Auditing One Assignment 4th Year

A.
quantity
1. Various types of quality audits B. quality

are: C. Preliminary
A. product D. sequential
B. process 4. Each of the three parties involved
C. management (system) in an audit …………………….
D. registration (certification) plays a role that contributes to its
E) All of above success.
A. the client, the auditor, and the

2. When the auditor is an employee
auditeer
of the organization being
B. the client, the auditor, and the
audited (auditee), the audit is
audite
classified as an …….. quality
audit. C. the client, the moderator, and the
auditee
A. internal
D. the client, the auditor, and the
B. external
auditee
C. compliance
5. An audit is usually conducted in
D. Both A & B
three steps:
3. The most comprehensive type of
(1) A pre-examination or opening
audit is the ……… system audit,
meeting with the auditee marks
which examines suitability and the
effectiveness of the system as a
beginning of the process.
whole.
2Hunde Emiru Abeku: Assessing Customer Satisfaction on Service Delivery of
Cooperative Bank of Oromiya Nekemte Branch
(2) involves a suitability audit of the 6. Audit standards and reference

documented procedures against documents used
the selected reference standard. 7. Determination of proper

corrective action(s)
(3) the auditor examines in depth
the implementation of the 8. Duration of audit
quality A. 1
system. B. 2
A. True C. 4
B. False D. 8
6. The audit final report should
include, at a minimum, the
7. The time required and costs
following: involved in an external audit are
(choose the one NOT requireD. much higher as compared to
1. Type of audit conducted internal audits.
2. Characteristics of audit A. True
3. Identification of involved parties: B. False

auditor, auditee, and third
party 8. Audit is a fact-finding process

4. Audit team members that compares actual results with
5. Critical nonconformities and ………………….

other observations
Science Journal of Business and Management 2022; X(X): XX-XX 3
A. specified standards and plans B. False
B. expected results 11. Who among the following can be

appointed as auditor of a
C. premature results
company?
D. preliminary results
A. A partner or a director of the
company.
9. The ……… is also expected to
B. A person of unsound mind.
provide the resources needed
and C. Mr. Y who owes Rs. 500 to the
company.
select staff members to accompany
the auditors. D. Mr. Z the holder of C.A
certificate.
A. auditor
12. Confirmation of the court is
B. client
necessary for __________.
C. internal auditor
A. increasing the share capital.
D. auditee
B. reduction of share capital.
10. For the benefit of the
organisation, quality auditing C. conversion of shares into stock.
should D. issue of new shares.
only report non-conformances and Answer: B

corrective actions, but should 13. Audit means ___________.
not highlight areas of good practice. A. recording business transactions.
A. True
B. preparing the final accounts. only.
C. examination of books, accounts, C. private limited company only.

vouchers etc. D. co-operative societies
D. preparing final accounts. 17. When a transaction has not
14. Auditor shall report on the been recorded in the books of
accounts examined by him account either wholly or partially
__________. such errors are called as
A. to the shareholders. _________.
B. to the court. A. Error of commission
C. to the bank. B. Error of omission.
D. to the general public. C. Compensating error.
15. Sale of land is a __________. D. Error of principle.
A. revenue receipt. 18. Verification of the value of

assets, liabilities, the balance of
B. capital receipt.
reserves, provision and the amount
C. capital expenditure.
of profit earned or loss
D. revenue expenditure
suffered a firm is called _________.
16. Secret reserve can be created by
A. Continuous audit.
_______________.
B. Balance sheet audit.
A. public limited company only
C. Interim audit.
B. banking and financial companies
D. Partial audit. 22. The auditor of a government

company shall be appointed by
19. Vouching of the balances of all
incomes and expenses account ________.
is known as vouching of ______. A. the government company itself.
A. Personal ledger. B. the central government.
B. Impersonal ledger. C. the share holders.
C. Cash D. the debenture holders.
D. Sales 23. The main object of the audit of

the cash book may be ________.
20. Preliminary expenses are the
best example for _________. A. to verify the assets and liabilities.
A. fictitious asset. B. to know that all receipts and

payments have been properly
B. intangible asset.
recorded.
C. wasting asset.
C. to check the internal control
D. floating asset.
system in business.
21. Periodical audit is also called as
D. to check the bank balance.
_________.
24. One of the audit procedures to
A. Final audit.
check the issue of share capital
B. Interim audit.
of the newly formed company is
C. Balance sheet audit. __________.
D. Income statement audit. A. the memorandum of association

and articles of association. A. to discover errors and frauds.
B. the share transfer register. B. to prevent errors and frauds.
C. the issue of debenture. C. to verify statements.
D. none of the above. D. all the above
25. The work of one clerk is 28. Share may be issued

automatically check by another _____________.
clerk
A. at par.
is called _________. B. at premium.
A. Internal control. C. at discount.
B. Internal check. D. all the above.
C. Internal audit. 29. The liabilities of an auditor can
D. None of the above. be _________.
26. The owners of the company are A. Civil

called __________. B. Criminal
A. Debenture holders. C. Civil and Criminal.
B. Debtors D. Official
C. Shareholders 30. Internal auditor of a company
D. None of the above. must be _______________.
27. The main objects of A. Cost accountant.

investigation is _________. B. Chartered accountant.
C. ICWA fill the
D. need not possess any professional vacancy.

qualification. D. none of these can appoint a
31. A vacancy caused by resignation person to fill the vacancy.
of an auditor is filled by 34. The most difficult type of
_________. misstatement to detect fraud is
A. board of directors. based on __________.
B. managing director. A. related party purchases.
C. general meeting. B. related party sales.
D. central government. C. the restatement of sales.
33. When at an annual general D. omission of a sales transaction

meeting of a company no auditor from being recorde
is 35. Professional skepticism requires
appointed or reappointed. In that that the auditor assume that
case ________ management is _________.
A. the central government appoints A. reasonably honest.
a person to fill the vacancy
B. neither honest nor dishonest.
B. the board of directors appoints a
C. not necessarily honest.
person to fill the vacancy.
D. dishonest unless proved
C. the managing director of the
otherwise.
company appoints a person to
36. The use of an audit engagement C. inform management about it.

letter is the best method of D. take help of other auditors.
assuring the auditor will have 38. Audit of banks is an example of
which of the following? __________.
A. Auditor will obtain sufficient A. Statutory audit.
appropriate audit evidence.
B. Balance sheet audit.
B. Management representation
C. Concurrent audit.
letter.
D. All of the above.
C. Access to all books, accounts and
vouchers required for audit 39. In India balance sheet audit is
synonymous to
purpose.
_______________.
D. Co-operation from other
A. Annual audit.
auditors
B. Continuous audit.
37. An auditor who accepts an audit
but does not posses the C. Detailed audit.
industry expertise of the business D. Statutory audit.

entity should ______________. 40. Balance sheet audit included
A. engage experts. verification of ________.
B. obtain knowledge of matters that A. assets

relate to the nature of entity B. liabilities
business. C. income and expenditure
accounts where appropriate. oversights.
D. all of the above. D. It helps to accumulate evidence

supporting the validity of a
42. In determining the level of
specific
materiality for an audit what
account balance
should not be considered?
44. Of the following, which is the
A. Prior years errors.
least persuasive type of audit
B. The auditor remuneration.
evidence?
C. Adjusted interim financial
A. Bank statements obtained from
statement.
the client
D. Prior year financial statements.
B. Documents obtained by auditor
43. Which of the following
from third parties directly.
statement is most closely
C. Carbon copies of sales invoices
associated
inspected by the auditor
with analytical procedure applied at
D. Computations made by the
substantive stage?
auditor.
A. It helps to study relationship
46. Audit Programme is prepared
among balance sheet accounts.
by ___________.
B. It helps to discover material
A. the auditor.
misstatements in the financial
B. the client.
statements.
C. the audit assistants.
C. It helps to identify possible
D. the auditor and his audit another client on similar issues.

assistants. 50. The board of directors shall
47. The quantity of audit working appoint first auditor of a
papers complied on engagement company
would most be affected by ___________.

_________________. A. within one month of completion
A. management integrity. of capital subscription state of
the
B. auditor experience and
professional judgement. company
C. Auditor qualification. B. within one month of the

promotion of the company.
D. control risk.
C. within one month of the
48. Which of the following is not an
commencement of the business
advantage of the preparation
of the
of working paper?
company.
A. To provide a basis for review of
D. within one month of
audit work.
incorporation of the company.
B. To provide a basis for subsequent
51. In case the directions fail to
audits
appoint first auditors, the
C. To ensure audit work is being
shareholders shall appoint them at
carried out as per Programme.
_______ by passing a resolution.
D. To provide a guide for advising
A. a general meeting. B. The shareholders are authorized

to do so
B. first annual general meeting.
C. The approval of the central
C. statutory meeting.
government is required for such
D. annual general meeting
removal.
52. The auditor of a government
54. The retiring auditor does not
company is appointed by the C
have a right to _________.
&
A. make written representations.
AG. His remuneration is fixed by
_____________. B. get his representation circulated.
A. the C & AG. C. be heard at the meeting.
B. the shareholders. D. speak as a member of the

company.
C. the shareholders at an annual
general meeting. 55. Auditor of a _______ company
does not have right to visit
D. the board of directors.
53. Which of the following foreign branches of the company.
statement is not correct A. unlimited liability.

regarding B. manufacturing
removal of first auditor before C. banking
expiry of the term?
D. non-profit making.
A. He is removed at a general
58. Audit of transactions does not
meeting.
include __________.
A. propriety audit. related to assessed level of control

risk
B. efficiency cum performance
audit. A. Randomly
C. audit of receipts. B. Disproportionately
D. audit of expenditure. C. Directly
59. Audit of rent, deposits and D. Inversely

remittances does not cover
68. Which of the following factors is
____________. most important in
A. audit of borrowings. determining the appropriations of

audit evidence?
B. audit of amortization of debt.
A. The reliability of audit evidence
C. audit of sanctions
and its relevance in meeting the
D. remittance audit.
audit objective
63. Goods sold on the basis of ‘sales
B. The objectivity and integrity of
or return ‘ should
the auditor
A. Be included in the stock
C. The quantity of audit evidence
B. Not be included in the stock
D. The independence of the source
C. Not be checked by auditor
of evidence
D. None of the above
70. Which of the following is not
67. The nature, timing and extent of corroborative evidence?
substantive procedures is
A. Minutes of meetings
B. Confirmations from debtors actual fact is not
C. Information gathered by auditor C. The auditor has rejected an item

through observation from sample which was not
D. Worksheet supporting supported by documentary

consolidated financial statements evidence
73. Which of the following affects D. He applies random sampling on

audit effectiveness? data which is inaccurate and
A. Risk of over reliance inconsistent
B. Risk of incorrect rejection 76. Audit programme is prepared

by
C. Risk of incorrect acceptance
A. The auditor
D. Both (a) and (c)
B. The client
74. What would most effectively
describe the risk of incorrect C. The audit assistants
acceptance in terms of substantive D. The auditor and his audit

audit testing? assistants
A. The auditor has ascertained that 77. The working papers which
the balance is materially correct auditor prepares for financial
when in actual fact it is not statements audit are: _
B. The auditor concludes the A. Evidence for audit conclusions

balance is materially misstated B. Owned by the client
when in
C. Owned by the auditor
D. Retained in auditor’s office until normally, include

a change in auditors A. Extracts from client’s bank
statements
78. The quantity of audit working B. Past year’s financial statements

papers complied on engagement C. Attorney’s letters
would most be affected by D. Debt agreements
A. Management’s integrity
82. For what minimum period
B. Auditor’s experience and should audit working papers be
professional judgment retained by audit firm?
C. Auditor’s qualification A. For the time period the entity
D. Control risk remains a client of the audit
firm.
79. Which of the following best
describes the primary purpose of B. For a period of ten years
audit programme preparation? C. For a period auditor opines them
A. To detect errors or fraud. to be useful in servicing the

client
B. To comply with GAAP
D. For the period the audit firm is
C. To gather sufficient appropriate
in existence.
evidence
83. Which of the following factors
D. To assess audit risk
would least likely affect the
81. The auditor’s permanent
quantity and content of an auditor’s
working paper file should not
working papers the effectiveness of the audit

firm’s
A. The assessed level of control risk
quality control
B. The possibility of peer review
86. The current file of the auditor’s
C. The nature of auditor’s report
working papers, generally,
D. The content of management
should include
representation letter
A. A flowchart of the internal
controls
statement is true regarding an
auditor’s B. Organisation charts
working papers? C. A copy of financial statements
A. They document the level of D. Copies of bond and debentures

independence maintained by the 87. Knowledge of the entity’s
auditor business does not help the
B. They should be considered as the auditor to
principle support for the A. Reduce inherent risk
auditor’s
B. Identify problem areas
report
C. Evaluate reasonableness of
C. They should not contain details estimates
regarding weaknesses in the
D. Evaluate appropriates of GAAP.
internal control system
D. They help the auditor to monitor

88. Payment for wage should be
vouched with the help of with the
A. Piece Work Statement. help of
B. Wage sheets A. Brokers bought notes
C. Minutes book B. Brokers Sold notes
D. Bank pass book C. Minutes book
89. Payment for building purchased D. Inventory of investment

should be vouched with the 93. Which of the following is not a
help of revenue expense?
A. Title Deed A. Cost of raising a loan
B. Correspondence with the brokers B. Cost of accessories of motor

vehicles spent at the time of
C. Building Account
purchase
D. Cash book
C. Expenses incurred for laying of
90. Purchase returns should be
sewers on land purchased
vouched with the help of
D. Insurance premium paid at the
A. Bought notes
time of registration of the ship
B. Credit notes
Answer: B.Cost of accessories of
C. Goods inward book motor vehicles spent at the time
D. Cash book of
91. Receipts from sale of purchase
investments should be vouched 94. Depreciation does not arise form

_______ D. Charging higher rates of

depreciation on fixed assets than
A. Effluxion of time
actually
B. Use
required
C. Obsolescence through technology
100. Who is responsible for the
be market changes
appointment of statutory auditor
D. Remarket expectation
of a limited company?
98. Which of the following is a
A. Directors of the company
revenue reserve?
B. Members of the company
A. Capital redemption reserve
C. The Central Government
B. Security premium account
D. All of the above
C. Debenture redemption reserve
101. Which of the following sections
D. Capital reserve
deal with qualifications of the
99. Which of the following will not
auditor ?
lead to creation of secret
A. Section 226 (1) and section
reserve?
226(2)
A. Undervaluation of closing stock
B. Section 224 (1) and section 224
B. Charging capital expenditure to
(2)
revenue
C. Section 226 (3) and section
C. Goods sent on consignment being
226(4)
shown as actual sales
101. Which of the following sections
deal with qualifications of the D. All partners should be chartered

accountants
auditor ?
Answer: C.Majority of the partners
A. Section 226 (1) and section
should be practicing in India
226(2)
103. As per the requirements of
B. Section 224 (1) and section 224
section 226(3) and 226(4) a
(2)
person
C. Section 226 (3) and section
is disqualified from being appointed
226(4)
as a statutory auditor if he
D. Section 224(3) & Sec.224
holds
Answer: A.Section 226 (1) and
A. Equity shares or debentures of
section 226(2)
the company
B. Equity shares carrying voting of
statement is not true?
the company
A. A partnership firm can be
C. Shares carrying voting rights of
appointed as a statutory auditor
the company
of
D. Security carrying voting rights of
limited company
the company
B. Appointment can be made in the
Answer: D.Security carrying voting
name of the firm
rights of the company
C. Majority of the partners should
104. The board of directors shall
be practicing in India
appoint first auditor of a
company general meeting
A. Within one month of completion C. the conclusion of next annual

of capital subscription state of general meeting
the D. the date of removal
company Answer: B.the conclusion of first
B. Within one month of the annual general meeting
promotion of the company 106. In case the directions fail to
C. Within one month of the appoint first auditor (s), the
commencement of the business shareholders shall appoint them
of the at…..by passing a resolution
company A. a general meeting
D. Within one month of B. first annual general meeting
incorporation of the company
C. statutory meeting
Answer: D.Within one month of
D. annual general meeting
incorporation of the company
Answer: A.a general meeting
105. The term of the auditor ship of
first auditor would be from 107. Which of the following
statement is not true regarding
the date of appointment till__
appointment of statutory auditor by
A. the conclusion of statutory
the Central Government?
meeting
A. Such powers have been
B. the conclusion of first annual
conferred upon it by section
224(3) of
B. If a company fails to appoint an a firm which shall betaken into

auditor at a general meeting account would be as on the date
of
C. If an auditor refuses to accept
appointment, the powers of the _
Central A. Completion of audit
D. None of the above B. Auditor’s report
Answer: B.If a company fails to C. Acceptance of audit

appoint an auditor at a general D. Starting of audit work
meeting Answer: C.Acceptance of audit
108. If a casual vacancy in the office 110. Which of the following is
of auditor arises by his counted for the purposes of
resignation it should only be filled section
by the company in a…….. 224(IB) the number of partners of a
A. Board meeting firm which shall be taken into
B. Extraordinary general meeting account would be as on the data of

___
C. General meeting
A. Joint audit
D. Annual general meeting
B. Audit to non-profit companies
Answer: C.General meeting
C. Audit of unlimited companies
109. For the purposes of section
224(IB) the number of partners D. All of the above
Answer: D.All of the above B. Joint audit
111. Mr. A, a Charted Accountant, C. Audit head office & branches

has nineteen audits, Out of D. Audit of one or more branches of
following audits which audits a company
should he accept to ensure he Answer: A.Audit of one branch
doesn’t violate provisions of section each of two different companies
224(IB) __ 113. The auditor of a Government
A. Audit of a private company company is appointed by the C
B. Audit of branch of a foreign & AG. His remunerationis fixed

company by__
C. Audit of two branches of an A. The C & AG

Indian company B. The shareholders
D. All of them C. The shareholders at an annual
Answer: D.All of them general meeting
112. Which audit out of the D. The board of directors

following would not be regarded Answer: B.The shareholders
as
114. The section which contains
one audit for the purposesof section provisions regarding
224(IB)?
remuneration of the auditor is_
A. Audit of one branch each of two
A. Section 224(9)
different companies
B. Section 224(7)
C. Section 224(8) B. The shareholders are authorized

to do so
D. Section 224(6)
C. The approval of the Central
Answer: C.Section 224(8)
Government is required for such
115. The authority to remove the
removal
first auditor before the expiry of
D. The provisions for such removal
term is with_
are contained in section 224(7)
A. The shareholders in a general
Answer: C.The approval of the
meeting
Central Government is required
B. The shareholders in the first
for
annual General meeting
such removal
C. The board of directors
117. The retiring auditor does not
D. the Central Government
have a right to___
Answer: A.The shareholders in a
A. make written representations
general meeting
B. get his representations
circulated.
statements is not correct
C. be heard at the meeting
regarding
removal of first auditor before D. speak as a member of the

company
expiry of the term?
Answer: D.speak as a member of
A. He is removed at a general
the company
meeting
118. Who out of the following 120. The auditor has a right to
cannot be appointed as a A. Obtain information and
statutory explanation
auditor of the company? B. Obtain information and
A. Erstwhile director explanation from the employees
and
B. Internal auditor
officers
C. Relative of a director
C. Obtain information and
D. Only (b) and (c)
explanation necessary for the
Answer: B.Internal auditor
purpose of
119. A statutory auditor has a right
audit
of access at all times to
D. Both (b) and (c)
A. Books and accounts of a
Answer: D.Both (b) and (c)
company
121. The principal auditor, as per
B. Books, accounts and documents
clarification issued by the ICAI,
of the company
does not have any right to
C. Books, accounts and vouchers of
the company A. Inspect working papers of the
branch auditor
D. Notices and documents of the
company B. Visit branches
Answer: C.Books, accounts and C. Seek information necessary for

vouchers of the company audit purposes
D. Incorporate the branch audit other than cash

report in his audit report C. Shares allotted against a debt
Answer: A.Inspect working papers payable
of the branch auditor D. All of them
122. Under which of the following Answer: D.All of them
section auditor has a duty to
124. Right to visit branches has
enquire into six specified matters been given to the auditor under
and report by exception?
which section?
A. Section 227(4A)
A. Section 222(3)
B. Section 227 (IA)
B. Section 228(2)
C. Section 227 (2)
C. Section 228(4)
D. Section 227(3)
D. Section 228(3)
Answer: A.Section 227(4A)
Answer: D.Section 228(3)
123. The auditor has to enquire,
under section 227 (IA) into
statements with regard to rules
different aspects, related to shares
regarding exemption from branch
allotted for cash for the
audit is not true?
purpose of auditor include
A. A branch office of a company can
A. Shares against whose allotment be granted exemption on the
cash has actually been received basis
B. Shares allotted for consideration of quantum of activity criterion
B. If a satisfactory arrangement of made, it can be exempted from

scrutiny check of the books of branch audit
account of a branch office of a 126. The branch auditor is

manufacturing company has appointed by –
been A. Shareholders in an annual
made, it can be exempted from general meeting
branch audit B. Shareholders in general meeting
C. Cost consideration should be C. Board of directors in board
considered as an important meeting
factor/
D. Any of the above
ground for exemption from branch
Answer: B.Shareholders in general
audit
meeting
D. The auditor should state in his
127. Special audit is conducted at
audit report that branch office is
the order of the Central
exempted by virtue of quantum of
Government. Which section gives
activity or any other basis
such powers?
Answer: B.If a satisfactory
A. Section 233(A)
arrangement of scrutiny check
of the books B. Section 233A
of account of a branch office of a C. Section 242(A)

manufacturing company has D. Section 242A
been
Answer: C.Section 242(A)
128. Who among the following can Answer: B.Both (i) and (ii)
be appointed as special auditor 130. If any director is disqualified
by the Central Government? from being appointed under
A. The statutory auditor section 274(1) (g), the auditor

should mention this fact in his
B. chartered accountant in practice
audit
C. Any chartered accounted who is
report. For this purpose, how does
not in practice
hedetermine their eligibility :
D. Both (a) and (b)
A. He obtains a representation from
Answer: D.Both (a) and (b)
each director
129. The scope of the audit
B. He obtains a management
including reference to the
representation
pronouncements of the ICAI, which
C. He enquiries from Registrar of
the auditor adheres to,
Companies
generally is communicated to the
D. Any one of the above
client in the ____ i) auditor’s
Answer: A.He obtains a
report ii) engagement letter iii)
representation from each
representation letter
director
A. i) only
131. As per the ‘Statement on
B. Both (i) and (ii) Qualification in Auditor’s
C. Both (i) and (iii) Report’s
D. All the above issued by theICAI, the auditor,

Under section 227(3) has to gave which the accounts are approved
a by the management
statement of fact on_ 133. Section 227(2) of the
A. Proper books of account Companies Act, requires the
auditor to
B. Accounting standards
give his report to the members of
C. Cess payable under section 441A
the company on certain matters.
D. None of the above
Which of the following is not
Answer: C.Cess payable under
included in the above?
section 441A
A. Accounts examined by him
132. The date on auditor’s report
B. Every balance sheet and profit
should not be__
and loss account laid before a
A. The data of AGM
general meeting during his tenure
B. Later than the date on which the
C. Every document that is a part of
accounts are approved in
or ‘annexed to’ the balance sheet
board’s
D. Every document which is
meeting
attached to the profit and loss
C. Earlier than the date on which
account
the accounts are approved by the
Answer: D.Every document which
management
is attached to the profit and loss
D. Both (a) and (b)
account
Answer: C.Earlier than the date on
134. When restrictions that D. Inadequacy of accounting

significantly affect the scope of records
the Answer: B.Reliance on the report of
audit are imposed bythe client, the other auditor
auditor generally should issue 136. The inventory consists of about
which of the following opinion? one per cent of all assets. The
A. Qualified opinion client hasimposed restriction on

auditor to prohibit observation
B. Disclaimer of opinion
of stock take. The auditor cannot
C. Adverse opinion
apply alternate audit
D. Unqualified report with ‘an
procedures.
emphasis of matter’ paragraph;
A. Unqualified opinion
Answer: A.Qualified opinion
B. Qualified opinion
135. Which of the following report
not result in qualification of C. Disclaimer of opinion
the auditor’s opinion due to a scope D. Adverse opinion

limitation? Answer: C.Disclaimer of opinion
A. Restrictions the client imposed 137. The auditor has serious
B. Reliance on the report of other concern about the going concern
auditor of
C. Inability to obtain sufficient the company. It is dependent on

appropriate evidential matter company’s obtaining a working
capital loan from a bank which has B. These are given to adhere to
been applied for. Then requirements of section 211.
management of the company has C. These are given by auditors of

made full disclosure of these the company in auditor’s report
facts in the notes to the balance D. All of the above

sheet. The auditor is satisfied Answer: B.These are given to
with the level of disclosure. He adhere to requirements of
should issue_ section 211.
A. Unqualified opinion 139. The client changed method of

depreciation from straight line
B. Unqualified opinion with
reference to notes to the to written down value method. This
accounts has been disclosed as a note to
C. Qualified opinion the financial statements. It has an

immaterial effect on the
D. Disclaimer of opinion
current financial statements. It is
Answer: B.Unqualified opinion with
expected, however, that the
reference to notes to the
accounts change will have a significant effect
on future periods. Which of
138. Which of the following is true
about explanatory notes? the following option should the
auditor express?
A. These are given by the directors
of the company A. Unqualified opinion
B. Qualified opinion directors of a public company
C. Disclaimer of opinion C. The auditor requires every

director to submit a written
D. Adverse opinion
representation in respect of each
Answer: A.Unqualified opinion
Public company, of which the is
a
true regarding requirements
director, as to whether such
under section 227(3) (f) of the
company has defaulted in terms
Companies Act, 1956?
of
A. The auditor has to satisfy himself
provisions of sections 274(1) (g)
whether any of the directors of
D. The disqualification should be
the
considered on the date of audit
company, whether public or
report.
private, are disqualified from
being Answer: D.The disqualification
should be considered on the date
appointed as directors as per
of
section 274(1) (g).
audit report.
B. Section 274(1) (g) is applicable to
appointment of directors both in 141. The management of a
company, to which AS3 is not
public and private companies but
reporting is limited to only those applicable, does not include
statement of cash flows in its
directors of a company who are also
annual
report. The auditor should express paragraphs
A. Unqualified opinion 143. A departure from recognized

accounting principle is disclosed
B. Qualified opinion
in a note to the financial statements.
C. Adverse opinion
The auditor should
D. Any of these depending upon
A. Issue a standard unqualified
materiality and pervasiveness
audit report
and
B. Issue a qualified report
adequacy of disclosure
C. Issue an unqualified report with
Answer: A.Unqualified opinion
‘emphasis of matter’ paragraph
142. In case the auditor gives a
D. Disclaim opinion
disclaimer of opinion in the audit
Answer: B.Issue a qualified report
report which of the following
paragraph(s) of a standard 144. The auditor should state the
reasons for his reservations in
unqualified audit report are
modified? audit report and should try to
quantify the effect on them. This
A. Scope paragraph
should be done in case he has
B. Opinion paragraph
expressed _ i) A qualified opinion
C. Scope and opinion paragraphs
ii)
D. Introductory, scope and opinion
an unqualified opinion with
paragraph
emphasis of matter paragraph
Answer: C.Scope and opinion
iii) An revenue such as dividends, interest,

commission, etc to
adverse opinion IV) a disclaimer of
opinion A. Identify cases of unrecorded
revenue
A. i) only
B. Ensure proper disclosure in the
B. i) and (iv) only
balance sheet
C. i), iii) and (iv) only
C. Recomputed accrued income on
D. All of the above
the data of balance sheet
Answer: A.i) only
D. Any of these
Answer: A.Identify cases of
documents is not relevant for
unrecorded revenue
vouching cash sales?
147. To test whether sales have been
A. Daily cash sales summary recorded, the auditor should
B. Salesmen’s summary draw a sample from a file of
C. Monthly statements sent to A. Purchase orders

customers
B. Sales orders
D. Bank statement
C. Sales invoices
Answer: C.Monthly statements sent
D. Bill of loading
to customers
Answer: C.Sales invoices
146. The auditor should examine
148. For vouching of which item,
subsequent realization of
the auditor is most likely to
examine cost records? audit procedure is
A. Commission earned A. To ensure that there are no ghost

workers
B. Bad debts recorded
B. To ensure the casual workers
C. Credit sales
employed are authorized by the
D. Sale of scrap
supervisor
Answer: D.Sale of scrap
C. To test procedures for
149. The “Guidance Note on
distributing pay cheques
Revenue” issued by the ICAI
D. To obtain understanding of
does not
internal control system
deal with
Answer: C.To test procedures for
A. Sales revenue
distributing pay cheques
B. Revenue rendering service
151. Which of the following would
C. Revenue from sale of fixed assets prevent double payment of the
D. Income from interest, dividend same voucher?

Answer: C.Revenue from sale of A. The person signing the cheque
fixed assets should cancel the supporting
150. An auditor conducts a surprise documents

check on the pay day (i.e) the
B. Cheques should be signed by at
day wages and salaries are paid. best two persons
The primary purpose of this
C. The data of payment of vouchers
of similar nature should be the Which of the following activities
same or close to each other should not be done by same

department?
D. All of the above
A. Maintaining personnel records
Answer: A.The person signing the
and approving changing in
cheque should cancel the
wages
supporting
rates
documents
B. Proposing pay roll summary and
152. In case of unclaimed wages, the
disbursement of wages
auditor should examine
C. Making salary statements and
whether
filing tax returns
A. The amount has been deposited
D. Comparing time clock records
in a separate bank account
with time reports prepared by
B. Deposited with the cashier
supervisors and preparing list of
C. Held in a safe deposit box
workers employed along with
D. All of these the
Answer: A.The amount has been units of production for each one of
deposited in a separate bank them
account
Answer: B.Proposing pay roll
153. While vouching wages, auditor summary and disbursement of
should examine whether there wages
is proper segregation of duties. 154. In order to vouch, which of the

expenses, the auditor will 156. In case of sales return, the

auditor should examine which
examine Bill of Entry?
documents?
A. Custom
A. Credit notes, advice notes and
B. Excise duties
inward return notes
C. Sales tax
B. Debit notes, advice notes and
D. Income tax
inward return notes
Answer: A.Custom
C. Purchase invoices, advice notes
155. While vouching, how will the and inward return notes
auditor ensure himself that all
D. Credit notes, inspection report
credit salestransactions have been and inward return notes
recorded by the entity?
Answer: D.Credit notes, inspection
A. Examining cut-off points report and inward return notes
B. Matching entries in the sales 157. An internal auditor discovered

book against renumbered sales that fictitious purchases have
invoices and goods outward notes been recorded by the purchase
C. Counting the number of invoices clerk. This indicates absence of
and matching the number with which control?
entries on sales book A. Purchase invoices are
D. Both (a) and (b) independently matched with

purchase orders
Answer: D.Both (a) and (b)
and goods received notes D. Assuring the quality of goods
B. Goods received notes requires Answer: C.Authorizing the

the signature of individual who acquisition of goods
authorized the purchase 159. The auditor is most likely to

examine related party
C. Routine checks are performed by
internal auditor fortnightly. transactions very carefully while
vouching
D. Purchase function and
production function are clubbed A. Credit sales
in one B. Sales returns
department C. Credit purchases
Answer: A.Purchase invoices are D. Cash purchases
independently matched with
Answer: C.Credit purchases
purchase orders and goods received
160. In order to vouch bought
notes
ledger, the auditor obtain
158. Which of the following is most
confirmations from creditors. The
crucial to a purchase
principal reason for the auditor
department?
to examine suppliers statements at
A. Reducing the cost of acquisition balance sheet date is to obtain
B. Selecting supplies evidence that
C. Authorizing the acquisition of A. The supplier exist
goods
B. There are no unrecorded
liabilities B. Sales return
C. Recorded purchases actually C. Purchase return

occurred D. Discount allowed to customers as
D. To link creditors with cash book per organizational policy
entries Answer: D.Discount allowed to
Answer: B.There are no unrecorded customers as per organizational
liabilities policy
161. The creditor’s accounts, 163. Vendors should be approved by

generally, have credit balance. Management before
Debit purchase department executes an
balance may be due to order. If this is not done, then
A. Advance paid against an order which of the following situations

may arise?
B. Goods returned
A. Purchases could be made from
C. Wrong debit to supplier account
vendors whose product quality
D. Any of these
may
Answer: D.Any of these
not be good
162. In case of vouching, the auditor
B. Purchases may be made from
is least likely to examine
related parties without
authorization by appropriate management’s
authority in case of –
knowledge
A. Bad debts written off
C. Purchases could be made from A. Valuation of assets is the

vendors who may have offered responsibility of management
price B. The auditor can rely on a
to manager purchases certificate issued by an
authorized
D. Any of these
valuationer as to the valuation of
Answer: D.Any of these
assets in the balance sheet
C. The auditor should value the
true with regard to verification
asset as per generally accepted
of assets?
accounting principle
A. It invoices substantiation of
D. Valuation is no part of auditor’s
occurrence of transactions
duty
B. Its objective is to establish
Answer: C.The auditor should
existence, ownership, possession,
value the asset as per generally
valuation and disclosure of assets
accepted
C. The auditor has to form an
accounting principle
opinion on different aspects
166. An auditor is verifying
D. All are true
valuation of building which has
Answer: A.It invoices substantiation been
of occurrence of transactions
self constructed by the client.
165. Which of the following Which of the following
statements is not true? documents is
least relevant to the auditor for unrecorded sale of plant and

verification purposes? machinery. Which of the
following
A. Bills of contractor
audit procedures may be adopted to
B. Minutes of meeting of board of
discover it?
directors
A. Examination of property tax files
C. Certificates of engineer and
architect B. Inquiry of plant manager
D. Loan agreement C. Examination of debits to

accumulated depreciation
Answer: B.Minutes of meeting of
board of directors D. All of the above
167. Which of the following assets is Answer: D.All of the above

least likely to be subjected to 169. The auditor has noticed
lien? existence of recurring losses sale
of
A. Freehold land
fixed assets this indicates
B. Plant and machinery
A. Depreciation charges are
C. Leasehold property
insufficient
D. Motor vehicles
B. Policy of sale or disposal of fixed
Answer: C.Leasehold property
assets needs to be reviewed
168. An analysis of fixed assets
C. The sale of assets have not been
account has revealed possibility
properly authorized
of
D. Accounting errors C. Write it in letter of weakness
Answer: A.Depreciation charges are D. Both (b) and (c)

insufficient Answer: D.Both (b) and (c)
170. Which of the following 172. While verifying intangible
financial statements assertions assets, an auditor would
are
recomputed amortization charges
addressed by testing the cut off for and determines whether
plant asset addition?
amortization period is reasonable.
A. Existence and ownership The auditor tries to establish
B. Valuation and disclosure ….by doing it
C. Possession and ownership A. Valuation
D. Completeness and valuation B. Existence
Answer: D.Completeness and C. Disclosure
valuation
D. Possession
171. The auditor while verifying
Answer: A.Valuation
prepaid insurance has concluded
173. When auditing prepaid
that there is inadequate insurance
insurance, an auditor discovers
of building, He should__
that
A. Modify his audit report
the insurance policy bond on
B. Insist it should be disclosed in the building is not available for
notes to financial statements
inspection. This may indicate__
A. No insurance has been 175. Which of the following would

undertaken for building give the assurance that debtors
B. Lien on building mentioned on the date of balance

sheet actually exist?
C. Insurance premium has not been
paid A. Sending debtor’s confirmation
letters
D. Insurance premium paid but not
recorded B. Reviewing subsequent collection
Answer: B.Lien on building C. Verify debtors against sales

document
174. Which of the following controls
would ensure that securities D. Both (a) and (b)
are not lost,stolen or diverted? Answer: D.Both (a) and (b)
A. Establish physical barriers over 176. Tests of control are not

investment securities concerned with_
B. Maintain files of authorized A. Existence of controls

signatures B. Effectiveness of controls
C. Segregate investment approval C. Continuity of controls
from accounting and from
D. Designing of controls
custody of
Answer: D.Designing of controls
securities
177. The sequence of steps in the
D. All of the above
auditor’s consideration of
Answer: D.All of the above
internal control is as follows –
A. Obtain an understanding, design control, design substantive

substantive test, perform tests of procedures.
control, and make a preliminary 178. Which of the following is not

assessment of control risk an inherent limitation of
B. Design substantive tests, obtain internal control system?

an understanding, perform tests A. Management override
of
B. Collusion among employees
control, and make a preliminary
C. Inefficiency of internal auditor
assessment of control risk
D. Abuse of authority
C. Obtain an understanding, make
a preliminary assessment of Answer: C.Inefficiency of internal
control auditor
risk, perform tests of control, design 179. An auditor should study and
substantive procedures. evaluate internal controls to
D. Perform tests of control, obtain A. Determine whether assets are

and understanding, make a safeguarded
preliminary assessment of control B. Suggest improvements in

risk, design internal control
Answer: C.Obtain an C. Plan audit procedures

understanding, make a D. Express and opinion
preliminary assessment
Answer: C.Plan audit procedures
of control risk, perform tests of
180. The primary purpose of
performing tests of control is to conclusions
provide reasonable assurance that_ 182. The overall attitude and

awareness of an entity’s board of
A. There are no material
misstatements due to fraud or directors concerning the
error in importance of internal control is
financial statement reflected in
B. Accounting system is well A. Accounting controls

documented B. Control environment
C. Written evidence is there to C. Control procedures
support transactions
D. Supervision
D. if internal control is effective
Answer: B.Control environment
Answer: D.if internal control is
183. Which of the following are
effective
included in test of control?
181. If the auditor assesses control
A. Reperformance and observation
risk as high….
B. Inquiry and analytical
A. Document the conclusions
procedures
B. Documents the reasons along
C. Comparison and conformation
with conclusions
D. Inspection and verification
C. Perform tests of control
Answer: A. Reperformance and
D. Perform walk through tests
observation
Answer: A.Document the
184. Control risk is assessed at auditor, of an entity’s internal
A. Overall financial statements level control system is a graphic

representation that depicts the
B. Fraud risk factor level
auditor’s.
C. Financial statement assertion
level A. Understanding of the system
D. Control environment level B. Understanding of fraud risk

factors
Answer: C.Financial statement
assertion level C. Documentation of assessment of
control risk
185. An auditor assesses control risk
because it D. Both (a) and (c)
A. Affects the audit risk Answer: A.Understanding of the

system
B. Affects the level of detection risk
that auditor may accept 187. The performance of tests of
control is documented in
C. Helps him to fix materiality level
for each financial assertion A. Audit programme
D. Is directly related to inherent B. Flow charts

risk C. Working papers
Answer: B.Affects the level of D. Any of the above
detection risk that auditor may
Answer: C.Working papers
accept
188. The independence of an
186. A flow chart, made by the
internal auditor will most likely
be auditor’s work
assured if he reports to the B. Examine the system of

supervising review and
A. President Finance
documentation of
B. President System
internal auditor’s work
C. Managing Director
C. Adequacy of related audit
D. CEO
programme
Answer: C.Managing Director
D. all of the above
189. In comparison to the
Answer: D.all of the above
independent auditor, an internal
191. Proper segregation of duties
auditor is more likely to be
reduces the opportunities in
concerned with
which a person would both
A. Cost accounting system
A. Establish controls and executes
B. Internal control system
them
C. Legal compliance
B. Records cash receipts and cash
D. Accounting system payments
Answer: B.Internal control system C. Perpetuate errors and frauds
190. When an independent auditor and conceals them
relies on the work of an D. Record the transaction in
internal auditor, he or she should journal and ledger
A. Examine the scope of internal Answer: C.Perpetuate errors and

frauds and conceals them defraud, usually, tries to keep

bank and
192. Analytical procedures are least
likely to be use in the audit of book amounts in daily agreement so
that a bank reconciliation will
–
not
A. Cash balance
detect the irregularity.
B. Investments
Answer: C.If same individual
C. Bills receivables
maintains cash receipts and cash
D. Debtors
payments teeming and lading is
Answer: A.Cash balance likely to exist
193. Which of the following 194. The balance of cash in often

statements is not true with between one to five percent of
regard to
total assets. Tickthe most
teeming and lading ? appropriate statement with
A. It results in the deliberate regard to

misappropriation of cash verification of cash in context of this
receipts
A. Cash in always material as
B. It is associated with cash receipts materiality is qualitative concept
C. If same individual maintains B. No audit of cash is needed when,

cash receipts and cash payments in auditor’s opinion, cash is
teeming and lading is likely to exist immaterial. Materiality is a relative
D. To conceal the shortage, the concept

C. The cash balance need only be Answer: C.Ensure postage and

audited if the balance is in revenue stamps are not counted
overdraft in
D. Cash is to be verified if control physical count

risk is assessed as high 196. Which of the following
Answer: A.Cash in always material statement is not true regard to
as materiality is qualitative auditor’s attendance at stock
concept taking?
195. When counting cash on hand A. Auditor should attend physical

the auditor should ___ stock taking only if inventory is
A. Ensure presence of somebody material

from management B. Auditor may not attend physical
B. Obtain a receipt from custodian verification of stock by
as to its return management, if he does not find it
C. Ensure postage and revenue appropriate to rely on it
stamps are not counted in C. If inventory is material, even
physical when the auditor is not placing
count reliance on the physical verification
D. Temporary advances to by the management, he should
employees are counted to attend it
calculate balance
D. The primary objective of an
of cash in hand
auditor’s observation of an B. Sales returns

entity’s C. Goods with consignor
observation of an entity’s stock take D. Purchase discounts
is to obtain direct knowledge
Answer: B.Sales returns
that
198. Inspection report/receiving
the stock and has been property
report supports entries in
counted
A. Sales book and sales return book
Answer: C.If inventory is material,
even when the auditor is not B. Purchase book and sales return
book
placing reliance on the physical
verification by the management, C. Cash book and purchase book
he D. Sales book and purchase return
should attend it book
197. While observing a client’s Answer: B.Purchase book and sales

annual physical inventory, an return book
auditor conducted tescounts for 199. ……………….. Starts where

certain test counts were higher …………….. Ends
than the recorded quantities in the A. Accounting, auditing

client’s perpetual records. B. Auditing, accounting
This situation could be the result of C. Vouching, auditing
the client’s failure to record –
D. Accounting,vouching
A. Purchase returns
Answer: B.Auditing, accounting
200. ………… means “proving the

truth or confirmation”
A. Vouching
B. Verification
C. Inspection
D. Auditing
Answer: B.Verification
201. Civil liability of an auditor

implies liability for
A. misappropriation of cash
B. misappropriation of goods

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A.

1. Various types of quality audits B. quality

D. registration (certification) plays a role that contributes to its

E) All of above success.

A. the client, the auditor, and the

(2) involves a suitability audit of the 6. Audit standards and reference

the selected reference standard. 7. Determination of proper

2. Characteristics of audit A. True

3. Identification of involved parties: B. False

party 8. Audit is a fact-finding process

5. Critical nonconformities and ………………….

A. specified standards and plans B. False

B. expected results 11. Who among the following can be

only report non-conformances and Answer: B

B. preparing the final accounts. only.

C. examination of books, accounts, C. private limited company only.

A. to the shareholders. _________.

B. to the court. A. Error of commission

C. to the bank. B. Error of omission.

D. to the general public. C. Compensating error.

15. Sale of land is a __________. D. Error of principle.

A. revenue receipt. 18. Verification of the value of

D. Partial audit. 22. The auditor of a government

is known as vouching of ______. A. the government company itself.

A. Personal ledger. B. the central government.

B. Impersonal ledger. C. the share holders.

C. Cash D. the debenture holders.

D. Sales 23. The main object of the audit of

A. fictitious asset. B. to know that all receipts and

D. Income statement audit. A. the memorandum of association

and articles of association. A. to discover errors and frauds.

B. the share transfer register. B. to prevent errors and frauds.

C. the issue of debenture. C. to verify statements.

D. none of the above. D. all the above

25. The work of one clerk is 28. Share may be issued

26. The owners of the company are A. Civil

27. The main objects of A. Cost accountant.

C. ICWA fill the

D. need not possess any professional vacancy.

A. board of directors. based on __________.

B. managing director. A. related party purchases.

C. general meeting. B. related party sales.

D. central government. C. the restatement of sales.

33. When at an annual general D. omission of a sales transaction

36. The use of an audit engagement C. inform management about it.

industry expertise of the business D. Statutory audit.

B. obtain knowledge of matters that A. assets

accounts where appropriate. oversights.

D. all of the above. D. It helps to accumulate evidence

D. the auditor and his audit another client on similar issues.

would most be affected by ___________.

C. Auditor qualification. B. within one month of the

A. a general meeting. B. The shareholders are authorized

A. the C & AG. C. be heard at the meeting.

B. the shareholders. D. speak as a member of the

53. Which of the following foreign branches of the company.

statement is not correct A. unlimited liability.

A. propriety audit. related to assessed level of control

C. audit of receipts. B. Disproportionately