AUDITING MCQs

AUDITING MCQs


Which of the following is the main object of an audit ___

a) Expression of opinion

b) Detection and Prevention of fraud and error

c) Both (a) and (b)

d) Depends on the type of audit.


Which of the title of AAS2 issued by Council of ICAI ___

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


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


A 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


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


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)


AUDITING – BASIC MCQS


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.


How many principles are listed in AAS1 which govern auditor’s professional obligation?

a) Nine

b) Fourteen

c) Seven

d) Eight


The risk of management fraud increases in the presence of :
a) Frequent changes in supplies

b) Improved internal control system

c) Substantial increases in sales

d) Management incentive system based on sales done in a quarter


Auditing standards differ from audit procedures in that procedures relate to
a) Audit assumptions

b) acts to be performed

c) quality criterion

d) methods of work


Which of the following factors likely to be identified as a fraud factor by the auditor?
a) The company is planning a initial public offer of quality shares to raise additional capital for expansion.
b) Bank reconciliation statement includes depositsintransit.
c) Plant and machinery is sold at a loss.
d) The company has made political contributions.


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.


AUDITING – BASIC MCQS


Which of the following is the most appropriate potential reaction of the auditor to his assessment that the risk of material misstatement due to fraud is high in relation to existence of inventory?

a) Visit location on surprise basis to observe test counts

b) Request inventory count at a date close to yearend

c) Vouch goods sent on approval very carefully

d) Perform analytical procedures.


Which of the following is not likely to be a fraud risk factor relating to management’s characteristics

a) Tax evasion

b) Failure to correct known weakness in internal control system

c) Adoption of conservative accounting principles

d) High management turnover


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


Which of the following information should a successor auditor obtain during the inquiry of the predecessor auditor before accepting engagement?

i) Information about integrity of management
ii) Disagreement with management concerning auditing procedures
iii) Review of internal control system.
iv) Organisation structure
a) (i) and (ii)

b) (ii) and (iii)

c) (i) , (ii) and (iii)

d) i) and (iii)


The audit engagement letter, generally, should include a reference to each of the following except

a) limitations of auditing

b) responsibilities of management with respect to audit work

c) expectation of receiving a written management representation letter.

d) a description of the auditor’s method of sample selection.


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