auditing MCQs – Page 2

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 Review each marked answer and report any item that may be outdated or unclear.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
21. Which of the following is NOT the responsibility of a companys directors?
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A. Reporting to the shareholders on the accuracy of the accounts

B. Supplying information and explanations to the auditor

C. Establishment of internal controls

D. Keeping proper accounting records

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

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

C. None of the above

D. The auditor concludes that the balance is materially misstated when in actual fact it not
23. Which of the following is true about written representations?
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A. They should be used only when there is a lack of other substantive audit evidence

B. Shareholders receive a copy of all material written representations

C. They should be used only when there is other substantive audit evidence to complement it

D. They are the best source of audit evidence

24. The board of directors shall appoint first auditor of a company
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A. With in one month of the promotion of the company

B. With in one month of the commencement of the business of the company

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

D. With in one month of incorporation of the company
25. What are analytical procedures?
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A. Substantive tests designed to assess control risk

B. Substantive tests designed to evaluate the validity of managements representation letter

C. All of the above

D. Substantive tests designed to study relationships between financial and nonfinancial
26. Which of the following statements is not correct about materiality?
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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
27. Which of the following factors is most important in determining the appropriations of audit evidence?
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A. The independence of the source of evidence

B. The objectivity and integrity of the auditor

C. The quantity of audit evidence

D. The reliability of audit evidence and its relevance in meeting the audit objective
28. Which of the following is true about explanatory notes?
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A. All of the above

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

C. These are given by the directors of the company

D. These are given by auditors of the company in auditors report

29. Which one of the following may auditors NOT perform for their client?
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A. Preparation of accounting records

B. Taking management decisions

C. Preparing tax computations

D. Advising on weaknesses in the internal control systems

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

31. Which of the following is not an advantage of the preparation of working paper?
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A. To provide a basis for subsequent audits

B. To provide a basis for review of audit work

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

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

32. Which of these are types of Audit Report?
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A. l of above

B. Disclaimer of opinion.

C. Unqualified opinion

D. Adverse opinion

E. Qualified opinion

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

B. fifteen

C. ten

D. two

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

B. Familiarity threat

C. Self-interest threat

D. Self-review threat

35. Which of the following is a revenue reserve?
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A. Debenture redemption reserve

B. Capital reserve

C. Capital redemption reserve

D. Security premium account

36. Audit of banks is an example of_____________?
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A. Balance sheet audit

B. Statutory audit

C. All of the above

D. Concurrent audit

37. Which of the following are you unlikely to see in the current file of auditors working papers?
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A. Audit planning memorandum

B. Summary of unadjusted errors

C. Details of the work done on the inventory count

D. Memorandum & articles of association
38. Which of the following affects audit effectiveness?
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A. Risk of over reliance

B. Risk of incorrect rejection

C. Risk of incorrect acceptance

D. Both A. and C.
39. Goods sent on approval basis have been recorded as Credit sales. This is an example of____________?
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A. Error of omission

B. Error of principle

C. Error of commission

D. Error of duplication

40. Analytical procedures issued in the planning stage of an audit, generally?
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A. All of the above

B. indicates important aspects of business

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

D. directs attention to potential risk areas