auditing MCQs – Page 6

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 Review each marked answer and report any item that may be outdated or unclear.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

101. Of the following, which is the least persuasive type of audit evidence?
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A. Computations made by the auditor

B. Documents obtained by auditor from third parties directly.

C. Carbon copies of sales invoices inspected by the auditor

D. Bank statements obtained from the client

102. Which of the following is not true about opinion on financial statements?
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A. He should examine whether recognised accounting principle have been consistently

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

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

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

103. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?
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A. The auditor concludes the balance is materially misstated when in actual fact is not

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

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

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

104. Which of the following expenses should not be treated as capital expenditure?
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A. Legal expenses incurred to defend a suit related to title of patent.

B. Expenses paid on installation of a plant.

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

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

105. Which of the following factors would least likely affect the quantity and content of an auditors working papers
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A. The nature of auditors report

B. The assessed level of control risk

C. The possibility of peer review

D. The content of management representation letter

106. Concurrent audit is a part of____________?
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A. Internal audit system

B. None of these

C. Continuous audit

D. Internal check system

107. Which of the following is not type of engagement standard?
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A. Standard on Quality Control

B. Standards on Review Engagement

C. Standards on Assurance Engagement

D. Standards on Auditing

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

B. The quantity of audit evidence

C. The objectivity and integrity of the auditor

D. The independence of the source of evidence

109. Goods sold on the basis of sales or return should:
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A. None of the above

B. Be included in the stock

C. Not be included in the stock

D. Not be checked by auditor

110. Which of the following statement best describes the understanding with respect to ownership and custody of working papers prepared by an auditor?
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A. The safe custody of working papers is the responsibility of client, if kept at his premises

B. The working papers may be obtained by third parties when they appear to be relevant to issues raised in litigation

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.

111. In determining the level of materiality for an audit, what should not be considered?
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A. Adjusted interim financial statements

B. The auditors remuneration

C. Prior years financial statements

D. Prior years errors

112. Who is responsible for the appointment of statutory auditor of a limited company ?
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A. All of the above

B. Directors of the company

C. Members of the company

D. The Central Government

113. Which of the following is not an analytical procedure?
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A. Comparing the actual costs with standard costs

B. Comparing aggregate wages paid to number of employees

C. All of them are analytical procedure

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

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

115. Internal audit is undertaken:
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A. By independent auditor

B. By a government auditor

C. Statutorily appointed auditor

D. By a person appointed by the management

116. The quantity of audit working papers complied on engagement would most be affected by__________?
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A. Managements integrity

B. Auditors qualification

C. Control risk

D. Auditors experience and professional judgment

117. A statutory auditor has a right of access at all times to___________?
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A. Books, accounts and vouchers of the company

B. Books and accounts of a company

C. Notices and documents of the company

D. Books, accounts and documents of the company

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

B. Expenses incurred for laying of sewers on land purchased

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

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

119. Audit fess is a part of__________.
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A. distribution overhead.

B. works on cost.

C. administration overhead

D. selling overhead.

120. At the planning stage you would NOT consider____________?
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A. the potential use of internal audit

B. whether corrections from the inventory count have been implemented

C. the timing of the audit

D. last years audit

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