31 Oct 2014


Auditing Multiple Choice Questions (MCQS) Page-3. These Mcqs are very helpful for preparation of various posts i.e. Senior Auditor, Junior Auditor,Accountant. These Mcqs are also Important for Punjab Public Service Commission, National Testing Service, Federal Public Service Commission Tests/examinations.

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1. Audit of banks is an example of                                                                                                                                                                                 
a) Statutory audit
b) Balance sheet audit
c) Concurrent audit
d) Both (a) and (b)
e) All of the above

2. Concurrent audit is a part of                                                                                                                                                     
a) Internal check system   
 b) Continuous audit    
c) Internal audit system    
d) None
3. In Pakistan, balance sheet audit is synonymous to                                                                                                                                   
a) Annual audit
b) Continuous audit
c) Detailed audit
d) Statutory audit
4. Audit in depth is synonymous for                                                                                                                                       
a) Complete audit
b) Completed audit
c) Final audit
d) Detailed audit

5. Balance sheet audit includes verification of_

a) Assets
b) Liabilities
c) Income and expense accounts where appropriate
d) All of the above

6. Which of the following statements is not true about continuous audit?

a) It is conducted at regular interval
b) It may be carried out on daily basis
c) It is needed when the organization has a good internal control system
d) It is expensive

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

a) Economic audit
b) Efficiency audit
c) Expenditure audit
d) Effectiveness audit
8. The Delhi Government had constructed six bungalows for its ministers. They are lying unoccupied for last three years. This would be a matter of concern for                                                                                          
a) Propriety Auditor   
 b) Performance Auditor           
c) Financial Auditor           
d) None of the above

9. Financial auditor is not concerned with propriety of business transactions. However, the exceptions to this rule are contained for audit of limited companies in_

a) Section 227 (IA) of the Companies Act, 1956
b) Section 227 (IA) and section 227(4A) of the Act
c) CARO, 2003
d) Section 227 (IA) and CARO, 2003

10. Balance Sheet does not include ---
a) Verification of assets and liabilities
b) Vouching of income and expense accounts related to assets and liabilities
c) Examination of adjusting and closing entries
d) Routine checks

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

a) Materiality is a relative concept
b) Materiality judgments involve both quantitative and qualitative judgments
c) Auditor’s consideration of materiality is influenced by the auditor’s perception of the needs
of an informed decision maker who will rely on the financial statements
d) At the planning state, the auditor considers materiality at the financial statement level

12.…...the audit risk, the materiality and …the audit effort

a) Lower, Higher, Lower
b) Lower, Lower, Higher
c) Higher, Lower, Lower
d) Lower, Higher, Higher

13. When issuing unqualified opinion, the auditor who evaluates the audit findings should be
satisfied that the

a) Amount of known misstatement is documented in working papers
b) Estimates of the total likely misstatement is less than materiality level
c) Estimate of the total likely misstatement is more than material y level
d) Estimates of the total likely misstatement cannot be made

14. In determining the level of materiality for an audit, what should not be considered?

a) Prior year’s errors 
b) The auditor’s remuneration
c) Adjusted interim financial statements 
d) Prior year’s financial statements

15. Analytical procedures issued in the planning stage of an audit, general y

a) helps to determine the nature, timing and extent of other audit procedures
b) directs attention to potential risk areas
c) indicates important aspects of business
d) All of the above

16. Which of the following statements is most closely associated with analytical procedure?
Applied at substantive stage?

a) It helps to study relationship among balance sheet accounts
b) It helps to discover material misstatements in the financial statements
c) It helps to identify possible oversights
d) It helps to accumulate evidence supporting the validity of a specific account balance

17. For al audits of financial statements made in accordance with AAS­14, the use of analytical
procedures are at the discretion of the auditor in which stage?

a) Substantive testing
b) Planning stage
c) Overall review stage
d) All of the above

18. The basic assumption underlying the use of analytical procedures is:

a) It helps the auditor to study relationship among elements of financial information
b) Relationship among data exist and continue in the absence of known condition to the
c) Analytical procedures will not be able to detect unusual relationships
d) None of the above.

19. What are analytical procedures?

a) Substantive tests designed to assess control risk
b) Substantive tests designed to evaluate the validity of management’s representation letter
c) Substantive tests designed to study relationships between financial and non­financial
d) All of the above

20. Which of the following is not an analytical procedure?

a) Tracing of purchases recurred in the purchase book to purchase invoices.
b) Comparing aggregate wages paid to number of employees
c) Comparing the actual costs with standard costs
d) All of them are analytical procedure

21. When applying analytical procedures, an auditor could develop independent estimate of an
account balance to compare it to­

a) client’s unedited account balance
b) client’s unedited account balance adjusted for trends in the industry
c) Prior year audited balance
d) Prior year audited balance adjusted for trends in the industry

22. What is the primary objective of analytical procedures used in the overall review stage of an

a) To help to corroborate the conclusions drawn from individual components of financial
b) To reduce specific detection risk
c) To direct attention to potential risk areas

d) To satisfy doubts when questions arise about a client’s ability to continue

                                                                  CONCEPTS OF AUDITING

1. E 2. C 3. A 4. D 5. D    6. C 7. C 8. D 9. D 10. d
11. D 12. A 13. B 14. B 15. D 16. D 17. A 18. B 19. C 20. A   21. D 22. A


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