Multiple choice Questions of fybaf

Auditing

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]

60A The term “Audit” originated from the Latin word-

a) Audire b) Adhere c) Adihere d) None of the
above

Answer: Option [A]

61. Audit done by the employees of the business undertaking is called _______.
A. Final audit
B. Management Audit
C. Government Audit
D. Internal Audit
ANSWER: B

62. Management audit otherwise called as _______.

A. Efficiency Audit
B. Final audit
C. Cost Audit
D. Cash audit
ANSWER: A
63. A number of checks and controls exercised in a business to ensure its efficient
working are known as ________.
A. Internal Check
B. Interim Check
C. Internal Audit
D. Internal Control
ANSWER: D

64. A Voucher is a _______.

A. Document is support of an entry made in books of accounts
B. Invoice received from suppliers
C. Receipt issued to a customer for cash
D. Dispatch Receipt
ANSWER: A

65. Internal check is meant for ___________.

A. Prevention of frauds
B. Detection of frauds
C. Helping audit is depth
D. Detection of errors
ANSWER: A

66. A kind of audit conducted for a part of the accounting year is called _______.
A. Periodical Audit
B. Partial Audit
C. Cost Audit
D. Interim Audit
ANSWER: A

67. The receipt of goods must be entered in _________.

A. Goods inward book
B. Goods outward book
C. Receipt of Stores & Goods outward book
D. Receipt issue and balance of stores
ANSWER: A

68. Auditing standards differ from auditing procedures in that procedures relate to
________.
A. Measure of performance
B. Audit principles
C. Acts to be performed
D. Audit judgments
ANSWER: C

69. Profit prior to incorporation may be utilized to ___________.

A. write of goodwill
B. pay interest on purchase consideration
C. writing off fixed assets
D. pay interest on secured loans
ANSWER: A
70. Which of the following is not true about opinion on financial statements?
A. The auditor should express an opinion on financial statements
B. His opinion is no guarantee to future viability of business
C. He is responsible for detection and prevention of frauds and errors in financial
statements
D. He should examine whether recognized accounting principles have been
consistently
followed
ANSWER: A

71. Audit programme is prepared ______________.

A. to help the auditor and his staff about the work to be done while auditing
B. to help the accountant to prepare the balance sheet
C. to help the company to submit its accounts
D. to help the shareholders to file the returns
ANSWER: A

72. Purchase of machinery is a ____

A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
ANSWER: C
73. Shares are forfeited on the non-payment of ____________.
A. share calls amount
B. calls in advance
C. minimum share capital
D. debenture amount
ANSWER: A

74. Internal controls and internal check are ____________.

A. one and the same
B. different
C. internal control includes internal check
D. both are not related
ANSWER: C

75. A sale of Rs. 50000 to Mr. A was entered as a sale to Mr. B. This is an example
of what?
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
ANSWER: B

76. Recording a transaction twice in the books of original entry is an error of

__________.
A. principle
B. commission
C. omission
D. duplication
ANSWER: D
77. Errors and frauds already committed can be discovered under the system of
________.
A. internal audit, internal check, internal control
B. external check
C. statutory audit
D. interim audit
ANSWER: A

78. Treating revenue expenditure as capital expenditure is a case of _________.

A. fraud
B. misappropriation of cash
C. misappropriation of goods
D. manipulation of accounts
ANSWER: D

79. Goods sent on approval basis have been recorded as credit sales. This is an
example of
what?
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
ANSWER: A

80. The profits that can be legally distributed to shareholders are called
_________.
A. revenue profits
B. capital profits
C. divisible profits
D. divisible profits
ANSWER: D

81. Errors of principle are due to ___________.

A. wrong entry of the transaction in the books of original entry
B. wrong allocation of expenditure between capital and revenue
C. mistake in the payment of commission
D. mistake in the payment of salary
ANSWER: A

82. An audit programme is ___________.

A. a description, memorandum or an outline of the work to be done in a business
B. the rules and regulations prescribed for writing up the books of accounts
C. to gain knowledge of clients accounting system
D. a trial work
ANSWER: B

83. The first auditors appointed by head office ____________.

A. for a period of one year
B. for a period of two years
C. for a period of three years
D. till the conclusion of the first annual general meeting
ANSWER: D

84. Capital reserves are created out of profits of __________.

A. a revenue nature
B. a capital nature
C. a secret reserve
D. contingency reserve
ANSWER: B

85. A good audit report must at least meet one of the following qualifications
__________.
A. it should offer constructive and timely suggestions to the management
B. it should not point out mistakes
C. it should not be based on factual information
D. it should not be based on balance sheet
ANSWER: A

86. the auditor has to maintain __________ of important matter of the work done
by him.

A. working papers

B. auditing papers

C. questioners

D. financial statement.

ANSWER A

87. ________ means showing the books of accounts attractive.

A. Window Dressing.

B. Secret Reserve

C. Profit and loss a/c

D. Balance sheet

ANSWER A

88. ______________ is an external user of financial information.

A. Owner

B. Government.

C. Public.

D. Banks.

ANSWER B

89. any information is considered as ______ if it can change the decision of the
users.

A. Material

B. confidentiality.

C. secrets

D. information.

ANSWER A

90. ______ means part of the profit secretly kept aside for future use.

A. window dressing

B. Secret Reserve.
C. case balance

D. bank balance.

ANSWER B

91.In the case of financial audit, a set of financial statements are said to be true and
fair when they are free of-

A. Error
B. Fraud
C. Material Misstatements

D. None of the above

Answer C

92 The purpose of audit and investigation is

a) Same b) Different
c) Sometimes same and sometimes different d) None of the above
Answer B

93. Which of the following is not the objective of Internal audit-

a) To keep proper control over business activities
b)To evaluate accounting system
c) To report to the owner and outsiders
d)To evaluate the internal check system
Answer C

94. The evidences obtained by an auditor are persuasive rather than-

a) Correct b) Reliable
c) Conclusive d) All of the above
Answer c

95.misappropriation of cash is a type of __________

A. Error
B. omission.
C. Commission.
D. Fraud
Answer D

96. preparation of books of account is responsibility of _________

A. Management
B. Employees.
C. Shareholders.
D. Auditor.
ANSWER A

97. audit of small enterprises is generally

A. compulsory.
B. Voluntary.
C. both A and B
d. None of Above
ANSWER B

98. concurrent audit mean audit conducted. _________or __________ as

transaction takes place.
A. concurrently, continuously
B. Concurrently, Yearly
c. yearly, continuously
d. None of the above
ANSWER A
 99. Internal audit is a part of ___________ system
A. internal control
B internal check.
C. Final audit.
D. interim audit
Answer A

100. auditor should prepare an audit programme according to the __________

and ___________ of the audit
A. 50 days, non-receipt of appointment letter
B 30 days, joining.
C. 30 days, receipt of appointment letter
D. 20 days, receipt of appointment letter
ANSWER C

101. in case of recurring audits, working papers can be divided into

____________ and current file pertaining to audit for current year.
A. temporary audit file
B. Permanent audit file.
c. Loose paper file.
D. accounts file.
ANSWER B

102 the audit has to ____________ the internal control systems.

A. Check.
B. Verify
C. Evaluate.
D. Inform.
ANSWER C

103. _____ is a review of the operations and records within a business by specially
designed staff
A. Internal check
B. Internal audit
C. Internal control
D. Interim auditing
ANSWER B
 104 internal control for salaries can be checked with ________ supporting
document
A. Sales invoice
B. Sales books
C. Salary slip
D. Contract
ANSWER C

105. internal auditor has ___________ to attend the metting of the shareholders
A. right
B. No Right.
C. Duty.
D. compulsory.
ANSWER B

106 investigation is conduct by ______

A. Cost Accountant
B. Chartered Accountant
C. Company secretary
D. All of he above
Answer D
107. The external auditor can rely on Internal auditor and there is no need of –
a) Stautory audit b) Cost audit
c) Management audit d) Cent percent checking
ANSWER A

108. auditor can suggest the way and means to improve the-
a) Accounting performance b) Auditing performance
c) Management performance d) Business performance
answer d

109. The auditor can go through the internal audit report at the time of-
a) Starting audit work b) Finishing audit work
c) Starting accounting work d) Finishing accounting work
ANSWER A

110. While preparing an audit plan due consideration may be given to the areas
where there is any change in-
a)Legal policies b)Audit policies
c)Accounting policies d) Management policies
ANSWER C

111. It is important for the auditor to identify the areas which involves-----, so
that the audit can be planned in such a way that overall audit risk will be less.
a)Lesser audit risk b)Great audit risk
c)Inherent audit risk d)Zero percent audit risk
ANSWER B

112. While laying down an audit plan the auditor shall assess the effectiveness
of-
a)Accounting system b)System of internal controls
c)Both (a)and (b) above d)External controls on the operations of the entity
ANSWER C

113. The nature and extend of audit evidence will vary-

a)in different auditing situations b)In different accounting situations
c)Indifferent managing situations d)from one organisation to another organisation
ANSWER A

114. .An audit program largely depends on the-

a)Size of the business activities b) Size of the documents and record
c) Size of the auditing staff d) Size of the
organization and other relevant factors.
ANSWER D

115. Audit programmes helps in ensuring that all important areas are
appropriately covered during.
a)Accounting b)Recording
c)Auditing d)Accounting and auditing

ANSWER D
116. Audit programme kills the -------- of capable persons. Assistant can not
suggest any improvement in the plan.
a)Qualities b)Qualification
c)Efficiency d)initiative
ANSWER D

117. The auditor has to obtain------------ to substantiate his opinon on the

financial statements.
a)Internal evidence b)External evidence
c)Internal and external evidence d)Sufficient and appropriate evidence
ANSWER D

118. Audit evidence is more reliable when the auditor obtains ----------from
difference sources or of a different nature.
a) Internal evidence b) External evidence
c)Circumstantial evidence d) Consitent evidence
ANSWER B

119. Which of the following is not a technique of obtaining evidence.

a) Inspection b)Observation
c) Enquiry d)Investigation.
 ANSWER D

120. The auditor has to obtain sufficient appropriate evidence to-

a)Form his opinion b)Mention his opinion
c)Substantiate his opinion d)confirm his opinion
ANSWER A

E.