auditing MCQs – Page 4

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 Review each marked answer and report any item that may be outdated or unclear.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
61. Institute of Chartered Accountants of Pakistan was established in____________?
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A. 1956

B. 1961

C. 1972

D. 1949

62. In Pakistan, balance sheet audit is synonymous to___________?
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A. Continuous audit

B. Statutory audit

C. Detailed audit

D. Annual audit
63. Lapping is also known as___________?
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A. Looping

B. Embezzlement

C. Hacking

D. Teeming and lading
64. How long is the auditors term of office?
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A. Until the financial statements are complete

B. Until the directors remove them

C. Until the audit is complete

D. Until the next AGM (Annual General Meeting)
65. Which of the following best describes the primary purpose of audit programme preparation?
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A. To gather sufficient

B. To comply with GAAP appropriate evidence

C. To detect errors or fraud

D. To assess audit risk

66. Auditing is what?
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A. Reporting the financial information

B. maintaining the ledger records

C. Preparation financial statements

D. Examination of financial statements
67. Verification refers to_________?
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A. Examining the journal and ledger

B. Examination of vouchers related to assets.

C. None of the above.

D. Examining the physical existence and valuation of assets.
68. Auditing is compulsory for____________?
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A. Joint stock Companies

B. Partnership firms

C. Small scale business

D. Proprietary Concerns

69. Which of the following statements is, generally, correct about the reliability of audit evidence?
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A. Evidence obtained from outside sources routed through the client

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

C. All are correct.

D. Effective internal control system provides reliable audit evidence
70. Audit in depth is synonymous for____________?
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A. Completed audit

B. Detailed audit

C. Final audit

D. Complete audit

71. Which of the following statements is INCORRECT?
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A. An auditor may serve on the board of directors of an audit client.

B. Purchasing goods from an audit client on normal commercial terms does not create a threat to the auditors independence.

C. An auditor who is an immediate family member of the director of an audit client must not be assigned to the audit team.

D. An auditor who was recently a director of an audit client must not be assigned to the audit team for that client.

72. Which of the following is NOT an accepted method of selection in sampling?
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A. Systematic selection

B. Haphazard selection

C. Random selection

D. Pervasive selection
73. In case the directions fail to appoint first auditor (s), the shareholders shall appoint them at_________by passing a resolution.
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A. first annual general meeting

B. a general meeting

C. annual general meeting

D. statutory meeting

74. The branch auditor is appointed by___________?
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A. Any of the above

B. Board of directors in board meeting

C. Shareholders in an annual general meeting

D. Shareholders in general meeting
75. The auditor has a right to___________?
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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.
76. If a casual vacancy in the office of auditor arises by his resignation it should only be filled by the company in a_________?
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A. extraordinary general meeting

B. annual general meeting

C. Board meeting

D. General meeting
77. 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
78. The current file of the auditors working papers, generally, should include____________?
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A. Copies of bond and debentures

B. Organisation charts

C. A copy of financial statements

D. A flowchart of the internal controls

79. Which of the following is correct in relation to materiality?
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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
80. Which of the following statements is correct?
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A. In a review engagement, evidence is gathered mainly by means of computation and inspection.

B. In an attestation engagement, the accountant is required to report on the quality of work performed.

C. In an engagement to review financial statements, the amount of work required is the same as for an audit

D. When a company negotiates a friendly takeover, it usually appoints a firm of accountants to carry out due diligence on the takeover target.