= CHAPTER 1: INTRODUC LION 10 AUSIT Qs. Multiple Choice Questions Financial statements need not to be prepared in accordance with: 4). Relevant statutory requirements b) Accounting standards issued by the Institute of Chartered Accountants of india 6) Guidance Notes issued by the Institute of Chartered Accountants of India 4) Internal polcies laid down by the management of the company. W the financial statements are prepared in accordance with the required financial reporting framework, the 2 auditor yives 29 opinion that the financial statements. a) Auereiable and dependable b) Arecorrect and fair_¢) Gea true and fairview" d) Are perfectly right. 3. The tern “General Purpose Financial Statements” never includes. a) Aeash tion stateren 1d explanatory notes which form part thereof bh) Staternents a 1). Statement from the accountant of the company. and information based on such staternents. €) Supplerrentary schedut 4. Which of the following errors is an error of principle? 2), Repairs to vehicle have been debited to Motor Car Account sen recorded 25 Rs. 24324 to Motor Car Account by). Sale of Pi. 23,342 has & ©) Repairs to wericle have been cre: ) None of these Which of the following errors will affect the Trial Balance? 2). Installation charges paic on new machinery have been debited to Repairs Account. bb) The total of sales journal is Rs.21,000 short €) Repairs to building have been capitalized and debited to Building A/c. €) None of these 6. The total of Purchase Book was not posted to the ledger. This i 'b) Error of Princip ©) Error of Commission €) None of the above a) Error of Omission Sales to SRK of Rs.12311 pasted to his account as Rs.13211, This is 2) Error of Principle) Error of Commission €) Error of Omission €) None of the above Goods of value of Rs.2311 were returned by SRK and were taken into stock on the same date but ne entry was made in the books. This is a) Error of Omission B) Error of Principle ¢) Error of Commission _¢) None of the above is basically responsible for prevention and detection of errors and fraud. (2) Company Secretary (2) Accountant (©) Management (¢) Auditor 10. Which of the following is incorrect about opinion on financial statements? a) His opinion is no indication to future viabilty of business. 1b) The auditor should express as opinion on financial statements. ©) Hels responsibic for detection and prevention of frauds and errors in financial statements, ee-Tiely Voinpieton of 3. Routine checking 4: [Hap hazard selection 5] system of internal conival - cr (Answers: Td TT 3. Fillin the blanks with appropriate word 4 Test checking involves an element of 2. The sampies should be selected on a basis. 3 {iak' the probobiity that the auctor may arrive at a different conclusion had he audited the entire population instead of the sample. 4. Under the method, samples are selected using a constant interval between two sample. Under ailitems in the population have equal change of selection, 6 The 2 internal controlhas an influence on the nature, timing and extent of audit procedures tobe applied by the suitor. 2 The is Fesporsible for setting up and operating the internal control system, 8. The internal audit reports help the {0 understand the various issues related company. means to sclect and examine areprosentative sample from a large number similar iter ‘The auditor needs to consider whether errorsin the population might eneee the Answers: - eee eee See = a 1. surprise 2random 13. sampling [gr ystemateeeccnan Tees | S-etfecuveness | 7. managerent 1 8 stotuoryoudtor st check ts. 10. tolerable ext oF yO al Q4, State with reasons whether following statements are true or false, {The auuitor uses is nclgement while deciding the entent of test cecking. 2. Test checking helps to reduce work load and completa the audit inton 3. Detection of errors and frauds may become citfcult f test checking sopplee 4 & The sample for test chock must be selected on arandom boee (iter saeriom selection metho for selecting sample, the BudkOr Selects the sample in a haphazard & Expected erroris the maximum error that the auditor would be wing to accept 7 The auctor may face the sampling rk of under relance winen the auditor cari’ Out test of control or compliance procedures The auditor has to only note the weakness of intern controls for his refeconce 2. Theintemal auctor should not ideally be involvedin any executive functeys Ht the ofganization fo. The auditor has to consiger the nature and volun ofthe business wile devin the compe ore Answers: Troe: 1,254,749, 10. 3. Fae: Is possible that some important areas may Yo Unaudited and errors may not be detected as al the {transactions are not covered in test checking, Frere uptct random selection method, auetor selects sample on a raniom bats. Each item in the Population has an equal chance of getting selected. 6. False: Tolerable error isthe maximum error that the auditor would be wiling to accept 8. False: The auditor should communicate in w control system. ing to the management the material wepaness in the intemal1d) He touts verity if recognized accounting principles have been followed. -_ As per SA 240, if auditor detects an errors then 2) He should communicate it to the shareholders. 1b) He should submit nis resignation. ©The auaitor should ensue financial statements are adjusted for detected esrors ) He should call a meeting of board of directors. 12, Which of the following is nota limitation of audit as per SA 240? 2) Anausitor cannotrely upon experts. ¢) Audit evidence is not conclusive, b) Auditor cannot aiscover all frauds 4) Auditor cannot audit ail transactions, 13. The risk of fraud increases when (9) The sie of the company is very big, (b) Auditors remain the same for many years. (c) There are many people in the accounts department, (¢) Management isin the hands of a single person. 14. Audit of banks is an example of ~ (2) Statutory audit (b)Bolance sheet aucit (c)tnternal Audit (¢) Allof the above a § 2 ea een oon 'b) SA 320 deais with materiality a eo ity? Answers: ud [ae xe [aa [5b ba [7b we [ne oa ind l Q2-Fill in the blanks, audit is Suitable when number of transactions is very 1 2 audit means an audit at regular intervals throughout the accounting yea 3 ‘audit means an audit taker up after the end of the accounting year. 4 SA deals with the concept of materiality 5. SA ideals with the concept of going concern, 6. Audit of company is __ audit a refers to presentation of accounts ina way that it shows a better positional than the actual position. 18, Public Limited Companies listed on the stock exchange have to declare their results on a quater basis. 9. The primary object of an auuit isto enable the auditor to express an audit is the most common type of audit. 2, Continuous [4320 Gi statutory 7.Window dressing | 8. quarterly La. opinion 10. Final [ Q. Match the following columns: [Column a Column 8CHAPTER 4: VOUCHING OF INCOME AND EXPENDITURE QJ. Multiple Choice Questions ~ Select the appropriate option and rewrite the following sentences: 1. Which of the following is an importance of vouching? (2) Ensures all items are disclosed in the financial statement as per Schedule VI provisions (0) Itheips to verify whether entries are passed as per acceptable accounting principles. (Helps in detection and prevention of errors & frauds (d) All the above Checking the head of account debited or credited during vouching helps the auditor to (2) Detect errors of principle (b) Check whether accounting is proper. (Find errors of commission (©)Allof the above Which of the point is not to be considered while checking a voucher? (@)Nome of perty (©) Seria number of voucher (©) Credit period of payment (d) Accounting entey Which of the following can be accepted as a supporting document? (2) Invoice /Chollan (b) Debit nove/ Credit note. (c) Emailsjletters, (d) All of the above. Checking the date of voucher on the voucher during vouching mainly helps the auditor to obtain evidence that. (9) The transaction relates to current year. (b) The transaction has taken place. (©) Tre transaction fs genuine, (¢) The transaction is lego. 6. While verifying recovery of bad debts, the auditor has to check (2) Whether the amount was actually written off in some previous year (®) The source of income of the debtor (c) Thot the debtor has returned the entire amount written off (A)Allof the above, 2 The auditor doos not have to check the following while auditing salaries or wages: ©) Calculation of the salary (D) Whether the calculation was verified by department heads (©) wheter dues lio PF, PT, TOS have bean deducted and deposited (@) Payment has been made to all the employees on first of the month 8 Checking the date of entry of voucher in the books mainly helps auditor to obtain evidence that: (a) Entry was made on the same day as that of the voucher. (b) Entries are passed on a daily basis () The vouchers are filied every day. (©) No vouchers are missing n order to aut petty cash expenses, the auditor has to check (0) Petty cash register (b) Inteal controls _(c) Reconciiation of petty cash register and cash book (AIO the above. 10. In case of sales return, the auditor should check. (a) Crecit notes and delivery challans. (0) Whether cash has been repaid ta the cient (©) Purchase invoices and goods received notes. (4) Credit notes and goods received notes:SSsGamiigtte dicate [Gy vatontay Aad Meetings eof expres ipa cipal | (2) Window Drawing | 3. Sales transaction not recorded at all (c) Kingston Cotton Mills Case {enteral Aud (@) Portal omission 5 Expeme booked twice (€) Error of principle 6 tncentonol mistake (Derr of duplication |. Going concem assumptionis appropriate (@) Unquaiied repor (0) Two sides errors Fraud OCompiete omission Q4- State whether true oF fase, sfving reasons i 1 Itis not the objective of the aucit to give an opinion on the future prospect of business. 2 Aunqualfied audit report means that the business will be profitable in future 3 Error of duplication causes difference inthe tril balance. 4. Ifthe amount is postediin the wrong account or ts written on the wrong side of an account, fis called as an estor of commission. 5. Asocrat reserve i legally slowed to be crested by banks. 6. Balance sheet Audit doos not involve an examination of the various items inthe Profit and Loss Account. 7. Auditing of accounts is compulsory in a sole proprietorship firm. 8. The aucitor must not disclose any information accuired by him in the course of his work without the written Permission of the institute of Chartered Accountant of India 9. The opinion of the auditor should be unbiased and independent. 10. Window dressing can be done by overstatement of assets and understatement of liabilities 1. The auditor should act Ike a bloodhound and not a watchdog. 12, Interim audit ef a company is compulsory under the Companies Act, 1956. Answers: True: 14.5,9.10. 2 False; According to SA 200, itis not the objective of the audit to give an opinion on the future prospects of business. Therefore, even if audit report isan unqualified audit report, does not indicate whether the business will continue to be profitabie in future. False; Difference in trial balance can be caused only by one-sided error Ike error of partial omission, error of Posting and casting, Error of duplication isa two ~ sided error. Hence, it does not cause difference in the Trial Balance. 6, False; Balance sheet Audit involves examination of significant items which affect the balance sheet. It is not 3 routine aucit in which allitems of financial staternents are audited. 7 False; There is no law specifically governing a sole proprietorship firm and no other law makes the audit of sole proprietorship firms compulsory. Hence, itis not compulsory. 8. False; As per SA 200, the auditor must not disclose any information acquired by him in the course of his work to ‘any third party. However, he may disclose information to @ third party only with consent of the ausitee. He ‘need not consult the Institute of Chartered Accountants of incla. '1. False; The auditor should act like a watchdog and not a bloodhound, '2, False; Interim audit is conducted between the annual audits. Annual audits are compulsory under the Companies Act, 1956, However, interim audit isnot compulsory.Ui ills Robins + meant comparing the entries in books of accounts with documentary evidence in support thereok 2. Incase of foreign travel, approval has to be obtained as i involves foreign exchange. 3. While avciting interest expense, the auditor has (o ensure Ut the name of ‘on the loan agreement is that of the aucitee. 4. Incase, interests received net of TDS, interest should be recorded in the books at. 5. Companies are required to maintain accounts 2s per 6. Thepayee should sign ona stamp, ifthe payment exceeds Rs.5,000/-. Answers: ([icVoueting [3-8 3. Match the following columns ie Vfowmat 6. Revenve “[usborroner [a groavabe [s.revised sche {Column [oturnn 8 — | trporance fveuching (@) To be” dacioned under “Rovere Wom 2.Authorieation operations” 5. Sales (©) Points to be considered while checking |g: ncome from investments voucher $5: Cash payment exceeding Rs.5000 (© Signature of payee on revenue stomp | 6 Traveling expenses in orsign currency | (4) Saretion from Rel | {Proper xecounting {@) Tobe dsclosed under “Other income” 7_[zb Iss [ag Tee = (4, State whether True oF False, giving reasons, in briat When the goods are sent to an agent on consignment basi, sales should be booked when the goods are actually sold by the consignee. (Checking the date on the supporting documents isnot atallimportant: ‘Auditor should ensure that the value of goods returned disclosed separately in the profit and loss account. ‘The amount mentioned on the voucher has to match with the @Tiount in supporting documents and iso the books of accounts. Hf taxis deducted at source (10S) from interest, auditor should see that interest is shown in the account net of Tos, 6. The autor should reconcile the sales register anc’ stack register to ensure that the goods sold are actually removed trom the godown, 3. Im case of rent income, the sare has tobe disclosed as a “operating income”: 8. Every voucher need not be authorized. While vouching dividend received, the auditor has to verify the schedule of investments, o 40. Auditor should ensure that remuneration to directors is disclosed separately Answers: True: 14,6,55 10 2. False: ICs important to verify the date mentioned on the voucher as i helps in identifying whether the payment ‘made actually pertains to that financial year. 3. False: Salas figure should appear at gross sales less returns. Thus, returns should be directly reduced from gross Sales. enced not be disclosed saparataly inthe profit and loss account. 5: False; Interest amount is alwys to be shown at gross amount. TDS deducted should be separately shown in books of accounts. 7. Faise; Rent income has to disclosed as “non-operating” income, 8. False; Every voucher has to be authorized by a senior person who has the power to authorize the expenditures in the organization.SS) CHAPTER 5: VERIFICATION UF ADDEID ANU LinDILITIES Q)- Multiple Choice Questions ~ Select the appropriate option and rewrite the following sentenc 1 Verification of assets & labiltis is done to.confirm the following: (a) Asset exists on the balance sheet date (D)Asset is legally owned by the company (©) Company nas recorded al assetsand lables (4) Allof the above. 2. Which ofthe following is nota technique of verification: (a) Inspection (b) Observation (¢) Counting (@)Confirmation patents, the auditor has ensure that (a) Oumnership of the patent ie with the audicee (©) The patent is valued properly in the balance sheet (d)Allof the above (b) The patents registered in the name of the auditee 4. Closing stock with consignee is to be shown as the assets of (2) The consignor (b)The consignee _(c) Boththeabove (d) Not tobe shown as stock 5+ Prior period Expenses are (2) Expenses of the current year paid innext year _(b) Expenses of the previous year paidin current year (©) Expenses of the previous year paid in previous year (4) Expenses of the current year paid in previous year 6. While verifying bad debts, the auditor has to ensure that (2) The amount of bad debts has been property authorized by concemed official (b) The debtor has written off the amount payable nhis books (<) The debtor has turned insolvent (@) None of the above. x involves depositing the ttle deeds of the property with the lender as security. GP Equitable mortyage (b) Pledge —_(¢) Hypothecation of goods (@) Mortgage B. An auditor is verifying valuation of investment in shares. Which is of the following document is not required by the auditor? (a) Report from the accountant (0) Valuation statement (original copy of the share certificate (4) All of the above 19. Which of the following procedures need not be followed for verification of outstanding expenses? (2) Preparelist of recurring expenses _(b) Verify payment of outstanding expenses (© Ledger Scrutiny (@) Ensuring that the payment is made by cheque 10. Which of the following assets cannot be subject to physical verification? (2) Debtors (b) Machinery (<) Loosetools_(¢) Land Answers: CO PO) 30 [4@ [se [6@ [7@ 18 @ [@[.@) | I (Qu. Fill in the blanks 1 Verification involves obtaining and examining evidence in respect of an item of or 2. The purpose of verification is to confirm the ownership, recording, existence and‘CHAPTER 3: AUDITING TECHNIQUES AND INTERNAL AUDIT {Q4. Multiple Choice Questions - Select the appropriate option and rewrite the following sentences: The following is not an usefulness of internal audit to the management a) Legal complionceis checked) Assets are safeguarded c)Saves time during statutory audit d) Various areas ae covered 2. Which of the following is an objective of internal audit: 4) Ersure proper accounting controls Detection and prevention of errors and frauds €) Physical verification of assets 4d) All ofthe above. 3. Which of the following is not a duty of the auditor with regards ta internal checks: 2) Reporting under CARO >) Communicating weakness to management €) Understand the system 4) check actual application of intemal checks 4. Which of the following isnot a limitation of internal control a) Leads to high cost b) Reduces work of statutory auditor €) Prone te human error 4) Misused by management 15, Which of theseis a sampling risk: 2a) Risk of under reliance ) Risk of over retance ©) Risk ofincorrect acceptance __-d) Allof tie above 6. Which of theseis nota factor determining sample size 2) Sampling error by Time avallabiity ) Availabilty of aucitstatt {Nature anc volume of business 7. Which of the following is method of sample selection: a) Random selection ) Group selection €) Complete selection 4) Automatic selection 8. Internal Auditor is appointed by 1) the management b) the government ¢) Theststutory auditor 1d) the shareholders 9. Which ofthe following sa disadvantage of test checking: 2) Auct staff may take smal sample) Detal checking snot done ¢) Detection of errors may be difficult. d) Allof the above 10. Which of the followings not an example of test check a) Vouching a sales except month of ne b) Serutinicng eccounts of enly major debtors, €) Vouching expenses only sbave Re 3000 4) Al of the above answers: (so, Tze) 2@__[3.@) [a0 5.0 6 © [7.@ 20.() | L 2. Match the folio [—Tempa 1 | Test checkext year, wherein assets are recorded proceaures ensure separ scurry! werisenuuns ur wie cunrein Fea tu ‘4. Venficavon results in physical verification of assets. This helps in avoiding but not actvally avaiable. 5. Mortgage means a ‘on immovable property to secure 2 debt 6 The auditor may observe the ‘of assats being done by others. 2. The auditor should encure if any even has happened after the the asset. 8 Trademarks can either be (or purchased. 9. tne balanceis a cedtor's account isa creat balance, it indicates that 1. Debentures are to be shown under Non-Curren lablties under the head date which has affected the valve of are more than sates. Answers: F.balance sheet | 8.self generated | 9.recebis {be inspection 5: Match he following columns: Foun Givin —_] (i. Method ofvaluaton | (@) Confirmation "| 2- Technique of vertcation (@)Inspecton | 3: Debtors | © Avoids raves | | 4. Advantage of verification (2) counting | 5: Main purpose of verifiation Ge) Avoids wrong accounting (Assets ore owned, recerded, eis and dsdesed. | (g)Saie method | (e) Replacement method co z= Be sa [ee a] 4. State whether True of False, giving reasons, in brief 1 Verification involves obtaining and examining evicence in respect of an asset and lability 2. The auditor is not at al concemmed about the events after the date of the balance sheet. 3+ Ifthe stock is understated the profits and assets will be understated. 4. There isno need to verity cash at bank and the auditor can rely on the bank statements given by the con pary, 5. Patents should be written off over their legal period of valiaity or their working life, whichever is shorter. 6. No depreciation can be claimed in respect of free hold land, 2. Trademarks can only be self-generated. 8. Scrap method is one of the methods of valuation of assets, 9. The company can change the method of valuation as pee its wish. to. itis necessary for the auctor to scrutinize the ledgers of each asset and ability. Answers: Trueet 5,51 648) 10. 2. False: The auditor has to also check if there has been any event after the date of the balance sheet wich has affected the value of assets or liability. 4. False: The auditor should call for confirmation of account balances directly from the bank as Of the balance disclosed in the books. 7. False: Trademarks can be self-generated or they can also be purchased from a third party. ‘9. False: There should be consistency in the method of valuation. If there is a change in method, then the basis for ‘such a change should be justified. the best proofpowers oo wostantie [auditor ‘7 Scardhmetcal | @ procedures 15. compliance] | tod wbrtantive | [ead caniaiaisod la permanent 9. Inspection *0. Inquiry 1 Lprogramme | ps od Qs. Match the following, columns ‘column A a column _— Oo sanalytical review 2) Substantive precedure ~ 2 Audt working popers b)Aude Procedure 3 Audt notebook Recording queries and replies eece'ved 4 Verification {€) Nature, taning and extent of sucit procedures Audit Programme ©) Property of the autor 1) Avait Techovque a | ecopy waudtee “ Ammer it f 2-6 ano sd Q4- State whether True oF False, giving reasons, inbrict: 1 Aut plans once developed cannot be revised during the course ofthe audit 2. The auditor need not check whether his appointment i in order or not. He can beige his work once the manayement 3. The auditor should ebtain sutficent knowledize about the cient’ business before conwnencing thes 4. The auditor must consider the areas covered by terra auditors while developing, an over al aut pian 5 Acopy of the audit working papers should ako be given tothe company for their rcierence 6. The act programme dows not contain the craton of the audit 2. The old audivor must hand over his working papers tothe new aUxhtOr appointed! in his pl 8 Am audit programme hele the auditor fy supervision and reve, 9. The auditor has to gather evidence abwut internal eontrobs 10. Inspection isa type of aeubt procedue Answers: True 3.4.8.9 1s False; Aut plans are basically developed before the commencement of audit, Homever, as necessary, it can be revised during the course of the audit 2. False; The auditor has to check whether his appointment tesohition approved in general meeting oF buard meeting as the case may t 4. False; An Audit Note Book is prepared by the auuit wsistants ty record their obser ‘uGit. The audit notebook is reviewed by the auditor on a periowic bass 5. False; Audit working papers are the property of the ausitor and hence they nec not b company. However, a copy of the audit working papers may be given, atthe option of the auctor if required 6. False; Audit programme contains the date of commencement of audit and the duration of the oud 2. False; Working papers are the property of the auditor. Therefore, it need not be shared with any other person, border OF not. He should obtain the copy of the on and queries during the However, it may be given to the new auditor at the option of old auditor. 10. False; nspectionis » type of audit technique.~ (CHAP IE ©: INIHODUCTION TU COMPANY AUDIT (1. Multiple choice questions 1. The reappointment of aucitors is done by (a)Institute of Chartered Accountants of India __(b) Sharcholdersin AGM, (Directors in Board Meeting (@) Allof the above toyetherin a special meeting 2. The statutory auditor of a company cannot bee (9) Body corporate ie.acompany _(b)Sole proprietorship firm (©) Partnership rm (o) Chartered accountant 3 The auditor of a Government company is appointed by — (e) The central Govt. (6) The Shareholders (0) The comptroller and Auditor General of india. (d) The Boord of Directors. 4 Inthe case ofa company in which net les than 55% of the subscribed share capitals held by any ofthe specified financial neittions. (2) The appointment of an autor shal be made by 9 general resolution. {©) Me appointment of an autor sha be made by 2 special rescltion (©) The appoirement of an autor sal be made by the shaehosdees (6) The appointment of an autor sal be approved by the central government. 5. Aperson cannot be appointed a¢ an auditor if heis (2)An employee of the company (©) Partner of an employee of the company (©) Guarantor of loan exceeding 8s. 1000 (©) Alo theabove. 6. Ifa casual vacancy in the office of auditor arises by his resignation it should only be filled by the company in a (@) Annual General meeting (b) Extraordinary general meeting («)General meeting (4) Board meeting 7. Therotiring auditor can (2) Make written representations. _(b) Gethsrepresentaton circulated. (© Be given a right to be heard (@)allof the above. 8. When the appointment of auditors is done by C&AG, the remuneration is fixed by (a)Auditor himself (6) Government —__(¢) Sharcholders (2) 800 ‘The remuneration of a company may not be fixed by the shareholders in case of () The first auditors (b) The auditors appointed in by re-appointment (@) The auditors appointed by central government (4) The auditor appointed in place of the retiring aucitors, 10, A firm of chartered accountant means (@) All partners are chartered accountants (b) All partners are practicing chartered accountancy (@)Al partners are practicingin india (@) Allof the above.‘CHAPTER 2; AUDIT PLANNING, PROCEDURES AND DOCUMENTATION Qi. Multiple Choice Questions ~ Select the appropriate option and rewrite the following sentences: ‘The following are benefits of audit planning (a) Appropriate attention ( allimportant areas _(b) Proper contol of aucit (© Proper allocation of work (@)Alof the above. 2. The auditor cannot get knowledge about clients business from (@Newspaper cuttings (©) internat aut reports (o)Minutes of meetings (2) Balance sheet of competitor » popersare the link between the client's records and the auditor's report. Devin (&) Working (©)Secret_ () News 4. Which of the following SA deals with Audit Planning? (@)5Asco—(W)SA300 (€)SAG20_—_(c) A270 5. The auditor has to consider the following while developing an overall audit plan {@) Terms of engagemen (@) Areas covered by internal auditors (©)Avaiiabilty of auat stat (@allthe above ©. Theauditor need not consider the following while developing an audit programme: (@) Tentative avait programme for next year (b) Client's nature of business (©)Retiance on internal controls (@) Availabilty of audit stoi, 7. Thefollowingis nota disadvantage of audit programme (2) Audi taf loses initiative (b) Easy escape for inelfcient audit staff (©) Auditee comes ta know the auditor's programme (4) Work becomes mechanical and monotonous Current file and permanent file are together known as (a) Audit programme (5) Audit documents. (c) Audit plan (d) Audit working papers Answers: _ _ [e-@ a= @) [5-©) i. 6-€) 12- (©) 2. Flin vie blanks: 1 Ledger srutinyis a audit procedure. 2. Working Papers are the property ofthe 3. Computation consists of checking the accuracy of accounting entries, 4 Audit ‘mean the steps taken to obtain auckt evidence. 5. Audit Procedures can be classified basically into procedures and procedures. ®. % 1s defined as a detailed plan of the audit work to be performed epecilying the procedures to be followed in verification of each item in the financial statements and giving an estimated time period. refers to any information obtained by the auditor that can help him te draw conclusions and ‘express opinion on financial statements, file contains papers of continuing importance. ‘Audit technique of Consists of examining records, documents or tangible assets. Audit technique of Consists of seeking information from other.Ee 3a tb 6 @) e-— Ss fe 1 J 2. Fillin the blanks 1 Apersonwho owesan amountexceecing Rs. cannot be appointed as statutory antor of the company. 2. A chartered secountantin cannot sign audit reports, 3. The termof appointment of any auditor shat be from the date of his appointment to the dake oF Whe i 4 For appointing a person other than the retiring auditor, a special naticw f such a resolution must be piven tothe onpenyeestbelorethe of son mteing Answers 1. 1000 2. full time employment: TT rt cH $F noe 3. Match the fllowing chars Coumaa ame 8 +. Disqualified from appointment | a) Officer of an employee of the company, — 2 bisquited om reapponument ) Mast be approved by Cental Government 3 Falure of sharchlderstoreappohtavdtor |) pressed ulingnes by anole wring | acconsalveconcycuavetncobercyofmudter | e)Spucal essai 5. Remuneration of udtor ©) Beardo! Decor | | fh mus veaslosed separately under Schedule eentt con pee ae TS (Q4 State whether True or False, giving reasons in br 1. A partnership firm whereof all the partners are Chartered Accounts practicing in Inia may be appointed as an auditor of a company. 2. Apartner of the director of the company cannot be appointed as the auditor of the company. 3. Asper the Companies Act, a chartered accountant cannot sign more than 35 audit reports. 44H there is a easual vacancy due to reasons like death, insulvency ete, the auditor is appointed by the central government '5. The frst aucitor, appointed by the board of directors, can be removed by the Board of Directors before the expiry Of his term, only ater obtaining the prior approval ofthe shareholders, 6. All ausitors have been appointed by way of special esol 7. Anaudtor must retire once he attains the age of 58 8, The retiring auctor can be present at the AGM but he has noright to be heard True:12.5 3. False: As per the Companies Act, 1956 a practicing chartered accountant cannot sign more than 20 aud reports 4. False: in case of casual vacancy in the office ofthe auditor due to feasons of death, insolvency «te, the auditor is appointed by the Board of Diectors in a Board Mecting,. 6. False: The auditors of @ company are generally appointed by way of an ordinary resolution. Appointment by way ‘of special resolution is required only winen more than 25% ofthe share capital is held sly of jinty by financial institutions of nationalized banks, 7. False: There is no age init for retirement of an auditor. An auditor need not retire even if he attains the age of 8. 4, False: The retiring auditor has the right to be heard at the AGM. He also has the right to make written representation.INTRI ‘ON _TO AubrTr! A. The main enjet ora eucit is by Detection and Prevention ef fraud and ere 4) Expreasion upton G bot a ane 1) Depends on the yp of audit. 2, ‘he tt of AAS? iesued by Coxne of ICAL ig ay Objecine aba Scope of he Financial Saterients 1) Oiypetive al Scope of the Atel ef Financial Statements fy Botea an seope o Bures of an ity gin not true about opiion on financial statements? 2. Which of the faow al The auditor should 1) tis opinion fr guaentee to Rature vailay of business 1 He is rsponsible fr detection and prevention of Faude eral errors in financial satcients 4) Me should examine whether recognised accounting principe have been conasetenly sale of Rs, 50.000 10 A was entered as a sale t0 8. This isan example of. 49) ror ofomiesen » b] Err of commission. e] Compensating etvor 0} Error er peincipe 5. “Goods sent on approval basis! have been recorded as “Cree Sls, This isan exarane of ‘} Errorfomicsion ey nor of duplication 2) Bror of principle 8) Ervor of commision 6 Which ofthe folowing statements ia not tn? ‘al Management Iraud is more dilficlt to detect than employee fraud 2 Internal control system reduces the possiblity of aecurtence of employee fraud and management fel 6] Thc auler's responsivity for tection and prevention errors and frauds i irae As por AAG- if auditor detects an err then = 8} He shoutd inform the management b) Ie should cosnimunicate tothe management i it is mo 1) The autor chould encure financial statements ore adjusie for detected estore Bota () and te B. Which ofthe flowing ie nots limitation of uel aa per ASA? 9) Objectivity of auditors juggment 2) Selective testing 1) Liniations of iternal canto gystem 6 Pemuasiveness of exiderne 9 Tow many principles ae listed in AAS-1 waleh povera auditors profesional obligation? 1 Pourteen Seve, a) giant Which of the a)Nine 40. Doth aveiting and accounting are eoncemed with financial statements following a} Audiling uses the theory of evidence to verify the fnarial information made available by Accountancy b) Audiing lends credibility dimension and quality dimension te the Maancial statements prepared by the accountant. {) Autor should have through knowledge of acco 1mm to express an epinion on financial statements, GLAlLot the above “The risieof management feaud increases in the presence of. ‘aj Frequent changes m supplies 1b) Improved intersal contsel system ©) Substantial increases in Sales 1} Management incentive aystem based on sales done in a quarter ing concepes and convertion to enable 1 MCQ’S QUESTION BANK IN AUDITING/814. 112. Auditing standards differ from audit procedures in 9) Audit assumptions v) acts to be pevionined el quality rievion d) mcthode of work 43. Which of the following factors likely to te identified as frvud factor by the auditor? Be company is planning a initial public ofer of qualty shates to aise additional capital br expansion, 2B) Banke veconciliation statement includes deposit ¢) Plant and machinery is sold ata loss, 4) The company tas made political conteiby 14. The most difficull type of misstatement to detect fraud is bascd on; ‘al Related party purchases 1b) Related party sales 0) The restatement of eales 4) Omission of 2 sales transaction from being recorded. A6-Which of the following statements is correct concerning the required documentation in workday papers of fraud risk assessment undertaken by the auditor A) All nak factors as mentioned in AAS-4, should be considered ard documented along with response to them ©) Document the identification of frau risk factors along with response to them «} Document material fraud, tisk factors and response to Liem, 4) No documentation in required 16.Which of the following is the most appropriate potential reaction of the auditor to his assestment that the nek of material misstatement due t0 fraud is, high in ration es existence of inventory? 8) Visit location on suaprise basis to observe test counts by Request inventory count at a date ciose to yearend! | Vouch goods sent on approval very earelully 4) Perform analytical procedures. ing is not likely to be a fraud risk factor relating to ma 17.Which of the followi wgerent’s ‘characteristics a) Tax evasion ») Failure to correct known weakness in internal controt system | Adoption of conservative accounting prine ples d) High management tumaver 418. Professional skepticism requires that the auditor assume that manageme 'a) reasonably honest 1) Neither honest nor dishor ©) Not necessarily honest 4) Dishonest unless proved utherwise 19. Which ef the following information should a successor auditor obtain during the inquiry of the predecessor auditor before accepting engagement? 4) Information about integrity of management i) Disagreement with management conceming auditing procedures i) Review of internal contrel eystemn, iv) Organisation structure 2) 6) and (i) >) (i) ant (i) 4) 8) and wy 4) i) and (ii 20.The audit engagement leter, generally, should include a reference to each ofthe folowing except mi b) responsibilities of management with respect to audit work 4) limitations of auditing clexpectation of receiving a written management mpresentation letter «dj a description of the auditor's metliod of sample selection, 21.The use of an audit engagement letter is the best method of assuring the auditor will have Which of the following? 8) Auditor will obtain suficient appropriate audit evidence +b) Management representation letter 6} Access 10 all books, accounts and vouche 4) Cooperation from other auditors MCQ'S QUESTION DANK INAUDITING/B 14g 18 required for audit purposesera LUN, 22. The use of an adie engagement Iter the best method of dacumentn, 3) the sequied!communieation ef significant deicenece is tnerea oko {significantly higher contol rink tan that atserced ane ) bac ie ‘changes in the orginal arrangements of the audi ay) and i) DIU) and (i ©) ian (i) Gi and Gn tudor wo accepts an audit but does not posscis the industry expense of the business entity should se al engage experts 2) obiain knowlege of matters that rel 4 inform managerce {o the nature of entity’s business ‘boutit take help of other auditors ser erein aeampertant clement in the evaluation of an audit Grm's system of quality control would relate to- ay tof audit assistants system of determining audit fees ©) consultation with experts, 4) confidentiality of client's information, 25. Tye primary Purpose of ctabishing qually contol policies and procedures for deciding on client evaluation is to- 4a] enoure adherence to generally accepted auditing standards 3 aecepiance or retention ofchonts whose management dies not lad integrity } ensure audit fes is charged according tothe type of audit work accigney 4) all of the above 26. Which ofthe following is not a quality control consideration on accepting new client? a) Availabilty of audit assiotante with necessary skill and competent b) Provision of other services to the client which may impair independence ¢) Predecessor auditor's advice as to whether audit ies tere paid protpay 4) Review of audit work done by one purtnee by the oiner 27. An auditor obtains tmowledge about a new cents business and its industry to 48) Make constructive suggestions conceming improveinents to te clients internal control system, ) Evaluate the appropriateness of audit evidence obtained 4} Under stand the events and transactions that may have an eflct on client's financial 4) All of the above CONCEPTS OF AUDITING 1. Audit of banks is an example of- a) Statutory audit Bj Balance shect audit, —_¢) Concurrent audit ) Both fal and (b)——_e} All of the above 2. Concurrent audit is a part of 4) Internal check system b) Continuous sudit ¢ Internal audit system) None 3, In India, balance sheet audit is synonymous to= a) Annual audit b)Continuows audit —¢} Detailed audit. —_g) Statutory audit 4. Audit in depth is synonymous for- a) Complete audit b) Completed audit) Final audit ©) Detailed audit 5. Balance sheet audit includes verification of. a) Assets ) Liabilities ©) Income and expense accounts where appropriated) All of the above MCQ'S QUESTION BANK IN AUDITING/B14__J. Which of the folowing statements fy rot true about continuous auc? © Site conducted at fegular inerval 1) Temay be carried out on daily basis G}itis needed when the organizaion has a good Internal control system af tie exponaive 7. Which of the following in not «fact of BPA? a) Economic auciit = +b) Efficiency audit ¢) Pxpenditure audit d) Effectiveness audit & The jowernmnent had constructed six bungalows for ite ministers. They are lying lunoceuphed for last three years. This would be a matter of concern for- 4) Propriety Auditor b) Performance Auditor) Finaicial Auditor d} None of the above 9 Financial audiivor is not concerned with propriety of business transactions. However, the ‘exceptions to this rule are contained for ouch of limited companies in. 29) Section 227 (IA) of the Companies Act, 1954 ) Section 227 WA) anid section 227 (4A) of the Act 0) CARO, 2003 ‘¢) Section 227 (1A) and CARO, 2009, 10.Balance sheet dows not inclu {9} Verification of assets and liabilities By Vouching of incoine and expense accounts related to assets and liabilities ©} Examination of adjusting and elosing entries 1) Routine checks L -Which of the following statements is not correct about materiality? ‘a Materiality 18 a relative concept 1) Matenality judgments involve both quaniiiative and qualitative judgments 6] Auditor's consideration of mnatenality ss influenced by the auditor's perception of th fof an informed decision maker who will tely on the finan G) At the planning state, the auditor considers materiality at the financial statement level only 32.....the audit risk... the materiality and ..-the audit effort 4) Lower, Higher, Lower bb Lower, Lower, Higher €) Higher, Lower, Lower 4) Lower, Ihigher, Higher 39. Whon issuing unqualified opinion, the auditor who evaustes the aut findings should be folisied that the 4) Aniount of known misstatement is documented in working popers 8) Estimates of the total kely misstatement fleas than tere level Estimate ofthe total likely" misstatement ie more tan manent eee 4) Estimates of the total kely mnisstatemsen eae be mes 24. tn detesinining the level of miterislity for an aud, what should not be considered? 2) Prior year's errors 1) The auditor's remuneration (0) Adjusted interim financial statements 6) Prior year’s financial 1S. Analytical procedures issued in the planning stage ofan audit, generally ‘) helps to determine the nature, timing und extent of oiler audit proceclares 2b) directs attention tw potential risk areas ¢/ indicates important aspects of busiiess 1) Alot the above 16-Which of the following statements is most closely associated with analytical proceelue applied st substantive stage? = Sn anche See a) Itheips 0 study relationship among belance shcet accounts bItheips to discover material misstatemente inthe nana tavements €] It helps to identity possible oversignis 1 ebelps to accumulate evidence supporting the vali ofa specific account balance MCQ’S QUESTION BANK IN AUDITING/B 14 4 eyFor ail audits of financial statements made in accordance with AAS-14, the use of analytical {the diseretion of the auditor in which stags? a7. ) Planning stage) Overall review staged) All of the above procedures i 2) Substantive testing 18, The basic assumption underlying the use of analytical procedures is = fy It helps the auditor to study relationship among elements of financial information 8) Relationship among :nown condition to the contrary ©) Analytical procedures will not be able to detect unusual relationships 4) None of the above. ‘data exist and continue in the absence of 19. What are analytical procedures? 'a) Substantive tests designed to assess control risk b) Substantive tests designed to evaluate the validity of manageinent’s representation eter ¢) Substantive tests designed to study relationships between financial and non-financial 4) All ofthe above 20.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 ©} Comparing the actual cosis with standard costs 4) 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 6) Prior year audited balance 4) Prior year audited balance adjusted for trends in the industry 22, What is the primary objective of anslytical 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 ¢) To direct attention to potential risk areas @) To satisfy doubts when questions arise about a client's ability to continue AUDIT EVIDENCE Of the following, which is the least persuasive type of audit evidence? 1 a) Bank statements obtained from the elicnt bj Documents obtained by auditor from third parties directly. c} Carbon copies of gales invoices inspected by the auditor 4d) Computations made by the auditor 2. Which of the following statements is, generally, correct about the reliability of audit evidence? {) To be reliable, evidence should conclusive rather than persuasive b) Effective internal control system provides reliable audit evidence ©) Evidence obtained from outside sources routed through the client d) All are correct. 3. 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 ‘) will increase proportionately when the auditor decreases the assessed level of control risk 4) may be test of transactions, test of balance and analytical procedures MCQ'S QUESTION BANK IN AUDITING/B14.10. ae a MCQ’S QUESTION BANK IN AUDITING/B 14 timing and extent of substantive procedures is related to assessed level of bj disproportionately cj directly 4) inversely owing factors 18 Most Important in deternuning the appropmations of suit Wrich of me evidence? as a) The seliabilty of audit evidence and its relevance in meeting the a rhe independence of t ycetive b) The obyectuvity and antegnty of the ¢) The quanuty of audit evidence source of evidence ai When is evidential matter, generally, considered 1 a) When it conshtutes entire pepnilaton by When it as chough to provide a basis for giving masonadle truthtuiness ©) When its objective and relevant 4d) When auditor collects and evaluates it independent Which of the fo 4) Minutes of meetines ©) Infurrnation gathered by auch hee tvation i) Worksheet stipjurting conscindated lineatn tal saver Which of the following statement true with respect h sites obtamed ay per ANS 0) Authenti sted copy of relevent 8 of mec ay be regarded as marageny Fepreseataten wits ~ 2 woth ott wr we : oa What would seen tre tel a) The auihivor« . m teal fact ue net U) The mad that thee b atest warn sacl a The auditor I sal d) Nome of tHe ate Which of the follwing affects ness fa) Risk of aver v6 . . 6) Mink of incartect anes pt What wi Fective . . ect accept x of suibcxanti uch a) The auc ascerta the . erect when sn actual fact bb) The auditor concludes the balance us uate whe tis aot €) The auditor has injected an sample whch was hut suppotted by docimen tar eviden d) He applies random samplin which ss anaceura sistent AUDIT PREPARATION Which of the following Audinng Assurance Standard deals w.th Audit Plancung? AAS Mas 3 a) AAS-7, DB) AASS. Audit programme is prepared by a) the auditor bj the chent 4) the auditor and his audit assistants dit assistants3. The working papers which auditor prepares for financial statements audit are a) evidence for audit conclusions b) owned by the elient (0) owned by the auditor 4) retained in auditor's office until a change in auditors 4. The quanuity of audit working papers complied on engagement would most be affected (6) management's integety by auditor's experience and professional judgineat 6) auditors qualification 6) cunteol risk 5. Which of the following best describes the primary purpose of audit pr a) To detect errors or fraud bb) To cenuply with GAAP ¢)To gather sulficient appropriate evidence ) To assess audit isk 6. Which of the following is pot an of working paper? . 1a) To provide 4 bustin for review o 1b) To provide a bunis for subsecp €) To ensure audit work i bring carried out a8 per 4d) To provide a guide for advising anather elent on similar sues s permanent working payer fle should not nora, sneide: 1b) paist years fan kal sta 7. The audi 8) extracts from chent’s bunk state its ce) attorney's letters For what minimum period should audit working papers be retained by auelt fren? 1a) For the lime penien! the entity renuuns a chentorthe audit frm bb) For a peried of tori years ind aunditor opines them to be useful in servieiny the elient ©) For a pe a eid the aust frm 69 existence 9. Which of the following factors wuuld least Hhely affect the quantity aud « of an aditor’s workin papers a) The assessed level of control sk b) The possibility of peer tevww ) The nature of wudiior’s report The ev He tepesentation fetter eHnIPA Us Neue Feyiadany. os audit's Wor knag peopers? wl by the air mont for thes auton repeat ob om hae prin ape 4) They help the auditor to nnansior the aaidst firm's qualty conteul f¢ understanding with respect ta pared by an auditor? riwrs wien they appear to be relevant to ment best describes 11.Which of the following sts ownership and custody of working pape ts p 8) The working payers may te ublaued by third j fssues raised a ) The sale custody of working papers is the respe 6) The working papers wiust be retained Uy an atalst fii bs d) Successor auditors may have access to wurkuny, papers of he predecessor auditors, The ehproval of clint i not recured sibihty of client, (kept at his premises Id inetude 12, The current file of the auditor's working papers, peneally, sho ‘aa flowchart of the internal contsois b) Orgarasation charts ) aecopy of financial statemenis pues of busid atl de tures 13. Knowledge of the entity's business does not help the auditor to- ‘a) reduce inherent tisk bj denufy problen ¢} evaluate reasonableness of estimates 4) evaluate appropriat sof GAAP, 24. he main advantage of using statistical surpling techniques is that such techniques s) mathematically measure Fink chiniate the need fo une al sare ¢] defines the values of tolerable error dj all of the thew. “ MCQ'S QUESTION BANK IN AUDITING/B14. 715.Which of the following methods of sample selection is least suitable for extrapolating results the population? a) Systematic sar pling b) Random sampling c| Haphazard sampling d) None 16.Which of the fllowing statements is correct? 'a) Lower the sampling risk greeter the sample size 5) Smaller the tolerable error, greater the sample size } Lower the expected eror, smaller the sample size 4) All are correct, 117. Which of the following features is most important for randow-based selection? 'a) Sample should be drawn form population 1b) Rreey strata of population shouild he represented in the sample ©) Every itetn in he population has an equal chance of being sciected in the sample 4) Keme chould be selected at ‘ath interval 18, Risk of under reliance ie the risk that the sample selected to test controls __ a) Does not support the auditor's planned assessed level of control risk when the true operating eflectveniees of the sontiol structace justifies auch dn assessment b) Supports the sucitor’s planned assessed level of contro) risk when the docs not warrant such relisner ¢}Is not supported by adequate decuments, 4) both a) & (e), ‘ual position 10. Which of the following factors is (are| considered in determining the sample size for teste of contres? 4) Projected error b) Tolerable error ) Expected error d) Both (b) and (2) 20. Tolerable ertor, is the maximum monetary error that the auditor is prepared to aceept in the population and sill conchude that audit objective has been achieved, is directly related to 2) Sample size Audit risk ‘9 Materiality ‘d) Expected error CAPTIAL AND REVENUE EXPENDITURE 1, Which of the fotowing expenses should not be treated as capital expenditure? 2) Bxpenses paid on installation of @ plant. 1) Cost ofdismantiing a building in case 2 new building is to be constructed on the land «) Legal expenses incurred to defend a suit related vo tlle of patent, ‘The suit has been lost 6) The fees paid to engineer who constructed the plant 2. Which of the following is not a revenue expense? 2) Cost ofraising a loan 1b) Cost ef accessories of motor vehicles spent at the time of purchase © Expenses incurred for laying of sewers on land purchased 49) Insurance premium paid atthe time of regisization of the ship 18. Depreciation does not arise forn a) effluxion of time by use {] obsolescence through technology be market changes <} reinatket expectation 4. Which of the following Schedule of the Companies Act, 1956 deals with depreciations? a) Schedule X1V_ 1) Schedule V 1 Sehedlule XIN «l) Schedule X S. Schedule XIV has prescribed rates of depreciation for double shift and triple shift working for which one ofthe following assets? a} Building 1) Plant and Machinery ¢) Furniture and fittings Ships 6. Ifthe book value ofan asset stands at... per cent ofthe original cost, company need no! Provide depreciation on it Se ona one ‘ a) two byniteen five ajten MCQ’S QUESTION BANK IN AUDITING/B 14 s‘A company has bought patents, Which of the following methods is most suitable for riding depreciation om therm? jean swov ©) Sumotyear cigits 6) Any ofthe above 8. Which of he following ina revere resewve? “apital redemption reserve 6) Debenture redemption reserve 2 bj Security premium account dl Capital reserve 9. Which of the following will not lead to creation of secret reserve? {) Undervaluation of elosing stock 'b) Charging capital expenditure to reverie ‘| Goods sent on consignment being shown as actual sales 4) Charging higher rates of deprecialion on fixed assets than actually required COMPANY AUDITOR ‘Who is responsibie for the appointment of statutory auditor ofa limited company 4) Directors of the company 9) Members of the company ¢) The Central Government 4) All of the above Which of the following sections deal with qualifications of the auditor ? 4) Section 226 (1) and section 226(2) bj Section 224 (1) and section 224 (2) 6} Section 226 (3) and section 226(4) 4) Section 224(3) Sec.224 3. Which ofthe following statement is not true? 4) A partnership firm can be appointed as a statutory auditor of limited company D) Appointment can be made in the name of the firm «) Majority of the pertners should be practicing in India 4) All partners should be chartered accountants [AS per the requirements of section 226(3| and 226(4} a person is disqualified from being ‘appointed as a statutory auditor if he hold: ‘a Equity shares or debentures of the company 1b Equity shares carrying voting of the company ¢) Shares carrying voling rights of the company. 4) Security carrying voting rights of the company ‘5. The board of directors shall appoint first auditor of a company 1a) With in one month of completion of capital subscription state of the company With in one month of the promotion of the company ¢) With in one month of the commencement of the business of the company dd) With in one month of incorporation of tie company The term of the auditor ship of frst auditor would be from the date of appointment till 6 4) the conclusion of statutory meeting ) the conclusion of first annual general meeting, «) the conclusion of next annual general meeting _d) the date of removal 7. In case the directions fail to appoint first auditor (3), the shareholders shall appoint them at....by passing. « resolution 4) 4 general necting 6) statutory meeting ) first annual general meeting, ¢) annual general meeting 8 Life Insurance Corporation of India bolus wenty five percent of subscribed capital of XYZ Ltd. The appointment of statutory auditor in XYZ Ltd. Would be by_ 7 2) ordinary rexolution special resolution «) Or) d) none of the above 9 ICICI prudential, a life insurance company. holds thirty l company, holds thirty-two percent of subscribed share capital of Delta id, The statutory auditor of Delta Lid. would be appointed by ‘#) ordinary resolution —b) Special resolution —“c) either of the above d) none MCQ'S QUESTION BANK IN AUDITING/B14. 910. Which of the following statement is not true regarding appointment of statutory auditor by ‘he Cena Goveenmnent? 1a) Such powers have been conferred upon it by section 224(2) 11 Ifa company fails (9 appoint an audiior at a general meeting 6) Han auditor teluses to eeccyl appuisiinent, the powers ol te Central Government cant be exercived 4 None of the above aor arises by his resjznation I should only be fed by 11.1F 0 cenual vacancy in the office of the company in a) Board soceiing. bjexironinary geneeal meeting General meeting ‘enced roevting 12. For the purposes of section 224(11) the number of partnces of @ firm which shall be takes into account would be as.on the date af _ im of audit C)aceeptance of audit b) audhtor’s report 6) Staring a 5s 224419) th he laa of rposen of eet 1b) Aualt to: non-pet comran 6) Alef the above a 13. Which of the following on and (b) only imited companies Audi h © nineteen audits, Out of followin autits whi te proviscons of sections 22415) 16.Me, Narayan, a Charted Accountant a) Audit of b) Audi ott of tw ay anor he of Virtue bid aided os Ont atalit for the purpeses of of the fllowingg wuld nit bee heal of by Joint audit 4) Audit of one oF tore branches of: coxupuany 16. The auditar of 4 Government company is appointed by the © & AG, His remunera fixed by ah the CRAG ) the shareholders 6) the sharebolders at meeting d) the buand of divvetars ‘Section? 2446) 1 regarding remuneration of the i 1) Secteni 22306) We the frst auditor before the expiry of term is with 18.The authority to ¥ a) the shuarctiokkers at b) the shareholders i the 6) the board of directors al meetin 6 the Central Guvereument ing removal of first auditor before 19. Which of the following st expiry of the term? 8} He is removed at a gene B) The sharchalders are authorised to do so ©) The approval of the Central Gowwsment is requived for such removal 4) The provisions for such removal are contained 4 section 224(7) 20.The retiring auditor does not have a right to b) gethis represcatations circulated, ') make writien representations ¢) be heard at the meeting d) speak as a member of the company 10 MCQ'S QUESTION BANK IN AUDITING/B 14.21. Who out of the following cannot be appointed as a statutory auditor of the company? QEsstwhile divector b) Internal auditer — ¢) Relalive of a director dj Only (bj and (e) atatory auditor has a right of access at all times 10 1b) Dooks, a counts and documents of the company. 22.4 a) Boks nid accounts of & company (6 Books, accounts and vouchers of the company 4) Notices and documents oF the eo 23.The auditor has a night to- oP ard expla i information and exp nployees and off he pospase of ©) Both (b) AL, dees rut have any right to: 24.The princigea anu “a) Inspect working. branch ainttor 1 Vint baaite hes 6) Seek information neces nuk pourpeners 4) Incorporate the Uren audit repeat af Hus mudi report a duty te enquire into sin specified matters Of the following section auditor he oh ‘ane Fejmrl DY EN epi08? fa} Sections 22712} 79) e) Section ite under section 227 HA\ into eatfere ditt hide water diuneashy ©) Shares allotted ayanst a debt poyable ) All of thee AP. Richt to vest brane bees bas b 1040 the auditor uncle whivh section? a) Section 22205) 1 Seaton 22842 pSecten 22gqay Section 228) 3) 28. Which of the folluming statements with regard to rules ieganbang exeruption frome branes uli is not true? 8) A branch wilfice of company can be granted exemption on the basis of quantum of O) Ika nalitectory arrangentint of serutiny check of thie bakes of ace mat of a eines wl Of maustacturinis eenngmap9 Hues tet tole, Heals be exc ted fry UC Cost cxninider pould be considered as wats teoportant factor /yround fom brancts aaa @) The auditor should state sn his audit repart that branch office is exctapted by virtue of quantum of actwaty oF any other bis aca by 29.The branch 'a} Shatebolders in €] Beware of cree 30. Auditor of a ‘a) Unlimited ability ; 4) Sun profit aking. Goverument Which scction gives stich, a1. Special audit is conducted at the onder of the Centr powers? a) Section 23344) b) Section 2334, ) Section 242(4) Section 2428 ted aa apecial auditur by the Central Government? ) chartered acevuntant at jcactce 4 Both (a) anid (bj 32, Who among the following ean be apy a) The stanitory aul ‘) Any chartered accounted who is not in practice 29,The scope of the audit including reference to the pronouncerments of the ICAL, which the auditor adheres to, generally is communicated to the client in the MCQ’S QUESTION BANK IN AUDITING/B14 aCAPTIAL AND REVENUE EXPENDITURE a n a z a : sta o | COMPANY AUDITOR = H € a € B i a > a b a © B co = & Cc = a d INTERNAL CONTROL 2 € 3. © asad ni ea acva/ianb rennet a ee 7 ls b is. [a a9 a 22 MCQ’S QUESTION BANK IN AUDITING/B 14.b) Detection risk is related directly to they effectiveness of the auditor prosecutor ¢) Detection risk related inversely to control risk 6) Internet risk and conteol risk are highly interrelated 16. The independence of an internal auditor will most likely be assured ifhe reports to the ‘a)President Finance b) President System ¢) Managing Director) CEO uditor is more Wkey to be concerned wit ') internal control system d) accounting system 17 In comparison tothe independent auditor, an interna a) cost accounting system 6) legal compliance 18.When an independent auditor decides that the Work performed by internal auditors may have bearing on the nature, i Judit procedures, the independent auditor should evaluate ebjectniiy of the tor. The most wnportant Lactor influencing, it would be: ‘) organizational level to which he reports 6) system of quality control of his work ‘ation of internal auditor 4} all of the above 1 auditor, he of she sho int auditor telies on the work of an intern itor’ work ny review and docuumentat all of the stow 19. When an independ examine the scope af intersal Db) exminine the system of supers adequacy of related audit prograinine 19 of internal auditor's work 20. Proper segregation of duties reduces the opportunities in whieh « person would both a) establish controls and executes then >) records cash receipts anid cash payments ©) perpetuate errors and frauds and conceals them, 4) record the transaction in journal and ledger INTRODUCTION TO AUDITING 8a 31d 10. - (aes oh 1. 17 fa 18. 19 20. a +Ja 5. MCQ’S QUESTION BANK IN AUDITING/B14.3. Which of the following is not an inherent limitation of intemal contrul aysiemn? @) Management override b) Collusion among employees ©) Inefliciency of internal auditor 4) Abuse of authority 4. An auditor should study and evaluate intemal controls to- a) determine whether assets are safeguarded —_b) Suggest improvements in intemal control ¢) Plan audit procedures 6) express and opinion 5. XYZ Lid. Conducts quarterly review of operations, It discovers that unrest in @ south east Asian country may affect the supply of raw materials t> it the next quarter. This is al example of a) risk assessment —b) control procedure ¢) supervision) control environment ©. The primary purpose of performing tests of control is to provide reasonable assurance that_ a) there are no material misstatements due to fraud or error in finacicial state ment ) accounting system is well documented ©) Written evidence is there to support transactions 4) iF intemal control is effective 7 Ifthe auditor assesses control risk as high. 4) Document the conclusions 5) docu ©) perform tests of control 4 perform walks through tests 5 the reasons along with conclusions 8 The overall atiiivde and awareness of an entity's board of directors concerning the ternal control #9 reeeted in importanice of i a) xerounting controls b) control environment ¢) control procedures d) supervision 9. Which of the following are included in test of contrul? a) Reperformance and observation ') Inquiry and analytical proceduces ©) Comparison and conformation 6) Inspection and veriiication 10.Control risk is assessed at- 2) Overall Financial staiements level 6) Financial staternent assertion level Wel sk factor Tovel rol environment level LL.Which of the following is noi an example of a circumstance, in which adlelitos ‘control will not be performed after obtaining ant understanding to plan te aulit? a} Controls are known to be cost inefective B) Controls are effective but auditor opines that performing tests of control and reduced subptantive tests would not be cost elfective C} Controls are clfective and evidence already obtained is adequate to support a planned assessed level of contiol risk which is less than 4) Performing extensive substantive testing would not lead to eificiency 412.An auditor assessvs control risk because It- a) affects the audit risk ») affects the level of detcetion risk that auditor m 0) helps him to fix materiality level for each financial assertion 4) is directly related to inherent ris y's intemal control aystem is a geoph 43.4 flow chart, made by the auditor, of an ent Tepresentation that depicts the auditor's a) understanding of the system ©) documentation of assessment of control risk. b) understanding of fraud risk factors 4) Both (a) andl te) 14. The performance of tests of control is documented in- ‘a) audit programme bj flow charts c] working papers 4) any of the above 15, Which of the following statements is not correct? ‘@) Intern risk and control risk cannot be controlled by the management ie are uncontrollable MCQ'S QUESTION BANK IN AUDITING/B 14 2015. Analytical proceduses are leat Hely te be usin the adit of = yeaah bolanoe by imvestncnta ‘bills receivables) debtors igor lads 16. Which ofthe following statements in net trae with regard to tee ‘a IC reaults inthe deliberate musapprupnauon of cash recepts i) is associated with cual eeconpte 6) same iodividual mnainiains cash feceipts And cash payinents teeming ang lading is 4) To conceal the shortage, the defraud, usually, ries to keep Dank and book arrounts in Gaul agreement xo that bank reconciliation will net detect the regularity 7-The balance of cash in often betwen ane to fe percent of total assets. Tek the inost e sicnent with regard to veriication of casi in content of this, eee 2) Cash in always unateria a8 materiality i qualiive concept No audi of cash ie needed when, sn auditor's opinion, cash ix inwnatrial. Material 1 a relative concept 6 The eath balance need only be audited ifthe balance isin oventia 4d) Casts fo be werted if contvol risk i assessed high, 18. When counting cash on aru the auditor should ‘al ensure presence of somelsady rom management obtain a recep fom custodian as to its Fearn ensure postage and revenue stamps ane ot counted in physicol count al temporary advances to employees are counted w calculate balance Of cash in hand 19,Which of the following statement is not ue regard 19 auditors attendance at stock taking? ‘al Auditor should attend physical stock taking only sPineertory te satesial 5) Auditor may not attend physical eriicaion ef siock bY management, ihe does not find it appropnate to rely on it ) If inventory is matoral, even when the auditor is aot placing reliance on the physical verification by the management, he show stend 4) The primary objective of ai auditor's ubservaton of an entity's observation of an entity’ stuck take fs fo obtain direct knowedge that the stock and has bce property counted 20. While observing a client's annual physical inventory, an sucitar conducted te certain test counts wore higher than the recorded quinties in the client's perpetual fecorus. ‘This situation could be the result ofthe clan's falure to cor! — ns bjealesretuens.e) gous with wwuggnur d) parchase Uiscounts 2) purchase rotu 21. Inspection report /receiving report supports entric in 4} sates beok anu sales return book 3) purchase book and sales retin bone 6 cash book and purchase boole 6) Sales beoke and purchase retum book. INTERNAL CONTROL A, Tests of control are not concerned with a) Eistonce of cortrols 6] Continuity of eonirols by Brfectiveness of conteole 1) Desiring of eontiois 2. The sequence of steps in the audios conseraton of internal comizo is as follows ~ a) Obtsin an understanding, design substantive tect, perform terta of contra, make a Drelinunary assessment of control risk Bf Dorign substantive torts, obtain un understanding, perform teats of contavt, meke a Preliminary assessivent of control risk ©) Obtain an understanding, make « preliminary assessment of control sisk, perform tests of Conti, design substanive procedires 4) Perform tests of control, obtain and understanding, miske a preliminary assessment of contol risk, design MCQ'S QUESTION BANK IN AUDITING/B14. 19‘building which has been self-constructed by the client a. An auditor i venting valuation of suitor ering ats eas (evant to he autor for verification roses? wonb of * 'b) Minutes of meeting of board of directors: ‘ts ar contractor Dis ocontereipecrand architect Lou wget assets is Ieast likely to be subjected to lien? which ofthe folowing i Plant and machinery c) easenoid propecty a) Motor vehicles a) Freehold land) P si an anayee of xed assets account has revealed possibilty of unrecorded sale of pant and fn analy or of the following suct procedures may De adopted to acover iC? 1) Inquiry of plane manager Al sxamination of property tax files 2 eetMination of debits to accumulated depreciation d) All of the above tence of recurring losses sale of fixed assets this indicates assets aceds to be reviewed dd) Accounting errors 6. The auditor has noticed exis 4) Depreciation charges aze insuih b) Pokey of sale of disposal of fixed G) the sale of assets have not been properly authorized Which of the following financial statements assertions are addressed by testing the cut off for plant asset addition a) Existence and ownership ¢] Possession and ownership 1 b) Valuation and disclosure ) Completeness and valuation 8. The auditor while verifying prepaid insurance has concluded that there is Inadequate insurance of building He should fa] Modify his audit report 8) Insist it should be disclosed in the notes to financial statements 9 Write it in letter of weakness, «Both (o) and (c) auditor would recompute amortization charges and 9. While verifying intangible assets, an ae ine either amortization period is reasonable. The auditor tries to establish ...by doing it 9) valuation bj existence ©) disclosure 4) possession 10.When auditing prepaid insurance, an auditor discovers that the insurance policy bond on ‘building is not available for inspection. This may indicate EyNo inburance has been undertalen for building h) Lien on building 2 unenee premicm has nat been paid dj Insurance premium paid but not recorded 11.Bquity shares of X¥ Lid. held by ABC Lid. are in the custody of Stock Holding Corporation of TURN fnited, The auditor many verily Uhis investment by ~ a] Reviewing last year's working papers. B) Gotaining a eeitiicate froma fesponsible official of the ABC Ltd C} Oblaining a certificate from SHICIL ) Obtaining a certificate trom xy ltd 12.Which ofthe following controls would ensure that securities are not lost, stolen or diverted? ‘a Botablish physical barriers over investment securities >) Maintain files of authorized signatures 2} Sourepate investment approval form accounting and from custody of securities fd) All the above 13. Which of the following is not a proper third party to hold investments on behalf of the client? 4) Regional level custodian ) National level custodian 3) dia trill National level stock broking firm d) AEZ Securities Ltd. a stock bioking frm Which of the following would give the assurance that debtors mentioned on the date of 14s balance sheet actually exist? {4} Sending debtor's confirmation letters b) Reviewing subsequent collection 0 Verily debtors ogainst sales document <) Both (a) and (b) MCQ’S QUESTION BANK IN AUDITING/B 14, 1812. In case of sales return, the alcitor should exarnine whi 8] Credit notes, advice notes and inward 1clom eae bj Debit notes, advice notes and inward retain nonce ©} Purchase invoices, advice note 4) Creait notes, ich Gocuments? rd inward return notes inspection report and inwerd return neve 19. An internal auditor discovered that fetitious pi clerk. This indicates absence of which contrel> mores hase invoices are independently malched with puschase orde urchases have been recorded by the purchase 1S and goods received ©) Routine cheeks are 4) Purchase funeticn 14. Which of the following is most cruci 8) Reducing the cost of acquisition © Authorizing the acquisition of goods ial 10 purchase department? b) Selecting supplies 4 Assuring the quality of goods 15.The auditor is most vouching. a) credit sales ‘Meely to examine related party transactions very carefully white P)sales returns cyeredit purchases) cash purchases 26.In order to vouch bought principal reason for the such obtain evidence that 8) the supplier exist recorded purchases actually occurred Jcdger, the auditor obtain confirmations tum creditors. The ior to examine suppliers statements at balance sheet dae lace 1) there are no unrecorded liabilities 9) 10 link creditors with cash book entries Ars The creditors acces a) advance paki , generally, have credit balance. Debit batanes may be due to- inst an order 1) goods returned ©) wrong debit to supplier account 8) Any of these 18.In case of vouching, authority in ease of = 4) bad bads writien off) sales return ©) purchase return ) discount allowed! o customers as per organizational poles the auditor is least likely to examine authorizati by appropriate 19, Vendors should be approved by Managesment before purchase department executes If this is not done, then which of the following eituatfons may ariec 2] purchases could be mace from vendors whose prodvict quality may not be good D) Purchases may be made from related parties without management's keceie tee ) Purchases could be made from vendors who may have oiled. pice to Sce-president Purchases 6) Any of these an oveer, VERIFICATION & VALUATION OF ASSETS VERIFICATION & VALUATION OF ASSETS of the following is not true with regard ta verification of assets? woiees eubstentiation of occurrence of transactions | Its objective is to establish existence, ownership, possession, valuation and disclosure of assets ©) The auditor has to form an opinion on diferent aspects 0) Allare true 2, Which of the following statements is not truc ? a) Valuation of assets is the responsibility of management b) The auclitor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in the balance shect ©) The auditor should value the assct as per generally accepied accounting principle 4) Valuation is no part of auditor's duty MCQ’S QUESTION BANK IN AUDITING/B14. azAUDIT OF CASH TRANSACTION 1. Which of the folowing documents is not relevant for vouching cash sales? 13) Daily cash salen eummary 'b) Salesmen's summary SMontnly statements vent to customers 4) Bank statement 2. The auditor should examine subsequent realization of revenue such as dividends, interest, ‘commission, ete to Sh identily cases of vnrecorded revenue bj ensure proper disclosure in the balance sheet G)recompute accrued income on the data of balance sheet dj Any of these 3. To test whether sales have been recorded, the auditor should draw a sample from a file of al purchase orders sales orders} sales invoices d) bill of ioading 4, For vouiching of which item, the auditor is most likely 10 examine cost records? fa) Commission earned b) Bad debts recorded «) Credit sales d} Sale of scrap 5. The “Guidance Note on Revenue” issued by the ICAI does not deal with 8) Sales revenue 'b| Revenue rendering service ¢) Revenue from sale of fied assets lj Income from interest, dividend 6. An auditor conducts a surprise check on the pay day {ie) the day wages and salaries are paid. The primary purpose of this auxlt procedures is 8) to ensure that there are no ghost workers Bj toensure the casual workers employed are authoriaed by the supervisor €) to test procedures for distributing pay cheques dl) to ebtain understanding of internal control system Which ofthe following would prevent double payment ofthe same voucher? 2)"The person signing the chejue should cancel the supporting documents 1) Cheques should be signed by at best two persons «The data of payiment of vouchers of similar nature should be the same or close to each, other 0) All of the above In case of unclaimed wages, the auditor should examine whether- 4) the amount has been deposited in ¢ separate bank account b) deposited with the eashicr—c) held in asale deposit box) Allof these 9. While youching wages, editor should examine whether there is proper segregation of duties. Which of the following activities should not be done by same department? 8) Maintaining personnel records and approving changing in wages rates | Proposing pay roll suramary and disbursement of wages ¢) Making salary statements and Ming tax returns 4d} Comparing tine clock records with time reports prepared by supervisors and preparing list of workers employed along with the units of production for each one of ther ine Bill of Entry? ‘Sales tax 4) Income tax 11. While vouching, how will the auditor ensure himself that all credit sales transactions have been recorded by the entity? a) Examining cut-off points 1b) Matching entrics in the sales bock against renumbered sales invoices and goods outward notes ‘¢) Counting the number of invoices and matching the number with entries an sales book 4} Both (a) and (0) MCQ'S QUESTION BANK IN AUDITING/B 14EDP AUDIT 4. Which of the following statement is not distinguishing feature for computer based processing ‘and manual processing? Senor ina C18 environment are less systemic as comparcd to errors in manual processing £) "The potential for human error in the CIS environment is greater system G a's computer based accounting system, aucit tral is in electronic forma §) Computer processing offers management a varicty of analytical tools as compared to manual 2, To avoid involid data input, @ bank added an extra number at the cnd of each account ‘nuanber and subjected the new mumbet to an algoritham. This technigues is known as fa) Dual read b) Test for reasonableness c) Check digit d} Occurrence correction 3. When computer programme or files can be accessed from terminate, access can be limited (O authorised individuals by 4) appointing a librarian bj controlling passwords 6) appointing EDT audiior | Both (a) and tb) 1 detected by computer program controls. It has been excluded irom 4. Erroneous data has be error Report”. Who should most probability by review processing and printed separately And follow up on this report? “)spetem analyst b) Data control group) Programmer —_—_) Computer operator ‘5. General controls will be ineffective when EDP department- f} Participates in computer soliware acquisition decisions 5} Design Docuientation for computerized operations, Cj Originate changes in master flee. <) Provide physical security for prograsnine fies. 6. Which ofthe following ectivities would most likely be performed by EDP department? 4) Authorising transactions, 1b) Parity checks © Distributing output 4) Correction of transactional errors 7. The completeness of “wages” figure can be tested by comparing the number of time cards 9 be procersed with (ransaetion on wages sheet, This lype of control techiique is called aleheok total b) control wat ‘J occurrence correction) check digit '8. Which of following will not affect audit in a CIS environment? tt The ubjective of enpresaion of opinion on financial statements 1b} Compliance procedures adopted by the auditor ¢} Performance of substantive procedures 4) Evaluation of inherent risk and conttol risk 9. Which of the following statements is not true of the test data approach in a test of ccoinpuiterised! accounting, system? 4S) that data tests only those controle which the auditor wishes to rely §) Peat data should consist of data relaied to all controls prevalent ii the organization q} The result of test data indicates that all the application and general controls are functioning properly {4} Test data processed by the client's computer programme under the auditor's control 10.Which of the following CANTS allow ficuitious transactions planted by the auditor to be processed along with teal ones on clicnt’s system? 5] Integrated test facility >) Test data approach ©) Generalised audit sonware 4) Parallel simulation 11.An auditor is least likely te se computer software fo- 8) access client data files 'b) assess control risk ©) performing analytical producers ) None of the above MCQ'S QUESTION BANK IN AUDITING/B14. 15'53. Under CARO, 2005 the auditor Is fequited to report on a) arrears of cumuilative preference dividends ) Preferential alotment of shares to related party «) disposal of fixed! auacte and its effect on going concern, 4) unsecured loans granted to related party OVERNMENT AUDIT A. At per C& AG Act, 1971 the tenure of the Comptioller and Auditor General is ....Years a} Four by tive six d) seven, 2, The part of Government Aucit which is concerned with examining whether the money has bbeent spent for the purpose specified in Appropriation Aet is called, a) audit of sanctions "audit of provision of funds (6) aut of rules and orders, audi of financial propriety 3. Ault of transaction does not inctutte ~ fa] Propriety audit Ly efficisney ~cum performance audit audit of receipts, ) audit of expenditure 4. The income Tax Department has sent Mr. X double refund of advance tax. The Goverment Auditur detected this while conducting, al aust of expenditure ) performance aust ©) audit of stares and stock audit of reesipte S. Audit of debs, deposits anxl remittances dues not cover= 2) aut of borrowings ) audit of amortization of debt (©/auuit of sancuoas 4) Feanitiance audit ©. A state Govemment spent rupees fifty lakhs on renovation of Raj Bhiaw Inthe C ® AG's opinion, this expenditure wae more than what occasion cexampled of — =) Propriety audit by Pert audit aga for ts Governor. femunded? (i ee aul provision of tunes 4) Nene of the above 7. Audit reports on PSU are 4) subsnlited to the President Governor for being laid before the parliament 1D) sent to concerned ministres/ departments ‘Submitted to BOD of concerned PSU A) Any of the above 8 The C & AG, some Years ayo, gave adverse comments on eapenditure incurred on Duy offing for soldiers Killed in a war In his opinion, tse ealinc eaves imported could huwe See feplace with less expensive, doonesticlly produced ones, This isan aspect of — a)Auditofeanetions b) Audit of stores and stocks) Propeily audit J) Both (b) and (e} 9. Who among the following i eligible to be appointed ax an audit of Governinent Company? a) A chartered accountant in praclice bj Achaftered accountant whether in praclive or not 6) An auditor appointed by the © &AG_¢) Any of the above 20.The starutory autitor of a Government Company submits his report to, ‘a] the BOD® of the company 1) the C fe AG 6) the Legistatu MCQ’S QUESTION BANK IN AUDITING/B 14 14449."The clent changed method of depreciation (rom straight line to written down value method. ‘This has been disclosed as a note to the financial statements, It has an immaterial clfect on the current financial statements. It is expected, however, that the change will have a significant effect on future periods. Which of the following option should dhe auditor express? 43] Uncuaitied opinion b) Qualified pinion ¢) Disclaimer of opinion a) Adverse opinion 45.Which of the following is not true regarding requirements under section 22713) (9 of the ‘Companies Act, 1956? 2) The auditor has to satisfy himself whether any of the directors of the corspany, whether public or private, are disqualified from being appointed as directors as per section 274( 1) (e) 5) Section 274(') (g) is applicable to appointment of directors beth in public and private companies but reporting 1s linited to only these directors of a company who are also directors of a public company €) The auditor requires every director to submit a written representation in respect of each public company, of which the is a director, as t@ whether such company has debated i terms of provisions of sections 274(3) la) 4) The disqualification should be considered on the date of audit report. 46. The management of a company, to which AS-3. not applicable, does not include stateinent of cash flows in its annual report. The auditor should expects. 8) Unqualiied opinion b) Qualified opinion c] Adverse opinion 19) Any of thees depending Upon materiality and pervasiverices and adequacy of disclosure 47.10 case the auditor gives a dieclsimer of opinion in the aut report which of the following paragraph(s) of a standard unqualiied audit report are modiied 4) Scope paregraph bj Opinion paragraph «} Scape and opinion paragraphs 4 Introductory, scope and cpinion paragraph 48.4 departure from recognized accounting principle is disclosed in a note to the financial staiements. The auditor should a) issue a standard ungualiied avelit report 1) inne a qualified report ¢) issue an unqualified report with ‘emphasis of matter’ paragraph ¢) disclaim opinion 49. AB & Co, chartered accountant, have been requested by their lient XYZ Ltd. not to confirm, accounts receivables because of concerns about crcesing conflicts with customers over Amounts owed. ‘The auditors were stlished concerning rece sabes aller appiying altematioe audit procedures AB & Co.'s auditors rejart likely contained, 8) Qualified opiris by Disclaimer of opinion 6} Unqualified | opinion with an explanatory paragraph 9) Unqaalified opinion ‘50. The auditor shoul! state the rcasons for his reservations in wulit report ind should try 10 Quentfy the effect on them. This should be done ia case he has expressed — 1) a qualified opinion Ii) an unqualified opinion with emphasis of matter paragraph iijan adverse opinion —_ iv) adisclaimer of opinion a) only ) 9 and (i) only 1) ij and ds) only) All of te above '51.Companies exempted from application of CARO, 2003 does not include fa) banking company b).an insuronce company” ¢)a private hmited company with paid up capital and reserves not more than Bity Bve lakh a) licensed company 82, Under CARO, 2009, the auditor’ report should inchide report about maintenance of proper recording relating 10 4) Fixed assets anid cose 1) Fixed assets, cost and investments ) Fixed esete vcost investments and inventories d) Fixes! asacts, coat and inventory MCQ'S QUESTION BANK IN AUDITING/B14, 13epee Pte 21. Who out ofthe folowing cannot be appointed as a statutory auditor of the company? 4) Erstvhile distor bj nvernal auditor ¢} Relatwe ofa director 6) Only (0) and (e) 22.4 stalutory auditor has wright of access st all times to 4) Books and accounts ofa company’ b) Books, accounts and docamsnts of the company «) Books, accounts and vouclers ofthe company, 6) Nowees and documents of the company 28. The autor has a Fight to- 2) Obtain information and explanation ) Obiaia information and explanation fom the employees and officers 4) Obiain ivormation and explanation scessuny fw the pa puse of aut 1) Both () ata (9) 24. The principal auttor, as per clarification issued by the ICAL. does net have any Fight 10 4) Inspect working papers of the branch auditor b) Wat Uravces Seek information necessary fOr audit purposes 4) Incorporate the branch suit report in his dt report 25. Under which ofthe following. section auditor hae a daiy to enquite into ix epecified metier= ‘end report by exception? a} Section 227184) 6) Section 227 (IN) e)Seetion 227 (2) 4) Section 22719) 20.The suitor has to enquire, under section 227 (IA into different aspects, alloted for eas forthe purpooe of auditor inclale- 4) Shares agains whose allounest cash has setually been received 1} Shates alotted for consideration other than cath Shates alloted against a debt payatie a) Alor them 27-Right to visit branches has been given tothe auditor under which section? al Section 222(3) by Section 22812, J Section 228d) Sect 228(3) 28. "hich of the flowing statements with regan to rules regarding exemption fron brane Dusit ia nol trae? 44).A branch office of a compary can be granted exemption on the basis of quantum of Dy a satisfactory arrangement of scrutiny cick of the books ef account of a branch offee ofa manutueturing company has ben mate ican be exerted farm branch aud } Cost consideration should be considcied as an important facter/ground for exemption irom branch aux di The aucitor should otate in his aut seport that branch office is excimpled by virwe of Quantum of activity of any other basis 29. The branch auditor is appointed by ~ a) Shareboiders in an annus general mecting 1) Sharwholders in general meeting } Board of directors in board raceting 6) ay of the above 30. Auditor ofa company does not have righ to vist foreign beanetes actie company a) Unimited fiabinty, 0) Manulactaring¢) anking sd} Non-proft mraking 31. Special aueit is conducted at the order of the Central Government. Which section gives such 8) Secon 23314) by Section 2330 1 Section 24214) a) Section 242 32. Who among the folowing ean be appointed ws special aulior by the Central Government? a) The statutory auibitor ) chartered accountant tn practice 6] Any chartered accounted who is notin practice) 14h (a) and (b) '99.7he seape of the audit including reference to the pronouncements of the ICAL, which the ‘Aliditor adheres to, generally i cemmunicated to the client in the MCQ'S QUESTION BANK IN AUDITING/B14. a