when –

(a) There is mistake of employees

(b) Directors work autocratically

(c) Employees do not indulge in fraud

(d) Accounts are not kept properly (✓)

530, An auditor gives clean report when –

(a) Accounts are kept properly (✓)

(b) Employees are honest

(c) Employees do not make error willfully

(d) Employees provide accurate information to the auditor

531, Which type of report is given by an auditor when accounts of the company give a
true and fair view of the company –

(a) Unqualified Report (✓)

(b) Qualified Report

(c) Interim Report

(d) Final Report

 

532, In which case an auditor gives qualified report –

(a) When accounting principles are not appropriately adopted

(b) In case of inadequate depreciation on fixed assets

(c) When proper books of accounts are not kept

(d) All above (✓)

533, An audit report will be –

(a) Precise

(b) Specific

(c) Avoiding vague statements

(d) All above (✓)

534, Which of the following part of statutory report is certified by company auditor?

(a) Contract presented for the acceptance of meeting

(b) The extent to which underwriting contract is not fulfilled

(c) Commission given to any director on shares

(d) Number of allotted shares, amount received on them and summary of receipts and
payment (✓)
 

535, When auditor does not have any reservation, objection regarding the
information under audit then he issues an –

(a) Qualified opinion

(b) Adverse opinion

(c) Unqualified opinion (✓)

(d) Negative opinion

536, Due to lack of audit evidence auditor issues a –

(a) Qualified opinion (✓)

(b) Adverse opinion

(c) Unqualified opinion

(d) Negative opinion

537, The Statutory Auditor of a his report to Government company submits –

(a) The Board of Directors of the company

(b) The C & AG (✓)

(c) The legislature

(d) The company secretary

 

538, In his report, the company auditor states –

(a) Correct state of affairs

(b) True state of affairs

(c) True and fair state of affairs (✓)

(d) Fair state of affairs

539, Companies (Auditors Report) order came into from –

(a) 1st July, 2003 (✓)

(b) 1st January, 1975

(c) 1st July, 1975

(d) 1st January, 1956

13. Investigation
 

540, Investigation is get done –

(a) For specific object (✓)

(b) For general object

(c) Above both (a) and (b)

(d) None of these

541, The investigation is conducted –

(a) at the end of a year

(b) throughout the year

(c) as per need (✓)

(d) None of these

542, The qualification of an investigator is –

(a) C.A.

(b) R.A.

(c) Commerce Graduate

(d) Not prescribed (✓)

543, To investigate the affairs of a company under Section 238, an investigator may
be –

(a) an individual (✓)

(b) association
(c) company

(d) None of these

544, The accounts of a company are investigated on demand of members of a

company under section –

(a) 235

(b) 236 (✓)

(c) 237

(d) None of these

545, Investigation report is –

(a) Brief

(b) Detailed (✓)

(c) Above both (a) and (b)

(d) None of these

546, Investigation begins –

(a) When accounting ends

(b) When auditing ends (✓)

(c) When book-keeping ends

(d) None of above

547, Investigation is –

(a) Compulsory

(b) Voluntary (✓)

(c) Statutory

(d) None of these

548, Investigation is get done by –

(a) The proprietor of the firm

(b) Outside parties

(c) Both (a) and (b) (✓)

(d) None of these

649, In investigation checking are done of –

(a) One year accounts

(b) Two years accounts

(c) May cover several years (✓)

(d) None of these

550, The term investigation implies an examination of the accounts of a business for
some special purpose”, this is defined by –

(a) Spicer and Pegler (✓)

(b) Lacaster

(c) Dicksee

(d) None of these

551, Investigation is –

(a) An intensive examination behind the books and depth of transactions (✓)

(b) Verification of the accuracy of the figures of balance sheet

(c) Normal checking of accounts

(d) None of these

552, Investigation is a –

(a) Test checking of books of account

(b) Intensive and thorough examination accounts (✓)

(c) Examination of the accounts

(d) All above

553, Investigation looks for –

(a) Substantive evidences

(b) Conclusive

(c) Prima facie evidences

(d) All above (✓)

554, Investigation into the affairs of a company not having share capital may be
directed by the central government on the application of –

(a) 200 members (✓)

(b) 100 members

(c) Not less than 1/5 of the members

(d) None of these

555, Investigation into the affairs of a company not having share capital may be
directed by the Central Government on the application of –

(a) 200 members

(b) 100 members

(c) Not less than 1/5 of the members (✓)

(d) None of these

556, Investigation proves helpful in –

(a) Purchasing a business

(b) Admission of a new partner

(c) Detection of fraud

(d) All above (✓)

14. Special Audit

 

557, Under which Act, Banking Companies An India –

(a) Banking Regulation Act, 1949 (✓)

(b) Banking Regulation Act, 1969

(c) Banking Companies Act, 1970

(d) None of above

558, Which section of the Banking Regulation Act is related with audit of annual
accounts –
(a) Section 25

(b) Section 30 (✓)

(c) Section 27

(d) None of these

559, In banking companies –

(a) Intensive audit is taken place

(b) Auditor examine each transaction in detail

(c) Auditor mínutely check the assets and liabilities shown in balance sheet (✓)

(d) None of these

560, For aided educational institutions, audit is –

(a) Compulsory (✓)

(b) Necessary

(c) Statutory

(d) None of these

561, Non-trading institutions prepare –

(a) Trading Account

(b) Profit and Loss Account

(c) P/L Appropriation Account

(d) Income and Expenditure Account (✓)

562, According to which of the following Act, final accounts of Insurance Companies
are prepared?

(a) Insurance Companies Act, 1938

(b) Companies Act, 1956

(c) Both above (a) and (b) (✓)

(d) None of these

563, Accounts of Insurance Companies are prepared according to which sections of

Insurance Companies Act, 1938 –

(a) Section 10-29 (✓)

(b) Section

(c) Section 30

(d) None of above

564, Minimum percentage of provision for a Insurance Company is –

(a) 20%
(b) 25%

(c) 40% (✓)

(d) 10%

565, Cost Audit is started in –

(a) 1913

(b) 1935 (✓)

(c) 1949

(d) 1965

566, Cost audit is helpful for an institution in –

(a) Price determination

(b) Cost control

(c) Cost control

(d) All above (✓)

567, Cost Audit is compulsory in –

(a) Retail business

(b) Manufacturing concern (✓)

(c) Mines

(d) None of these

568, The cost auditor shall submit his report to –

(a) Shareholders

(b) Central Government (✓)

(c) Board of Directors

(d) Any of the above

569, Cost audit is beneficial for –

(a) Business organisation

(b) Labourers

(c) Government

(d) All above (✓)

570, Qualification of cost auditor is –

(a) Chartered Accountant

(b) Cost and Works Accountant (✓)

(c) Commerce Graduate

(d) All above

571, Cost auditor is appointed by –

(a) General meeting

(b) Board of directors

(c) Permission of Central Government

(d) Both (a) and (c) above (✓)

572, Main object of Cost Audit is –

(a) Checking of accuracy of total cost and per unit cost of production (✓)

(b) Determining total cost

(c) Determining tender price

(d) All above

573, Cost Audit report is to be furnished –

(a) Within 90 days of the end of the relevant year

(b) Within 180 days of the end of the relevant financial year (✓)

(c) Within 30 days of the date on which the relevant records are made

(d) At least 21 days before the date of annual general meeting of the company
 

574, Tax audit is compulsory under section –

(a) 44 AA

(b) 44 AB (✓)

(c) 44 AC

(d) 44 AD

575, Management audit is a –

(a) New Concept (✓)

(b) Traditional concept

(c) Medival Period Concept

(d) None of above

576, Where management audit is first used?

(a) Japan

(b) America (✓)

(c) India

(d) None of these

 
577, Qualification of Management Auditor is –

(a) Chartered Accountant

(b) Commerce Graduate

(c) No Prescribed Qualification (✓)

(d) M.B.A.

578, Objective of Management audit is –

(a) Make management more efficient

(b) Detecting shortcomings of management operation

(c) Making cordial relations with employees

(d) All above (✓)

579, Under management audit, which of the following is examined –

(a) Work of employees

(b) Work of auditor

(c) Work of top authorities (✓)

(d) None of these

580, For manufacturing concerns, cost audit is –

(a) Voluntary

(b) Compulsory (✓)

(c) Statutory

(d) None of these

581, Cost auditor furnish his report to –

(a) Shareholders

(b) Central Government (✓)

(c) Board of Directors

(d) Any of above

582, Management audit is get done by –

(a) Statutory auditor

(b) Government auditor

(c) Cost auditor

(d) None of these (✓)

583, Which of the following section of Companies Act related with cost audit –

(a) Section 233(B) (✓)

(b) Section 100

(c) Section 150

(d) None of these

584, Management Audit is –

(a) Compulsory

(b) Voluntary (✓)

(c) Statutory

(d) None of these

585, What is essential for measuring efficiency of management?

(a) Social Audit

(b) Cost Audit

(c) Tax Audit

(d) Management Audit (✓)

586, In management audit, evaluation is being done of the –

(a) Cost accounts

(b) Financial accounts

(c) Managerial functions and policies (✓)

(d) Assets and liabilities

https://altclasses.in/paper-3-advanced-auditing-mcqs-case-studies-tests/

1.Scope of audit in case of joint stock companies is defined by.

A. Auditor
B. Management
C. Law
D. Shareholders
ANSWER: C

2.Following are the advantages of continues audit except.

A. Interim dividend
B. Auditors-employee friendship
C. Detailed checking
D. Moral Check
ANSWER: B

3.Following are accounting techniques except.

A. Depreciation Rate
B. Interest Rate
C. Verification
D. A & B
ANSWER: C

4.Auditing techniques include.

A. Vouching
B. Verification
C. Valuation
D. All of Above
ANSWER: D

5.The purposes of audit program include.

A. Timetable
B. Controls cost of audit
C. Future references
D. All of Above
ANSWER: D

6.Following are disadvantages of final audit except.

A. Accounts delayed
B. Planned fraud cannot be detected
C. Companies can fulfil their legal requirements
D. Detailed checking is not possible
ANSWER: C

7.Contents of audit program include.

A. Duration
B. Old report
C. Checking book
D. All
ANSWER: D

8.The right, duties & liabilities of a company auditor is defined by.

A. Management
B. Law
C. Both A & B
D. None of Above
ANSWER: B

9.The first auditor is appointed by directors within.

A. 30 Days of incorporation
B. 60 Days of incorporation
C. 90 Days of incorporation
D. None of Above
ANSWER: B

10.Reason of conducting interim audit.

A. Required by Law
B. Specific purpose
C. Both A & B
D. None of above
Answer B

11. Following are the rights of an auditor except

A. Call for information
B. Branch inspection
C. Make company’s policies
D. Access books of accounts
ANSWER: C

12.The status of company auditor is that he is an.

A. Employee of the company
B. Manager of the company
C. Outsider and independent person
D. All of above
ANSWER: C

13.Following persons cannot become auditor of the company.

A. Employee of the company
B. Employee of Director
C. Partner of Director
D. All of Above
ANSWER: D

14.Auditor should be qualified as per.

A. Chartered Accountants Ordinance 1951
B. Chartered Accountants Ordinance 1961
C. Chartered Accountants Ordinance 1971
D. Chartered Accountants Ordinance 1981
ANSWER: B

15.Repair to machinery is considered as addition to machinery.

A. Error of commission
B. Error of omission
C. Error of compensation
D. Error of principle
ANSWER: D

16.Various types of quality audit are.

A. Product
B. Process
C. System management
D. All of above
ANSWER: D

17.When the auditor is an employee of the company audit is called.

A. Internal
B. External
C. Compliance
D. A & B
ANSWER: A

18.The most comprehensive type of audit system is.

A. Quantity
B. Quality
C. Preliminary
D. Sequential
ANSWER: B

19.Each of the three parties involved in an audit success is.

A. Client, auditor, auditeer
B. Client, Auditor, Auditee
C. Client, Moderator, Auditee
D. Client, Auditor, Auditee
ANSWER: D

20.An audit is usually conducted in three steps.

A. Pre examination
B. suitable
C. depth
D. A & B
ANSWER: A

21.Audit is a fact finding process that compares actual results with.

A. Standard and plan
B. Expected Results
C. Premature results
D. Preliminary results
ANSWER: A
22.The ______ is expected to provide the resources to the auditor.
A. Client
B. Internal Auditor
C. External Auditor
D. Auditee
ANSWER: D

23.The auditing standard different from audit procedure is.

A. Audit assumptions
B. Acts to be performed
C. Quality
D. Method of work
ANSWER: B

24.The most difficult type of misstatement to detect fraud is based on.

A. Related party purchases
B. Related party sales
C. restatement of sale
D. omission of sales
ANSWER: D

25.The fundamental objective of the audit of a company is.

A. Protect the interest of the minority shareholder
B. Prevent error and fraud
C. Assess the performance of a company
D. Assess the credibility of the company
ANSWER: D

26.The Concept of stewardship means that company directors.

A. Are responsible for ensuring the law of company
B. Are responsible for ensuring the tax of the company
C. Are responsible for ensuring the assets of the company
D. Report suspected fraud and money laundering
ANSWER: C

27.Why do auditors concentrate their efforts on material items in accounts.

A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated
D. Because the directors have asked for it
ANSWER: C

28.Which of the following is not the responsibility of company directors.

A. Reporting to the shareholder
B. Establishment of internal control
C. keeping proper accounting record
D. Information and explanation to the auditor
ANSWER: A

29.International auditing standard are issued by.

A. International accounting standard board
B. Financial accounting standard board
C. International audit assurance board
D. Auditing practice board
ANSWER: C

30.Which one of the following is not a duty of auditor.

A. Duty to report to the company bank
B. Duty to report to the member
C. Duty to sign the audit report
D. Any violation of law
ANSWER: A

1. Audit of banks is an example of:

A. Statutory Audit

B. Balance Sheet Audit

C. Concurrent Audit

D. All of the above

Ans. All of the above

2. In Pakistan, balance sheet audit is synonymous to

A. Annual Audit

B. Continuous Audit

C. Detailed Audit

D. Statutory Audit

Ans. A. Annual Audit

3. ____________ is a systematic examination of the books and

records or a business?
A. Auditing
B. Vouching
C. Verification
D. Checking

Answer A. Auditing
4. Which of the following is not a fact of EPA?
A. Economic Audit
B. Efficiency Audit
C. Expenditure Audit
D. Effectiveness Audit

Ans. C.Expenditure Audit

5. The main object of an audit is _____________?

A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.

Ans. D. Depends on the type of audit.

6. An auditor is like a_______________?

A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these

Ans. B. Watch dog

7. Why do auditors concentrate their efforts on material items in

accounts?
A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it

Ans. C. Because the risk to the accounts of their being incorrectly stated is
greater

8. Internal auditor is appointed by ?

A: The management
B. government

C. FBR

D. FIA

Ans. A: The management

9. Scope of financial audit is__________?

A. Financial information
B. Non-financial information
C. Both (a) and (b)
D. None of these

Ans. A. Financial information

10. IFRS 9 explains about?

A. Inventory
B. Accounts Payable
C. Accounts Receivable
D. Expenses

Ans. C. Accounts Receivable

11. Audit fess is a part of__________.

A. works on cost.
B. selling overhead.
C. distribution overhead.
D. administration overhead

Ans. D. administration overhead

12. An auditor should not accept a loan on favourable commercial

terms from an audit client because of the threat to his or her
independence. The threat would be a___________?
A. Self-interest threat
B. Self-review threat
C. Advocacy threat
D. Familiarity threat

Ans. A. Self-interest threat

13. Which system produces information used for inventory valuation,

budgeting, cost control, performance reporting, and make buy
decision?
(A) Sales order Processing
(B) Purchases/accounts payable
(C) Cash disbursement
(D) None of these

Ans. (D) None of these

14. If your bank account is “Freeze” then…..

A: All the money lost

B: No debit transaction can be made

C: Can transfer money to other bank account

D: Only ATM transaction available

Ans. B: No debit transaction can be made

15. The order of the entries made in the ledger is by:

(A) Transaction number
(B) Account number
(C) Date
(D) None of these

Ans. (C) Date

16 In general a special journal would not be used to record:

(A) Sales
(B) Cash disbursements
(C) Depreciation
(D) Purchases
Ans. (C) Depreciation

17. Subsidiary ledgers are used in manual accounting environments.

What file is comparable to a subsidiary ledger in a computerized
environment?

(A) Archive file

(B) Reference file

(C) Transaction file

(D) master file

Ans. (D) master file

18. Which of the following is an archive file?

(A) An accounts payable subsidiary ledger
(B) A cash receipts file
(C) A sales journal
(D) a file of accounts receivable that have been written off

Ans. (D) a file of accounts receivable that have been written off

19. When determining the batch size, which consideration is the least
important?
(A) Achieving economies by grouping together large numbers of transactions
(B) Complying with legal mandates
(C) Providing control over the transaction process
(D) Balancing the tradeoff between batch size and error detection

Ans. (C) Providing control over the transaction process

20. Data flow diagrams

(A) Depict logical tasks that are being performed, but not who is performing them
(B) Illustrate the relationship between processes, and the documents that flow
between them
and trigger activities
(C) Represent relationships between key elements of the computer system
(D) Describe in detail the logic of the process

Ans. (A) Depict logical tasks that are being performed, but not who is
performing them

21. Which statement is not correct

(A) The post-closing trail balance reports the ending balance of each account in
general ledger
(B) One purpose of preparing the unadjusted trial balance is to ensure that debits
equal credits
(C) financial statements are prepared based on the unadjusted trial balance
(D) None of above

Ans. (C) financial statements are prepared based on the unadjusted trial
balance

22. Financial statements are prepared from the:

(A) Trial balance
(B) Adjusted trial balance
(C) General Ledger
(D) None of these

Ans. (B) Adjusted trial balance

23. Which situation indicates an internal control risk in the general

ledger/Financial reporting system (GL/FRS)?
(A) The employee who maintains the cash journal computes depreciation expense
(B) The cash receipts journal voucher is approved by the treasure
(C) The cash receipts journal vouchers are pre numbered and store in a locked safe
(D) the employee who maintains the cash receipts journal records transactions in
the accounts
receivable subsidiary ledger

Ans. (D) the employee who maintains the cash receipts journal records
transactions in the accounts
receivable subsidiary ledger
24. Which best describes a batch process General Ledger System
(GLS)
(A) Paper documents are eliminated
(B) The general ledger master file is updated each night
(C) There is a time lag between transaction processing and posting to the general
ledger
(D) No direct access or querying of the General Ledger is possible

Ans. (C) There is a time lag between transaction processing and posting to the
general ledger

25. An advantage of a batch General Ledger System (GLS) is that

(A) Separation between authorization and transaction processing is strictly enforced
(B) The general ledger master file is recreated with each update
(C) Updates and reconciliation of transactions occur as a step within the transaction
cycle
(D) Errors and out-of-balance conditions are identified at the end of the month

Ans. (C) Updates and reconciliation of transactions occur as a step within the
transaction cycle

26. Which statement is not true?

(A) Authority refers to an individual’s obligation to achieve desired results
(B) If an employee is given the responsibility for a task, that employee should be
given
authority to make decisions within the limits of that task
(C) The detail provided to employee is function of the employee’s position with the
firm
(D) All of the above are true

Ans. (A) Authority refers to an individual’s obligation to achieve desired

results

27. The income statement should be prepared

(A) Before the retained earnings statement and balance sheet
(B) After the retained earnings statement and before the balance sheet
(C) After the retained earnings statement and balance sheet
(D) After the balance sheet and before the retained earnings statement

Ans. (A) Before the retained earnings statement and balance sheet

28. In a defined-benefit plan, the process of funding refers to

(A) Determining the projected benefit obligation.
(B) Determining the accumulated benefit obligation.
(C) making the periodic contributions to a funding agency to ensure that funds are
available to meet retirees’ claims.
(D) Determining the amount that might be reported for pension expense.

Ans. (C) making the periodic contributions to a funding agency to ensure that
funds are
available to meet retirees’ claims.

29. In a defined-contribution plan, a formula is used that

(A) Defines the benefits that the employee will receive at the time of retirement.
(B) Ensures that pension expense and the cash funding amount will be different.
(C) Requires an employer to contribute a certain sum each period based on the
formula.
(D) Ensures that employers are at risk to make sure funds are available at
retirement.

Ans. (C) Requires an employer to contribute a certain sum each period based
on the formula.

30. Which of the following is not a characteristic of a defined-

contribution pension plan?
(A) The employer’s contribution each period is based on a formula.
(B) The benefits to be received by employees are usually determined by an
employee’s
three highest years of salary defined by the terms of the plan.
(C) The accounting for a defined-contribution plan is straightforward and
uncomplicated.
(D) The benefit of gain or the risk of loss from the assets contributed to the pension
fund are
borne by the employee.
Ans. B) The benefits to be received by employees are usually determined by
an employee’s
three highest years of salary defined by the terms of the plan.

31. Alternative methods exist for the measurement of the pension

obligation (liability). Which measure requires the use of future salaries
in its computation?
(A) Vested benefit obligation
(B) Accumulated benefit obligation
(C) Projected benefit obligation
(D) Restructured benefit obligation

Ans. (C) Projected benefit obligation

32. The projected benefit obligation is the measure of pension

obligation that
(A) Is required to be used for reporting the service cost component of pension
expense.
(B) Requires pension expense to be determined solely on the basis of the plan
formula
applied to years of service to date and based on existing salary levels.
(C) Requires the longest possible period for funding to maximize the tax deduction.
(D) Is not sanctioned under generally accepted accounting principles for reporting
the service
cost component of pension expense.

Ans. (A) Is required to be used for reporting the service cost component of
pension expense.

33. The purpose of financial markets is to:

(A) Control inflation

(B) Allocation savings efficiently

(C) Increase the price of common stocks

(D) Lower the yield on bonds

Ans. (B) Allocation savings efficiently

34. Assets are held for the purpose of:

(A) Earning revenue

(B) resale

(C) conversation into cash

(D) None of these

Ans. (A) Earning revenue

35. Depreciation is provided on:

(A) Fixed Asset

(B) Outward charges

(C) Current assets

(D) Intangible assets

Ans. (A) Fixed Asset

36. Deferred taxation is:

(A) Fixed Asset

(B) Fixed Liabilities

(C) Part of owners’ equity

(D) None of these

Ans. (C) Part of owners’ equity

37. Process of costing is relevant to:

(A) Cement Industry

(B) Job order cost-oriented projects

(C) Both (A & B)
(D) None of these

Ans. A) Cement Industry

38. Stratified audit sample means:

(A) Randomly selected items from audit

(B) Purposively selected items for audit

(C) Items carefully selected from each group

(D) None of these

Ans. (A) Randomly selected items from audit

39. Income tax rate are the same for:

(A) Limited companies

(B) Baking Companies

(C) Public Companies

(D) None of these

Ans. (B) Baking Companies

40. Leaders perform:

(A) Decisional roles

(B) Informal roles

(C) Informational roles

(D) International roles

Ans. (A) Decisional roles

41. Current ratio is calculated to:

(A) Compare the current assets with Past assets
(B) Compare the current assets with Fixed assets
(C) Measure the Liquidity of Concern

(D) None of these

Ans. (C) Measure the Liquidity of Concern

42. Debenture Represent:

(A) The investment of equity shareholders

(B) Director share in a business

(C) Long term liabilities of a business

(D) Long term capital of a business

Ans. (C) Long term liabilities of a business

43. Auditing is a branch of:

(A) Natural Science

(B) Social Science

(C) Abstract Science

(D) None of these

Ans. (B) Social Science

44. Stock in trade is a:

(A) Fixed Assets

(B) Citations Assets

(C) Intangible Assets

(D) Current assets

Ans. D) Current assets

45. A business asset of Rs. 44312 and owner’s equity Rs.13210. what
is the amount of liabilities?
(A) Rs.31102

(B) Rs.57522

(C) Rs.44312

(D) None of these

Ans. (A) Rs.31102

46. Trading & Profit & Loss account and balance sheet is prepared
from:
(A) Ledger balance

(B) Ledger balance, cash and bank balances

(C) Cash book and bank book

(D) Trail balance

Ans. (D) Trail balance

47. Calculate the gross profit/loss if sale Rs.60000, Cost of sales

Rs.50000, Opening stock Rs.10000; Purchases Rs.40000; Wages
Rs.20000 and Office rent Rs.10000.
(A) Loss Rs.10000

(B) Loss Rs.20000

(C) Profit Rs.10000

(D) None of these

Ans. (C) Profit Rs.10000

48. The cost of the asset after expiry of its useful life the
called__________.
(A) Written down Value
(B) Residual Value

(C) Expired Value

(D) None of these

Ans. (B) Residual Value

49. In Pakistan, financial statement of limited companies are prepared

in the according with:
(A) International Accounting standards adopted in Pakistan

(B) Companies Ordinance 1984

(C) Both (A & B)

(D) None of these

Ans. (C) Both (A & B)

50. The main object of an audit is___________.

(A) Expression of opinion

(B) Detection and prevention of fraud&error

(C) Both (A & B)

(D) Depends on the type of audit

Ans. (D) Depends on the type of audit

51. The risk of management fraud increases in the presence of:

(A) Frequent changes in supplies
(B) Improved internal Control System
(C) Substantial increase in sales

(D)  Management incentive based on sale done in a quarter

Ans. (D)  Management incentive based on sale done in a quarter

52. Concurrent audit is a part of:

(A) Internal check system
(B) Continuous audit
(C) Internal audit system

(D) None of these

Ans. (B) Continuous audit

53. A company is owned by its

(A) directors
(B) managers
(C) shareholders
(D) employs

Ans. (C) shareholders (FPSC senior auditor repeated MCQ)

54. Shares of listed companies are traded in the

(A) stock exchange

(B) option market
(C) future exchange
(D) none of these

Ans. Stock Exchange

55. What from the following is an integral part of business?

(A) Profit
(B) Risk
(C) Certainty
(D) Profit and Risk

Ans. (B) Risk

56. A company sold goods of worth Rs.1 million, the manufacturing
cost of the goods
were Rs.600,000. The transport used in the sale cost Rs.100,000 and
the wages paid
during the process of sale were also Rs.100,000. What is the gross
and net profit?

(A) Gross Profit = Rs.600,000 and Net Profit = Rs.400,000

(B) Gross Profit = Rs.400,000 and Net Profit = Rs.600,000
(C) Gross Profit = Rs.200,000 and Net Profit = Rs.400,000
(D) Gross Profit = Rs.400,000 and Net Profit = Rs.200,000

Ans. (D) Gross Profit = Rs.400,000 and Net Profit = Rs.200,000

57. Every transaction has a _ effect.

(A) zero
(B) single
(C) double
(D) triple

Ans. (C) double

58. The main source(s) of Generally Accepted Accounting Principles

(GAAP) is/are:

(A) Company Law

(B) Accounting standards
(C) Both A and B
(D) None of these

Ans. (C) Both A and B

59. What standards are used to prepare financial statements by most
of the countries
and companies
(A) International Financial Reporting Standards
(B) International Financial Accounting Standards
(C) International Accounting & Auditing Standards
(D) International Risk Reporting Standards

Ans. (A) International Financial Reporting Standards

60. The correct form of Accounting equation is

(A) Assets + Liabilities = Equity
(B) Assets – Liabilities = Equity
(C) Assets – Receivable = Equity
(D) Assets + Receivable = Equity

Ans. (B) Assets – Liabilities = Equity

61. A company sold goods worth $5,000 on 5 June and $10,000 on 28

June. The
company received the first payment on 25 June and second on 7 July.
The company
prepared the financial statement on 30 June. What would be the total
sale on the
financial statement?
(A) $0
(B) $5,000
(C) $10,000
(D) $15,000

Ans. (D) $15,000

62. Advance payments are recognized as

(A) receivable
(B) payable
(C) bad debt
(D) none of these

Ans. (A) receivable

63. What from the following is NOT a current asset?

(A) Patent rights
(B) Inventory
(C) Cash
(D) Trade receivables

Ans. (A) Patent rights

64. What from the following is NOT a non-current asset?

(A) Capital
(B) Property
(C) Patent rights
(D) Inventory

Ans. (D) Inventory

65. What from the following is/are NOT tangible asset(s)?

I. Patent rights
II. Goodwill
III. Land
(A) I only
(B) II only
(C) I and II only
(D) I, II and III

Ans. (C) I and II only

66. A machine price was $1,000 and was carried through a truck. The
truck’s fares were
$500. The engineers charged $500 for the installation. The cost of the
machine is?
(A) $1,000
(B) $1,500
(C) $2,000
(D) $2,500

Ans. (C) $2,000

67. Depreciable amount =

(A) Cost of an asset + Residual value
(B) Cost of an asset – Residual value
(C) Residual value – Cost of an asset
(D) None of these

Ans. (B) Cost of an asset – Residual value

68. The accounting process of allocation cost of intangible assets is

called
(A) Amortization
(B) Depletion
(C) Going Concern
(D) Residual Value

Ans. (A) Amortization

69. The process of recording consumption of natural resources (or

wasting assets) is
called
(A) Amortization
(B) Depletion
(C) Going Concern
(D) Residual Value
Ans. (B) Depletion

70. The concept that the enterprise will continue in a foreseeable

future is known as
(A) Amortization
(B) Depletion
(C) Going Concern
(D) Residual Value

Ans. (C) Going Concern

71. What from the following is NOT a capital expense?

(A) Purchase of property
(B) Purchase of office equipment
(C) Replacement of a vehicle,
(D) Repair of a vehicle

Ans. (D) Repair of a vehicle

72. An item of equipment cost $300,000 and has a residual value of

$50,000 at the end
of its expected useful life of four years. What is the depreciable
amount?
(A) $50,000
(B) $250,000
(C) $300,000
(D) $350,000

Ans. (B) $250,000

73. The expected disposal value of the asset (after deducting disposal
costs) at the end
of its expected useful life is called
(A) residual value
(B) net book value
(C) depreciation
(D) substance over form

Ans. (A) residual value

74. The figure that appears in the statement of financial position, after
the depreciation,
is known as
(A) depreciation
(B) substance over form
(C) residual value
(D) net book value

Ans. (D) net book value

75. Which from the following asset is NOT depreciated?

I. Advances
II. Land
III. Machinery
(A) I only
(B) II only
(C) I and II
(D) II and III

Ans. (C) I and II

For Current Affairs MCQs Preparation: Current Affairs MCQs

76. Depreciation is normally charged as

(A) payable
(B) receivable
(C) expenses
(D) advances

Ans. (C) expenses

77. A company purchases a non-current asset in Year 1 for $90,000.
The depreciation
charge is $15,000. What net book value would be recorded in financial
position
statement (or balance sheet) at the end of Year-2?
(A) $75,000
(B) $60,000
(C) $30,000
(D) $15,000

Ans. (B) $60,000

78. All procurement opportunities over _ rupees should be advertised

in the
newspaper.
(A) 0.5 million
(B) 1.5 million
(C) 1.5 million
(D) 2.0 million

Ans. (D) 2.0 million

79. The procurement opportunities over two million rupees should be

advertised in at
least _ newspaper(s).
(A) one
(B) two
(C) three
(D) four

Ans. (B) two

80. The principal method for the procurement of goods, services and
works is
(A) open competitive bidding
(B) close competitive bidding
(C) FIFO
(D) LIFO

Ans. (A) open competitive bidding

81. The bidder with the _ evaluated bid shall be awarded the

procurement
contract.
(A) highest
(B) lowest
(C) average
(D) zero variance

Ans. (B) lowest

82. Where needed the procuring agency shall require the successful
bidder to furnish a
performance guarantee which shall not exceed _ of the contract
amount.
(A) 5%
(B) 7.5%
(C) 10%
(D) 12.5%

Ans. (C) 10%

83. The bids for procurement opportunities shall be submitted in

a/an _ package
or packages.
(A) open
(B) sealed
(C) transparent
(D) none of these

Ans. (B) sealed

84. Where the procuring agency require the bidders to furnish a bid
security, the bid
security should not exceed _ of the bid price.
(A) 5.0%
(B) 7.5%
(C) 10.0%
(D) 12.5%

Ans. (A) 5.0%

85. All bids shall be opened

(A) randomly
(B) privately
(C) secretly
(D) publicly

Ans. (D) publicly

86. There are _ procedures of open competitive bidding.

(A) 2
(B) 3
(C) 4
(D) 5

Ans. (C) 4

87. The main open competitive bidding procedure is

(A) single stage one envelope bidding
(B) single stage two envelope procedure
(C) two stage bidding procedure
(D) two stage two envelope bidding procedure

Ans. (A) single stage one envelope bidding

88. Where alternative technical proposals are possible, the bidding
process used is
(A) single stage one envelope procedure
(B) single stage two envelope procedure
(C) two stage bidding procedure
(D) two stage two envelope bidding procedure

Ans. (D) two stage two envelope bidding procedure

89. Where the bids are to be evaluated on technical and financial

grounds and price is
taken into account after technical evaluation, the bidding process used
is
(A) single stage one envelope procedure
(B) single stage two envelope procedure
(C) two stage bidding procedure
(D) two stage two envelope bidding procedure

Ans. (B) single stage two envelope procedure

90. In large and complex contracts where technically unequal

proposals are likely to be
encountered, or there are two or more equally acceptable technical
solutions available
to the procuring agency, the bidding process used is
(A) single stage one envelope procedure
(B) single stage two envelope procedure
(C) two stage bidding procedure
(D) two stage two envelope bidding procedure

Ans. (C) two stage bidding procedure

91. Any bidder feeling aggrieved by any act of the procuring agency
may lodge a written
complaint concerning his grievances not later than _ days after the
announcement of the bid evaluation report.
(A) 7
(B) 10
(C) 15
(D) 30

Ans. (C) 15

92. The committee shall investigate and decide upon the complaint
within _ days
of the receipt of the complaint.
(A) 15
(B) 30
(C) 45
(D) 60

Ans. (A) 15

93. The statutory auditor of a Government company submits his report

to:
(A) The BODs of the Company

(B) The C & AG

(C) The Legislature

(D) The company secretary

Ans. (B) The C & AG

94. In order to vouch which of the expense, the auditor will examine
bill of entry?
(A) Custom

(B) Excise duties

(C) Sale Tax

(D) Income Tax

Ans. (A) Custom

95. When counting cash on hand the auditor should:

(A) Ensure presence of somebody from management
(B) Obtain a receipt from custodian as to its return
(C) Ensure postage and revenue stamps are not counted in physical count
(D) Temporary advances to employees are counted to calculate balance of cash in
hand

Ans. (C) Ensure postage and revenue stamps are not counted in physical count

96. Control risk is assessed at:

(A) Overall financial statement level

(B) Fraud risk factor level

(C) Financial Statement assertion level

(D) control environment level

Ans. C) Financial Statement assertion level

97. A large organization with separate legal status is known as:

(A) Limited Company

(B) Sole Proprietorship

(C) Partnership

(D) None of the

Ans. (D) None of these (Correct answer is a joint stock company)

98. If the profit is 1 / 4 of the sales then it is

(A) 1/4 of the cost price
(B) 1/3 of the cost price
(C) 1/5 of the cost price

(D) 1/2 of the cost price

Ans. (B) 1/3 of the cost price

99. An example of financing activities in the context of cash flow

statement is
(A) Fixed capital expenditure

(B) Long term deposit

(C) Financial Charges paid

(D) Dividend Paid

Ans. D) Dividend Paid

100. Debentures are a company’s:

(A) Assets

(B) Liability

(C) Expense

(D) Investment

Ans. B) Liability

https://www.teachmint.com/tfile/studymaterial/b-com/advancedavcountancy/auditingmcqpdf/
e383ee25-d856-4058-9611-060baa0deb09

1.     A company is owned by its

(A)   Directors

(B)   Managers

(C)   Shareholders

(D)  Employs
 
2.     Shares of listed companies are traded in the
(A)   Stock Exchange

(B)   Option Market

(C)   Future Exchange

(D)  None of these

 
3.     What from the following is an integral part of business?

(A)   Profit

(B)   Risk

(C)   Certainty

(D)  Profit and Risk

 
4.     A company sold goods of worth Rs.1 million, the manufacturing cost of the
goods were Rs.600,000. The transport used in the sale cost Rs.100,000 and the
wages paid during the process of sale were also Rs.100,000. What is the gross
and net profit?

(A)   Gross Profit = Rs.600,000 and Net Profit = Rs.400,000

(B)   Gross Profit = Rs.400,000 and Net Profit = Rs.600,000

(C)   Gross Profit = Rs.200,000 and Net Profit = Rs.400,000

(D)   Gross Profit = Rs.400,000 and Net Profit = Rs.200,000

5.     Every transaction has a _____ effect.

(A)   Zero

(B)   Single

(C)   Double

(D)  Triple
 

6. The main source(s) of Generally Accepted Accounting Principles (GAAP) is/are:

(A)   Company Law

(B)   Accounting standards

(C)   Both A and B

(D)  None of these

 
7. What standards are used to prepare financial statements by most of the countries and
companies?

(A)   International Financial Reporting Standards

(B)   International Financial Accounting Standards

(C)   International Accounting & Auditing Standards

(D)  International Risk Reporting Standards

8. The correct form of Accounting equation is

(A)   Assets + Liabilities = Equity

(B)   Assets – Liabilities = Equity

(C)   Assets – Receivable = Equity

(D)  Assets + Receivable = Equity

 
9. A company sold goods worth $5,000 on 5 June and $10,000 on 28 June. The
company received the first payment on 25 June and second on 7 July. The company
prepared the financial statement on 30 June. What would be the total sale on the
financial statement?

(A)   $0

(B)   $5,000
 (C)   $10,000

(D)   $15,000
 
10. Advance payments are recognized as

(A)   Receivable

(B)   Payable

(C)   Bad debt

(D)  None of these

ACCCOUNTING MCQS FOR FPSC

SENIOR AUDITOR TEST
 

11. What from the following is NOT a current asset?

(A)   Patent rights

(B)   Inventory

(C)   Cash

(D)  Trade receivables

 
12. What from the following is NOT a non-current asset?

(A)   Capital

(B)   Property

(C)   Patent rights

(D)   Inventory
 
13. What from the following is/are NOT tangible asset(s)?

I. Patent rights
II. Goodwill
 III. Land

(A)   I only

(B)   II only

(C)   I and II only

(D)  I, II and III

 
14. A machine price was $1,000 and was carried through a truck. The truck’s fares were
$500. The engineers charged $500 for the installation. The cost of the machine is?

(A)   $1,000

(B)   $1,500

(C)   $2,000

(D)  $2,500

 
15. Depreciable amount =

(A)   Cost of an asset + Residual value

(B)   Cost of an asset – Residual value

(C)   Residual value – Cost of an asset

(D)  None of these

16. The accounting process of allocation cost of intangible assets is called

(A)   Amortization

(B)   Depletion

(C)   Going Concern

(D)  Residual Value
 
17. The process of recording consumption of natural resources (or wasting assets) is
called

(A)   Amortization

(B)   Depletion

(C)   Going Concern

(D)  Residual Value

 
18. The concept that the enterprise will continue in a foreseeable future is known as

(A)   Amortization

(B)   Depletion

(C)   Going Concern

(D)  Residual Value

 
19. What from the following is NOT a capital expense?

(A)   Purchase of property

(B)   Purchase of office equipment

(C)   Replacement of a vehicle,

(D)   Repair of a vehicle
 
20. An item of equipment cost $300,000 and has a residual value of $50,000 at the end
of its expected useful life of four years. What is the depreciable amount?

(A)   $50,000

(B)   $250,000

(C)   $300,000

(D)  $350,000
 

ACCOUNTING MULTIPLE CHOICE

QUESTIONS FOR FPSC SENIOR
AUDITOR TEST
 

21. The expected disposal value of the asset (after deducting disposal costs) at the end
of its expected useful life is called

(A)   Residual value

(B)   Net book value

(C)   Depreciation

(D)  Substance over form

 
22. The figure that appears in the statement of financial position, after the depreciation,
is known as

(A)   Depreciation

(B)   Substance over form

(C)   Residual value

(D)   Net book value

 
23. Which from the following asset is NOT depreciated?
I. Advances
II. Land
III. Machinery

(A)   I only

(B)   II only

(C)   I and II
 (D)  II and III

 
24. Depreciation is normally charged as

(A)   Payable

(B)   Receivable

(C)   Expenses

(D)  Advances

 
25. A company purchases a non-current asset in Year 1 for $90,000. The depreciation
charge is $15,000. What net book value would be recorded in financial position
statement (or balance sheet) at the end of Year-2?

(A)   $75,000

(B)   $60,000

(C)   $30,000

(D)  $15,000

PUBLIC PROCUREMENT RULES MCQS

FOR FPSC SENIOR AUDITOR TEST
26. All procurement opportunities over _______ rupees should be advertised in the
newspaper.

(A)   0.5 million

(B)   1.5 million

(C)   1.5 million

(D)   2.0 million
 
27. The procurement opportunities over two million rupees should be advertised in at
least _______ newspaper(s).

(A)   One

(B)   Two

(C)   Three

(D)  Four

 
28. The principal method for the procurement of goods, services and works is

(A)   Open competitive bidding

(B)   Close competitive bidding

(C)   FIFO

(D)  LIFO

 
29. The bidder with the _______ evaluated bid shall be awarded the procurement
contract.

(A)   Highest

(B)   Lowest

(C)   Average

(D)  Zero variance

30. Where needed the procuring agency shall require the successful bidder to furnish a
performance guarantee which shall not exceed _______ of the contract amount.

(A)   5%

(B)   7.5%

(C)   10%
 (D)  12.5%

31. The bids for procurement opportunities shall be submitted in a/an _______ package
or packages.

(A)   Open

(B)   Sealed

(C)   Transparent

(D)  None of these

 
32. Where the procuring agency require the bidders to furnish a bid security, the bid
security should not exceed _______ of the bid price.

(A)   5.0%

(B)   7.5%

(C)   10.0%

(D)  12.5%

 
33. All bids shall be opened

(A)   Randomly

(B)   Privately

(C)   Secretly

(D)   Publicly
 
34. There are _____ procedures of open competitive bidding.

(A)   2

(B)   3

(C)   4
 (D)  5

 
35. The main open competitive bidding procedure is

(A)   Single stage one envelope bidding

(B)   Single stage two envelope procedure

(C)   Two stage bidding procedure

(D)  Two stage two envelope bidding procedure

36. Where alternative technical proposals are possible, the bidding process used is

(A)   Single stage one envelope procedure

(B)   Single stage two envelope procedure

(C)   Two stage bidding procedure

(D)   Two stage two envelope bidding procedure

 
37. Where the bids are to be evaluated on technical and financial grounds and price is
taken into account after technical evaluation, the bidding process used is

(A)   Single stage one envelope procedure

(B)   Single stage two envelope procedure

(C)   Two stage bidding procedure

(D)  Two stage two envelope bidding procedure

 
38. In large and complex contracts where technically unequal proposals are likely to be
encountered, or there are two or more equally acceptable technical solutions available
to the procuring agency, the bidding process used is

(A)   Single stage one envelope procedure

(B)   Single stage two envelope procedure

 (C)   Two stage bidding procedure

(D)  Two stage two envelope bidding procedure

 
39. Any bidder feeling aggrieved by any act of the procuring agency may lodge a written
complaint concerning his grievances not later than _______ days after the
announcement of the bid evaluation report.

(A)   7

(B)   10

(C)   15

(D)  30

 
40. The committee shall investigate and decide upon the complaint within _______ days
of the receipt of the complaint.

(A)   15

(B)   30

(C)   45

(D)  60