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Top 300 Auditing Multiple Choice

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
Auditing MCQs and Answers
Auditing Faqs

1. Various types of quality audits are:

A. product
B. process
C. management (system)
D. registration (certification)
E) All of above

Answer: E

2. When the auditor is an employee of the organization

being audited (auditee), the audit is classified as an ……..
quality audit.

A. internal
B. external
C. compliance
D. Both A & B

Answer: A

3. The most comprehensive type of audit is the ………

system audit, which examines suitability and effectiveness
of the system as a whole.

A. quantity
B. quality
C. Preliminary
D. sequential

Answer: B

4. Each of the three parties involved in an audit

……………………. plays a role that contributes to its success. 
A. the client, the auditor, and the auditeer
B. the client, the auditor, and the audite
C. the client, the moderator, and the auditee
D. the client, the auditor, and the auditee

Answer: D

5. An audit is usually conducted in three steps:

(1) A pre-examination or opening meeting with the auditee marks

the beginning of the process.
(2) involves a suitability audit of the documented procedures against
the selected reference standard.
(3) the auditor examines in depth the implementation of the quality
system.

A. True
B. False

Answer: A

6. The audit final report should include, at a minimum,

the following:
(choose the one NOT requireD.

1. Type of audit conducted

2. Characteristics of audit
3. Identification of involved parties: auditor, auditee, and
third party
4. Audit team members
5. Critical nonconformities and other observations
6. Audit standards and reference documents used
7. Determination of proper corrective action(s)
8. Duration of audit

A. 1
B. 2

C. 4
D. 8

Answer: B

7. The time required and costs involved in an external

audit are much higher as compared to internal audits.

A. True
B. False

Answer: A

8. Audit is a fact-finding process that compares actual

results with ………………….

A. specified standards and plans

B. expected results
C. premature results
D. preliminary results

Answer: A

9. The ……… is also expected to provide the resources

needed and select staff members to accompany the
auditors.

A. auditor
B. client
C. internal auditor
D. auditee

Answer: D

10. For the benefit of the organisation, quality auditing

should only report non-conformances and corrective
actions, but should not highlight areas of good practice.

A. True
B. False

Answer: B

AUDITING MCQs

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: 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: 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: 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: A

15. Sale of land is a __________.

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

20. Preliminary expenses are the best example for

_________.
A. fictitious asset.
B. intangible asset.
C. wasting asset.
D. floating asset.
Answer: A

21. Periodical audit is also called as _________.

A. Final audit.
B. Interim audit.
C. Balance sheet audit.
D. Income statement audit.
Answer: 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: 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: 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: 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: B

26. The owners of the company are called __________.

A. Debenture holders.
B. Debtors
C. Shareholders
D. None of the above.
Answer: 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: D

28. Share may be issued _____________.

A. at par.
B. at premium.
C. at discount.
D. all the above.
Answer: D

29. The liabilities of an auditor can be _________.

A. Civil
B. Criminal
C. Civil and Criminal.
D. Official
Answer: 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: 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: C

32. Cost audit under section 233(B. of the companies act is

___________.
A. voluntary
B. compulsory
C. advisable
D. avoidable
Answer: 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: 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: 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: 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: 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: 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: D

39. In India balance sheet audit is synonymous to

_______________.
A. Annual audit.
B. Continuous audit.
C. Detailed audit.
D. Statutory audit.
Answer: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: 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: B

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.Kingston Cotton Mills case

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.Cost or market price whichever is lower

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.Be included in the stock

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.Carbon copies of sales invoices inspected by the auditor

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.Effective internal control system provides reliable audit

evidence

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.May be test of transactions, test of balance and

analytical procedures

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.Directly

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.The reliability of audit evidence and its relevance in

meeting the audit objective

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.When it is enough to provide a basis for giving

reasonable assurance regarding truthfulness

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.Worksheet supporting consolidated financial

statements

71. Which of the following statements is not true with

respect to managementrepresentations 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.It should always be in working

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.The auditor concludes that the balance is materially

misstated when in actual fact it not

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.Both (a) and (c)

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.The auditor has ascertained that the balance is

materially correct when in actual fact it is not

75. Which of the following Auditing Assurance Standard

deals with Audit Planning?
A. AAS7

B. AAS8

C. AAS9

D. AAS3

Answer: B.AAS8

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.The auditor and his audit assistants

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.Owned by the auditor

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.Auditor’s experience and professional judgment


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.To gather sufficient appropriate evidence

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.To provide a guide for advising another client on similar

issues

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.Extracts from client’s bank statements


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.For a period auditor opines them to be useful in

servicing the client

83. Which of the following 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.The content of management representation letter

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.They should be considered as the principle support for

the auditor’s report

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.The working papers may be obtained by third parties

when they appear to be relevant to issues raised in litigation

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.A copy of financial statements


87. Knowledge of the entity’s 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.Reduce inherent risk

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.Wage sheets

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.Title Deed

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.Credit notes

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.Brokers Sold notes

92. Which of the following expenses should not be treated

as capital expenditure?
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.Legal expenses incurred to defend a suit related to title

of patent. The suit has been lost

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.Cost of accessories of motor vehicles spent at the time of

purchase

94. Depreciation does not arise form _______

A. Effluxion of time

B. Use

C. Obsolescence through technology be market changes

D. Remarket expectation

Answer: D.Remarket expectation

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.Schedule XIV

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.Plant and Machinery

97. A company has bought patents. 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.SLM

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.Debenture redemption reserve

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.Goods sent on consignment being shown as actual sales

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.Members of the company

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.Section 226 (1) and section 226(2)

102. Which of the following statement is not true?

A. A partnership firm can be appointed as a statutory auditor of
limited company

B. Appointment can be 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.Majority of the partners should be practicing in India

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.Security carrying voting rights of the company

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.Within one month of incorporation of the company

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.the conclusion of first annual general meeting

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.a general meeting

107. Which of the following 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.If a company fails to appoint an auditor at a general

meeting

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.General meeting

109. For the purposes of section 224(IB) the number of

partners of a firm which shall betaken 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.Acceptance of audit

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.All of the above

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.All of them

112. Which audit out of the following would not be

regarded as one audit for the purposesof 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.Audit of one branch each of two different companies

113. The auditor of a Government company is appointed by

the C & AG. His remunerationis fixed by__
A. The C & AG

B. The shareholders

C. The shareholders at an annual general meeting

D. The board of directors

Answer: B.The shareholders

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.Section 224(8)

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.The shareholders in a general meeting

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.The approval of the Central Government is required for

such removal

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.speak as a member of the company

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.Internal auditor

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.Books, accounts and vouchers of the company

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.Both (b) and (c)

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.Inspect working papers of the branch auditor

122. Under which of the following section auditor has a

duty to enquire into six specified matters and report by
exception?
A. Section 227(4A)

B. Section 227 (IA)

C. Section 227 (2)

D. Section 227(3)

Answer: A.Section 227(4A)

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.All of them

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.Section 228(3)

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.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

126. The branch auditor is appointed by –

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.Shareholders in general meeting

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.Section 242(A)

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.Both (a) and (b)

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.Both (i) and (ii)

130. If any director is disqualified from being appointed

under section 274(1) (g), the auditor should mention this
fact in his audit report. For this purpose, how does
hedetermine 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.He obtains a representation from each director

131. As per the ‘Statement on Qualification in Auditor’s

Report’s issued by theICAI, 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.Cess payable under section 441A

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.Earlier than the date on which the accounts are

approved by the management

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.Every document which is attached to the profit and loss

account

134. When restrictions that significantly affect the scope of

the audit are imposed bythe 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.Qualified opinion


135. Which of the following 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.Reliance on the report of other auditor

136. The inventory consists of about one per cent of all

assets. The client hasimposed 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.Disclaimer of opinion

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.Unqualified opinion with reference to notes to the

accounts

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.These are given to adhere to requirements of section

211.

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

B. Qualified opinion

C. Disclaimer of opinion

D. Adverse opinion

Answer: A.Unqualified opinion


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.The disqualification should be considered on the date of

audit report.

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.Unqualified opinion


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.Scope and opinion paragraphs

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

Answer: B.Issue a qualified 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.i) only

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.Monthly statements sent to customers

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.Identify cases of unrecorded revenue

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.Sales invoices

148. For vouching of which item, 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.Sale of scrap

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.Revenue from sale of fixed assets

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.To test procedures for distributing pay cheques

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.The person signing the cheque should cancel the

supporting documents

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.The amount has been deposited in a separate bank

account

153. While vouching wages, 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.Proposing pay roll summary and disbursement of wages

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.Custom

155. While vouching, how will the auditor ensure himself

that all credit salestransactions 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.Both (a) and (b)

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.Credit notes, inspection report and inward return notes

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.Purchase invoices are independently matched with

purchase orders and goods received notes

158. Which of the following 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.Authorizing the acquisition of goods


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.Credit purchases

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.There are no unrecorded liabilities

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.Any of these


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.Discount allowed to customers as per organizational

policy

163. Vendors should be 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.Any of these

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.It invoices substantiation of occurrence of transactions

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.The auditor should value the asset as per generally

accepted accounting principle

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.Minutes of meeting of board of directors

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.Leasehold property

168. An analysis of fixed assets 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.All of the above

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.Depreciation charges are insufficient

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.Completeness and valuation

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.Both (b) and (c)

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.Valuation

173. When auditing prepaid 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.Lien on building

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.All of the above

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.Both (a) and (b)

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.Designing of controls

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, design

Answer: C.Obtain an understanding, make a preliminary

assessment of control risk, perform tests of control, design
substantive procedures.

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.Inefficiency of internal auditor


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.Plan audit procedures

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.if internal control is effective

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.Document the conclusions

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

Answer: B.Control environment

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. Reperformance and observation

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.Financial statement assertion level

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.Affects the level of detection risk that auditor may

accept

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.Understanding of the system

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.Working papers

188. The independence of an internal auditor will most

likely be assured if he reports to the
A. President Finance

B. President System

C. Managing Director

D. CEO

Answer: C.Managing Director

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.Internal control system

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.all of the above

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.Perpetuate errors and frauds and conceals them

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.Cash balance

193. Which of the following 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.If same individual maintains cash receipts and cash

payments teeming and lading is likely to exist

194. The balance of cash in often between one to five

percent of total assets. Tickthe 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.Cash in always material as materiality is qualitative

concept

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.Ensure postage and revenue stamps are not counted in

physical count

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.If inventory is material, even when the auditor is not
placing reliance on the physical verification by the management, he
should attend it

197. While observing a client’s annual physical inventory,

an auditor conducted tescounts 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 –
A. Purchase returns

B. Sales returns

C. Goods with consignor

D. Purchase discounts

Answer: B.Sales returns

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.Purchase book and sales return book

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

A. Accounting, auditing

B. Auditing, accounting

C. Vouching, auditing

D. Accounting,vouching

Answer: B.Auditing, accounting

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

A. Vouching

B. Verification

C. Inspection

D. Auditing

Answer: B.Verification

201. Civil liability of an auditor implies liability for

A. misappropriation of cash

B. misappropriation of goods

C. fraud

D. misfeasance

Answer: D.misfeasance

202. An auditor is held criminally liable for

A. Loss to his client

B. Neglect of his duty

C. Offence against statutory provisions

D. Frauds

Answer: C.Offence against statutory provisions


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.Professional misconduct

204. __________ is a systematic examination of the

books and records or a business.
A. Auditing

B. Vouching

C. Verification

D. Checking

Answer: A.Auditing

205. An audit which is compulsory by the law is

__________.
A. Government Audit

B. Internal Audit

C. Cost Audit

D. Statutory Audit

Answer: D.Statutory Audit

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.Government audit

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.Internal Audit

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.Interim audit

209. Management audit otherwise called as _______.

A. Final audit

B. Efficiency Audit

C. Cost Audit

D. Cash audit

Answer: B.Efficiency Audit

210. 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 Programme

D. Audit Control

Answer: C.Audit Programme

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.Internal Control

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.Document is support of an entry made in books of
accounts

213. Voucher relates to _________.

A. Cash receipt & payments, credit transactions

B. Cash payment only

C. Credit transactions only

D. Cash receipt only

Answer: A.Cash receipt & payments, credit transactions

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.Prevention of frauds

215. Purchase of machinery is a ____________.

A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

Answer: C.capital expenditure

216. Sale of land is a __________.

A. revenue receipt

B. capital receipt

C. capital expenditure

D. revenue expenditure

Answer: B.capital receipt

217. When a transaction has not been recorded in the

books of account either wholly or partially such errors are
called as _________.
A. errors of commission

B. errors of omission

C. compensating error

D. error of principle

Answer: B.errors of omission

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.balance sheet audit.

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.Error of commission

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.duplication

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.internal audit, internal check, internal control

222. 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.manipulation of accounts

223. /. Special audit is necessary for _________.

A. inefficient concern

B. processing concern

C. trading concern

D. manufacturing concern

Answer: A.inefficient concern

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

Answer: D.till the conclusion of the first annual general meeting

AUDITING Objective Questions with Answers Quiz Test pdf

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2 THOUGHTS ON “TOP 300 AUDITING MULTIPLE CHOICE

QUESTIONS MCQS QUIZ”

addisu bedada mumicha

JANUARY 3, 2024 AT 12:04 AM 
 good practical quation. it’s the most important to seinor
auditor of for any origanization.

REPLY

kebede bekele
JANUARY 3, 2024 AT 12:04 AM

The questions are carefully weighed on the selected stu-

dent. Thanks be to God.

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