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auditing MCQs

Practise multiple-choice questions from auditing for competitive examinations and subject revision. Review each marked answer and report any item that may be outdated or unclear.

auditing Mcqs
1. Assuming that it is not the first appointment of the auditor, who is responsible for the appointment of the auditor?
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A. The board of directors in a board meeting

B. The shareholders in a general meeting

C. The audit committee

D. The managing director

2. An auditor is like a_______________?
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A. Blood haunt

B. Watch dog

C. May both according to situation

D. None of these

3. Which of the following statements is, generally, correct about the reliability of auditevidence?
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A. Effective internal control system provides reliable audit evidence

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

C. Evidence obtained from outside sources routed through the client

D. All are correct.

4. Audit risk is composed of 3 factors. Which of the following is NOT one of those factors?
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A. Inherent risk

B. Control risk

C. Detection risk

D. Compliance risk
5. The concept of stewardship means that a companys directors________________?
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A. Are responsible for ensuring that the company pays its tax by the due date

B. Safeguard the companys assets and manage them on behalf of the shareholders

C. Are responsible for ensuring that the company complies with the law

D. Report suspected fraud and money laundering to the authorities

6. Who out of the following cannot be appointed as a statutory auditor of the company?
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A. Internal auditor

B. Erstwhile director

C. Relative of a director

D. Only (B. and (C.

7. According to ISA 500, the strength of audit evidence is determined by which two qualities?
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A. Appropriateness & competence

B. Objectivity & independence

C. Sufficiency & appropriateness

D. Reliability & extensiveness

8. Audit of banks is an example of__________?
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A. Statutory audit

B. Balance sheet audit

C. Concurrent audit

D. Both (A. and (B.

E. All of the above
9. Which of the following statements is most closely associated with analytical procedure applied at substantive stage?
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A. It helps to accumulate evidence supporting the validity of a specific account balance

B. It helps to study relationship among balance sheet accounts

C. It helps to identify possible oversights

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

10. How many Standards on Auditing have been issued?
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A. 38

B. 32

C. 36

D. 34

11. _______the audit risk,_______the materiality and _______the audit effort?
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A. Lower, Higher, Higher

B. Lower, Higher, Lower

C. Higher, Lower, Lower

D. Lower, Lower, Higher

12. 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?
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A. Unqualified opinion

B. Qualified opinion

C. Disclaimer of opinion

D. Adverse opinion

13. For companies required to produce interim financial statements (IFI):
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A. the same firm should review the IFI and the financial statements for the year as a whole.

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

14. Which one of the following is NOT a duty of the auditor?
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A. Duty to report to the members

B. Duty to report on any violation of law

C. Duty to sign the audit report

D. Duty to report to the companys bankers
15. The degree of effectiveness of an internal control system depends on:
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A. The design of the internal controls and the implementation of the control system

B. The design of the internal control system and the implementation of the controls

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

16. Stock should be valued at_________?
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A. Cost or Market price whichever is lower.

B. Cost

C. Cost less depreciation.

D. Market price

17. Analytical procedures issued in the planning stage of an audit, generally
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A. Indicates important aspects of business

B. Directs attention to potential risk areas

C. Helps to determine the nature, timing and extent of other audit procedures

D. All of the above
18. International auditing standards are issued by the______________?
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A. Auditing Practices Board

B. International Accounting Standards Board

C. International Standards Board

D. International Federation of Accountants
19. Which of the following is not corroborative evidence?
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A. Confirmations from debtors

B. Information gathered by auditor through observation

C. Worksheet supporting consolidated financial statements

D. Minutes of meetings

20. The term of the auditor ship of first auditor would be from the date of appointment till________?
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A. the conclusion of first annual general meeting

B. the date of removal

C. the conclusion of statutory meeting

D. the conclusion of next annual general meeting