auditing MCQs – Page 7

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 Review each marked answer and report any item that may be outdated or unclear.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

121. Audit programme is prepared by____________?
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A. The audit assistants

B. The auditor and his audit assistants

C. The client

D. The auditor

122. The main object of an audit is _____________?
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A. Expression of opinion

B. Detection and Prevention of fraud and error

C. Both (A) and (B)

D. Depends on the type of audit.

123. What would most effectively describe the risk of incorrect acceptance in terms of substantive audit testing?
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A. The auditor has rejected an item from sample which was not supported by documentary evidence

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

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

D. The auditor concludes the balance is materially misstated when in actual fact is not

124. Which of the following statement is true regarding an auditors working papers?
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A. They should not contain details regarding weaknesses in the internal control system

B. They should be considered as the principle support for the auditors report

C. They document the level of independence maintained by the auditor

D. They help the auditor to monitor the effectiveness of the audit firms quality control

125. Which of the following will not lead to creation of secret reserve?
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A. Goods sent on consignment being shown as actual sales

B. Undervaluation of closing stock

C. Charging higher rates of depreciation on fixed assets than actually required

D. Charging capital expenditure to revenue

126. The auditor has serious concern about the going concern of the company. It is dependent on companys obtaining a working capital loan from a bank which has been applied for. The management of the company has made full disclosure of these facts in the notes to the balance sheet. The auditor is satisfied with the level of disclosure. He should issue___________?
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A. unqualified opinion

B. unqualified opinion with reference to notes to the accounts

C. disclaimer of opinion

D. qualified opinion

127. The nature, timing and extent of substantive procedures is related to assessed level of control risk
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A. Disproportionately

B. Directly

C. Inversely

D. Randomly

128. The fundamental objective of the audit of a company is to_____________?
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A. Protect the interests of the minority shareholders

B. Detect and prevent errors and fraud

C. Assess the effectiveness of the companys performance

D. Attest to the credibility of the companys accounts

129. IFRS 9 explains about?
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A. Accounts Receivable

B. Accounts Payable

C. Inventory

D. Expenses

130. Which of the following statements is not true?
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A. Internal control system reduces the possibility of occurrence of employee fraud and management fraud

B. The auditors responsibility for detection and prevention of errors and frauds is similar.

C. All statements are correct.

D. Management fraud is more difficult to detect than employee fraud

131. The authority to remove the first auditor before the expiry of term is with__________?
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A. the Central Government

B. the shareholders in a general meeting

C. the shareholders in the first annual General meeting

D. the board of directors

132. Which of the following should NOT be considered at the planning stage?
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A. The timing of the audit

B. Analytical review

C. Obtaining written representations

D. Last years written representation letter

133. The date on auditors report should not be____________?
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A. the data of AGM

B. later than the date on which the accounts are approved in boards meeting

C. earlier than the date on which the accounts are approved by the management

D. Both A. and B.

134. Balance sheet audit includes verification of____________?
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A. Income and expense accounts where appropriate

B. Assets

C. Liabilities

D. All of the above

135. The working papers which auditor prepares for financial statements audit are___________?
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A. Retained in auditors office until a change in auditors

B. Owned by the client

C. Evidence for audit conclusions

D. Owned by the auditor

136. When applying analytical procedures, an auditor could develop independent estimate of an account balance to compare it to___________?
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A. Prior year audited balance

B. clients unedited account balance adjusted for trends in the industry

C. clients unedited account balance

D. Prior year audited balance adjusted for trends in the industry

137. Which of the following statements is not true about continuous audit?
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A. It may be carried out on daily basis

B. It is expensive

C. It is needed when the organization has a good internal control system

D. It is conducted at regular interval

138. When is evidential matter, generally, considered sufficient?
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A. When auditor collects and evaluates it independently

B. When it constitutes entire population

C. When it is objective and relevant

D. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness

139. Which of the following documents is not relevant for vouching cash sales?
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A. Daily cash sales summary

B. Salesmens summary

C. Monthly statements sent to customers

D. Bank statement

140. Which of the following statements is not true with respect to management representations obtained as per AAS11?
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A. Authenticated copy of relevant minutes of meetings may be regarded as management representation

B. It should be addressed to the auditor

C. It may be dated prior to the report date

D. It should always be in working

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