1. Which of the following sections deal with qualifications of the auditor ?
Correct : A. Section 226 (1) and section 226(2)
2. Which of the following statement is not true?
Correct : C. Majority of the partners should be practicing in India
3. 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
Correct : D. Security carrying voting rights of the company
4. The board of directors shall appoint first auditor of a company
Correct : D. Within one month of incorporation of the company
5. The term of the auditor ship of first auditor would be from the date of appointment
till__
Correct : B. the conclusion of first annual general meeting
6. In case the directions fail to appoint first auditor (s), the shareholders shall appoint
them at…..by passing a resolution
Correct : A. a general meeting
7. Which of the following statement is not true regarding appointment of statutory
auditor by the Central Government?
Correct : B. If a company fails to appoint an auditor at a general meeting
8. If a casual vacancy in the office of auditor arises by his resignation it should only be
filled by the company in a……..
Correct : C. General meeting
9. 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 _
Correct : C. Acceptance of audit
10. 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 ___
Correct : D. All of the above
11. 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) __
Correct : D. All of them
12. Which audit out of the following would not be regarded as one audit for the purposes
of section 224(IB)?
Correct : A. Audit of one branch each of two different companies
13. The auditor of a Government company is appointed by the C & AG. His remuneration
is fixed by__
Correct : B. The shareholders
14. The section which contains provisions regarding remuneration of the auditor is_
Correct : C. Section 224(8)
15. The authority to remove the first auditor before the expiry of term is with_
Correct : A. The shareholders in a general meeting
16. Which of the following statements is not correct regarding removal of first auditor
before expiry of the term?
Correct : C. The approval of the Central Government is required for such removal
17. The retiring auditor does not have a right to___
Correct : D. speak as a member of the company
18. Who out of the following cannot be appointed as a statutory auditor of the company?
Correct : B. Internal auditor
19. A statutory auditor has a right of access at all times to
Correct : C. Books, accounts and vouchers of the company
20. The auditor has a right to
Correct : D. Both (b) and (c)
21. The principal auditor, as per clarification issued by the ICAI, does not have any right
to
Correct : A. Inspect working papers of the branch auditor
22. Under which of the following section auditor has a duty to enquire into six specified
matters and report by exception?
Correct : A. Section 227(4A)
23. The auditor has to enquire, under section 227 (IA) into different aspects, related to
shares allotted for cash for the purpose of auditor include
Correct : D. All of them
24. Right to visit branches has been given to the auditor under which section?
Correct : D. Section 228(3)
25. Which of the following statements with regard to rules regarding exemption
from branch audit is not true?
Correct : 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
26. The branch auditor is appointed by –
Correct : B. Shareholders in general meeting
27. Special audit is conducted at the order of the Central Government. Which
section gives such powers?
Correct : C. Section 242(A)
28. Who among the following can be appointed as special auditor by the Central
Government?
Correct : D. Both (a) and (b)
29. 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
Correct : B. Both (i) and (ii)
30. 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 he
determine their eligibility :
Correct : A. He obtains a representation from each director
31. 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_
Correct : C. Cess payable under section 441A
32. The date on auditor’s report should not be__
Correct : C. Earlier than the date on which the accounts are approved by the management
33. 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?
Correct : D. Every document which is attached to the profit and loss account
34. 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?
Correct : A. Qualified opinion
35. Which of the following report not result in qualification of the auditor’s opinion due to a scope limitation?
Correct : B. Reliance on the report of other auditor
36. 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.
Correct : C. Disclaimer of opinion
37. 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_
Correct : B. Unqualified opinion with reference to notes to the accounts
38. Which of the following is true about explanatory notes?
Correct : B. These are given to adhere to requirements of section 211.
39. 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?
Correct : A. Unqualified opinion
40. Which of the following is not true regarding requirements under section 227(3) (f) of the Companies Act, 1956?
Correct : D. The disqualification should be considered on the date of audit report.
41. 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
Correct : A. Unqualified opinion
42. 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?
Correct : C. Scope and opinion paragraphs
43. A departure from recognized accounting principle is disclosed in a note to the
financial statements. The auditor should
Correct : B. Issue a qualified report
44. 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
Correct : A. i) only
45. Which of the following documents is not relevant for vouching cash sales?
Correct : C. Monthly statements sent to customers
46. The auditor should examine subsequent realization of revenue such as
dividends, interest, commission, etc to
Correct : A. Identify cases of unrecorded revenue
47. To test whether sales have been recorded, the auditor should draw a sample
from a file of
Correct : C. Sales invoices
48. For vouching of which item, the auditor is most likely to examine cost records?
Correct : D. Sale of scrap
49. The “Guidance Note on Revenue” issued by the ICAI does not deal with
Correct : C. Revenue from sale of fixed assets
50. 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
Correct : C. To test procedures for distributing pay cheques
51. Which of the following would prevent double payment of the same voucher?
Correct : A. The person signing the cheque should cancel the supporting documents
52. In case of unclaimed wages, the auditor should examine whether
Correct : A. The amount has been deposited in a separate bank account
53. 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?
Correct : B. Proposing pay roll summary and disbursement of wages
54. In order to vouch, which of the expenses, the auditor will examine Bill of
Entry?
Correct : A. Custom
55. While vouching, how will the auditor ensure himself that all credit sales
transactions have been recorded by the entity?
Correct : D. Both (a) and (b)
56. In case of sales return, the auditor should examine which documents?
Correct : D. Credit notes, inspection report and inward return notes
57. An internal auditor discovered that fictitious purchases have been recorded by
the purchase clerk. This indicates absence of which control?
Correct : A. Purchase invoices are independently matched with purchase orders and goods received notes
58. Which of the following is most crucial to a purchase department?
Correct : C. Authorizing the acquisition of goods
59. The auditor is most likely to examine related party transactions very carefully
while vouching
Correct : C. Credit purchases
60. 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
Correct : B. There are no unrecorded liabilities
61. The creditor’s accounts, generally, have credit balance. Debit balance may be due to
Correct : D. Any of these
62. In case of vouching, the auditor is least likely to examine authorization by
appropriate authority in case of –
Correct : D. Discount allowed to customers as per organizational policy
63. 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?
Correct : D. Any of these
64. Which of the following is not true with regard to verification of assets?
Correct : A. It invoices substantiation of occurrence of transactions
65. Which of the following statements is not true?
Correct : C. The auditor should value the asset as per generally accepted accounting principle
66. 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?
Correct : B. Minutes of meeting of board of directors
67. Which of the following assets is least likely to be subjected to lien?
Correct : C. Leasehold property
68. 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?
Correct : D. All of the above
69. The auditor has noticed existence of recurring losses sale of fixed assets this
indicates
Correct : A. Depreciation charges are insufficient
70. Which of the following financial statements assertions are addressed by testing
the cut off for plant asset addition?
Correct : D. Completeness and valuation
71. The auditor while verifying prepaid insurance has concluded that there is
inadequate insurance of building, He should__
Correct : D. Both (b) and (c)
72. 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
Correct : A. Valuation
73. When auditing prepaid insurance, an auditor discovers that the insurance
policy bond on building is not available for inspection. This may indicate__
Correct : B. Lien on building
74. Which of the following controls would ensure that securities are not lost,
stolen or diverted?
Correct : D. All of the above
75. Which of the following would give the assurance that debtors mentioned on the
date of balance sheet actually exist?
Correct : D. Both (a) and (b)
76. Tests of control are not concerned with_
Correct : D. Designing of controls
77. The sequence of steps in the auditor’s consideration of internal control is as
follows –
Correct : C. Obtain an understanding, make a preliminary assessment of control risk, perform tests of control, design substantive procedures.
78. Which of the following is not an inherent limitation of internal control system?
Correct : C. Inefficiency of internal auditor
79. An auditor should study and evaluate internal controls to
Correct : C. Plan audit procedures
80. The primary purpose of performing tests of control is to provide reasonable
assurance that_
Correct : D. if internal control is effective
81. If the auditor assesses control risk as high….
Correct : A. Document the conclusions
82. The overall attitude and awareness of an entity’s board of directors concerning
the importance of internal control is reflected in
Correct : B. Control environment
83. Which of the following are included in test of control?
Correct : A. Reperformance and observation
84. Control risk is assessed at
Correct : C. Financial statement assertion level
85. An auditor assesses control risk because it
Correct : B. Affects the level of detection risk that auditor may accept
86. A flow chart, made by the auditor, of an entity’s internal control system is a graphic representation that depicts the auditor’s.
Correct : A. Understanding of the system
87. The performance of tests of control is documented in
Correct : C. Working papers
88. The independence of an internal auditor will most likely be assured if he reports
to the
Correct : C. Managing Director
89. In comparison to the independent auditor, an internal auditor is more likely to
be concerned with
Correct : B. Internal control system
90. When an independent auditor relies on the work of an internal auditor, he or
she should
Correct : D. all of the above
91. Proper segregation of duties reduces the opportunities in which a person would
both
Correct : C. Perpetuate errors and frauds and conceals them
92. Analytical procedures are least likely to be use in the audit of –
Correct : A. Cash balance
93. Which of the following statements is not true with regard to teeming and
lading ?
Correct : C. If same individual maintains cash receipts and cash payments teeming and lading is likely to exist
94. 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
Correct : A. Cash in always material as materiality is qualitative concept
95. When counting cash on hand the auditor should ___
Correct : C. Ensure postage and revenue stamps are not counted in physical count
96. Which of the following statement is not true regard to auditor’s attendance at
stock taking?
Correct : C. If inventory is material, even when the auditor is not placing reliance on the physical verification by the management, he should attend it
97. 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 –
Correct : B. Sales returns
98. Inspection report/receiving report supports entries in
Correct : B. Purchase book and sales return book
99. ……………….. Starts where …………….. Ends
Correct : B. Auditing, accounting
100. ............ means “proving the truth or confirmation”