Auditing

1. Goods purchased but not recorded in the purchase register is

A. an error of omission
B. to reduce profits
C. an error of commission
D. affect on agreement of trial balance
Answer:A

2. Working papers are the property of the

A. client and auditor
B. auditor
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C. client
D. equity shareholders
Answer:B

3. Which of the following documents is not relevant for vouching of sales

A. daily cash sales summary

B. credit memos
C. delivery challans
D. sales department attendance record
Answer:D

4. The main object of an Audit is

A. to ensure that final accounts are prepared
B. expression of an opinion on true and fair view of accounts
C. to ensure the future viability of the enterprise
D. detection and prevention of frauds and errors
Answer:B

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5. An Audit Programme must be prepared
A. before commencement of an audit
B. after completion of an audit
C. after submission of an audit report
D. during the conduct of an audit
Answer:A

6. Analytical Review is
A. an audit technique
B. audit in depth
C. a compliance procedure
D. reporting requirement
Answer:A

7. Audit in Depth means

A. none of the above
B. detailed examination of all transactions
C. investigation of all transactions
D. detailed examination of selected transactions
Answer:D

8. Audit programme should be

A. flexible
B. rigid
C. oral and flexible
D. oral
Answer:A

9. incorporates both Accounting and Administrative Controls.

A. internal control
B. internal check
C. statutory audit
D. internal audit
Answer:A

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10. Debtors are valued at
A. realizable value
B. as per articles of association
C. book value
D. decided by the customer
Answer:C

11. The main objective of Window Dressing is

A. increase liability
B. to mislead investors
C. to reduce tax liability
D. to understate profits
Answer:B

12. document is not relevant for vouching cash purchases

A. purchase order
B. goods inward register
C. purchase invoice
D. attendance record of cashier
Answer:D

13. To select a sample for Audit, the auditor should consider

A. all the above
B. the size of the sample
C. the volume of transactions
D. adequacy of internal control system
Answer:A

14. Secret reserves are shown on

A. assets side of balance sheet
B. none of the above
C. liabilities side of balance sheet
D. credit side of trading account
Answer:B

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15. Stock of goods on consignment should be valued at
A. none of the above
B. invoice price
C. cost of realizable value whichever is lower
D. cost price
Answer:C

16. is not an error of Commission

A. mathematical error
B. compensating error
C. posting error
D. none of the above
Answer:B

17. Telephone charges should be examine on the basis of

A. cash memo
B. telephone bill
C. all the above
D. agreement with telephone department
Answer:B

18. The Auditor examines Bill of Lading in order to vouch

A. sales within the state
B. all the above
C. sales outside the state
D. sales outside the country
Answer:D

19. Asset, which is not subject to physical verification

A. stock
B. cash
C. furniture
D. debtors
Answer:D

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20. Goods sold but not recorded in Sales Register is
A. compensating error
B. an error of commission
C. an error of omission
D. none of the above
Answer:C

21. Audit plan should be best on knowledge of the

A. client\s reputation
B. client\s family
C. client\s share capital
D. client\s business
Answer:D

22. Confirmation is
A. a compliance procedure
B. an audit technique
C. a principle of audit
D. none of the above
Answer:B

23. should be checked by the Auditor in verification of Machinery

A. all the above
B. charge/line
C. the possession
D. ownership
Answer:A

24. Closing stock with the consignee is to be shown as the Asset of

A. consignee
B. customer
C. all the above
D. consignor
Answer:D

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25. If a material financial fraud is detected, Auditor should
A. report it to police
B. report it to the institute of ca of india
C. ignore it
D. report it to the owners or shareholders
Answer:D

26. An auditor is like a

A. Blood haunt
B. Watch dog
C. May both according to situation
D. None of these
Answer:B

27. The term ‘Audit’ is derived from a Latin word “audire” which means;
A. To inspect
B. To examine
C. To hear
D. To investigate
Answer:C

28. Process of verifying the documentary evidences of transactions are known as:
A. Auditing
B. Testing
C. Vouching
D. Verification
Answer:C

29. Auditing is compulsory for

A. Small scale business
B. Partnership firms
C. Joint stock Companies
D. Proprietary Concerns
Answer:C

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30. The main object of an audit is
A. Expression of expert opinion
B. Detection and Prevention of fraud and error
C. Both (a) and (b)
D. Depends on the type of audit.
Answer:D

31. Concealment of shortage by delaying the recording of cash receipts is known as

A. Embezzlement
B. Misappropriation
C. Lapping
D. None of these
Answer:C

32. The title of AAS2 issued by Council of ICAI is

A. Objective and Scope of the Financial Statements
B. Objective and Scope of the Audit of Financial Statements
C. Objective and Scope of Business of an Entity
D. Objective and Scope of Financial Statements Audit
Answer:B

33. Lapping is also known as:

A. Teeming and lading
B. Embezzlement
C. Looping
D. Hacking
Answer:A

34. 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 recognised accounting principle have been consistently
Answer:C

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35. A sale of Rs. 25,000 to A was entered as a sale to B. This is an example of _
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of principle
Answer:B

36. ‘Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example of _
A. Error of principle
B. Error of commission
C. Error of omission
D. Error of duplication
Answer:A

37. Which of the following statements is not true?

A. Management fraud is more difficult to detect than employee fraud
B. Internal control system reduces the possibility of occurrence of employee fraud and
management fraud
C. The auditor’s responsibility for detection and prevention of errors and frauds is similar.
D. All statements are correct.
Answer:B

38. As per AAS4, if auditor detects an error then –

A. He should inform the management.
B. He should communicate it to the management if it is material
C. The auditor should ensure financial statements are adjusted for detected errors.
D. Both (b) and (c)
Answer:D

39. Which of the following is not a limitation of audit as per AAS4?

A. Objectivity of auditor’s judgment
B. Selective testing
C. Persuasiveness of evidence
D. Limitations of internal control system.
Answer:A

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40. Internal audit is undertaken
A. By independent auditor
B. Statutorily appointed auditor
C. By a person appointed by the management
D. By a government auditor
Answer:C

41. The scope of internal audit is decided by the :

A. Shareholders
B. Management
C. Government
D. Law
Answer:B

42. Audit of banks is an example of –

A. Statutory audit
B. Balance sheet audit
C. Concurrent audit
D. All of the above
Answer:D

43. Concurrent audit is a part of

A. Internal check system
B. Continuous audit
C. Internal audit system
D. None
Answer:C

44. In India, balance sheet audit is synonymous to

A. Annual audit
B. Continuous audit
C. Detailed audit
D. Statutory audit
Answer:A

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45. Audit in depth is synonymous for
A. Complete audit
B. Completed audit
C. Final audit
D. Detailed audit
Answer:D

46. Institute of Chartered Accountants of India was established

A. 1956
B. 1949
C. 1956
D. 1948
Answer:B

47. Which of the following statements is not true about continuous audit?
A. It is conducted at regular interval
B. It may be carried out on daily basis
C. It is needed when the organization has a good internal control system
D. It is expensive
Answer:C

48. Internal check is carried on by

A. Staff specially appointed for the purpose
B. Internal auditor
C. Supervisor of the staff
D. Members of the staff
Answer:D

49. Errors of Omission are

A. Technical errors
B. Errors of principle
C. Compensating errors
D. None of the above

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Answer:A

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50. Window dressing implies:
A. Curtailment of expenses
B. Checking of Wastages
C. Under valuation of assets
D. Over Valuation of assets
Answer:D

51. Test Checking refers to

A. Testing of accounts and records
B. Checking of selected number of transactions
C. Examination of adjusting and closing entries
D. Checking of all transactions recorded
Answer:B

52. Which of the following statements is not correct about materiality?

A. Materiality is a relative concept
B. Materiality judgments involve both quantitative and qualitative judgments
C. Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs of an
informed decision maker who will rely on the financial statements
D. At the planning state, the auditor considers materiality at the financial statement level only
Answer:D

53.........the audit risks… the materiality and ……the audit effort

A. Lower, Higher, Lower
B. Lower, Lower, Higher
C. Higher, Lower, Lower
D. Lower, Higher, Higher
Answer:A

54. When issuing unqualified opinion, the auditor who evaluates the audit findings should be satisfied
that the
A. Amount of known misstatement is documented in working papers
B. Estimates of the total likely misstatement is less than materiality level
C. Estimate of the total likely misstatement is more than materially level
D. Estimates of the total likely misstatement cannot be made
Answer:C

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55. In determining the level of materiality for an audit, what should not be considered?
A. Prior year’s errors
B. The auditor’s remuneration
C. Adjusted interim financial statements
D. Prior year’s financial statements
Answer:B

56. Analytical procedures issued in the planning stage of an audit, generally

A. Helps to determine the nature, timing and extent of other audit procedures
B. Directs attention to potential risk areas
C. Indicates important aspects of business
D. All of the above
Answer:D

57. Which of the following statements is most closely associated with analytical procedure
applied at substantive stage?
A. It helps to study relationship among balance sheet accounts
B. It helps to discover material misstatements in the financial statements
C. It helps to identify possible oversights
D. It helps to accumulate evidence supporting the validity of a specific account balance
Answer:D

58. For all audits of financial statements made in accordance with AAS14, the use of analytical
procedures is at the discretion of the auditor in which stage?
A. Substantive testing
B. Planning stage
C. Overall review stage
D. All of the above
Answer:A

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59. Verification refers to :
A. Examining the physical existence and valuation of assets.
B. Examining the journal and ledger
C. Examination of vouchers related to assets.
D. None of the above.
Answer:A

60. Stock should be valued at

A. Cost
B. Market price
C. Cost or Market price whichever is lower.
D. Cost less depreciation.
Answer:C

61. ‘Auditor is not a valuer’, was stated in

A. Kingston Cotton Mills case
B. London Oil Storage Co. Case
C. London and General Bank case
D. None of the above
Answer:A

62. Floating assets are valued at

A. cost
B. Market price
C. Cost or market price whichever is lower
D. Cost less depreciation
Answer:C

63. Goods sold on the basis of ‘sales or return ‘ should

A. Be included in the stock
B. Not be included in the stock
C. Not be checked by auditor
D. None of the above
Answer:A

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64. 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:C

65. Which of the following statements is, generally, correct about the reliability of audit evidence?
A. To be reliable, evidence should conclusive rather than persuasive
B. Effective internal control system provides reliable audit evidence
C. Evidence obtained from outside sources routed through the client
D. All are correct.
Answer:B

66. In an audit of financial statements, substantive tests are audit procedures that

A. May be eliminated for an account balance under certain conditions

B. Are designed to discover significant subsequent events
C. Will increase proportionately when the auditor decreases the assessed level of control risk
D. May be test of transactions, test of balance and analytical procedures
Answer:D

67. The nature, timing and extent of substantive procedures is related to assessed level of control
risk
A. Randomly
B. Disproportionately
C. Directly
D. Inversely
Answer:C

68. Which of the following factors is most important in determining the appropriations
of audit evidence?
A. The reliability of audit evidence and its relevance in meeting the audit objective
B. The objectivity and integrity of the auditor
C. The quantity of audit evidence
D. The independence of the source of evidence
Answer:A

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69. When is evidential matter, generally, considered sufficient?
A. When it constitutes entire population
B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
C. When it is objective and relevant
D. When auditor collects and evaluates it independently
Answer:B

70. Which of the following is not corroborative evidence?

A. Minutes of meetings
B. Confirmations from debtors
C. Information gathered by auditor through observation
D. Worksheet supporting consolidated financial statements
Answer:D

71. Which of the following statements is not true with respect to management representations
obtained as per AAS11?
A. Authenticated copy of relevant minutes of meetings may be regarded as management
representation
B. It should always be in working
C. It may be dated prior to the report date
D. It should be addressed to the auditor
Answer:B

72. What would most appropriately describe the risk of incorrect rejection in terms of
substantive testing?
A. The auditor concludes balance is materially correct when in actual fact it is not
B. The auditor concludes that the balance is materially misstated when in actual fact it not
C. The auditor has rejected an item for sample which was material
D. None of the above
Answer:B

73. Which of the following affects audit effectiveness?

A. Risk of over reliance
B. Risk of incorrect rejection
C. Risk of incorrect acceptance
D. Both (a) and (c)
Answer:D

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74. What would most effectively describe the risk of incorrect acceptance in terms of substantive
audit testing?
A. The auditor has ascertained that the balance is materially correct when in actual fact it is not
B. The auditor concludes the balance is materially misstated when in actual fact is not
C. The auditor has rejected an item from sample which was not supported by documentary
evidence
D. He applies random sampling on data which is inaccurate and inconsistent
Answer:A

75. Which of the following Auditing Assurance Standard deals with Audit Planning?
A. AAS7
B. AAS8
C. AAS9
D. AAS3
Answer:B

76. Audit programme is prepared by

A. The auditor
B. The client
C. The audit assistants
D. The auditor and his audit assistants
Answer:D

77. The working papers which auditor prepares for financial statements audit are:
_
A. Evidence for audit conclusions
B. Owned by the client
C. Owned by the auditor
D. Retained in auditor’s office until a change in auditors
Answer:C

78. The quantity of audit working papers complied on engagement would most be affected by
A. Management’s integrity
B. Auditor’s experience and professional judgment
C. Auditor’s qualification
D. Control risk
Answer:B

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79. Which of the following best describes the primary purpose of audit programme preparation?
A. To detect errors or fraud.
B. To comply with GAAP
C. To gather sufficient appropriate evidence
D. To assess audit risk
Answer:C

80. 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:D

81. The auditor’s permanent working paper file should not normally, include
A. Extracts from client’s bank statements
B. Past year’s financial statements
C. Attorney’s letters
D. Debt agreements
Answer:A

82. For what minimum period should audit working papers be retained by audit firm?
A. For the time period the entity remains a client of the audit firm.
B. For a period of ten years
C. For a period auditor opines them to be useful in servicing the client
D. For the period the audit firm is in existence.
Answer:C

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83.Duty
C. to sign
Which the following
of the audit report
factors would least likely affect the quantity and content of an auditor’s
working papers
A. The assessed level of control risk
B. The possibility of peer review
C. The nature of auditor’s report
D. The content of management representation letter
Answer:D

84. Which of the following statement is true regarding an auditor’s working papers?
A. They document the level of independence maintained by the auditor
B. They should be considered as the principle support for the auditor’s report
C. They should not contain details regarding weaknesses in the internal control system
D. They help the auditor to monitor the effectiveness of the audit firm’s quality control
Answer:B

85. Which of the following statement best describes the understanding with respect to ownership and
custody of working papers prepared by an auditor?
A. The working papers may be obtained by third parties when they appear to be relevant to issues
raised in litigation
B. The safe custody of working papers is the responsibility of client, if kept at his premises
C. The working papers must be retained by an audit firm for a period of 10 years
D. Successor auditors may have access to working papers of the predecessor auditors. The approval
of client is not required.
Answer:A

86. The current file of the auditor’s working papers, generally, should include
A. A flowchart of the internal controls
B. Organisation charts
C. A copy of financial statements
D. Copies of bond and debentures
Answer:C

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87.Duty
C. Knowledge ofaudit
to sign the the entity’s
report business does not help the auditor to
A. Reduce inherent risk
B. Identify problem areas
C. Evaluate reasonableness of estimates
D. Evaluate appropriates of GAAP.
Answer:A

88. Payment for wage should be vouched with the help of

A. Piece Work Statement.
B. Wage sheets
C. Minutes book
D. Bank pass book.
Answer:B

89. Payment for building purchased should be vouched with the help of
A. Title Deed
B. Correspondence with the brokers
C. Building Account
D. Cash book
Answer:A

90. Purchase returns should be vouched with the help of

A. Bought notes
B. Credit notes
C. Goods inward book
D. Cash book
Answer:B

91. Receipts from sale of investments should be vouched with the help of
A. Brokers bought notes
B. Brokers Sold notes
C. Minutes book
D. Inventory of investment
Answer:B

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92.Duty
C. Which of the
to sign the following expenses should not be treated as capital expenditure?
audit report
A. Expenses paid on installation of a plant.
B. Cost of dismantling a building in case a new building is to be constructed on the land
C. Legal expenses incurred to defend a suit related to title of patent. The suit has been lost
D. The fees paid to engineer who constructed the plant.
Answer:C

93. Which of the following is not a revenue expense?

A. Cost of raising a loan
B. Cost of accessories of motor vehicles spent at the time of purchase
C. Expenses incurred for laying of sewers on land purchased
D. Insurance premium paid at the time of registration of the ship
Answer:B

94. Depreciation does not arise form

A. Effluxion of time
B. Use
C. Obsolescence through technology be market changes
D. Remarket expectation
Answer:D

95. Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
A. Schedule XIV
B. Schedule V
C. Schedule XIII
D. Schedule X
Answer:A

96. Schedule XIV has prescribed rates of depreciation for double shift and triple shift working for
which one of the following assets?
A. Building
B. Plant and Machinery
C. Furniture and fittings
D. Ships
Answer:B

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97.Duty
C. A company
to sign thehas bought
audit reportpatents. Which of the following methods is most suitable for
providing depreciation on them?
A. SLM
B. WDV
C. Sum of year digits
D. Any of the above
Answer:A

98. Which of the following is a revenue reserve?

A. Capital redemption reserve
B. Security premium account
C. Debenture redemption reserve
D. Capital reserve
Answer:C

99. Which of the following will not lead to creation of secret reserve?
A. Undervaluation of closing stock
B. Charging capital expenditure to revenue
C. Goods sent on consignment being shown as actual sales
D. Charging higher rates of depreciation on fixed assets than actually required
Answer:C

100. Who is responsible for the appointment of statutory auditor of a limited company?
A. Directors of the company
B. Members of the company
C. The Central Government
D. All of the above
Answer:B

101. Which of the following sections deal with qualifications 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) & Sec.224
Answer:A

102. Which of the following statement is not true?

A. A partnership firm can be appointed as a statutory auditor of limited company
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 B. Appointment
C. Duty can bereport
to sign the audit
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made in the name of the firm
C. Majority of the partners should be practicing in India
D. All partners should be chartered accountants
Answer:C

103. As per the requirements of section 226(3) and 226(4) a person is disqualified from being
appointed as a statutory auditor if he holds
A. Equity shares or debentures of the company
B. Equity shares carrying voting of the company
C. Shares carrying voting rights of the company
D. Security carrying voting rights of the company
Answer:D

104. 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:D

105. The term of the auditor ship of first auditor would be from the date of appointment till

A. the conclusion of statutory meeting

B. the conclusion of first annual general meeting
C. the conclusion of next annual general meeting
D. the date of removal
Answer:B

106. In case the directions fail to appoint first auditor (s), the shareholders shall appoint them
at…..by passing a resolution
A. a general meeting
B. first annual general meeting
C. statutory meeting
D. annual general meeting
Answer:A

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107.
C. Which
Duty to signofthe
theaudit
following
report statement is not true regarding appointment of statutory
auditor by the Central Government?
A. Such powers have been conferred upon it by section 224(3)
B. If a company fails to appoint an auditor at a general meeting
C. If an auditor refuses to accept appointment, the powers of the Central
D. None of the above
Answer:B

108. If a casual vacancy in the office of auditor arises by his resignation it should only be filled by
the company in a……..
A. Board meeting
B. Extraordinary general meeting
C. General meeting
D. Annual general meeting
Answer:C

109. For the purposes of section 224(IB) the number of partners of a firm which shall be taken
into account would be as on the date of _
A. Completion of audit
B. Auditor’s report
C. Acceptance of audit
D. Starting of audit work
Answer:C

110. Which of the following is counted for the purposes of section 224(IB) the number of partners of
a firm which shall be taken into account would be as on the data of
A. Joint audit
B. Audit to non-profit companies
C. Audit of unlimited companies
D. All of the above
Answer:D

111. Mr. A, a Charted Accountant, has nineteen audits, Out of following audits which audits
should he accept to ensure he doesn’t violate provisions of section 224(IB)
A. Audit of a private company
B. Audit of branch of a foreign company
C. Audit of two branches of an Indian company
D. All of them
Answer:D
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C. Duty to sign the audit report
112. Which audit out of the following would not be regarded as one audit for the purposes of
section 224(IB)?
A. Audit of one branch each of two different companies
B. Joint audit
C. Audit head office & branches
D. Audit of one or more branches of a company
Answer:A

113. 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:B

114. The section which contains provisions regarding remuneration of the auditor is_
A. Section 224(9)
B. Section 224(7)
C. Section 224(8)
D. Section 224(6)
Answer:C

115. The authority to remove the first auditor before the expiry of term is with_
A. The shareholders in a general meeting
B. The shareholders in the first annual General meeting
C. The board of directors
D. the Central Government
Answer:A

116. Which of the following statements 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 provisions for such removal are contained in section 224(7)
Answer:C

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C. Duty to sign the audit report
117. The retiring auditor does not have a right to
A. make written representations
B. get his representations circulated.
C. be heard at the meeting
D. speak as a member of the company
Answer:D

118. Who out of the following cannot be appointed as a statutory auditor of the company?
A. Erstwhile director
B. Internal auditor
C. Relative of a director
D. Only (b) and (c)
Answer:B

119. A statutory auditor has a right of access at all times to

A. Books and accounts of a company
B. Books, accounts and documents of the company
C. Books, accounts and vouchers of the company
D. Notices and documents of the company
Answer:C

120. The auditor has a right to

A. Obtain information and explanation
B. Obtain information and explanation from the employees and officers
C. Obtain information and explanation necessary for the purpose of audit
D. Both (b) and (c)
Answer:D

121. The principal auditor, as per clarification issued by the ICAI, does not have any right to
A. Inspect working papers of the branch auditor
B. Visit branches
C. Seek information necessary for audit purposes
D. Incorporate the branch audit report in his audit report
Answer:A

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122.
C. Under
Duty which
to sign of the
the audit following section auditor has a duty to enquire into six specified matters
report
and report by exception?
A. Section 227(4A)
B. Section 227 (IA)
C. Section 227 (2)
D. Section 227(3)
Answer:A

123. The auditor has to enquire, under section 227 (IA) into different aspects, related to shares
allotted for cash for the purpose of auditor include
A. Shares against whose allotment cash has actually been received
B. Shares allotted for consideration other than cash
C. Shares allotted against a debt payable
D. All of them
Answer:D

124. Right to visit branches has been given to the auditor under which section?
A. Section 222(3)
B. Section 228(2)
C. Section 228(4)
D. Section 228(3)
Answer:D

125. Which of the following statements with regard to rules regarding exemption from branch
audit is not true?
A. A branch office of a company can be granted exemption on the basis of quantum of activity
criterion
B. If a satisfactory arrangement of scrutiny check of the books of account of a branch office of a
manufacturing company has been made, it can be exempted from branch audit
C. Cost consideration should be considered as an important factor/ground for exemption from branch
audit
D. The auditor should state in his audit report that branch office is exempted by virtue of quantum of
activity or any other basis
Answer:B

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126.
C. The
Duty branch
to sign the auditor is appointed by –
audit report
A. Shareholders in an annual general meeting
B. Shareholders in general meeting
C. Board of directors in board meeting
D. Any of the above
Answer:B

127. Special audit is conducted at the order of the Central Government. Which section gives such
powers?
A. Section 233(A)
B. Section 233A
C. Section 242(A)
D. Section 242A
Answer:C

128. Who among the following can be appointed as special auditor by the Central Government?
A. The statutory auditor
B. chartered accountant in practice
C. Any chartered accounted who is not in practice
D. Both (a) and (b)
Answer:D

129. The scope of the audit including reference to the pronouncements of the ICAI, which the auditor
adheres to, generally is communicated to the client in the
i) auditor’s report
ii) engagement letter
iii) representation letter
A. i) only
B. Both (i) and (ii)
C. Both (i) and (iii)
D. All the above
Answer:B

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130.
C. If to
Duty any director
sign is disqualified
the audit report from being appointed under section 274(1) (g), the auditor should
mention this fact in his audit report. For this purpose, how does he determine their eligibility :
A. He obtains a representation from each director
B. He obtains a management representation
C. He enquiries from Registrar of Companies
D. Any one of the above
Answer:A

131. As per the ‘Statement on Qualification in Auditor’s Report’s issued by the ICAI, the
auditor, Under section 227(3) has to gave a statement of fact on_
A. Proper books of account
B. Accounting standards
C. Cess payable under section 441A
D. None of the above
Answer:C

132. The date on auditor’s report should not be

A. The data of AGM
B. Later than the date on which the accounts are approved in board’s meeting
C. Earlier than the date on which the accounts are approved by the management
D. Both (a) and (b)
Answer:C

133. Section 227(2) of the Companies Act, requires the auditor to give his report to the members of
the company on certain matters. Which of the following is not included in the above?
A. Accounts examined by him
B. Every balance sheet and profit and loss account laid before a general meeting during his tenure
C. Every document that is a part of or ‘annexed to’ the balance sheet
D. Every document which is attached to the profit and loss account
Answer:D

134. When restrictions that significantly affect the scope of the audit are imposed by the client, the
auditor generally should issue which of the following opinion?
A. Qualified opinion
B. Disclaimer of opinion
C. Adverse opinion
D. Unqualified report with ‘an emphasis of matter’ paragraph?
Answer:A

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135.
C. Which
Duty to signofthe
theaudit
following
report report not result in qualification of the auditor’s opinion due to a
scope limitation?
A. Restrictions the client imposed
B. Reliance on the report of other auditor
C. Inability to obtain sufficient appropriate evidential matter
D. Inadequacy of accounting records
Answer:B

136. The inventory consists of about one per cent of all assets. The client has imposed restriction on
auditor to prohibit observation of stock take. The auditor cannot apply alternate audit procedures.
A. Unqualified opinion
B. Qualified opinion
C. Disclaimer of opinion
D. Adverse opinion
Answer:C

137. The auditor has serious concern about the going concern of the company. It is dependent on
company’s obtaining a working capital loan from a bank which has been applied for. Then
management of the company has made full disclosure of these facts in the notes to the balance sheet.
The auditor is satisfied with the level of disclosure. He should issue_
A. Unqualified opinion
B. Unqualified opinion with reference to notes to the accounts
C. Qualified opinion
D. Disclaimer of opinion
Answer:B

138. Which of the following is true about explanatory notes?

A. These are given by the directors of the company
B. These are given to adhere to requirements of section 211.
C. These are given by auditors of the company in auditor’s report
D. All of the above
Answer:B

139. The client changed method of depreciation from straight line to written down value method.
This has been disclosed as a note to the financial statements. It has an immaterial effect 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 the auditor express?
A. Unqualified opinion

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 B. Qualified
C. Duty opinion
to sign the audit report
C. Disclaimer of opinion
D. Adverse opinion
Answer:A

140. Which of the following is not true regarding requirements under section 227(3) (f) of the
Companies Act, 1956?
A. The auditor has to satisfy himself whether any of the directors of the company, whether public or
private, are disqualified from being appointed as directors as per section 274(1) (g).
B. Section 274(1) (g) is applicable to appointment of directors both in public and private companies but
reporting is limited to only those directors of a company who are also directors of a public company
C. The auditor requires every director to submit a written representation in respect of each Public
company, of which the is a director, as to whether such company has defaulted in terms of provisions of
sections 274(1) (g)
D. The disqualification should be considered on the date of audit report.
Answer:D

141. The management of a company, to which AS3 is not applicable, does not include statement of
cash flows in its annual report. The auditor should express
A. Unqualified opinion
B. Qualified opinion
C. Adverse opinion
D. Any of these depending upon materiality and pervasiveness and adequacy of disclosure

Answer:A

142. In case the auditor gives a disclaimer of opinion in the audit report which of the following
paragraph(s) of a standard unqualified audit report are modified?
A. Scope paragraph
B. Opinion paragraph
C. Scope and opinion paragraphs
D. Introductory, scope and opinion paragraph
Answer:C

143. A departure from recognized accounting principle is disclosed in a note to the financial
statements. The auditor should
A. Issue a standard unqualified audit report
B. Issue a qualified report
C. Issue an unqualified report with ‘emphasis of matter’ paragraph
D. Disclaim opinion
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Answer:B
C. Duty to sign the audit report

144. The auditor should state the reasons for his reservations in audit report and should try to
quantify the effect on them. This should be done in case he has expressed _
i) A qualified opinion
ii) an unqualified opinion with emphasis of matter paragraph
iii) An adverse opinion
IV) a disclaimer of opinion
A. i) only
B. i) and (iv) only
C. i), iii) and (iv) only
D. All of the above
Answer:A

145. Which of the following documents is not relevant for vouching cash sales?
A. Daily cash sales summary
B. Salesmen’s summary
C. Monthly statements sent to customers
D. Bank statement
Answer:C

146. The auditor should examine subsequent realization of revenue such as dividends,
interest, commission, etc to
A. Identify cases of unrecorded revenue
B. Ensure proper disclosure in the balance sheet
C. Recomputed accrued income on the data of balance sheet
D. Any of these
Answer:A

147. To test whether sales have been recorded, the auditor should draw a sample from a file of
A. Purchase orders
B. Sales orders
C. Sales invoices
D. Bill of loading
Answer:C

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148.
C. For
Duty to vouching of which
sign the audit reportitem, the auditor is most likely to examine cost records?
A. Commission earned
B. Bad debts recorded
C. Credit sales
D. Sale of scrap
Answer:D

149. The “Guidance Note on Revenue” issued by the ICAI does not deal with
A. Sales revenue
B. Revenue rendering service
C. Revenue from sale of fixed assets
D. Income from interest, dividend
Answer:C

150. An auditor conducts a surprise check on the pay day (i.e) the day wages and salaries are paid.
The primary purpose of this audit procedure is
A. To ensure that there are no ghost workers
B. To ensure the casual workers employed are authorized by the supervisor
C. To test procedures for distributing pay cheques
D. To obtain understanding of internal control system
Answer:C

151. Which of the following would prevent double payment of the same voucher?
A. The person signing the cheque should cancel the supporting documents
B. Cheques should be signed by at best two persons
C. The data of payment of vouchers of similar nature should be the same or close to each other
D. All of the above
Answer:A

152. In case of unclaimed wages, the auditor should examine whether

A. The amount has been deposited in a separate bank account
B. Deposited with the cashier
C. Held in a safe deposit box
D. All of these
Answer:A

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153.
C. While
Duty vouching
to sign the auditwages,
report auditor should examine whether there is proper segregation of duties.
Which of the following activities should not be done by same department?
A. Maintaining personnel records and approving changing in wages rates
B. Proposing pay roll summary and disbursement of wages
C. Making salary statements and filing tax returns
D. Comparing time clock records with time reports prepared by supervisors and preparing list of workers
employed along with the units of production for each one of them
Answer:B

154. In order to vouch, which of the expenses, the auditor will examine Bill of Entry?
A. Custom
B. Excise duties
C. Sales tax
D. Income tax
Answer:A

155. While vouching, how will the auditor ensure himself that all credit sales transactions
have been recorded by the entity?
A. Examining cut-off points
B. Matching entries in the sales book against renumbered sales invoices and goods outward notes
C. Counting the number of invoices and matching the number with entries on sales book
D. Both (a) and (b)
Answer:D

156. In case of sales return, the auditor should examine which documents?
A. Credit notes, advice notes and inward return notes
B. Debit notes, advice notes and inward return notes
C. Purchase invoices, advice notes and inward return notes
D. Credit notes, inspection report and inward return notes
Answer:D

157. An internal auditor discovered that fictitious purchases have been recorded by the purchase
clerk. This indicates absence of which control?
A. Purchase invoices are independently matched with purchase orders and goods received notes
B. Goods received notes requires the signature of individual who authorized the purchase
C. Routine checks are performed by internal auditor fortnightly.
D. Purchase function and production function are clubbed in one department
Answer:A

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158.
C. Which
Duty to signofthe
theaudit
following
report is most crucial to a purchase department?
A. Reducing the cost of acquisition
B. Selecting supplies
C. Authorizing the acquisition of goods
D. Assuring the quality of goods
Answer:C

159. The auditor is most likely to examine related party transactions very carefully while vouching
A. Credit sales
B. Sales returns
C. Credit purchases
D. Cash purchases
Answer:C

160. In order to vouch bought ledger, the auditor obtain confirmations from creditors. The principal
reason for the auditor to examine suppliers statements at balance sheet date is to obtain evidence that
A. The supplier exist
B. There are no unrecorded liabilities
C. Recorded purchases actually occurred
D. To link creditors with cash book entries
Answer:B

161. The creditor’s accounts, generally, have credit balance. Debit balance may be due to
A. Advance paid against an order
B. Goods returned
C. Wrong debit to supplier account
D. Any of these
Answer:D

162. In case of vouching, the auditor is least likely to examine authorization by appropriate
authority in case of –
A. Bad debts written off
B. Sales return
C. Purchase return
D. Discount allowed to customers as per organizational policy
Answer:D

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163.
C. DutyVendors should
to sign the auditbereport
approved by Management before purchase department executes an order.
If this is not done, then which of the following situations may arise?
A. Purchases could be made from vendors whose product quality may not be good
B. Purchases may be made from related parties without management’s knowledge
C. Purchases could be made from vendors who may have offered price to manager purchases
D. Any of these
Answer:D

164. Which of the following is not true with regard to verification of assets?
A. It invoices substantiation of occurrence of transactions
B. Its objective is to establish existence, ownership, possession, valuation and disclosure of assets
C. The auditor has to form an opinion on different aspects
D. All are true
Answer:A

165. Which of the following statements is not true?

A. Valuation of assets is the responsibility of management
B. The auditor can rely on a certificate issued by an authorized valuationer as to the valuation of assets in
the balance sheet
C. The auditor should value the asset as per generally accepted accounting principle
D. Valuation is no part of auditor’s duty
Answer:C

166. An auditor is verifying valuation of building which has been self constructed by the client.
Which of the following documents is least relevant to the auditor for verification purposes?
A. Bills of contractor
B. Minutes of meeting of board of directors
C. Certificates of engineer and architect
D. Loan agreement
Answer:B

167. Which of the following assets is least likely to be subjected to lien?

A. Freehold land
B. Plant and machinery
C. Leasehold property
D. Motor vehicles
Answer:C

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168.
C. Anto analysis
Duty of fixed
sign the audit reportassets account has revealed possibility of unrecorded sale of plant and
machinery. Which of the following audit procedures may be adopted to discover it?
A. Examination of property tax files
B. Inquiry of plant manager
C. Examination of debits to accumulated depreciation
D. All of the above
Answer:D

169. The auditor has noticed existence of recurring losses sale of fixed assets this indicates
A. Depreciation charges are insufficient
B. Policy of sale or disposal of fixed assets needs to be reviewed
C. The sale of assets have not been properly authorized
D. Accounting errors
Answer:A

170. Which of the following financial statements assertions are addressed by testing the cut off for
plant asset addition?
A. Existence and ownership
B. Valuation and disclosure
C. Possession and ownership
D. Completeness and valuation
Answer:D

171. The auditor while verifying prepaid insurance has concluded that there is inadequate
insurance of building, He should
A. Modify his audit report
B. Insist it should be disclosed in the notes to financial statements
C. Write it in letter of weakness
D. Both (b) and (c)
Answer:D

172. While verifying intangible assets, an auditor would recomputed amortization charges and
determines whether amortization period is reasonable. The auditor tries to establish ….by doing it
A. Valuation
B. Existence
C. Disclosure
D. Possession
Answer:A

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173.
C. When
Duty auditing
to sign prepaid
the audit report insurance, an auditor discovers that the insurance policy bond on
building is not available for inspection. This may indicate
A. No insurance has been undertaken for building
B. Lien on building
C. Insurance premium has not been paid
D. Insurance premium paid but not recorded
Answer:B

174. Which of the following controls would ensure that securities are not lost, stolen or
diverted?
A. Establish physical barriers over investment securities
B. Maintain files of authorized signatures
C. Segregate investment approval from accounting and from custody of securities
D. All of the above
Answer:D

175. Which of the following would give the assurance that debtors mentioned on the date of
balance sheet actually exist?
A. Sending debtor’s confirmation letters
B. Reviewing subsequent collection
C. Verify debtors against sales document
D. Both (a) and (b)
Answer:D

176. Tests of control are not concerned with_

A. Existence of controls
B. Effectiveness of controls
C. Continuity of controls
D. Designing of controls
Answer:D

177. The sequence of steps in the auditor’s consideration of internal control is as follows –
A. Obtain an understanding, design substantive test, perform tests of control, and make a
preliminary assessment of control risk
B. Design substantive tests, obtain an understanding, perform tests of control, and make a
preliminary assessment of control risk
C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control,
design substantive procedures.
D. Perform tests of control, obtain and understanding, make a preliminary assessment of control risk,
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 designto sign the audit report
C. Duty
Answer:C

178. Which of the following is not an inherent limitation of internal control system?
A. Management override
B. Collusion among employees
C. Inefficiency of internal auditor
D. Abuse of authority
Answer:C

179. An auditor should study and evaluate internal controls to

A. Determine whether assets are safeguarded
B. Suggest improvements in internal control
C. Plan audit procedures
D. Express and opinion
Answer:C

180. 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 financial statement
B. Accounting system is well documented
C. Written evidence is there to support transactions
D. if internal control is effective
Answer:D

181. If the auditor assesses control risk as high….

A. Document the conclusions
B. Documents the reasons along with conclusions
C. Perform tests of control
D. Perform walk through tests
Answer:A

182. The overall attitude and awareness of an entity’s board of directors concerning the
importance of internal control is reflected in
A. Accounting controls
B. Control environment
C. Control procedures
D. SupervisioN

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Answer:B
C. Duty to sign the audit report

183. Which of the following are included in test of control?

A. Reperformance and observation
B. Inquiry and analytical procedures
C. Comparison and conformation
D. Inspection and verification
Answer:A

184. Control risk is assessed at

A. Overall financial statements level
B. Fraud risk factor level
C. Financial statement assertion level
D. Control environment level
Answer:C

185. An auditor assesses control risk because it

A. Affects the audit risk
B. Affects the level of detection risk that auditor may accept
C. Helps him to fix materiality level for each financial assertion
D. Is directly related to inherent risk
Answer:B

186. A flow chart, made by the auditor, of an entity’s internal control system is a graphic
representation that depicts the auditor’s.
A. Understanding of the system
B. Understanding of fraud risk factors
C. Documentation of assessment of control risk
D. Both (a) and (c)
Answer:A

187. The performance of tests of control is documented in

A. Audit programme
B. Flow charts
C. Working papers
D. Any of the above
Answer:C

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188.
C. The
Duty independence
to sign of an internal auditor will most likely be assured if he reports to the
the audit report
A. President Finance
B. President System
C. Managing Director
D. CEO
Answer:C
189. In comparison to the independent auditor, an internal auditor is more likely to be concerned with
A. Cost accounting system
B. Internal control system
C. Legal compliance
D. Accounting system
Answer:B

190. When an independent auditor relies on the work of an internal auditor, he or she should
A. Examine the scope of internal auditor’s work
B. Examine the system of supervising review and documentation of internal auditor’s work
C. Adequacy of related audit programme
D. all of the above
Answer:D

191. Proper segregation of duties reduces the opportunities in which a person would both
A. Establish controls and executes them
B. Records cash receipts and cash payments
C. Perpetuate errors and frauds and conceals them
D. Record the transaction in journal and ledger
Answer:C

192. Analytical procedures are least likely to be use in the audit of –

A. Cash balance
B. Investments
C. Bills receivables
D. Debtors
Answer:A

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193.
C. Which
Duty to signofthe
theaudit
following
report statements is not true with regard to teeming and lading ?
A. It results in the deliberate misappropriation of cash receipts
B. It is associated with cash receipts
C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
D. To conceal the shortage, the defraud, usually, tries to keep bank and book amounts in daily
agreement so that a bank reconciliation will not detect the irregularity.
Answer:C

194. The balance of cash in often between one to five percent of total assets. Tick the most appropriate
statement with regard to verification of cash in context of this
A. Cash in always material as materiality is qualitative concept
B. No audit of cash is needed when, in auditor’s opinion, cash is immaterial. Materiality is a
relative concept
C. The cash balance need only be audited if the balance is in overdraft
D. Cash is to be verified if control risk is assessed as high
Answer:A

195. When counting cash on hand the auditor should

A. Ensure presence of somebody from management
B. Obtain a receipt from custodian as to its return
C. Ensure postage and revenue stamps are not counted in physical count
D. Temporary advances to employees are counted to calculate balance of cash in hand
Answer:C

196. Which of the following statement is not true regard to auditor’s attendance at stock taking?
A. Auditor should attend physical stock taking only if inventory is material
B. Auditor may not attend physical verification of stock by management, if he does not find it
appropriate to rely on it
C. If inventory is material, even when the auditor is not placing reliance on the physical
verification by the management, he should attend it
D. The primary objective of an auditor’s observation of an entity’s observation of an entity’s stock take is
to obtain direct knowledge that the stock and has been property counted
Answer:C

197. While observing a client’s annual physical inventory, an auditor conducted test counts for certain
test counts were higher than the recorded quantities in the client’s perpetual records. This situation
could be the result of the client’s failure to
record –

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 A. Purchase
C. Duty to sign returns
the audit report
B. Sales returns
C. Goods with consignor
D. Purchase discounts
Answer:B

198. Inspection report/receiving report supports entries in

A. Sales book and sales return book
B. Purchase book and sales return book
C. Cash book and purchase book
D. Sales book and purchase return book
Answer:B

199. ……………….. Starts where..........................................Ends

A. Accounting, auditing
B. Auditing, accounting
C. Vouching, auditing
D. Accounting,vouching
Answer:B

200...............means “proving the truth or confirmation”

A. Vouching
B. Verification
C. Inspection
D. Auditing
Answer:B

201. Civil liability of an auditor implies liability for

A. misappropriation of cash
B. misappropriation of goods
C. fraud
D. misfeasance
Answer:D

202. An auditor is held criminally liable for

A. Loss to his client
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 B. Neglect
C. Duty to signofthe
hisaudit
dutyreport McqMate.co
m
C. Offence against statutory provisions
D. Frauds
Answer:C

203. An auditor is held liable under C.A Act 1949 for

A. negligence
B. misfeasance
C. Professional misconduct
D. breach of contract.
Answer:C

204. is a systematic examination of the books and records or a business.

A. Auditing
B. Vouching
C. Verification
D. Checking
Answer:A

205. An audit which is compulsory by the law is .

A. Government Audit
B. Internal Audit
C. Cost Audit
D. Statutory Audit
Answer:D

206. .Instruction of audit issued by controller and auditor general of India

.
A. Statutory audit
B. Final Audit.
C. Management audit
D. Government audit
Answer:D

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C. Duty to sign the audit report
207. Audit done by the employees of the business undertaking is called .
A. Final audit
B. Management Audit
C. Government Audit
D. Internal Audit
Answer:D

208. This kind of audit is conducted generally between two annual audit .
A. Internal Audit
B. Interim audit
C. Final Audit
D. Continuous Audit
Answer:B

209. Management audit otherwise called as .

A. Final audit
B. Efficiency Audit
C. Cost Audit
D. Cash audit
Answer:B

210. Before the work of audit is commenced, the auditor plans out the whole of audit work is
called.
B. Audit Note
C. Audit Programme
D. Audit Control
Answer:C

211. A number of checks and controls exercised in a business to ensure its efficient working are
known as .
A. Internal Check
B. Internal Control
C. Internal Audit
D. Interim Check
Answer:B
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C. Duty to sign the audit report
212. 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

213. Voucher relates to .

A. Cash receipt & payments, credit transactions
B. Cash payment only
C. Credit transactions only
D. Cash receipt only
Answer:A

214. Internal check is meant for .

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

215. Purchase of machinery is a .

B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer:C

216. Sale of land is a .

A. revenue receipt
B. capital receipt
C. capital expenditure
D. revenue expenditure
Answer:B

217. When a transaction has not been recorded in the books of account either wholly or
partially such errors are called as .
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 A. errors
C. Duty of commission
to sign the audit report
B. errors of omission
C. compensating error
D. error of principle
Answer:B

218. 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:B

219. 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

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

.
A. principle
B. commission
C. duplication
D. omission
Answer:C

221. 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

222. Treating revenue expenditure as capital expenditure is a case of .

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 A. fraud
C. Duty to sign the audit report
B. misappropriation of cash
C. misappropriation of goods
D. manipulation of accounts
Answer:D

223. /. Special audit is necessary for .

A. inefficient concern
B. processing concern
C. trading concern
D. manufacturing concern
Answer:A

224. 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

225. Audit Note Book contains: ---------------------------------------------------------

A. Various dates of reference.
B. Details of work done.
C. Notes regarding item requiring clarification, explanations, etc.
D. All of the above.
Answer:D

226. Which of the following has a broader scope?

A. Internal Control.
B. Internal Audit.
C. Internal Checking.
D. None of the above.
Answer:D

227. An internal auditor is :

A. Temporary Employee.
B. Permanent Employee.
C. Daily Wager.
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 D. None
C. Duty of the
to sign theabove.
audit report
Answer:B

228. The main object of vouching is :

A. To prepare trial balance.
B. Conduct routine checking.
C. Verify authenticity & authority of transactions.
D. Checking of vouchers
Answer:D

229. Valuation is the base of:

A. Verification.
B. Marketing.
C. Internal checking.
D. Vouching.

230. The first auditor or auditors are appointed by :

A. Central Government.
B. Company Law Board.
C. Board of Directors.
D. Shareholders.
Answer:C

231. A number of checks & controls exercised in a business to ensure its efficient working is known
as :
A. Internal check.
B. Internal control.
C. Internal audit.
D. Interim check.
Answer:A

232. Voucher relates to :

A. Cash receipt.
B. Cash payment.
C. Credit transactions.
D. All the above.
Answer:D

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C. Duty to sign the audit report
233. Internal check is meant for :
A. Prevention of frauds.
B. Detection of frauds.
C. Helping audit in depth.
D. Detection of errors.
Answer:C

234. Internal auditor is appointed by :

A. The management.
B. The shareholders.
C. The government.
D. The statutory body.

235. Auditing begins where-------------------ends.

A. Selling.
B. Inventory valuation.
C. Accounting.
D. Purchases.
Answer:C

236. 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

237. 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:B

238. The owners of the company are called:

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 A. Debenture
C. Duty holders.
to sign the audit report
B. Debtors.
C. Shareholders.
D. None of the above.
Answer:C

239. Verification is :
A. The art of recording the business transactions.
B. An examination of the books of accounts.
C. The act of establishing the accuracy of entries in the books of accounts.
D. none
240. The main object of investigation is :
A. To discover errors and frauds.
B. To prevent errors and frauds.
C. To verify statements.
D. All the above.
Answer:D

241. Internal controls and internal check are :

A. One and the same.
B. Different.
C. Internal control includes internal check.
D. None of the above.
Answer:C

242. An auditor is like a :

A. Watchman.
B. Foolish dog.
C. Mad dog.
D. Watch dog.
Answer:D

243. Special audit is necessary for:

A. Inefficient concern.
B. Processing concern.
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 C. Trading
C. Duty to signconcern.
the audit report
D. Manufacturing concern.
Answer:A

244. The company’s auditor is expected to give:

A. His expert opinion about the accounts.
B. A factual position about the accounts.
C. A critical review of the accounts.

245. Auditors of a joint stock company are appointed by :

A. Directors of the company.
B. Annual general meeting.
C. Election at the annual general meeting.
D. Debenture holders.
Answer:C

246. A company auditor can be removed by :

A. Board of directors.
B. Managing director.
C. Any director.
D. General Meeting.
Answer:D

247. 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:C

248. Audit in depth means :

A. Audit of each and every item.
B. Intensive audit of each and every item.
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 C. Intensive
C. Duty audit
to sign the of few
audit items.
report
D. Audit of a few selected items.
Answer:B

249. Concurrent audit is a part of :

A. Internal check system.
B. Continuous audit.
C. Internal audit system.
D. Final audit.

250. Audit in depth is synonymous for:

A. Complete audit.
B. Completed audit.
C. Final audit.
D. Detailed audit.
Answer:D

251. Balance sheet audit included verification of :

A. Assets.
B. Liabilities.
C. Income & expenditure accounts where appropriate.
D. All of the above.
Answer:D

252. Which of the following statements is not true about continuous audit?
A. It is conducted at regular interval.
B. It may be carried out on daily basis.
C. It is needed when the organization has a good internal control system.
D. It is expensive.
Answer:C

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

A. Economic audit.
B. Efficiency audit.
C. Expenditure audit.
D. Effectiveness audit.
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Answer:C
C. Duty to sign the audit report

254. Balance sheet does not include :

A. Verification of assets & liabilities.
B. Vouching of income & expense accounts related to assets and liabilities.
C. Examination of adjusting and auditing & closing entries.
D. Routine checks.

255. When issuing unqualified opinion the auditor who evaluates the audit findings should be satisfied
that the :
A. Amount of known miss-statement is documented in working papers.
B. Estimates of the total likely misstatement are less than materiality level.
C. Estimated of the total likely misstatement is more than materiality level.
D. Estimates of the total likely misstatement cannot be made.
Answer:B

256. Under check system principle of is followed.

A. Division of labour
B. Division of work
C. Principle of scalar chain
D. Accountancy
Answer:A

257. This kind of audit is generally conducted between two annual audits.
A. Internal audit
B. Interim audit
C. Final audit
D. Continuous audit
Answer:B

258. Before the work of audit is commenced, the auditor plans out the whole of audit work is
known as –
A. Audit plan
B. Audit note
C. Audit risk
D. Audit program
Answer:D

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259.
C. Internal
Duty to sign auditor
the auditisreport
appointed by –
A. The management
B. The shareholders
C. The government
D. statutory body
Answer:A

260. The audit that is made compulsory under the statute is called –
A. Statuary audit
B. Partial audit
C. Complete audit
D. Continues audit
Answer:A

261. Who among the following can be appointed as the auditor of company?
A. A partner or the director of the company
B. A person of unsound mind
C. Mr. ‘Y’ who owes Rs.500 to company
D. Mr. ‘Z’ who holds the ‘CA’ Certificate
Answer:D

262. is documentary evidence by which the accuracy in the books of accounts may be proved.
A. Cheque
B. Receipt
C. Voucher
D. Statement
Answer:C

263. Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –
A. Error of omission
B. Error of commission
C. Compensating error
D. Error of Principle.
Answer:B

264. In comparison to the independent auditor an internal auditor is more likely to be concerned with
–
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 A. Cost
C. Duty accountancy
to sign the auditsystem
report
B. Internal control system
D. Accounting system
Answer:B

265. The audit program is prepared by –

A. The auditor
B. The client
C. The audit assistants
D. Auditor & his assistants
Answer:D

266. Interim audit refers to –

A. Examination of accounts continuously
B. Examination of accounts intermittently
C. Audit work to find out & check interim profits of a company
D. Carrying on audit for bonus purposes at the end of year
Answer:C

267. A company auditor should see that the dividend is paid –

A. After charging depreciation
B. Without charging depreciation
C. Out of capital
D. None of the above.
Answer:A

268. Errors of omission are –

A. Technical errors
B. Error of principle
C. Compensating error
D. none of these
Answer:A

269. Vouching implies –

A. Inspection of receipts
E. Examining the various assets

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 Answer:B
C. Duty to sign the audit report

270. Undervaluation of stock is –

A. Technical error
B. Compensatory error
C. Error of principle
D. none of these
Answer:C

271. Verification refers to –

A. Examination of journal & ledger
B. Examination of vouchers related to assets
C. Examining the physical existence & valuation of assets
D. Calculation of valuation of assets
Answer:C

272. Valuation of fixed assets is based on the concept –

A. Going concern
B. Money measurement
C. Dual aspect
D. Cost concept.
Answer:A

273. “Auditor is not valuer.” This statement was stated in –

A. Kingston Cotton Mill Case
B. London & General Bank Case
C. Lee VS Neuchatel Co. LTD Case
D. London Oil Storage Co.LTDCase
Answer:A

274. Floating assets are valued at –

A. Cost

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 B. Market
C. Duty price
to sign C.COST
the audit reportPRICE OR MARKET PRICE WHICHEVER IS LESS
D. Cost less than depreciation
Answer:C

275. Outstanding expenses should be verified with the help of –

A. Cashbook
B. Balance book
C. Journal proper
D. None of above.
Answer:C

276. First auditor of the company is appointed by the –

A. Shareholders
B. Central government
C. Company law board
D. Board of directors
Answer:D

277. The vacancy caused by resignation at a auditor is filled by –

A. Board of directors
B. At the general meeting of shareholders
C. By the central government
D. By the company law board
Answer:B

278. A special auditor is appointed by the –

A. Shareholders
B. Board of directors
C. Central government
D. CAG
Answer:C

279. A remuneration of a company auditor is fixed by the –

A. Shareholders
B. Board of directors

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 D. Appointing
C. Duty to sign theauthority
audit report
Answer:D

280. Internal auditor has to submit report to –

A. Shareholders
B. Government
C. Company law board
D. none of above
Answer:D

281. Auditor in general is –

A. Employee of the company
B. Agent of the company
C. Agent of the shareholders
D. None of the above
Answer:C

282. Shares issued for consideration other than cash should be vouched with help of –
A. Directors minutes book
B. Shareholders minute’s book
C. Contract with the party concerned
D. Cash book
Answer:C

283. The term Standard Auditing Practices refers –

A. Auditing techniques adopted by auditor for collecting & vouching evidences
B. Test checking
C. Standards of auditing
D. True & fair view
Answer:A

284. AAS refers to –

A. Audit evidence
B. Audit Planning
D. Knowledge of business

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 Answer:D
C. Duty to sign the audit report

285. The panel of Auditors of cooperative society is maintained by –

A. Charted Accountant
B. Central Government
C. Registrar
D. Shareholders
Answer:C

286. Banking Regulation Act was passed in the year–

A. 1912
B. 1949
C. 1956
D. 1955.
Answer:B

287. Which of the following statements is not correct regarding removal of first auditor before
expiry of the term?
A. He is removed at general meeting
B. Shareholders are authorized to do so
C. The approval of central government is required for such removal
D. The provision for such removal is contained in Section 224 (7)
Answer:C

288. Retiring auditor does not have right to –

A. Make written representations
B. Get his representation circulated
C. Be heard at the meeting
D. Speak as member of company
Answer:A

289. According to Section Special Audit is conducted at the central government

A. Section 233(A)
B. Section 233(B)
C. Section 242(A)
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Answer:C
C. Duty to sign the audit report

290. Audit of Banks is an example of –

A. Statutory Audit
B. Balance Sheet Audit
C. Concurrent Audit
D. All of above
Answer:D

291. Auditor of a company does not have right to visit foreign branches of company.
A. Unlimited Company
B. Manufacturing Company
C. Banking Company
D. Non-Profit making company
Answer:B

292. Cost Audit under Section 233(B) of The Company Act is

A. Voluntary
B. Compulsory
C. Advisable.
D. Avoidable
Answer:C

293. Internal Auditing Standards are issued by the –

A. International Accounting Standard Board
B. Financial Accounting Standard Board
C. International Audit & Assurance Standard Board
D. Auditing Practices Board
Answer:C

294. Which of the following is not a duty of an auditor?

A. Duty to report company’s banker
B. Duty to report to the members
C. Duty to report on any violation of law
Answer:A

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C. Duty to sign the audit report

295. The main object of vouching is :

A. To prepare trial balance.
B. Conduct routine checking.
C. Verify authenticity & authority of transactions.
D. Checking of vouchers.
Answer:C

296. Valuation is the basis of :

A. Verification.
B. Marketing.
C. Internal checking.
D. Vouching.
Answer:A

297. Voucher relates to:

A. Cash receipt.
B. Cash payment.
C. Credit transactions.
D. All the above.
Answer:A

298. Sale of Rs.50,000 to ‘A’ was entered as a sale to ‘B’. This is an example of –
A. Error of omission
B. Error of commission (
C. Compensating error
D. Error of Principle.
Answer:B

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C. Duty to sign the audit report

299. “Auditor is not valuer.” This statement was stated in –

A. Kingston Cotton Mill Case
B. London & General Bank Case
C. London Oil Storage Co.LTD Case
Answer:A

300. The vacancy caused by resignation of an auditor is filled by –

A. Board of directors
B. At the general meeting of shareholders
C. By the central government
D. By the company law board
Answer:B

301. Shares issued for consideration other than cash should be vouched with help of –
A. Directors minutes book
B. Shareholders minute’s book
C. Contract with the party concerned
D. Cash
book
Answer:C

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