auditing MCQs – Page 3

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 Review each marked answer and report any item that may be outdated or unclear.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

41. You have been proposed as auditor of a company. What is the first step that you should take?
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A. Obtain a copy of the companys most recent board minutes

B. Obtain the existing auditors working papers

C. Obtain a copy of the existing auditors letter of engagement

D. Obtain the clients permission to communicate with the existing auditor

42. Of the following, which is the least persuasive type of audit evidence?
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A. Carbon copies of sales invoices inspected by the auditor

B. Documents obtained by auditor from third parties directly.

C. Computations made by the auditor

D. Bank statements obtained from the client

43. What sort of assurance is provided in a review engagement?
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A. No assurance

B. Positive assurance

C. Negative assurance

D. High level of assurance

44. Which of the following is normally the most reliable source of audit evidence?
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A. Analytical review

B. Internal audit

C. Board minutes

D. Suppliers statements

45. Balance sheet does not include:_____________?
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A. Verification of assets and liabilities

B. Examination of adjusting and closing entries

C. Routine checks

D. Vouching of income and expense accounts related to assets and liabilities

46. Pick the odd one:
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A. None of the above

B. Evaluation of internal control

C. Checking the vouchers

D. Preparation of vouchers

47. The independent auditors primary responsibility is to______________?
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A. the companys creditors (payables)

B. the shareholders

C. the companys bank

D. the directors

48. The basic assumption underlying the use of analytical procedures is:____________?
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A. Analytical procedures will not be able to detect unusual relationships

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

C. None of the above.

D. Relationship among data exist and continue in the absence of known condition to the contrary

49. According to ISA 315, which of the following is NOT an element of the control environment?
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A. Participation of management

B. Information processing

C. Commitment to competence

D. Human resource policies and practices

50. Scope of financial audit is__________?
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A. Financial information

B. Non-financial information

C. Both (a) and (b)

D. None of these

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

B. Error of omission

C. Compensating error

D. Error of principle

52. Which of the following does NOT belong in the auditors report?
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A. Basis of the opinion

B. Statement of responsibilities of directors and auditors

C. Involvement of any specialist

D. Introductory paragraph specifying the pages to which the report relates and the accounting convention adopted

53. Floating assets are valued at____________?
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A. Market price

B. cost

C. Cost less depreciation

D. Cost or market price whichever is lower

54. Which one of the following is NOT considered to be part of planning?
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A. Previous years audit i.e. any qualifications in the report

B. Background i.e. industry

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

55. Which of the following statements is not true about continuous audit?
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A. It is needed when the organization has a good internal control system

B. It is expensive

C. It may be carried out on daily basis

D. It is conducted at regular interval

56. 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

E. y</strong>

57. The auditor should examine subsequent realization of revenue such as dividends, interest,commission, etc to:_____________?
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A. recompute accrued income on the data of balance sheet

B. identify cases of unrecorded revenue

C. Any of these

D. ensure proper disclosure in the balance sheet

58. The scope of internal audit is decided by the___________?
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A. Law

B. Shareholders

C. Management

D. Government