1. Goods purchased but not recorded in the purchase register is ________________
Correct : A. an error of omission
2. Working papers are the property of the ________________
Correct : B. auditor
3. Which of the following documents is not relevant for vouching of sales ________________
Correct : D. sales department attendance record
4. The main object of an Audit is ________________
Correct : B. expression of an opinion on true and fair view of accounts
5. An Audit Programme must be prepared ________________
Correct : A. before commencement of an audit
6. Analytical Review is ________________
Correct : A. an audit technique
7. Audit in Depth means ________________
Correct : D. detailed examination of selected transactions
8. Audit programme should be ________________
Correct : A. flexible
9. ________________ incorporates both Accounting and Administrative Controls.
Correct : A. internal control
10. Debtors are valued at ________________
Correct : C. book value
11. The main objective of Window Dressing is ________________
Correct : B. to mislead investors
12. ________________ document is not relevant for vouching cash purchases
Correct : D. attendance record of cashier
13. To select a sample for Audit, the auditor should consider ________________
Correct : A. all the above
14. Secret reserves are shown on ________________
Correct : B. none of the above
15. Stock of goods on consignment should be valued at ________________
Correct : C. cost of realizable value whichever is lower
16. ________________ is not an error of Commission
Correct : B. compensating error
17. Telephone charges should be examine on the basis of ________________
Correct : B. telephone bill
18. The Auditor examines Bill of Lading in order to vouch ________________
Correct : D. sales outside the country
19. ________________ Asset, which is not subject to physical verification
Correct : D. debtors
20. Goods sold but not recorded in Sales Register is ________________
Correct : C. an error of omission
21. Audit plan should be best on knowledge of the ________________
Correct : D. client\s business
22. Confirmation is ________________
Correct : B. an audit technique
23. ________________ should be checked by the Auditor in verification of Machinery
Correct : A. all the above
24. Closing stock with the consignee is to be shown as the Asset of ________________
Correct : D. consignor
25. If a material financial fraud is detected, Auditor should ________________
Correct : D. report it to the owners or shareholders
26. An auditor is like a
Correct : B. Watch dog
27. The term ‘Audit’ is derived from a Latin word “audire” which means;
Correct : C. To hear
28. Process of verifying the documentary evidences of transactions are known as:
Correct : C. Vouching
29. Auditing is compulsory for
Correct : C. Joint stock Companies
30. The main object of an audit is ___
Correct : D. Depends on the type of audit.
31. Concealment of shortage by delaying the recording of cash receipts is known as
Correct : C. Lapping
32. The title of AAS2 issued by Council of ICAI is ___
Correct : B. Objective and Scope of the Audit of Financial Statements
33. Lapping is also known as:
Correct : A. Teeming and lading
34. Which of the following is not true about opinion on financial statements?
Correct : C. He is responsible for detection and prevention of frauds and errors in financial statements
35. A sale of Rs. 25,000 to A was entered as a sale to B. This is an example of _
Correct : B. Error of commission
36. ‘Goods sent on approval basis’ have been recorded as ‘Credit sales’. This is an example
of _
Correct : A. Error of principle
37. Which of the following statements is not true?
Correct : B. Internal control system reduces the possibility of occurrence of employee fraud and management fraud
38. As per AAS4, if auditor detects an error then –
Correct : D. Both (b) and (c)
39. Which of the following is not a limitation of audit as per AAS4?
Correct : A. Objectivity of auditor’s judgment
40. Internal audit is undertaken
Correct : C. By a person appointed by the management
41. The scope of internal audit is decided by the :
Correct : B. Management
42. Audit of banks is an example of –
Correct : D. All of the above
43. Concurrent audit is a part of
Correct : C. Internal audit system
44. In India, balance sheet audit is synonymous to
Correct : A. Annual audit
45. Audit in depth is synonymous for
Correct : D. Detailed audit
46. Institute of Chartered Accountants of India was established
Correct : B. 1949
47. Which of the following statements is not true about continuous audit?
Correct : C. It is needed when the organization has a good internal control system
48. Internal check is carried on by
Correct : D. Members of the staff
49. Errors of Omission are
Correct : A. Technical errors
50. Window dressing implies:
Correct : D. Over Valuation of assets
51. Test Checking refers to
Correct : B. Checking of selected number of transactions
52. Which of the following statements is not correct about materiality?
Correct : D. At the planning state, the auditor considers materiality at the financial statement level only
53. …...the audit risks… the materiality and ……the audit effort
Correct : A. Lower, Higher, Lower
54. When issuing unqualified opinion, the auditor who evaluates the audit findings should
be satisfied that the
Correct : C. Estimate of the total likely misstatement is more than materially level
55. In determining the level of materiality for an audit, what should not be considered?
Correct : B. The auditor’s remuneration
56. Analytical procedures issued in the planning stage of an audit, generally
Correct : D. All of the above
57. Which of the following statements is most closely associated with analytical procedure
applied at substantive stage?
Correct : D. It helps to accumulate evidence supporting the validity of a specific account balance
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?
Correct : A. Substantive testing
59. Verification refers to :
Correct : A. Examining the physical existence and valuation of assets.
60. Stock should be valued at
Correct : C. Cost or Market price whichever is lower.
61. ‘Auditor is not a valuer’, was stated in
Correct : A. Kingston Cotton Mills case
62. Floating assets are valued at
Correct : C. Cost or market price whichever is lower
63. Goods sold on the basis of ‘sales or return ‘ should
Correct : A. Be included in the stock
64. Of the following, which is the least persuasive type of audit evidence?
Correct : 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?
Correct : B. Effective internal control system provides reliable audit evidence
66. In an audit of financial statements, substantive tests are audit procedures that __
Correct : 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
Correct : C. Directly
68. Which of the following factors is most important in determining the appropriations of
audit evidence?
Correct : A. The reliability of audit evidence and its relevance in meeting the audit objective
69. When is evidential matter, generally, considered sufficient?
Correct : B. When it is enough to provide a basis for giving reasonable assurance regarding truthfulness
70. Which of the following is not corroborative evidence?
Correct : D. Worksheet supporting consolidated financial statements
71. Which of the following statements is not true with respect to management
representations obtained as per AAS11?
Correct : B. It should always be in working
72. What would most appropriately describe the risk of incorrect rejection in terms of
substantive testing?
Correct : B. The auditor concludes that the balance is materially misstated when in actual fact it not
73. Which of the following affects audit effectiveness?
Correct : D. Both (a) and (c)
74. What would most effectively describe the risk of incorrect acceptance in terms of
substantive audit testing?
Correct : 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?
Correct : B. AAS8
76. Audit programme is prepared by
Correct : D. The auditor and his audit assistants
77. The working papers which auditor prepares for financial statements audit are: _
Correct : C. Owned by the auditor
78. The quantity of audit working papers complied on engagement would most be affected
by
Correct : B. Auditor’s experience and professional judgment
79. Which of the following best describes the primary purpose of audit programme
preparation?
Correct : C. To gather sufficient appropriate evidence
80. Which of the following is not an advantage of the preparation of working paper?
Correct : D. To provide a guide for advising another client on similar issues
81. The auditor’s permanent working paper file should not normally, include
Correct : A. Extracts from client’s bank statements
82. For what minimum period should audit working papers be retained by audit firm?
Correct : 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
Correct : D. The content of management representation letter
84. Which of the following statement is true regarding an auditor’s working papers?
Correct : 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?
Correct : 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
Correct : C. A copy of financial statements
87. Knowledge of the entity’s business does not help the auditor to
Correct : A. Reduce inherent risk
88. Payment for wage should be vouched with the help of
Correct : B. Wage sheets
89. Payment for building purchased should be vouched with the help of
Correct : A. Title Deed
90. Purchase returns should be vouched with the help of
Correct : B. Credit notes
91. Receipts from sale of investments should be vouched with the help of
Correct : B. Brokers Sold notes
92. Which of the following expenses should not be treated as capital expenditure?
Correct : 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?
Correct : B. Cost of accessories of motor vehicles spent at the time of purchase
94. Depreciation does not arise form _______
Correct : D. Remarket expectation
95. Which of the following Schedule of the Companies Act, 1956 deals with depreciations?
Correct : 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?
Correct : B. Plant and Machinery
97. A company has bought patents. Which of the following methods is most suitable for
providing depreciation on them?
Correct : A. SLM
98. Which of the following is a revenue reserve?
Correct : C. Debenture redemption reserve
99. Which of the following will not lead to creation of secret reserve?
Correct : C. Goods sent on consignment being shown as actual sales
100. Who is responsible for the appointment of statutory auditor of a limited company?