Auditing - Questions and Answers for Competitive Exams |

Questions
1. __________ is a systematic examination of the books and records or a business

 [A] Auditing
 [B] Vouching
 [C] Verification
 [D] Checking

Answer: Option [A]

2. Which of the following is not a kind of audit?

 [A] Statutory and private audit.

 [B] Government and continuous audit.
 [C] Continuous, final, Interim, Cash, Cost and Management audit.
 [D] None of these.

Answer: Option [D]

3. Instruction of audit issued by controller and auditor general of India ________.

 [A] statutory audit.

 [B] final audit.
 [C] management audit.
 [D] government audit.

Answer: Option [D]

4. This kind of audit is conducted generally between two annual audit ______.

 [A] internal audit.

 [B] interim audit.
 [C] final audit.
 [D] continuous audit.

Answer: Option [B]

5. Before the work of audit is commenced, the auditor plans out the whole of audit work is called
_________.

 [A] Audit plan.

 [B] Audit note.
 [C] Audit risk.
  [D] Audit programme.

Answer: Option [D]

6. Voucher relates to _________.

 [A] cash receipt.

 [B] cash payment.
 [C] credit transactions.
 [D] all the above.

Answer: Option [D]

7. Internal auditor is appointed by ________.

 [A] the management.

 [B] the shareholders
 [C] the government.
 [D] he statutory body.

Answer: Option [A]

8. Auditing begins where ______ ends.

 [A] Selling
 [B] inventory valuation
 [C] Accounting
 [D] Purchases

Answer: Option [C]

9. For which of the following, Audit is optional?

 [A] Trusts
 [B] Joint stock companies.
 [C] Proprietorship concern.
 [D] None of the above

Answer: Option [C]

10. The audit that is made compulsory under statute is called _________.

 [A] Statutory audit.

 [B] Partial audit.
 [C] Complete audit.
  [D] Continuous audit.

Answer: Option [A]

11. Who among the following can be appointed as auditor of a company?

 [A] A partner or a director of the company.

 [B] A person of unsound mind.
 [C] Mr. Y who owes Rs. 500 to the company.
 [D] Mr. Z the holder of C.A certificate.

Answer: Option [D]

12. Confirmation of the court is necessary for __________.

 [A] increasing the share capital.

 [B] reduction of share capital.
 [C] conversion of shares into stock.
 [D] issue of new shares.

Answer: Option [B]

13. Audit means ___________.

 [A] recording business transactions.

 [B] preparing the final accounts.
 [C] examination of books, accounts, vouchers etc.
 [D] preparing final accounts.

Answer: Option [C]

14. Auditor shall report on the accounts examined by him __________.

 [A] to the shareholders.

 [B] to the court.
 [C] to the bank.
 [D] to the general public.

Answer: Option [A]

15. Sale of land is a __________.

 [A] revenue receipt.

 [B] capital receipt.
 [C] capital expenditure.
  [D] revenue expenditure

Answer: Option [B]

16. Secret reserve can be created by _______________.

 [A] public limited company only

 [B] banking and financial companies only.
 [C] private limited company only.
 [D] co-operative societies

Answer: Option [B]

17. When a transaction has not been recorded in the books of account either wholly or partially
such errors are called as _________.

 [A] Error of commission

 [B] Error of omission.
 [C] Compensating error.
 [D] Error of principle.

Answer: Option [B]

18. Verification of the value of assets, liabilities, the balance of reserves, provision and the
amount of profit earned or loss suffered a firm is called _________.

 [A] Continuous audit.

 [B] Balance sheet audit.
 [C] Interim audit.
 [D] Partial audit.

Answer: Option [B]

19. Vouching of the balances of all incomes and expenses account is known as vouching of
______.

 [A] Personal ledger.

 [B] Impersonal ledger.
 [C] Cash
 [D] Sales

Answer: Option [B]

20. Preliminary expenses are the best example for _________.

  [A] fictitious asset.
 [B] intangible asset.
 [C] wasting asset.
 [D] floating asset.

Answer: Option [A]

21. Periodical audit is also called as _________.

 [A] Final audit.

 [B] Interim audit.
 [C] Balance sheet audit.
 [D] Income statement audit.

Answer: Option [C]

22. The auditor of a government company shall be appointed by ________.

 [A] the government company itself.

 [B] the central government.
 [C] the share holders.
 [D] the debenture holders.

Answer: Option [B]

23. The main object of the audit of the cash book may be ________.

 [A] to verify the assets and liabilities.

 [B] to know that all receipts and payments have been properly recorded.
 [C] to check the internal control system in business.
 [D] to check the bank balance.

Answer: Option [B]

24. One of the audit procedures to check the issue of share capital of the newly formed company
is __________.

 [A] the memorandum of association and articles of association.

 [B] the share transfer register.
 [C] the issue of debenture.
 [D] none of the above.

Answer: Option [A]

25. The work of one clerk is automatically check by another clerk is called _________.
  [A] Internal control.
 [B] Internal check.
 [C] Internal audit.
 [D] None of the above.

Answer: Option [B]

26. The owners of the company are called __________.

 [A] Debenture holders.

 [B] Debtors
 [C] Shareholders
 [D] None of the above.

Answer: Option [C]

27. The main objects of investigation is _________.

 [A] to discover errors and frauds.

 [B] to prevent errors and frauds.
 [C] to verify statements.
 [D] all the above

Answer: Option [D]

28. Share may be issued _____________.

 [A] at par.
 [B] at premium.
 [C] at discount.
 [D] all the above.

Answer: Option [D]

29. The liabilities of an auditor can be _________.

 [A] Civil
 [B] Criminal
 [C] Civil and Criminal.
 [D] Official

Answer: Option [C]

30. Internal auditor of a company must be _______________.

  [A] Cost accountant.
 [B] Chartered accountant.
 [C] ICWA
 [D] need not possess any professional qualification.

Answer: Option [B]

31. A vacancy caused by resignation of an auditor is filled by _________.

 [A] board of directors.

 [B] managing director.
 [C] general meeting.
 [D] central government.

Answer: Option [C]

32. Cost audit under section 233(b) of the companies act is ___________.

 [A] voluntary
 [B] compulsory
 [C] advisable
 [D] avoidable

Answer: Option [C]

33. When at an annual general meeting of a company no auditor is appointed or reappointed. In

that case ________

 [A] the central government appoints a person to fill the vacancy

 [B] the board of directors appoints a person to fill the vacancy.
 [C] the managing director of the company appoints a person to fill the vacancy.
 [D] none of these can appoint a person to fill the vacancy.

Answer: Option [A]

34. The most difficult type of misstatement to detect fraud is based on __________.

 [A] related party purchases.

 [B] related party sales.
 [C] the restatement of sales.
 [D] omission of a sales transaction from being recorded.

Answer: Option [D]

35. Professional skepticism requires that the auditor assume that management is _________.
  [A] reasonably honest.
 [B] neither honest nor dishonest.
 [C] not necessarily honest.
 [D] dishonest unless proved otherwise.

Answer: Option [B]

36. The use of an audit engagement letter is the best method of assuring the auditor will have
which of the following?

 [A] Auditor will obtain sufficient appropriate audit evidence.

 [B] Management representation letter.
 [C] Access to all books, accounts and vouchers required for audit purpose.
 [D] Co-operation from other auditors

Answer: Option [C]

37. An auditor who accepts an audit but does not posses the industry expertise of the business
entity should ______________.

 [A] engage experts.

 [B] obtain knowledge of matters that relate to the nature of entity business.
 [C] inform management about it.
 [D] take help of other auditors.

Answer: Option [B]

38. Audit of banks is an example of __________.

 [A] Statutory audit.

 [B] Balance sheet audit.
 [C] Concurrent audit.
 [D] All of the above.

Answer: Option [D]

39. In India balance sheet audit is synonymous to _______________.

 [A] Annual audit.

 [B] Continuous audit.
 [C] Detailed audit.
 [D] Statutory audit.

Answer: Option [A]

40. Balance sheet audit included verification of ________.

 [A] assets
 [B] liabilities
 [C] income and expenditure accounts where appropriate.
 [D] all of the above.

Answer: Option [D]

41. Which of the following is not a fact of EPA?

 [A] Economic audit.

 [B] Efficiency audit.
 [C] Expenditure audit.
 [D] Effectiveness audit.

Answer: Option [C]

42. In determining the level of materiality for an audit what should not be considered?

 [A] Prior years errors.

 [B] The auditor remuneration.
 [C] Adjusted interim financial statement.
 [D] Prior year financial statements.

Answer: Option [B]

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

 [A] It helps to study relationship among balance sheet accounts.

 [B] It helps to discover material misstatements in the financial statements.
 [C] It helps to identify possible oversights.
 [D] It helps to accumulate evidence supporting the validity of a specific account balance

Answer: Option [D]

44. Of the following, which is the least persuasive type of audit evidence?

 [A] Bank statements obtained from the client

 [B] Documents obtained by auditor from third parties directly.
 [C] Carbon copies of sales invoices inspected by the auditor
 [D] Computations made by the auditor.

Answer: Option [C]

45. Which of the following Auditing Assurance Standard deals with Audit planning?

 [A] AAS-7.
 [B] AAS-8.
 [C] AAS-9.
 [D] AAS-3.

Answer: Option [B]

46. Audit Programme is prepared by ___________.

 [A] the auditor.

 [B] the client.
 [C] the audit assistants.
 [D] the auditor and his audit assistants.

Answer: Option [D]

47. The quantity of audit working papers complied on engagement would most be affected by
_________________.

 [A] management integrity.

 [B] auditor experience and professional judgement.
 [C] Auditor qualification.
 [D] control risk.

Answer: Option [A]

48. Which of the following is not an advantage of the preparation of working paper?

 [A] To provide a basis for review of audit work.

 [B] To provide a basis for subsequent audits
 [C] To ensure audit work is being carried out as per Programme.
 [D] To provide a guide for advising another client on similar issues.

Answer: Option [D]

49. Which of the following sections deals with qualification of the auditor?

 [A] Section 226(1) and Section 226(2).

 [B] Section 224(1) and Section 224(2).
 [C] Section 226(3) and Section 226(4).
 [D] Section 224(3) and Section 224(4)

Answer: Option [A]

50. The board of directors shall appoint first auditor of a company ___________.

 [A] within one month of completion of capital subscription state of the company
 [B] within one month of the promotion of the company.
 [C] within one month of the commencement of the business of the company.
 [D] within one month of incorporation of the company.

Answer: Option [D]

51. In case the directions fail to appoint first auditors, the shareholders shall appoint them at
_______ by passing a resolution.

 [A] a general meeting.

 [B] first annual general meeting.
 [C] statutory meeting.
 [D] annual general meeting

Answer: Option [A]

52. The auditor of a government company is appointed by the C & AG. His remuneration is
fixed by _____________.

 [A] the C & AG.

 [B] the shareholders.
 [C] the shareholders at an annual general meeting.
 [D] the board of directors.

Answer: Option [B]

53. Which of the following statement is not correct regarding removal of first auditor before
expiry of the term?

 [A] He is removed at a general meeting.

 [B] The shareholders are authorized to do so
 [C] The approval of the central government is required for such removal.
 [D] The provision for such removal are contained in section 224(7)

Answer: Option [C]

54. The retiring auditor does not have a right to _________.

 [A] make written representations.

 [B] get his representation circulated.
 [C] be heard at the meeting.
 [D] speak as a member of the company.
Answer: Option [D]

55. Auditor of a _______ company does not have right to visit foreign branches of the company.

 [A] unlimited liability.

 [B] manufacturing
 [C] banking
 [D] non-profit making.

Answer: Option [B]

56. Special audit is conducted at the order of the central government. Which section givers such
powers?

 [A] Section 233(A).

 [B] section 233(B)
 [C] section 242(A)
 [D] Section 242(B).

Answer: Option [C]

57. As per C & AG Act, 1971 the tenure of the comptroller and Auditor General is ______ a.
four years.

 [A] four years.

 [B] five years.
 [C] six years.
 [D] seven years.

Answer: Option [C]

58. Audit of transactions does not include __________.

 [A] propriety audit.

 [B] efficiency cum performance audit.
 [C] audit of receipts.
 [D] audit of expenditure.

Answer: Option [B]

59. Audit of rent, deposits and remittances does not cover ____________.

 [A] audit of borrowings.

 [B] audit of amortization of debt.
 [C] audit of sanctions
  [D] remittance audit.

Answer: Option [C]

60. The statutory auditor of a Government Company submits his report to _________

 [A] the BOD of the company

 [B] the C & AG.
 [C] the legislature.
 [D] the company secretary.

Answer: Option [B]