What is an Auditor?
An auditor is a person authorized to review and
verify the accuracy of financial
records and ensure
that companies comply with tax laws. They protect businesses from fraud, point out discrepancies in accounting methods and, on occasion, work on a
consultancy basis, helping organizations to spot ways to boost operational efficiency. Auditors work in various
capacities within different industries.
____________ is a systematic
examination of the books and records or a business?
A. Auditing
B. Vouching
C. Verification
D. Checking
B. Vouching
C. Verification
D. Checking
The term ‘Audit’ is derived from a
Latin word “audire” which means___________?
A. To inspect
B. To examine
C. To hear
D. To investigate
B. To examine
C. To hear
D. To investigate
The main object of an audit is
_____________?
A. Expression of opinion
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.
B. Detection and Prevention of fraud and error
C. Both (A) and (B)
D. Depends on the type of audit.
An auditor is like a_______________?
A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these
B. Watch dog
C. May both according to situation
D. None of these
Process of verifying the documentary
evidences of transactions are known as___________?
A. Auditing
B. Testing
C. Vouching
D. Verification
B. Testing
C. Vouching
D. Verification
Auditing is compulsory
for____________?
A. Small scale business
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns
Concealment of shortage by delaying
the recording of cash receipts is known as_____________?
A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these
B. Misappropriation
C. Lapping
D. None of these
The fundamental objective of the
audit of a company is to_____________?
A. Protect the interests of the
minority shareholders
B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts
B. Detect and prevent errors and fraud
C. Assess the effectiveness of the company’s performance
D. Attest to the credibility of the company’s accounts
The concept of stewardship means
that a company’s directors________________?
A. Are responsible for ensuring that
the company complies with the law
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the shareholders
D. Report suspected fraud and money laundering to the authorities
B. Are responsible for ensuring that the company pays its tax by the due date
C. Safeguard the company’s assets and manage them on behalf of the shareholders
D. Report suspected fraud and money laundering to the authorities
Why do auditors concentrate their
efforts on material items in accounts?
A. Because they are easier to audit
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it
B. Because it reduces the audit time
C. Because the risk to the accounts of their being incorrectly stated is greater
D. Because the directors have asked for it
Which of the following is NOT the
responsibility of a company’s directors?
A. Reporting to the shareholders on
the accuracy of the accounts
B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor
B. Establishment of internal controls
C. Keeping proper accounting records
D. Supplying information and explanations to the auditor
International auditing standards are
issued by the______________?
A. International Accounting
Standards Board
B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board
B. International Federation of Accountants
C. International Standards Board
D. Auditing Practices Board
Which of the following is not true
about opinion on financial statements?
A. The auditor should express an
opinion on financial statements.
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial statements
D. He should examine whether recognized accounting principle have been consistently
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial statements
D. He should examine whether recognized accounting principle have been consistently
A sale of Rs. 50.000 to A was
entered as a sale to B. This is an example of____________?
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
B. Error of commission
C. Compensating error
D. Error of principle
When an auditor is proposed for
removal from office, which one of the following is he NOT permitted to do?
A. Circulate representations to
members
B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed
B. Apply to the court to have the proposal removed
C. Speak at the AGM/EGM where the removal is proposed
D. Receive notification of the AGM/EGM where the removal is proposed
Which one of the following is NOT a
duty of the auditor?
A. Duty to report to the company’s
bankers
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law
B. Duty to report to the members
C. Duty to sign the audit report
D. Duty to report on any violation of law
Assuming that it is not the first
appointment of the auditor, who is responsible for the appointment of the
auditor?
A. The shareholders in a general
meeting
B. The managing director
C. The board of directors in a board meeting
D. The audit committee
B. The managing director
C. The board of directors in a board meeting
D. The audit committee
The independent auditor’s primary
responsibility is to______________?
A. the directors
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders
B. the company’s creditors (payables)
C. the company’s bank
D. the shareholders
How long is the auditor’s term of
office?
A. Until the audit is complete
B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them
B. Until the financial statements are complete
C. Until the next AGM (Annual General Meeting)
D. Until the directors remove them
Which of the following is correct in
relation to materiality?
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
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
Which one of the following is NOT
considered to be part of planning?
A. Background i.e. industry
B. Previous year’s audit i.e. any qualifications in the report
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
B. Previous year’s audit i.e. any qualifications in the report
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
Audit risk is composed of 3 factors.
Which of the following is NOT one of those factors?
A. Compliance risk
B. Detection risk
C. Control risk
D. Inherent risk
B. Detection risk
C. Control risk
D. Inherent risk
Which of the following should NOT be
considered at the planning stage?
A. The timing of the audit
B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations
B. Analytical review
C. Last year’s written representation letter
D. Obtaining written representations
At the planning stage you would NOT
consider____________?
A. the timing of the audit
B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit
B. whether corrections from the inventory count have been implemented
C. last year’s audit
D. the potential use of internal audit
Which of the following describes
sampling risk?
A. The risk of the auditor carrying
out a test the wrong way round
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing
B. The risk of reliance on unsuitable audit evidence
C. The risk that the sample does not reflect the population
D. The risk of the auditor reaching the wrong conclusions from testing
Which of the following is NOT an
accepted method of selection in sampling?
A. Systematic selection
B. Pervasive selection
C. Random selection
D. Haphazard selection
B. Pervasive selection
C. Random selection
D. Haphazard selection
Which of the following are you
unlikely to see in the current file of auditors’ working papers?
A. Memorandum & articles of
association
B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count
B. Audit planning memorandum
C. Summary of unadjusted errors
D. Details of the work done on the inventory count
According to ISA 500, the strength
of audit evidence is determined by which two qualities?
A. Appropriateness & competence
B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence
B. Sufficiency & appropriateness
C. Reliability & extensiveness
D. Objectivity & independence
Which of the following is normally
the most reliable source of audit evidence?
A. Internal audit
B. Suppliers’ statements
C. Board minutes
D. Analytical review
B. Suppliers’ statements
C. Board minutes
D. Analytical review
The degree of effectiveness of an
internal control system depends on:
A. The design of the internal
control system and the implementation of the controls
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting records
B. The design of the internal controls and the implementation of the control system
C. The implementation of the controls and the correctness of the accounting records
D. The design of the internal control system and the correctness of the accounting records
According to ISA 315, which of the
following is NOT an element of the control environment?
A. Participation of management
B. Information processing
C. Commitment to competence
D. Human resource policies and practices
B. Information processing
C. Commitment to competence
D. Human resource policies and practices
According to ISA 315, which of the
following is NOT a control activity?
A. Performance reviews
B. Physical controls
C. Organizational structure
D. Segregation of duties
B. Physical controls
C. Organizational structure
D. Segregation of duties
Lapping is also known as___________?
A. Teeming and lading
B. Looping
C. Embezzlement
D. Hacking
B. Looping
C. Embezzlement
D. Hacking
Goods sent on approval basis’ have
been recorded as ‘Credit sales’. This is an example of____________?
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
B. Error of commission
C. Error of omission
D. Error of duplication
Which of the following statements is
not true?
A. Management fraud is more
difficult to detect than employee fraud
B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.
B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.
Internal audit is undertaken:
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
The scope of internal audit is
decided by the___________?
A. Shareholders
B. Management
C. Government
D. Law
B. Management
C. Government
D. Law
Audit of banks is an example of_____________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above
B. Balance sheet audit
C. Concurrent audit
D. All of the above
Concurrent audit is a part
of____________?
A. Internal check system
B. Continuous audit
C. Internal audit system
D. None of these
B. Continuous audit
C. Internal audit system
D. None of these
Audit in depth is synonymous for____________?
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
B. Completed audit
C. Final audit
D. Detailed audit
Institute of Chartered Accountants
of Pakistan was established in____________?
A. 1949
B. 1956
C. 1961
D. 1972
B. 1956
C. 1961
D. 1972
Which of the following statements is
not true about continuous audit?
A. It is conducted at regular
interval
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
Internal check is carried on
by___________?
A. Staff specially appointed for the
purpose
B. Internal auditor
C. Supervisor of the staff
D. Members of the staff
B. Internal auditor
C. Supervisor of the staff
D. Members of the staff
Errors of Omission are_____________?
A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above
B. Errors of principle
C. Compensating errors
D. None of the above
Window dressing
implies_______________?
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
Test Checking refers to___________?
A. Testing of accounts and records
B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded
B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded
Which of the following statements is
not correct about materiality?
A. Materiality is a relative concept
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s 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
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s 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
______the audit risks_______the
materiality and_________the audit effort.
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
When issuing unqualified opinion,
the auditor who evaluates the audit findings should be satisfied that
the___________?
A. Amount of known misstatement is
documented in working papers
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
In determining the level of
materiality for an audit, what should not be considered?
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
Analytical procedures issued in the
planning stage of an audit, generally
A. Helps to determine the nature,
timing and extent of other audit procedures
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above
Which of the following statements is
most closely associated with analytical procedure applied at substantive stage?
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
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
Verification refers to_________?
A. Examining the physical existence
and valuation of assets.
B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.
B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.
Stock should be valued at_________?
A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
Floating assets are valued
at____________?
A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
Goods sold on the basis of ‘sales or
return ‘should:
A. Be included in the stock
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
Of the following, which is the least
persuasive type of audit evidence?
A. Bank statements obtained from the
client
B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. 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. Computations made by the auditor
Which of the following statements
is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should
conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
In an audit of financial statements,
substantive tests are audit procedures that __________?
A. May be eliminated for an account
balance under certain conditions
B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures
B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures
The nature, timing and extent of
substantive procedures is related to assessed level of control risk
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
B. Disproportionately
C. Directly
D. Inversely
Which of the following factors is
most important in determining the appropriations of audit evidence?
A. The reliability of audit evidence
and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
When is evidential matter,
generally, considered sufficient?
A. When it constitutes entire
population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
Which of the following is not corroborative
evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
What would most appropriately
describe the risk of incorrect rejection in terms of substantive testing?
A. The auditor concludes balance is
materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
Which of the following affects audit
effectiveness?
A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A and C
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A and C
What would most effectively describe
the risk of incorrect acceptance in terms of substantive audit testing?
A. The auditor has ascertained that
the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
Audit programme is prepared
by____________?
A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants
B. The client
C. The audit assistants
D. The auditor and his audit assistants
The working papers which auditor
prepares for financial statements audit are___________?
A. Evidence for audit conclusions
B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors
B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors
The quantity of audit working papers
complied on engagement would most be affected by__________?
A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk
Which of the following best describes
the primary purpose of audit programme preparation?
A. To detect errors or fraud
B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk
B. To comply with GAAP appropriate evidence
C. To gather sufficient
D. To assess audit risk
Which of the following is not an
advantage of the preparation of working paper?
A. To provide a basis for review of
audit work
B. To provide a basis for subsequent audits
C. To ensure audit work is being carried out as per programme
D. To provide a guide for advising another client on similar issues
B. To provide a basis for subsequent audits
C. To ensure audit work is being carried out as per programme
D. To provide a guide for advising another client on similar issues
The auditor’s permanent working paper
file should not normally, include__________?
A. Extracts from client’s bank
statements
B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements
B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements
For what minimum period should audit
working papers be retained by audit firm?
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.
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.
Which of the following factors would
least likely affect the quantity and content of an auditor’s working papers?
A. The assessed level of control
risk
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter
Which of the following statement is
true regarding an auditor’s working papers?
A. They document the level of
independence maintained by the auditor
B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control
B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control
Which of the following statement
best describes the understanding with respect to ownership and custody of
working papers prepared by an auditor?
A. The working papers may be
obtained by third parties when they appear to be relevant to issues raised in
litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
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.
B. The safe custody of working papers is the responsibility of client, if kept at his premises
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.
The current file of the auditor’s
working papers, generally, should include____________?
A. A flowchart of the internal
controls
B. Organization charts
C. A copy of financial statements
D. Copies of bond and debentures
B. Organization charts
C. A copy of financial statements
D. Copies of bond and debentures
Auditing is what?
A. Reporting the financial
information
B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records
B. Examination of financial statements
C. Preparation financial statements
D. maintaining the ledger records
Audit of banks is an example
of__________?
A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above
B. Balance sheet audit
C. Concurrent audit
D. Both (A. and (B.
E. All of the above
In Pakistan, balance sheet audit is
synonymous to___________?
A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
Audit in depth is synonymous for_____________?
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
B. Completed audit
C. Final audit
D. Detailed audit
Balance sheet audit includes
verification of____________?
A. Assets
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above
C. Income and expense accounts where appropriate
B. Liabilities
D. All of the above
Which of the following statements is
not true about continuous audit?
A. It is conducted at regular
interval
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
Balance sheet does not include:_____________?
A. Verification of assets and
liabilities
B. Vouching of income and expense accounts related to assets and liabilities
C. Examination of adjusting and closing entries
D. Routine checks
B. Vouching of income and expense accounts related to assets and liabilities
C. Examination of adjusting and closing entries
D. Routine checks
Which of the following statements is
not correct about materiality?
A. Materiality is a relative concept
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s 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
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s 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
_______the audit risk,_______the
materiality and _______the audit effort?
A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
When issuing unqualified opinion,
the auditor who evaluates the audit findings should be satisfied that
the_____________?
A. Amount of known misstatement is
documented in working papers
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
If the book value of an asset stands
at________per cent of the original cost, a company need not provide
depreciation on it.
A. two
B. fifteen
C. five
D. ten
B. fifteen
C. five
D. ten
Which of the following expenses
should not be treated as capital expenditure?
A. Expenses paid on installation of
a plant.
B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent.
D. The fees paid to engineer who constructed the plant.
B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent.
D. The fees paid to engineer who constructed the plant.
Who is responsible for the
appointment of statutory auditor of a limited company?
A. Directors of the company
B. Members of the company
C. The Central Government
D. All of the above
B. Members of the company
C. The Central Government
D. All of the above
The board of directors shall appoint
first auditor of a company
A. Within one month of completion of
capital subscription state of the company
B. Within one month of the promotion of the company
C. Within one month of the commencement of the business of the company
D. Within one month of incorporation of the company
B. Within one month of the promotion of the company
C. Within one month of the commencement of the business of the company
D. Within one month of incorporation of the company
The term of the auditor ship of
first auditor would be from the date of appointment till________?
A. the conclusion of statutory
meeting
B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal
B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal
In case the directions fail to
appoint first auditor (s), the shareholders shall appoint them at_________by
passing a resolution.
A. a general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting
If a casual vacancy in the office of
auditor arises by his resignation it should only be filled by the company in
a_________?
A. Board meeting
B. extraordinary general meeting
C. General meeting
D. annual general meeting
B. extraordinary general meeting
C. General meeting
D. annual general meeting
The authority to remove the first
auditor before the expiry of term is with__________?
A. the shareholders in a general
meeting
B. the shareholders in the first annual General meeting
C. the board of directors
D. the Central Government
B. the shareholders in the first annual General meeting
C. the board of directors
D. the Central Government
Who out of the following cannot be
appointed as a statutory auditor of the company?
A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.
B. Internal auditor
C. Relative of a director
D. Only (B. and (C.
A statutory auditor has a right of
access at all times to___________?
A. Books and accounts of a company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company
In determining the level of
materiality for an audit, what should not be considered?
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
Analytical procedures issued in the
planning stage of an audit, generally?
A. helps to determine the nature,
timing and extent of other audit procedures
B. directs attention to potential risk areas
C. indicates important aspects of business
D. All of the above
B. directs attention to potential risk areas
C. indicates important aspects of business
D. All of the above
Which of the following statements is
most closely associated with analytical procedure applied at substantive stage?
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
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
The basic assumption underlying the
use of analytical procedures is:____________?
A. It helps the auditor to study
relationship among elements of financial information
B. Relationship among data exist and continue in the absence of known condition to the contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.
B. Relationship among data exist and continue in the absence of known condition to the contrary
C. Analytical procedures will not be able to detect unusual relationships
D. None of the above.
What are analytical procedures?
A. Substantive tests designed to
assess control risk
B. Substantive tests designed to evaluate the validity of management’s representation letter
C. Substantive tests designed to study relationships between financial and nonfinancial
D. All of the above
B. Substantive tests designed to evaluate the validity of management’s representation letter
C. Substantive tests designed to study relationships between financial and nonfinancial
D. All of the above
Which of the following is not an
analytical procedure?
A. Tracing of purchases recurred in
the purchase book to purchase invoices.
B. Comparing aggregate wages paid to number of employees
C. Comparing the actual costs with standard costs
D. All of them are analytical procedure
B. Comparing aggregate wages paid to number of employees
C. Comparing the actual costs with standard costs
D. All of them are analytical procedure
When applying analytical procedures,
an auditor could develop independent estimate of an account balance to compare
it to___________?
A. client’s unedited account balance
B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry
B. client’s unedited account balance adjusted for trends in the industry
C. Prior year audited balance
D. Prior year audited balance adjusted for trends in the industry
What is the primary objective of
analytical procedures used in the overall review stage of an audit?
A. To help to corroborate the
conclusions drawn from individual components of financial statements
B. To reduce specific detection risk
C. To direct attention to potential risk areas
D. To satisfy doubts when questions arise about a client’s ability to continue
B. To reduce specific detection risk
C. To direct attention to potential risk areas
D. To satisfy doubts when questions arise about a client’s ability to continue
Of the following, which is the least
persuasive type of audit evidence?
A. Bank statements obtained from the
client
B. Documents obtained by auditor from third parties directly.
C. Carbon copies of sales invoices inspected by the auditor
D. 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. Computations made by the auditor
In an audit of financial statements,
substantive tests are audit procedures that___________?
A. may be eliminated for an account
balance under certain conditions
B. are designed to discover significant subsequent events
C. will increase proportionately when the auditor decreases the assessed level of control risk
D. may be test of transactions, test of balance and analytical procedures
B. are designed to discover significant subsequent events
C. will increase proportionately when the auditor decreases the assessed level of control risk
D. may be test of transactions, test of balance and analytical procedures
The nature, timing and extent of
substantive procedures is _________ related to assessed level of control risk?
A. randomly
B. disproportionately
C. directly
D. inversely
B. disproportionately
C. directly
D. inversely
Which of the following statements
is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should
conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
When is evidential matter,
generally, considered sufficient?
A. When it constitutes entire
population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
Which of the following is not a
corroborative evidence?
A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
Which of the following affects audit
effectiveness?
A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A. and C.
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both A. and C.
Which of the following statements is
not true with respect to management representations obtained as per AAS11?
A. Authenticated copy of relevant
minutes of meetings may be regarded as management representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor
What would most appropriately
describe the risk of incorrect rejection in terms of substantive testing?
A. The auditor concludes balance is
materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
What would most effectively describe
the risk of incorrect acceptance in terms of substantive audit testing?
A. The auditor has ascertained that
the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary evidence
D. He applies random sampling on data which is inaccurate and inconsistent
Which of the following factors is
most important in determining the appropriations of audit evidence?
A. The reliability of audit evidence
and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
Which of the following is not a
revenue expense?
A. Cost of raising a loan
B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship
B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship
Depreciation does not arise form
_______
A. effluxion of time
B. use
C. obsolescence through technology be market changes
D. remarket expectation
B. use
C. obsolescence through technology be market changes
D. remarket expectation
Which of the following will not lead
to creation of secret reserve?
A. Undervaluation of closing stock
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required
Which of the following is a revenue
reserve?
A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
Which of the following are
fundamental ethical principles for professional accountants?
1 Competence
2 Compliance
3 Integrity
4 Objectivity
1 Competence
2 Compliance
3 Integrity
4 Objectivity
A. 1, 2 and
3 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only
B. 1, 3 and 4 only
C. 2, 3 and 4 only
D. 1, 2 and 4 only
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